BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2868| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 AB 2868 Page 2 (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. AB 2868 Page 3 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| AB 2868 Page 4 | | | | | | | |-----------------------------------+----+----+----+----+-----| |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 AB 2868 Page 5 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 AB 2868 Page 6 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 AB 2868 Page 7 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) AB 2868 Page 8 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 AB 2868 Page 9 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 **** END ****