BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2454


                                                                    Page  1





          ASSEMBLY THIRD READING


          AB  
          2454 (Williams)


          As Amended  May 31, 2016


          Majority vote


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Utilities       |10-3 |Gatto, Burke, Eggman, |Patterson, Chávez,  |
          |                |     |                      |Dahle               |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Cristina Garcia,      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Eduardo Garcia,       |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Roger Hernández,      |                    |
          |                |     |Obernolte, Quirk,     |                    |
          |                |     |Santiago, Williams    |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |15-5 |Gonzalez, Bloom,      |Bigelow, Gallagher, |
          |                |     |Bonilla, Bonta,       |Jones, Obernolte,   |
          |                |     |Calderon, Chang,      |Wagner              |
          |                |     |Daly, Eggman, Eduardo |                    |
          |                |     |Garcia, Roger         |                    |








                                                                    AB 2454


                                                                    Page  2





          |                |     |Hernández, Holden,    |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Weber, Wood           |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          SUMMARY:  Modifies the procurement requirements an electrical  
          corporations regulated by the California Public Utilities  
          Commission (CPUC) must propose and the CPUC must approve.   
          Specifically, this bill:


          1)Requires electrical corporations to consider the findings in  
            the Demand Response Potential Study, ordered by the CPUC, 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.  Requires the CPUC 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.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, the CPUC 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 the requirements.









                                                                    AB 2454


                                                                    Page  3






          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 CPUC  
            and the CPUC is required to review and accept, modify or  
            reject the proposed plan based on specific requirements.  


            In 2014, the CPUC 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  
            CPUC 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. 


            DR 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 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  








                                                                    AB 2454


                                                                    Page  4





            electricity. 




          Analysis Prepared by:                                             
                          Sue Kateley / U. & C. / (916) 319-2083  FN:  
          0003229