BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 2271 Hearing Date: 6/27/2016
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|Author: |Quirk |
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|Version: |6/13/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Electricity: research programs: peer review
DIGEST: This bill requires the California Public Utilities
Commission (CPUC) to establish a procedure for independent peer
review of research programs proposed by an electrical
corporation.
ANALYSIS:
Existing law:
1)Authorizes the CPUC to regulate private corporations that own,
operate, control, or manage a line, plant, or system for the
transportation or the production, generation, transmission, or
furnishing of heat, power, or storage directly or indirectly
to or for the public; and 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, including electrical and
gas corporations, subject to its jurisdiction. (Article 12 of
the California Constitution)
2)Requires that all charges demanded or received by any public
utility for any product, commodity or service be just and
reasonable, and that every unjust or unreasonable charge is
unlawful. (Public Utilities Code §451)
3)Authorizes the CPUC to allow recovery of expenses for research
and development within rates to be charged by electrical, gas,
heat, or telephone corporations and establishes guidelines for
evaluating research, development, and demonstration programs
AB 2271 (Quirk) PageB of?
proposed by electrical and gas corporations. (Public
Utilities Code §§740-740.1)
4)Establishes the Public Interest Energy Research,
Demonstration, and Development Program (PIER Program) - a
research, development, and demonstration program intended to
advance science and technology in the fields of energy
efficiency, renewable energy, advanced electricity
technologies, energy-related environmental protection,
transmission and distribution, and transportation
technologies. (Public Resources Code §25620 et seq.)
5)Establishes the Electric Program Investment Charge (EPIC)
program, a utility-funded, California Energy Commission
(CEC)-administered program of applied research and
development, technology demonstration and deployment, and
market facilitation for clean energy technologies and
approaches for the benefit of ratepayers. (Public Utilities
Code §25711.5)
This bill:
1)Requires the CPUC to establish a procedure for independent
peer review of research programs proposed by an electrical
corporation, to be conducted in accordance with the procedure
upon the CPUC's receipt of a proposed research program.
2)Defines a "research programs" as programs for the development
of novel and innovative processes that are proposed by
electrical corporations for approval by the commission and
that would be funded through the rates of ratepayers of the
electrical corporations.
3)Specifies that "research programs" do not include programs
that are funded pursuant to the PIER Program or the EPIC
program.
Background
Independent peer review. Generally stated, research peer review
is an independent, expert third-party assessment of a project.
Such a review is meant to identify problems with a proposal
that, ideally, can be fixed in subsequent iterations of the
proposal.
AB 2271 (Quirk) PageC of?
The competitive process incorporating peer review of proposals
is the standard among many granting institutions. Major federal
agencies that incorporate peer review for grant funding include
the Department of Agriculture, the National Science Foundation,
the National Institutes of Health, the Environmental Protection
Agency, the National Institute of Standards and Technology, the
National Oceanic and Atmospheric Administration, and the
National Aeronautics and Space Administration.<1>
Peer review not standard requirement for ratepayer-funded
research. The CPUC does not require peer review of
ratepayer-funded research proposals. As evidence of the need
for such review, the author relays the story of the CPUC
decision, in 2012, to authorize ratepayer funding of research at
Lawrence Livermore National Lab (LLNL).
In 2012, the CPUC authorized the investor-owned electric
utilities (IOUs - PG&E, SCE, SDG&E) to enter into a five-year
research and development agreement with LLNL.<2> The CPUC
authorized ratepayer funding of the 21st Century Energy Systems
(CES-21) program at costs of $30 million per year to be
collected by the IOUs and transferred to LLNL. The Utility
Reform Network and the then-named Division of Ratepayer
Advocates (DRA) both opposed the decision.
The CPUC identified that LLNL has expertise in supercomputing
facilities and analysis, which will be central to conducting the
research. In response to an inquiry from DRA, the utilities
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 for the CES-21 program. However,
they also stated that such an evaluation would be made for
specific proposals to be funded by CES-21 by the CES-21 Board of
Directors.<3>
Subsequent to the funding decision, the CPUC developed a set of
criteria that each funded project must adhere to, called the
Cooperative Research and Development Agreement. While the
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<1> US General Accounting Office, "Federal Research: Peer Review
Practices at Federal Science Agencies Vary." GAO/RCED-99-99.
March, 1999.
<2> CPUC D12-12-031, December 20, 2012
<3>
LawrenceLivermoreNationalLaboratoryPartnership_DR_DRA_004-Q29
AB 2271 (Quirk) PageD of?
criteria do not include "peer review" of proposals explicitly,
it is required that each proposal has the support of a majority
of the Board of Directors. The Board of Directors consists of
six members: three from academia or research institutions and
three from the utilities.
The author contends the LLNL research funding proposal would
have benefitted from peer review and serves as justification for
the need to require peer review of research proposals. In
addition to the 2012 LLNL proposal, the CPUC approves tens of
million in ratepayer-funded research annually.
Good for the goose, but not good for PIER or EPIC. The CEC
administers two IOU-ratepayer-funded research, design and
development programs - PIER and EPIC.
PIER is designed 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.<4> However, the program is now
ramping down as it failed to win legislative reauthorization
several years ago.
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
three major investor-owned utilities (IOUs).<5> 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 percent by the CEC and 20 percent 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.
Neither PIER nor EPIC uses independent peer review for every
proposal. As described by the CEC, it uses state employees with
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<4>
http://www.energy.ca.gov/2014publications/CEC-500-2014-035/CEC-50
0-2014-035-CMF.pdf
<5> http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/167664.pdf
AB 2271 (Quirk) PageE of?
area expertise and, when necessary, outside experts to review
research proposals for these programs according to published
criteria, using published results. The CEC notes that its
reviewers have no financial interest in the research in
question. While the author reports not being overly familiar
with the details of the review procedures applicable to these
two programs, he contends the review processes to be adequate
and therefore exempts them from the requirements of this bill.
But what is a "research program?" Helpfully, this bill provides
a definition of research program:
Programs for the development of novel and
innovative processes that are proposed by
electrical corporations for approval by the
commission and that would be funded through the
rates of ratepayers of the electrical
corporations.
Clear enough, it would seem. However, many parties - the Energy
Efficiency Council (EEIC), IOUs, and the CPUC - contend the
meaning, despite the definition is not clear, or at least open
to varying interpretations. The EEIC and PG&E fear this bill
could be applied very widely - and the CPUC notes their
interpretations do not seem unreasonable - and delay research
and innovation.
One partial remedy is to increase the dollar threshold provided
in this bill. Currently, this bill's requirements apply to any
research program proposed by an IOU if the program will cost
$50,000 or more. Few research proposals fall below that dollar
amount. If the threshold were to be raised significantly - the
author has suggested a threshold of $1 million - then only
financially substantial research programs, whatever that term
entails, would be subject to the requirements of this bill.
Another way to limit the scope of this bill is to apply it only
to those research programs not subject to CPUC staff review.
The EEIC notes that certain projects are reviewed and filed with
the staff of the CPUC's Energy Division.
Given the ambiguity around the term "research program," the
author may wish to amend this bill to limit its applicability to
research programs that 1) will cost more than $1 million and 2)
are not subject to direct, published review and approval by the
AB 2271 (Quirk) PageF of?
staff of the CPUC.
In any case, this bill provides authority to the CPUC to develop
the peer review procedures. The CPUC, in implementing this
bill, will have discretion to establish parameters and
definitions, including parameters and definitions regarding what
is meant by "research program," that make the procedures
practicable.
Prior/Related Legislation
SB 48 (Hill, 2014) would have 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. The bill passed
the Senate 35-0 but failed in the Assembly Committee on
Utilities and Commerce.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
None received
OPPOSITION:
California Energy Efficiency Industry Council
Pacific Gas and Electric Company, unless amended
ARGUMENTS IN SUPPORT: According to the author:
In the case of the LLNL funding proposal, 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.
ARGUMENTS IN OPPOSITION: The EEIC and PG&E similarly argue
that this bill's applicability is difficult to determine and may
AB 2271 (Quirk) PageG of?
lead to unnecessary, bureaucratic and time-consuming review of
projects, thereby discouraging and delaying important
innovations and insights.
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