BILL ANALYSIS Ó
AB 2271
Page A
Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
AB 2271
(Quirk) - As Amended March 17, 2016
SUBJECT: Electricity: research programs: peer review
SUMMARY: Requires the California Public Utilities Commission
(CPUC) to conduct an independent peer review, as specified, of
research programs proposed by an electrical corporation.
Specifically, this bill:
1)Requires the CPUC to establish a procedure for independent
peer review of research programs proposed by an electrical
corporation upon the CPUC's receipt of a proposed research
program.
2)Requires the CPUC to make available to the public on its
Internet Web site the results of the review upon the approval
of the research program.
3)Defines research programs to mean programs for the development
of novel and innovative processes that are proposed by
electrical corporations for approval by the CPUC and that
would be funded through the rates of ratepayers of the
electrical corporations. Research programs do not include
programs that are funded pursuant to the Public Interest
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Energy Research, Demonstration, and Development Program
(Chapter 7.1 (commencing with Section 25620) of Division 15 of
the Public Resources Code) or the Electric Program Investment
Charge program developed pursuant to Public Resources Code
Section 25711.5.
EXISTING LAW:
1)Establishes that public utilities are subject to control by
the Legislature. (California Constitution, Article XII,
Section 3)
2)Authorizes the CPUC to fix rates, establish rules, examine
records, issue subpoenas, administer oaths, take testimony,
punish for contempt, and prescribe a uniform system of
accounts for all public utilities subject to its jurisdiction.
(California Constitution, Article XII, Section 6)
3)Authorizes the CPUC to adopt rules for public utilities
regarding a showing of information to be made in support of
proposed rate changes and allowing opportunities to protest
those rate changes. (Public Utilities Code Section 454)
4)Authorizes the CPUC to allow an electrical corporation, gas
corporation, heat corporation, or telephone corporation to
include expenses for research and development in rates.
(Public Utilities Code Section 740)
5)Requires the CPUC to consider specified guidelines in
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evaluating the research, development, and demonstration
programs proposed by electrical and gas corporations. (Public
Utilities Code Section 740.1)
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement: "There is a need for more visibility in
the interactions between Commissioners and regulated
utilities. AB 2271 creates a transparent process for projects
that have been approved by the CPUC without any checks and
balances. It is essential to have a proper evaluation of the
scientific and technical merits of the research that the CPUC
approves. AB 2271 would require an independent peer review to
be conducted once the [CPUC] receives a proposed program. This
bill will also require the results of the review to be posted
to the CPUC website. The public has a right to know what it's
paying for."
2)Independent Peer Review: The goal of independent peer is to
obtain an independent, third-party review of a
scientific/technical work product from experts who have not
substantially contributed to its development.<1> This review
is intended to uncover problems or unresolved issues in a
preliminary (or draft) work product, and facilitates revision
of the draft product into a final product that reflects sound
technical information and analyses. This review typically
enhances a scientific/technical work product so the decision
or position taken on the work product has a sound, credible
basis. The National Research Council states:
When peer [independent] review results are used to
improve the quality of a decision process (e.g.
selection of proposals, prioritization of projects
for funding), it also enhances the credibility of
---------------------
<1> http://www.epa.gov/peerreview/pdfs/prhandbk.pdf
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the decisions. Use of peer [independent] review
therefore provides observers some confidence that
decisions are made with the best available
scientific and technical information.<2>
An independent peer review process is used by many granting
institutions, including but not limited to federal agencies
such as the Department of Agriculture, National Science
Foundation, National Institutes of Health, Environmental
Protection Agency, National Institute of Standards and
Technology, National Oceanic and Atmospheric Administration,
and National Aeronautics and Space Administration.<3> As an
example, the United States Department of Energy awarded an
Energy Hub grant of $120 million over five years to Argonne
National Laboratory for energy storage research, and did so
"through an open national competition with a rigorous merit
review process that relied on outside expert reviewers." The
California Energy Commission (CEC) conducts a peer review of
applications for Public Interest Energy Research (PIER)
funding, and the California Institute for Regenerative
Medicine requires peer review of all grant applications.
Although peer input, public comment, and stakeholder input add
value to the work product, they do not substitute for
independent expert review.<4> Peer input refers to the
contributions made by an open exchange of data, insights, and
ideas during development of a work product. However, when one
has a material stake in the project or participated
substantially in the development (such as a workgroup member),
reviews by those individuals may not qualify as unbiased,
independent review. One cannot argue that an independent
expert review is not necessary if a major work product has
received "enough" peer input. Public comment similarly does
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<2> NRC, Peer Review in the Department of Energy-Office of
Science and Technology, 1997.
<3> http://science.energy.gov/~/media/bes/pdf/rc99099.pdf
<4> http://www.epa.gov/peerreview/pdfs/prhandbk.pdf
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not always result in the in-depth analyses expected of an
independent review process. Finally, stakeholder involvement
also does not substitute for independent expert review, as it
typically involves external interest groups with a stake in
the work product outcome or regulatory position.
3)CPUC and CEC energy-related research programs and funds: To
meet the state's energy needs, the CPUC and CEC have proposed
a focus on research, development, and demonstrations related
to bioenergy, energy efficiency, renewable energy,
transportation fuels and vehicles, and carbon capture and
storage.<5> However, independent review is not always
utilized. The following are examples of energy-related
research programs involving the CPUC and/or CEC:
a) PIER program: PIER is a research, development, and
demonstration program intended to advance the fields of
energy efficiency, renewable energy, advanced electricity
technologies, energy-related environmental protection,
transmission and distribution, and transportation
technologies. The CEC administers PIER, granting funds
through an open project solicitation process. The program
invested more than $700 million over the past decade.<6> As
of June 2013, PIER is not funding new projects (funding has
been depleted), but the CEC managed projects through 2015.
b) The Electric Program Investment Charge (EPIC):
Established in 2012 by the CPUC, EPIC provides public
interest investments in applied research and development,
technology demonstration and deployment, market support,
and market facilitation, of clean energy technologies and
approaches for the benefit of electricity ratepayers of the
--------------------------
<5>
http://www.energy.ca.gov/2008publications/CEC-100-2008-001/CEC-10
0-2008-001.PDF
<6>
http://www.energy.ca.gov/2014publications/CEC-500-2014-035/CEC-50
0-2014-035-CMF.pdf
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three major investor-owned utilities (IOUs) Pacific Gas and
Electric, San Diego Gas and Electric, and Southern
California Edison.<7> EPIC is administered by the CEC and
the IOUs. Funds are administered under the oversight and
control of the CPUC, with $162 million in annual funding
approved from 2013 to 2020. The funds are administered 80%
by the CEC and 20% by the IOUs, with the IOU role limited
to technology demonstration and deployment. A public
proceeding is conducted every three years to consider
investment plans.
Independent of these programs, CPUC-regulated IOUs conduct and
administer research. These research programs are often
included in CPUC rate cases to recover costs through rates.
The CPUC may allow IOUs to use ratepayer funds if it
determines investments made with those funds will be in the
public interest and are just and reasonable. Between 2009 and
2014, the CPUC approved about $400 million in ratepayer funds
for research and development. The majority of these funds were
approved without review by experts in the field of research
being funded, because the CPUC does not have such a process in
place. Some funds have been awarded to sole-source projects.
1)Lawrence Livermore National Lab (LLNL) Funding Issue: One
example of funded research that may have benefited from
independent review involves the CPUC, the IOUs, and LLNL. In
2012, the CPUC authorized the electric IOUs to enter into a
five-year energy research and development agreement with LLNL.
The CPUC authorized ratepayer funding of $30 million per year
from the 21st Century Energy Systems (CES-21) program,
collected by the IOUs and transferred to LLNL.
The Utility Reform Network (TURN) and the CPUC Office of
Ratepayer Advocates (ORA) both opposed the decision. TURN
objected to the grant being made without competitive
solicitation, as the CPUC identified LLNL as having expertise
in supercomputing facilities and analysis, which were central
--------------------------
<7> http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/167664.pdf
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to the research, without examining other options. In response
to ORA, the IOUs also stated that even though they were aware
of other supercomputing facilities within California, they had
not contacted or evaluated those facilities to determine if
they would be appropriate or cost-effective.
In this case, an independent third-party review of the
application may have revealed issues with the proposed
research, increased the quality of research performed, and
provided additional credibility to the research and funding
process. Further transparency would have been added to the
process if the results of the review were published to an
Internet Web site upon the approval of the program.
2)Potential policy gaps: Currently, this bill does not address
two potential policy gaps:
a) Funding Cap: According to current bill language, every
project funded by ratepayers, as specified, will be subject
to independent review, as the bill currently does not
contain a cost cap in regards to the review. For example,
would the Legislature consider independent review of a
$1000 ratepayer funded project to be efficient and
cost-effective?
b) Timeline: Independent review is most useful when
conducted in a timely manner. However, a timeline or
parameters for review has not been established in the bill.
1)Prior Legislation:
SB 48 (Hill) of the 2013-14 Regular Session: Required the CPUC
to conduct an independent expert review, as specified, to
inform findings supporting any inclusion of research and
development expenses in electricity rates by CPUC-regulated
utilities. Died in the Assembly Utilities and Commerce
Committee.
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REGISTERED SUPPORT / OPPOSITION:
Support
None on file.
Opposition
None on file.
Analysis Prepared by:Darion Johnston / U. & C. / (916) 319-2083