BILL ANALYSIS Ó AB 2454 Page 1 Date of Hearing: May 18, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2454 (Williams) - As Amended May 4, 2016 ----------------------------------------------------------------- |Policy |Utilities and Commerce |Vote:|10 - 3 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill modifies the procurement requirements an electrical corporations regulated by the California Public Utilities Commission (PUC) must propose and the PUC must approve. AB 2454 Page 2 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 AB 2454 Page 3 the requirements. COMMENTS: 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 needs. 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 AB 2454 Page 4 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 electricity. Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081