BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 2454

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          Date of Hearing:  May 18, 2016


                               Lorena Gonzalez, Chair

          2454 (Williams) - As Amended May 4, 2016

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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   


          This bill modifies the procurement requirements an electrical  
          corporations regulated by the California Public Utilities  
          Commission (PUC) must propose and the PUC must approve.   


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          Specifically this bill:

          1)Requires electrical corporations to consider the findings in  
            the Demand Response Potential Study, ordered by the PUC, when  
            determining the availability of cost-effective, reliable, and  
            feasible demand response resources.

          2)Requires the electrical corporation to meet any identified  
            resource need through available renewable energy, energy  
            storage, energy efficiency, and demand reductions that are  
            cost effective, reliable, and feasible.  This bill requires  
            the PUC to require the electrical corporation to demonstrate  
            fulfillment of this provision prior to approving a contract  
            for any new or repowered gas-fired generation facility.

          3)Requires the PUC to report to the Legislature, 60 days after  
            issuing a final decision approving capacity additions in  
            excess of 100 MW that required prioritized procurement of  
            energy efficiency and demand resources is achieved.

          FISCAL EFFECT:

          Increased annual costs to the PUC of approximately $320,000 to  
          comply with the reporting requirements (Public Utilities  
          Commission Utilities Fund.)

          The PUC anticipates this bill will require an additional staff  
          analyst to track procurement decisions across numerous sections,  
          including storage, self-generation incentive program, combined  
          heat and power, and others to demonstrate the procurement  
          prioritized demand reduction and energy efficiency resources.   
          This bill will also require an administrative law judge to  
          ensure the decisions contain the analysis necessary to satisfy  


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          the requirements.


          1)Purpose.  According to the author, demand response is a  
            valuable tool that can enhance system reliability by reducing  
            peak demand on the grid when it is most expensive to generate  
            electricity, provide economic alternatives to generation,  
            reduce greenhouse gas emissions, help with renewable resource  
            integration, and provide customers options for managing their  
            energy needs. This bill will ensure demand response resources  
            are integrated into the wholesale market as supply-side  
            resources to address transmission level reliability issues and  
            used on the distribution system to address local reliability  

          2)Background.  Under existing law, each electrical corporation  
            is required to file a proposed procurement plan with the PUC  
            and the PUC is required to review and accept, modify or reject  
            the proposed plan based on specific requirements.  

            In 2014, the PUC issued a decision indicating its intention to  
            adopt a firm demand response (DR) goal specific to each  
            utility to increase participation in DR.  To that end, the PUC  
            authorized the undertaking of a DR Potential Study to  
            determine the amount of the DR capacity in California. This  
            report is due to be completed in 2016. 

            Demand response refers to altering energy usage in response to  
            an event or a schedule. By altering demand for energy at a  
            given time in a specified amount, DR can help maintain  


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            reliable operation of the electricity grid. Used correctly, it  
            can also reduce overall cost of energy procurement because it  
            has been generally true that the electricity demanded when  
            load is highest is always the most expensive electricity. A  
            reduction in demand can avoid the need for that most expensive  

          Analysis Prepared by:Jennifer Galehouse / APPR. / (916)