BILL ANALYSIS Ó AB 2454 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2454 (Williams) As Amended August 16, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |58-20 |(June 2, 2016) |SENATE: |26-13 |(August 22, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: U. & C. SUMMARY: Modifies the procurement requirements an electrical corporation 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 AB 2454 Page 2 repowered gas-fired generation facility. 3)Requires the CPUC to report to the Legislature, 60 days after issuing a final decision approving capacity additions in excess of 100 megawatts (MW) that required prioritized procurement of energy efficiency and demand resources is achieved. 4)Establishes chaptering out language for changes proposed by both this bill and AB 1937 (Williams) of the current legislative session to the same section in the Public Utilities Code. The Senate amendments: 1)Remove a requirement that electrical corporations undertake all feasible efforts to meet any identified resource need through available renewable energy, energy storage, energy efficiency, and demand reduction resources that are cost effective, reliable, and feasible. 2)Establish chaptering out language and also change reference from "gas-fired generation resources from new facilities" to "new generating units." FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS: 1)Purpose: According to the author, demand response (DR) is a valuable tool that can enhance system reliability by reducing peak demand on the grid when it is most expensive to generate AB 2454 Page 3 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 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 the overall cost of energy procurement because generally it has been 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: Sue Kateley / U. & C. / (916) 319-2083 FN: 0004527 AB 2454 Page 4