BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 1330|
          |Office of Senate Floor Analyses   |                              |
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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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