BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       AB 2868|
          |Office of Senate Floor Analyses   |                              |
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                                   THIRD READING 


          Bill No:  AB 2868
          Author:   Gatto (D), et al.
          Amended:  8/2/16 in Senate
          Vote:     21 

           SENATE ENERGY, U. & C. COMMITTEE:  7-2, 6/27/16
           AYES:  Hueso, Cannella, Hertzberg, Hill, Lara, Leyva, McGuire
           NOES:  Morrell, Gaines
           NO VOTE RECORDED:  Pavley, Wolk

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 8/11/16
           AYES:  Lara, Beall, Hill, McGuire, Mendoza
           NOES:  Bates, Nielsen

           ASSEMBLY FLOOR:  51-27, 6/1/16 - See last page for vote

           SUBJECT:   Energy storage


          SOURCE:    Author


          DIGEST:  This bill requires investor-owned utilities (IOUs) to  
          file applications with the California Public Utilities  
          Commission (CPUC) for programs and investments to accelerate  
          widespread deployment of distributed energy storage systems.

          ANALYSIS:  

          Existing law:
          
          1)Requires the CPUC to determine appropriate targets, if any,  
            for load-serving entities (LSEs) to procure energy storage  
            systems.  Requires LSEs to meet any targets adopted by the  
            CPUC by 2015 and 2020.  Requires publicly owned utilities  








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            (POUs) to set their own targets for the procurement of energy  
            storage and then meet those targets by 2016 and 2021.  (Public  
            Utilities Code §2835 et seq.) 

          2)Directs the California Energy Commission (CEC) and the CPUC,  
            where feasible, to authorize procurement of resources to  
            provide grid reliability services that minimize reliance on  
            system power and fossil fuel resources and, where feasible,  
            cost effective, and consistent with other state policy  
            objectives, increase the use of large- and small-scale energy  
            storage.  (Public Utilities Code §400) 

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

          This bill:

          1)Directs the CPUC, in consultation with the California Air  
            Resources Board (ARB) and the CEC, to direct IOUs to file  
            applications for programs and investments to accelerate  
            widespread deployment of distributed energy storage systems to  
            achieve ratepayer benefits, reduce dependence on petroleum,  
            meet air quality standards, and reduce emissions of greenhouse  
            gases. 

          2)Authorizes the CPUC to approve, or modify and approve,  
            programs and investments in distributed energy storage systems  
            with appropriate energy storage management systems and  
            reasonable mechanisms for cost recovery from all distribution  
            customers for distribution level distributed energy storage  
            systems, and from transmission customers for transmission  
            level distributed energy storage systems, if they are  
            consistent with the section, do not compete unfairly with  
            nonutility enterprises, and are in the interest of the  
            ratepayers.

          3)Defines "compete unfairly with nonutility enterprises" to mean  
            to eliminate the ability of nonutility enterprises to install  
            distributed energy storage systems for the benefit of utility  
            customers.









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          4)Requires the CPUC to first approve programs and investments  
            that provide distributed energy storage systems to industrial,  
            commercial, and low-income customers. 

          5)Authorizes the CPUC, beginning January 1, 2019, to approve  
            programs and investments offered to residential customers who  
            enroll in TOU pricing.
          6)Defines "distributed energy storage system" as an energy  
            storage system with a useful life of at least 10 years that is  
            located on the customer side of the meter.

          7)Defines "energy storage management system" as a system by  
            which an IOU can manage the charging and discharging of the  
            distributed energy storage system in a manner that provides  
            benefits to ratepayers.

          8)Sunsets all of the above provisions as of January 1, 2020.

          Background

          State encourages procurement of energy storage.  As the state  
          becomes increasingly reliant on intermittent renewable energy  
          resources, it will need options to allow it to flexibly manage  
          electric supply and demand.  Energy storage is one technology  
          that allows for such flexible management.

          Existing state programs seek to foster development and  
          deployment of energy storage systems.  Statute requires the CPUC  
          to determine appropriate targets, if any, for LSEs to procure  
          energy storage systems by 2015 and 2020, and directed POUs to  
          set their own comparable energy storage system procurement  
          targets. [AB  2514, Skinner, Chapter 469, Statutes of 2010)]   
          The CPUC, in implementing AB 2514, established the following  
          energy storage system procurement targets applicable to the  
          state's three largest electric IOUs [See CPUC Decision  
          13-10-040.]:
          
           -------------------------------------------------------------- 
          |                                                              |
           -------------------------------------------------------------- 
          |-----------------------------------+----+----+----+----+-----|
          |Energy Storage Procurement Targets |2014|2016|2018|2020|Total|








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          |                                   |    |    |    |    |     |
          |-----------------------------------+----+----+----+----+-----|
          |Southern California Edison (SCE)   |    |    |    |    |     |
          |-----------------------------------+----+----+----+----+-----|
          |Transmission                       |  50|  65|  85| 110|  310|
          |-----------------------------------+----+----+----+----+-----|
          |Distribution                       |  30|  40|  50|  65|  185|
          |-----------------------------------+----+----+----+----+-----|
          |Customer                           |  10|  15|  25|  35|   85|
          |-----------------------------------+----+----+----+----+-----|
          |Subtotal SCE                       |  90| 120| 160| 210|  580|
          |-----------------------------------+----+----+----+----+-----|
          |Pacific Gas and Electric (PG&E)    |    |    |    |    |     |
          |-----------------------------------+----+----+----+----+-----|
          |Transmission                       |  50|  65|  85| 110|  310|
          |-----------------------------------+----+----+----+----+-----|
          |Distribution                       |  30|  40|  50|  65|  185|
          |-----------------------------------+----+----+----+----+-----|
          |Customer                           |  10|  15|  25|  35|   85|
          |-----------------------------------+----+----+----+----+-----|
          |Subtotal PG&E                      |  90| 120| 160| 210|  580|
          |-----------------------------------+----+----+----+----+-----|
          |San Diego Gas and Electric (SDG&E) |    |    |    |    |     |
          |-----------------------------------+----+----+----+----+-----|
          |Transmission                       |  10|  15|  22|  33|   80|
          |-----------------------------------+----+----+----+----+-----|
          |Distribution                       |   7|  10|  15|  23|   55|
          |-----------------------------------+----+----+----+----+-----|
          |Customer                           |   3|   5|   8|  14|   30|
          |-----------------------------------+----+----+----+----+-----|
          |Subtotal SDG&E                     |  20|  30|  45|  70|  165|
          |-----------------------------------+----+----+----+----+-----|
          |Total IOU Energy Storage           | 200| 270| 365| 490|1325 |
          |Procurement Targets                |    |    |    |    |     |
           ------------------------------------------------------------- 
          The CPUC reports the IOUs have each progressed in meeting their  
          energy storage procurement goals.  However, none has yet met its  
          final procurement goal in any category, other than SCE, which  
          has already exceeded the procurement goal for customer-side  
          storage several times over.

          The state has also provided financial incentives to energy  








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          storage systems.   Over the last several years, the CPUC reports  
          that the Self-Generation Incentive Program (SGIP), which the  
          CPUC administers, has awarded $42 million to nearly 1,200 energy  
          storage projects. 


           ------------------------------------------------------------------- 
          |               SGIP Awards to Energy Storage Systems               |
           ------------------------------------------------------------------- 
          |---------+------+------------+----------+------------+-------------|
          | Years   |Projec| Installed  |Incentive |  Reserved  | Incentives  |
          |2009-2015|  ts  |  Capacity  |   Paid   |  Capacity  |Reserved     |
          |         |      |    (kW)    |          |    (kW)    |             |
          |---------+------+------------+----------+------------+-------------|
          |   Totals|  1175|            |$41,547,42|            |             |
          |         |      |            |        6 |            |$149,215,781 |
          |         |      |            |          |            |             |
          |         |      |         23 |          |         92 |             |
           ------------------------------------------------------------------- 

          The CPUC is currently considering revisions to SGIP program  
          eligibility.  While the CPUC has yet to make a decision about  
          program revisions, a staff proposal recommends reserving at  
          least 75 percent of future program awards for energy storage  
          systems.  A primary rationale for this storage-focus is the CPUC  
          staff's belief that the energy storage industry is ripe for  
          market transformation, so that system subsidies have the  
          potential or even the likelihood to lead to decreases in energy  
          storage system costs.

          Time-of-use rates.  TOU rates are a mechanism to shape demand  
          for energy.  TOU rates rely on 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.  


          Currently, the CPUC requires all commercial and industrial  
          customers of the IOUs to participate in TOU rates.  Statute  
          authorizes the CPUC to allow or require IOUs to offer TOU rates  
          to residential customers beginning in 2018.  The CPUC has  
          recently required the IOUs to offer mandatory TOU rates to  








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          residential customers beginning in 2019, with the option for the  
          customer to opt out of such rates at his or her request.  

          The use of energy storage systems has the potential to  
          complement TOU rates.  This is because the operator of an energy  
          storage system of a customer on TOU rates could charge the  
          storage system when electricity rates are low (signaling  
          abundance) and discharge the storage system when electricity  
          rates are high (signaling scarcity). 

          Focus on customer-side energy storage meant to ensure storage  
          systems benefit customers directly.  This bill limits the energy  
          storage programs and investments the IOUs are to propose to only  
          systems located on the customer side of the electricity meter.   
          The limitation prevents the IOUs from proposing programs and  
          investments in energy storage systems to be installed on  
          electricity transmission or distribution systems.  This is by  
          design.  The author reports that he intends the IOUs' programs  
          and investments to benefit IOU customers as a whole and  
          individual customers specifically; the best way to ensure  
          individual customers benefit from the IOU programs and  
          investments is to limit them to the customer side of the meter.

          Arguably, individual customers can benefit from energy storage  
          systems located at the transmission level, the distribution  
          level and behind the customer meter.  The author's intent seems  
          to be to encourage deployment of systems that provide direct  
          benefits - meaning lower electric utility bills - to the  
          customer.  Energy storage systems on the customer side of the  
          meter can lower a customer's electric utility bill.

          Short timeframe intended to spur fast action on energy storage.   
          The author intends to encourage rapid deployment of energy  
          storage technologies.  For this reason, this bill sunsets on  
          January 1, 2020.  The author views the short duration of the  
          program and encouraging quick action.  However, action at the  
          CPUC is rarely quick.  Its proceedings to implement bills can  
          take years.  In any case, the Legislature can always extend the  
          program sunset at a later date if becomes practically necessary.

          Related/Prior Legislation
          








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          AB 2514 (Skinner, Chapter 469, Statutes of 2010) required the  
          CPUC to determine appropriate targets, if any, for LSEs to  
          procure energy storage systems.  The bill required LSEs to meet  
          any targets adopted by the CPUC by 2015 and 2020.  The bill  
          required POUs to set their own targets for the procurement of  
          energy storage and then meet those targets by 2016 and 2021.

          AB 33 (Quirk, 2015) reiterates existing law, which states that  
          new pumped hydroelectric storage facilitates eligible for any  
          increased energy storage system targets adopted by the CPUC.   
          The bill is pending before the full Senate.

          SB 886 (Pavley, 2015) requires appropriate energy storage system  
          procurement targets; requires each load-serving entity and  
          locally owned public electric utility to plan for the  
          procurement of energy storage systems before fossil-fuel-based  
          generation; and requires each electrical corporation to propose  
          measures to encourage customers to install energy storage  
          systems.  The bill passed the Senate 25-14 and is pending in the  
          Assembly Committee on Appropriations.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes           


          According to the Senate Appropriations Committee:

           One-time costs of approximately $500,000 (Utilities  
            Reimbursement Account) to the CPUC for a consulting budget.


           Approximately $419,000 (Utilities Reimbursement Account)  
            annually to the CPUC for staffing costs. 


           Minor costs to the ARB for consultation.


          SUPPORT:   (Verified8/16/16)










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          Association of California Water Agencies
          California State Association of Electrical Workers
          Coalition of California Utility Employees
          San Diego County Water Authority
          SolarCity


          OPPOSITION:   (Verified8/16/16)


          Advanced Energy Economy
          California Energy Storage Alliance
          California Solar Industries Association
          Marin Clean Energy
          San Francisco Public Utilities Commission
          Silicon Valley Leadership Group
          Solar Energy Industries Association
          Sonoma Clean Power
          TechNet
          The Alliance for Solar Choice
          The Utility Reform Network

          ARGUMENTS IN SUPPORT:  According to the author:

            This bill requires the CPUC, in consultation with the ARB and  
            the State Energy Resources Conservation and Development  
            Commission, to direct electric corporations to file  
            applications for programs and investments to accelerate  
            widespread deployment of distributed energy storage systems. 

            Energy storage systems will help customers manage energy costs  
            and improve electrical grid reliability by reducing overall  
            system peak energy demands.  Increased demand for energy  
            storage technologies will drive new business opportunities and  
            will help keep and create manufacturing and industrial jobs in  
            California.  Energy storage also offers valuable benefits to  
            public and environmental health by assisting California  
            achieve its greenhouse gas emissions goals.

          ARGUMENTS IN OPPOSITION:Representatives of community choice  
          aggregators (CCAs), such as Marin Clean Energy, contend this  
          bill will require the CPUC to assign costs for the customer-side  








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          energy storage programs and investments required by this bill to  
          all transmission and distribution customers, CCA customers  
          included, though they receive no benefit from the program or  
          investments.

          In addition, the California Energy Storage Alliance contends  
          this bill could excessively authorize utility-owned  
          customer-sited energy storage investments and that this bill  
          goes too far in promoting utility-owned customer-sited energy  
          storage potentially to the detriment of businesses engaged in  
          the deployment and operation of third-party customer-sited  
          energy storage.


          ASSEMBLY FLOOR:  51-27, 6/1/16
          AYES:  Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown,  
            Burke, Calderon, Campos, 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, Levine, Lopez,  
            Low, McCarty, Medina, Mullin, O'Donnell, Quirk, Ridley-Thomas,  
            Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber,  
            Williams, Wood, Rendon
          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Chávez, Dahle, Beth Gaines, Gallagher, Grove, Harper, Jones,  
            Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez,  
            Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk
          NO VOTE RECORDED:  Hadley, Nazarian

          Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
          8/16/16 17:34:56


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