BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2454|
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THIRD READING
Bill No: AB 2454
Author: Williams (D)
Amended: 8/16/16 in Senate
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 6-3, 6/27/16
AYES: Hertzberg, Hill, Lara, Leyva, McGuire, Pavley
NOES: Morrell, Cannella, Gaines
NO VOTE RECORDED: Hueso, Wolk
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 58-20, 6/2/16 - See last page for vote
SUBJECT: Energy: procurement plans
SOURCE: Clean Power Campaign
DIGEST: This bill directs the California Public Utilities
Commission (CPUC), to (1) require an investor-owned utility
(IOU) to demonstrate that it will first meet its unmet resource
needs through all available energy efficiency and demand
reduction resources that are cost effective, reliable, and
feasible; (2) require an IOU to demonstrate compliance with its
approved procurement plan prior to approving the IOU's contract
for any new gas-fired generating unit, and (3) consider the
findings of the Demand Response Potential Study.
Senate Floor Amendments of 8/16/16 add a new section that
include the provisions of AB 2454 itself, as well as the
provisions of another bill - AB 1937 (Gomez) - that also affects
Public Utilities Code Section 454.5. The amendments also add a
contingency clause stating that this bill only becomes effective
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if (1) both it and AB 1937 are enacted, (2) each bill amends
Public Utilities Code Section 454.5, and (3) this bill is
enacted after AB 1937. Finally, the amendments also change
reference from "gas-fired generation resources from new
facilities" to "new generating units." The author intends the
change to encompass bids for new facilitates as well as bids for
new generating units at existing facilities.
ANALYSIS:
Existing law:
1)Requires electric utilities to procure 50 percent of their
retail sales of electricity from renewable energy by 2030.
This is known as the Renewable Portfolio Standard (RPS).
(Public Utilities Code §399.11 et seq.)
2)Requires each IOU to file an electricity procurement plan with
the CPUC, and requires the CPUC to review and accept, modify
or reject each IOU's proposed electricity procurement plan.
3)Provides that, among other elements, the procurement plan must
include a showing that it will achieve the IOU first meeting
its unmet resource needs through all available energy
efficiency and demand reduction resources that are cost
effective, reliable, and feasible. (Public Utilities Code
§454.5)
4)Requires the CPUC to adopt a process for each IOU to file an
integrated resource plan (IRP) to ensure IOUs meet the
greenhouse gas (GHG) emissions reduction targets for the
electricity sector; procure at least 50 percent eligible
renewable energy resources by December 31, 2030; enable each
IOU to fulfill its obligation to serve its customers at just
and reasonable rates; minimize impacts on ratepayers' bills;
ensure system and local reliability; strengthen the diversity,
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sustainability, and resilience of the bulk transmission and
distribution systems, and local communities; enhance
distribution systems and demand-side energy management; and
minimize localized air pollutants and other GHG emissions,
with early priority on disadvantaged communities. (Public
Resources Code §454.52)
This bill:
1)Requires the CPUC, prior to approving a contract for any new
or repowered gas-fired generation resource, to require an IOU
to demonstrate that it will first meet its unmet resource
needs through all available energy efficiency and demand
reduction resources that are cost effective, reliable, and
feasible.
2)Requires the CPUC to review and accept, modify, or reject any
updates or amendments to each IOU's procurement plan.
3)Requires the CPUC, in determining the availability of energy
demand reduction resources that are cost effective, reliable,
and feasible for purposes of reviewing an IOU's procurement
plan, to consider the findings in specified studies and the
extent that any demand reduction is consistent with commission
policy.
Background
Procurement plans tell how an IOU will procure electricity to
meet the needs of its customers. The CPUC describes its
long-term procurement plan (LTPP) proceedings as intended to
ensure a safe, reliable and cost-effective electricity supply in
California through integration and refinement of a comprehensive
set of procurement policies, practices and procedures. LTPP
proceedings take a 10-year-ahead look at system, local, and
flexible needs. Proceeding assumptions are revised every two
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years to incorporate changes in the resource mix and revisions
to state policies.
An IOU's procurement plan - part of an LTPP proceeding - details
what energy resources an IOU is going to procure and how it will
procure them. These plans must adhere to state policies,
including the loading order, which mandates that utilities seek
to meet need first though cost-effective energy efficiency and
demand response, followed by procurement of renewable energy
and, lastly, procurement of fossil-fuel-generated electricity.
If an IOU's procurement plan does not comply with state policies
or adequately balance safety, reliability, cost, and
environmental goals, the CPUC orders the IOU to modify the plan.
Current law requires an IOU's procurement plan to show that the
IOU will first meet its unmet resource needs through all
available energy efficiency and demand reduction resources that
are cost effective, reliable, and feasible. This bill adds new
teeth to the requirement, stating that the CPUC shall require
the IOU to demonstrate compliance with the preceding requirement
before approving a contract for any new gas-fired generation
unit. But new teeth might not be needed.
In 2015, the Legislature passed SB 350 (De León, Chapter 547,
Statutes of 2015). In addition to significantly increasing the
state's commitment to renewable energy and energy efficiency,
the statute requires the IOUs (as well as the publicly owned
utilities) to develop and regularly update integrated resources
plans (IRPs). The plans, which the CPUC must review and
approve, are to detail how each IOU is to meet the state's clean
energy and environmental objectives. The CPUC, in approving an
IOU's proposed procurement, is to ensure the proposal is
consistent with the IOU's IRP.
If the IRP process works as intended, then there would seem to
be no need for this bill. This is because, according to the
CPUC, the IRP process will subsume the LTPP. The IRP process is
in its early stages of development. It is as yet unknown how
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effectively the IRP process will function.
Demand response. Demand response refers to a variety of
mechanisms by which an electricity customer may vary its demand
for electricity in response to signals, such as a change in
price or the availability of incentives. For example,
time-of-use rates use price signals to encourage customers to
reduce their use of electricity when the relative availability
of electricity is low or, in some cases, to increase their
electricity use when relative supply is abundant.
The CPUC is currently considering establishing binding demand
response goals applicable to the state's regulated electric
utilities. As part of that consideration, the CPUC authorized a
study to determine the potential of demand response as a
resource to meet California's energy needs. In April of this
year, a team at Lawrence Berkeley National Laboratories issued
phase one of the study.
[file:///C:/Users/dickenjm/Downloads/CPUC%20CA%20DR%20Potential%2
0Study_Phase1%20(1).pdf.] The team will issue subsequent phases
of the study. This bill seeks to ensure that the CPUC considers
the study's findings regarding technically and economically
achievable demand reduction when it review the IOU's procurement
plans.
Related/Prior Legislation
AB 1937 (Gomez, 2016) requires an electric IOU bids for new
gas-fired generation resources to consider, and give preference
to, bids for resources that are not gas-fired generation
resources located in communities that suffer from cumulative
pollution burdens. The bill was passed by the Senate Committee
on Energy, Utilities and Communications by a vote of 7-3 and is
pending consideration by the full Senate.
SB 350 (De León, Chapter 547, Statutes of 2015) created, among
other things, the obligation that IOUs develop and regularly
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update IRPs, which the CPUC must review and approve, and are to
detail how each IOU is to meet the state's clean energy and
environmental objectives.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified8/16/16)
Clean Power Campaign (source)
Advanced Energy Management Alliance
EnerNOC
Environmental Defense Fund
Silicon Valley Leadership Group
TechNet
OPPOSITION: (Verified8/16/16)
None received
ARGUMENTS IN SUPPORT: According to the author:
The LTPP proceeding develops assumptions and forecasts of
resource availability and determines if the existing planned
mix of resources is sufficient to meet future needs. An IOU's
proposed procurement plan must include certain elements,
including a requirement that it will first meet its unmet
needs through all available energy efficiency and demand
reduction resources that are cost effective, reliable, and
feasible.
Demand response is defined as changes in electricity use by
customers from their normal consumption pattern in response to
fluctuations in the price of electricity, financial incentives
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to reduce consumption, changes in wholesale market prices, or
changes in grid conditions. In other words, demand response
reduces energy demand when power is needed most, rather than
increasing supply from carbon-emitting fuels. As of 2014, the
CPUC bifurcated demand response programs take two forms:
1) Load modifying resources (LMR) modify load through
customers' behavioral change; for example, time-of-use
rates, and are administered by the IOUs or third-party
providers.
2) Supply-side resources reduce or increase demand at a
particular time and location and by a specific amount and
can be scheduled and dispatched into the CAISO energy
markets when and where needed, for example; the Base
Interruptible Program.
In December 2014, the CPUC authorized the undertaking of a
demand response Potential Study to determine the amount of
demand response that is potentially available in the State.
The Potential Study is currently being completed by the
Lawrence Berkeley National Lab and will answer some of the
most fundamental questions about the potential of demand
response and will consider all forms of demand response that
may be available to IOUs or the CAISO, as well as the
potential for integrating demand response with other
distributed energy resources, such as electric vehicles and
solar, to meet a broader range of system needs. The Potential
Study will be a transparent framework that associates numbers
in gigawatts with every demand response end use, how many
hours of avoided generation are available, and a forecast of
costs. These models will extend to 2025 to provide a
comprehensive overview of the role that demand response can
provide to meet California's GHG reduction goals.
However, before the study's completion, the CPUC adopted a
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decision (R13-09-011) in November 2015 that significantly
devalued certain LMR programs and prohibited IOUs from
attributing any capacity value to these programs. This
preemptive decision significantly impacts the ability for IOUs
to incorporate demand response into the LTTP process.
AB 2454 highlights the significant challenge that demand
reduction has faced as an under-utilized resource in danger of
being prematurely undervalued by the CPUC. This bill
solidifies the role demand reduction has in the LTPP
proceeding by clarifying that the CPUC shall take the results
of the study into account when IOUs include demand reduction
in their required portfolio of short and long term strategies.
ASSEMBLY FLOOR: 58-20, 6/2/16
AYES: Alejo, Travis Allen, Arambula, Atkins, Baker, Bloom,
Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chang, Chau,
Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman,
Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin,
Jones-Sawyer, Lackey, Levine, Lopez, Low, Maienschein,
McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk,
Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Waldron, Weber, Williams, Wood, Rendon
NOES: Achadjian, Bigelow, Brough, Chávez, Dahle, Beth Gaines,
Gallagher, Grove, Harper, Jones, Linder, Mathis, Mayes,
Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Wilk
NO VOTE RECORDED: Hadley, Kim
Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
8/17/16 16:42:58
**** END ****
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