BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1330|
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THIRD READING
Bill No: AB 1330
Author: Bloom (D)
Amended: 8/9/16 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SENATE ENERGY, U. & C. COMMITTEE: 6-2, 6/27/16 (Pursuant to
Senate Rule 29.10)
AYES: Hueso, Hertzberg, Hill, Lara, Leyva, McGuire
NOES: Morrell, Gaines
NO VOTE RECORDED: Cannella, Pavley, Wolk
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/16/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
SUBJECT: Energy efficiency
SOURCE: California Energy Efficiency Industry Council
DIGEST: This bill requires the California Public Utilities
Commission (CPUC) to ensure there are sufficient monies
available to electrical and gas corporations to meet their
efficiency targets, as established by the CPUC.
ANALYSIS:
Existing law:
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1)Establishes a charge on electricity and natural gas
consumption to fund cost-effective energy efficiency and
conservation activities. (Public Utilities Code §§381 and
890)
2)Requires electrical corporation procurement plans to first
meet unmet resource needs through all available energy
efficiency, and demand reduction resources that are cost
effective, reliable, and feasible. (Public Utilities Code
§§454.5 (b)(9)(C))
3)Requires the CPUC to authorize electrical or gas corporations
to provide financial incentives, rebates, technical
assistance, and support to their customers to increase the
energy efficiency of existing building, including measures to
bring the buildings to conformity with, or exceed, the
requirements of Title 24 building codes. Authorizes
electrical and gas corporations to count the energy savings
achieved through bringing buildings to code towards overall
energy efficiency goals or targets established by the CPUC,
unless otherwise determined. (Public Utilities Code §381.2
(b))
4)Requires the CPUC to identify all potentially achievable
cost-effective electricity and natural gas efficiency savings
and to establish energy efficiency procurement targets and
ratepayer-funded programs for investor-owned utilities (IOUs).
Requires a gas corporation to first meet its unmet resource
needs through all available natural gas efficiency and demand
reduction resources that are cost effective, reliable, and
feasible. (Public Utilities Code §§454.55 and 454.56.)
5)Requires the California Energy Commission (CEC) to develop and
implement a comprehensive program to achieve greater energy
savings in California's existing residential and
nonresidential building stock. (Public Resources Code §25943)
6)Requires the CEC, in collaboration with the CPUC and local
publicly owned electric utilities, to, on or before November
17, 2017, establish annual targets for statewide energy
efficiency savings and demand reduction that will achieve a
cumulative doubling of statewide energy efficiency savings and
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electricity and natural gas final end uses of retail customers
by January 1, 2030. (Public Resources Code §25302.2)
This bill requires the CPUC to ensure there are sufficient
monies available to electrical and gas corporations to meet
their efficiency targets, as established by the CPUC.
Background
Energy loading order. The "loading order" guides the state's
energy policies and decisions according to the following order
of priority: (1) decreasing energy demand by increasing energy
efficiency; (2) responding to energy demand by reducing energy
usage during peak hours; (3) meeting new energy generation needs
with renewable resources; and (4) meeting new energy generation
needs with clean fossil-fueled generation. This policy has been
adopted by the energy agencies - the CEC and CPUC - and its
principles guide all energy programs.
Energy efficiency funded programs. Consistent with the loading
order, statute requires both electrical and gas IOUs to meet
unmet resource needs with all available energy efficiency and
demand reduction that is cost-effective, reliable and feasible.
The CPUC uses these criteria to establish energy efficiency
targets for the IOUs. To achieve these targets, the IOUs (and,
in some cases, community choice aggregators) administer energy
efficiency programs with ratepayer funds approved by the CPUC.
Currently funded at about $1 billion per year, the programs
include a portfolio of financial incentives, loans, and rebates
for installing energy efficient appliances, lighting, windows,
HVAC systems, whole-house retrofits, and sector-specific
efforts.
Doubling energy efficiency savings. The passage of SB 350 (De
León, Chapter 547, Statutes of 2015) enacts the Clean Energy and
Pollution Reduction Act of 2015, establishes targets to increase
retail sales of renewable electricity to 50 percent by 2030 and
double energy efficiency savings in electricity and natural gas
uses by 2030. Under the statute, the CEC, in consultation with
the CPUC and local publicly owned utilities, must establish
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annual targets for statewide energy efficiency savings and
demand reduction through a public process that will achieve a
cumulative doubling of statewide energy efficiency savings in
electricity and natural gas final end uses of retail customers
by January 1, 2030. In furtherance of that effort, the targets
must be established by November 1, 2017. As of the date of this
analysis, the CEC has begun to initiate the public process to
establish the targets, but the final outcome is not expected for
several months - and possibly a year.
Expanded opportunities for energy efficiency. The passage of AB
802 (Williams, Chapter 590, Statutes of 2015) has further
expanded the opportunity for energy efficiency IOU-funded
projects. Specifically, SB 802 requires the CPUC, by September
1, 2016, to authorize an IOU to provide incentives for the cost
of energy efficiency programs based on all estimated energy
savings, including energy savings from bringing existing
buildings into compliance with mandatory energy efficiency codes
for existing buildings issued by the CEC, and authorizes an IOU
to recover the costs in rates. The statute provides that the
energy efficiency measures described above may include savings
and reductions from measures to conform a building with existing
energy efficiency regulation, as well as certain operational,
behavioral, and retro commissioning activities. As a result,
for the first-time, IOUs may get credit towards achieving their
energy efficiency targets by funding measures to bring existing
buildings to meet the building code. Prior to the recent change
in statute, IOUs would only receive credit for funding energy
efficiency measures that would bring buildings above the
building code. As a result, IOU funds would be limited to
projects where building owners of existing buildings could
afford the measures to get the building up to code, but augment
with IOU funding for anything above code. Arguably, the policy
change provided in AB 802 is expanding opportunities for
implementing some of the most cost-effective energy efficiency
measures.
Cost-effectiveness. Over the past 10-plus years, the CPUC has
increased energy efficiency budgets. This ramp-up in spending
comports with Public Utilities Code §381's mandate that we
"allocate funds spent to programs that enhance system
reliability and provide in-state benefits including: (1)
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cost-effective energy efficiency and conservation activities."
Section 381 expressly limits the CPUC to allocating funds to
"cost-effective" activities. The CPUC has applied this approach
across an IOU's portfolio of programs, rather than requiring
that each individual program must be cost-effective. In
practice this means that many programs within portfolios are not
cost-effective, including "non-resource" programs (e.g.,
workforce education and training), which are nonetheless funded
so long as the overall portfolio is cost-effective.
Current process. Currently the CPUC's process approves a
10-year authorization of funding for IOU energy efficiency and
demand reduction investments, known as a rolling portfolio.
Rolling portfolios represent a 10-year authorization for
activities, with annual reviews of progress and effectiveness
and annual updates/true ups needed for specific aspects of the
portfolio (savings estimates, goals, evaluation results) through
a formal filing with the CPUC via a public and stakeholder
process. The rolling portfolio mechanism was adopted to smooth
out the start stop nature of a three year authorization,
revision, re-adoption by the CPUC. The CPUC is currently in its
first year of implementing rolling portfolios and still learning
about how to improve the effort.
Is a bill necessary? This bill requires the CPUC to authorize
more ratepayer funds for energy efficiency and demand reduction
activities should the CPUC find that an IOU does not have
sufficient funding to attain CPUC- mandated goals. However, the
CPUC already has authority to increase the amount funded for
energy efficiency. Additionally, as mentioned above, many of
the recent changes from SB 350 and AB 802 are in the initial
stages of being implemented. It's unclear why a bill would be
needed at this time. Furthermore, the process to establish the
goals to double energy efficiency savings by 2030 has only
recently been initiated and the results will not be finalized
until 2017. This bill also only addresses the IOU energy
efficiency measures, but says nothing about publicly-owned
utilities who must also contribute to the state's overall energy
efficiency savings.
Related/Prior Legislation
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AB 802 (Williams, Chapter 590, Statutes of 2015) required the
CPUC to authorize electrical corporations or gas corporations to
provide incentives and assistance for measures to conform a
building to CEC's energy efficiency standards for existing
buildings and to allow IOUs to recover in rates the reasonable
costs of those incentives and assistance.
SB 350 (De León, Chapter 547, Statutes of 2015) enacted the
Clean Energy and Pollution Reduction Act of 2015, which
establishes targets to increase retail sales of renewable
electricity to 50 percent by 2030 and double energy efficiency
savings in electricity and natural gas uses by 2030.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
Unknown, likely minor, costs (Utilities Reimbursement Account)
to the CPUC to determine the amount of ratepayer funds
necessary to meet energy efficiency targets.
Unknown, potentially significant costs, to the state as a
ratepayer.
SUPPORT: (Verified8/16/16)
California Energy Efficiency Industry Council (source)
Advanced Energy Economy
California Building Industry Association
California Business Properties Association
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Mission:data Coalition
OPPOSITION: (Verified8/16/16)
None received
ARGUMENTS IN SUPPORT: According to the author, "this bill would
authorize the CPUC to increase funding which could have the
impact of increasing rates. However, the CPUC would continue to
be constrained by the rigorous cost-effectiveness requirement
which currently governs expenditures on energy efficiency. The
author would submit that while California has the highest rates
in the nation, it does not have the highest bills - in part
because rates are invested in energy efficiency which has the
impact of lowering consumer bills because it reduces the need to
purchase power."
Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
8/16/16 17:52:55
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