BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2868


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          Date of Hearing:  April 20, 2016


                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE


                                  Mike Gatto, Chair


          AB 2868  
          (Gatto) - As Amended March 17, 2016


          SUBJECT:  Energy storage


          SUMMARY:  Requires the California Public Utilities Commission  
          (CPUC) to direct electrical corporations to file applications  
          for programs and investments to accelerate widespread deployment  
          of distributed energy storage systems.  Specifically, this bill:  
           


          1)Requires the CPUC, in consultation with the State Air  
            Resources Board and the State Energy Resources Conservation  
            and Development Commission, to direct electrical corporations  
            to file applications for programs and investments to  
            accelerate widespread deployment of distributed energy storage  
            systems.


          2)Requires the CPUC to first approve programs and investments  
            that provide distributed energy storage systems to industrial,  
            commercial, and low-income customers and, beginning January 1,  
            2019, authorizes the CPUC to approve programs and investments  
            for residential customers who enroll in time-variant pricing.


          EXISTING LAW:  








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          1)Authorizes, beginning January 1, 2018, the CPUC to require or  
            authorize an electrical corporation to employ default  
            time-of-use pricing for residential customers. (Public  
            Utilities Code Section 745)



          1)Requires the CPUC to determine appropriate targets, if any,  
            for each load-serving entity to procure viable and  
            cost-effective energy storage systems to be achieved by  
            December 31, 2015, and December 31, 2020. (Public Utilities  
            Code Section 2836)

          FISCAL EFFECT:  Unknown.





          COMMENTS:  


          1)Author's Statement: "Energy storage, the act of disconnecting  
            energy from when it is created and when it is used, is  
            critical to creating a reliable and efficient electrical grid.  
             Traditionally, storage has been accomplished via large water  
            pumping projects that pump water into a reservoir during the  
            hours when demand for electricity is low and then release  
            water to generate electricity during hours of peak electricity  
            demand.  As renewable energy technologies (such as solar and  
            wind) become more prevalent, local, customer-side storage  
            solutions provide an opportunity to capture excess energy and  
            store it for use until it is called on by the customer.   
            Similarly, storage technologies provide an opportunity to  
            shift a portion or a building's energy demand from on-peak to  
            off-peak times (load shifting).  Use of energy storage  
            technology not only increases the reliability of California's  








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            grid, but it increases the utility of renewable energy and can  
            reduce electricity bills.  Increased demand for energy storage  
            technologies will ease energy costs for large energy users,  
            will drive new business opportunities, and will help keep and  
            create manufacturing and industrial jobs in California."


          2)Background: On October 17, 2013, the CPUC approved D.  
            13-10-040 to establish storage procurement targets and  
            policies for load-serving entities (investor-owned utility  
            (IOU) and non-utility): For the IOUs, the CPUC set the  
            following targets for the IOUs: 1,325 megawatts (MW) of  
            storage by 2020 in four biennial solicitations (starting  
            December 2014), as follows: Pacific Gas and Electric (PG&E),  
            580 MW; Southern California Edison (SCE), 580 MW; San Diego  
            Gas and Electric (SDG&E), 165 MW. The CPUC divided the targets  
            into three "storage grid domains": Transmission-connected,  
            Distribution-level and Customer-Side of the Meter  
            applications. 


            For customer-side of the meter applications, the CPUC included  
            bill management/permanent load shifting, power quality, and  
            electric vehicle charging within energy storage. The CPUC set  
            total procurement targets on the customer-side of the meter at  
            85 MW for SCE, 85 MW for PG&E, and 30 MW for SDG&E.


             a)   According to SCE, it has procured approximately 171 MW  
               of customer-side storage through 2014 and has plans an  
               additional 50 MW. 


             b)   According to PG&E, it has procured approximately 91 MW  
               of customer-side storage through 2014 and has a target of  
               120 MW in 2016.


             c)   According to SDG&E it has procured 4.66 MW of  








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               customer-side storage in 2014 and has 20.29 MW pending  
               approval for 2016 with a target of 30 MW.


          3)Neither an Incentive Program or a Procurement Program: Current  
            programs to develop energy storage are limited to the  
            ratepayer-funded incentives provided by the Self-Generation  
            Incentive Program and utility procurement solicitations. 



            This bill does not require either an incentive or a  
            procurement solicitation. It allows a utility to design a  
            program that benefits ratepayers and provides utility  
            customers a way to better manage their energy bills. Initially  
            this bill is limited to industrial, commercial, and low income  
            programs.

            This bill does not specify the structure of the program or the  
            size of the program, which would allow the utilities to  
            develop a program that tailored to meet customer needs and  
            ratepayer benefits. Further, this bill is silent on the extent  
            a utility may partner with third-party energy storage  
            providers. To that extent, it allows the utilities to design  
            the program. 
            This bill requires that the costs be in the interest of  
            ratepayers in order for a utility to qualify for cost  
            recovery.  


          4)Time of Use Rates: In an attempt to reduce peak loads and/or  
            shift loads from peak to off-peak periods, utilities have  
            implemented "time-of-use" (TOU) rate structures that charge  
            for energy depending on the dime of day and season of the year  
            in which the energy is used. Industrial and commercial  
            customers are subject to the TOU tariffs of the load-serving  
            entity providing electric services, some of which also include  
            demand charges.  Similarly, Public Utilities Code Section 745  
            authorizes the CPUC to require or authorize an electrical  








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            corporation to employ default time-of-use pricing for  
            residential customers.

            Although TOU structures are effective, because of the nature  
            of their operations, industrial and commercial customers often  
            have challenges modifying their businesses to manage their  
            electricity consumption and costs.  More common, however, are  
            responsive changes in customer electricity usage, which modify  
            the peak time for electricity demand and effect demand charges  
            in rate design.

            Properly designed and dispatched energy storage systems will  
            help customers manage energy costs, help reduce overall system  
            peak energy demands, improve public health, and assist in  
            achieving greenhouse gas emissions goals.

            The CPUC is not required to implement residential customer  
            time of use rates until 2018.

          5)Sunset Date:  This bill requires the CPUC to first approve  
            those programs and investments that provide distributed energy  
            storage systems to industrial, commercial, and low-income  
            customers. After January 1, 2019, the CPUC may approve  
            programs and investments offered to residential customers who  
            enroll in time-variant pricing pursuant to Public Utilities  
            Code Section 745.
            This bill sunsets January 1, 2020.


          6)Arguments in Support: Supporters state that this bill will  
            significantly accelerate the deployment of energy storage  
            resources in California, where energy storage resources still  
            require further support to become mainstream resources  
            available for use in grid's and by electricity customers.



          REGISTERED SUPPORT / OPPOSITION:









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          Support


          California Energy Storage Alliance


          SolarCity




          Opposition


          None on file.




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