BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                               Senator Ben Hueso, Chair
                                 2015 - 2016  Regular 

          Bill No:          SB 723            Hearing Date:    4/21/2015
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          |Author:    |Pavley                                               |
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          |Version:   |4/13/2015    As Amended                              |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Jay Dickenson                                        |
          |           |                                                     |
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          SUBJECT: Energy efficiency:  United States Armed Forces bases and  
          facilities

            DIGEST:   This bill seeks to increase the availability of funds  
          for energy efficiency upgrades at military facilities.  Most  
          significantly, this bill authorizes military facilities to  
          calculate the savings from energy efficiency measures on military  
          facilities differently than savings for other energy efficiency  
          projects are calculated.

          ANALYSIS:
          
          Existing law requires the California Public Utilities Commission  
          (CPUC) to identify all potentially achievable cost-effective  
          electricity and natural gas efficiency savings and to establish  
          energy efficiency procurement targets and ratepayer-funded  
          programs for electrical and gas corporations.  (Public Utilities  
          Code  454.55 and 454.56.)

          This bill:

             1.   Requires the CPUC to approve financial incentives for  
               energy efficiency upgrades at military facilities through  
               existing energy efficiency programs administered by the  
               investor-owned utilities (IOUs).  The bill also requires the  
               CPUC to encourage the IOUs to expedite implementation of  
               energy efficiency measures at military facilities and to  
               enable achievement of additional energy goals by the  
               military, including demand response, self-generation, and  
               energy storage.  The bill directs the CPUC to identify other  
               potential sources of funding to achieve energy efficiency  







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               goals in military facilities, should it determine there are  
               insufficient ratepayer funds available to achieve the  
               military's energy efficiency goals.

             2.   Authorizes military facilities to calculate their energy  
               savings by comparing the facilities' existing energy usage,  
               as a whole, with the facilities' projected energy usage that  
               would be achieved from the implementation of the energy  
               efficiency measures.

          Background

           Energy Efficiency Sits Atop California Energy Policy  . The "loading  
          order" guides the state's energy policies and decisions according  
          to the following order of priority: (1) decreasing electricity  
          demand by increasing energy efficiency; (2) responding to energy  
          demand by reducing energy usage during peak hours; (3) meeting new  
          energy generation needs with renewable resources; and (4) meeting  
          new energy generation needs with clean fossil-fueled generation.   
          This policy has been adopted by the energy agencies - the  
          California Energy Commission (CEC) and CPUC - and its principles  
          guide all energy programs.

          California's IOUs administer energy efficiency programs with  
          ratepayer funds approved by the CPUC.   Currently funded at about  
          $1 billion per year, the programs include a portfolio of financial  
          incentives, loans, and rebates for installing energy efficient  
          appliances, lighting, windows, HVAC systems, whole-house  
          retrofits, and specialized programs aimed at a variety of sectors.  


           Military Receives Ratepayer Support for Energy Efficiency  .  
          According to the CPUC, existing IOU programs already target  
          military facilities for efficiency improvements.  In the 2010-2012  
          program cycle, military facilities in California received over $3  
          million dollars in energy efficiency incentives resulting in  
          almost 4,000 kW in peak savings and almost 350,000 therm in  
          natural gas savings.  The table below breaks out, by IOU, the  
          level of incentives, number of projects, amount of anticipated  
          savings, and number of military participants.  

          
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          |                                                         |         |
          |US Military Customer Energy Efficiency Participation by  |         |








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          |IOU (2010 - 2012)                                        |         |
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          |------+----------+--------+----------+--------+----------+---------|
          |      |# of      |   # of |Incentives|     kW |      kWh |   Therm |
          |      |Customers |Projects|         $| Savings|   Savings|  Savings|
          |      |          |        |          |        |          |         |
          |------+----------+--------+----------+--------+----------+---------|
          |SDG&E |         8|     285|$         |        |          |         |
          |      |          |        |  2,400,925 |  1,716 |       14,329,133 |         |
          |      |          |        |          |        |          | 293,567 |
          |------+----------+--------+----------+--------+----------+---------|
          |SCE   |         8|      27|$         |   1,183| 5,383,919|      N/A|
          |      |          |        |  434,316 |        |          |         |
          |------+----------+--------+----------+--------+----------+---------|
          |SCG   |         1|       1|$         |     N/A|       N/A|         |
          |      |          |        |   12,420 |        |          |         |
          |      |          |        |          |        |          |  14,966 |
          |------+----------+--------+----------+--------+----------+---------|
          |PG&E  |        15|      88|$         |     957| 3,413,104|   38,567|
          |      |          |        |  383,282 |        |          |         |
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           -------------------------------------------------------------------------------------------------------- 
          |        Total:|            32|           401|    $3,230,942|         3,856|    23,126,156|347,100       |
          |              |              |              |              |              |              |              |
           -------------------------------------------------------------------------------------------------------- 
           
          Note:  For the 2013 - 2014 (and the SB 723 DA) staff is waiting  
          for the results of a data request to confirm expenditures which  
          are expected to be similar annually to the 2010 - 2012 program  
          cycle. 
           
          A Different Measure  . This bill has four provisions, all related to  
          energy efficiency projects on military bases.  

                 First, it allows military facilities to calculate their  
               energy efficiency savings by comparing the facilities'  
               existing energy usage, as a whole, with the facilities'  
               projected energy usage that would be achieved from the  
               implementation of the energy efficiency measures. 

                 Second, it directs the CPUC to encourage electrical and  
               gas IOUs to expedite the implementation of energy efficiency  
               measures on military facilities and to enable the achievement  
               of additional energy goals, for example, microgrids, demand  
               response, self-generation, and energy storage, at Armed  








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               Forces bases and facilities.

                 Third, it directs the CPUC to approve financial incentives  
               for energy efficiency upgrades at military facilities through  
               existing energy efficiency programs administered by  
               electrical and gas IOUs.

                 Finally, it directs the CPUC, working with the CEC and  
               United States Armed Forces, to identify other potential  
               sources of funding to supplement funds collected from  
               ratepayers to achieve energy savings goals.  

          Of these four provisions, the first is, by far, the most  
          significant.  The third provision is, essentially, existing CPUC  
          practice, consistent with existing law. The second and fourth  
          provisions are not inconsequential and may be helpful to efforts  
          by the military to increase energy efficiency at its facilities.  
          But the first provision is the heart of the bill.

          The bill requires a calculation of the savings from IOU-funded  
          energy efficiency projects at military bases that differs from the  
          methodology by which other IOU-funded energy efficiency projects  
          calculate such savings.   As explained by the CPUC, the current  
          method for calculating energy savings for a given energy  
          efficiency measure compares energy use in absence of the energy  
          efficiency measure and energy use with the energy efficiency  
          measure.  In contrast, this bill requires, for military facilities  
          only, comparison of current energy use with projected usage that  
          would follow implementation of the efficiency measure.  In other  
          words, the bill requires use of a special energy efficiency  
          baseline for military facilities.

          Use of a different baseline at military facilities has  
          consequences.  Existing law requires the IOUs to capture all  
          cost-effective energy efficiency.  Use of the more-generous  
          measurement required by this bill would likely result in more  
          energy efficiency projects at military facilities being "cost  
          effective." 

          There is a good argument for changing the methodology for  
          calculating the energy savings from efficiency measures.  In fact,  
          the CPUC is considering such a change as part of its current  
          energy efficiency proceeding.  However, there is nothing to that  
          argument that is specific to military facilities.  If it makes  
          sense to measure the energy efficiency savings of measures based  








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          upon current use, then it makes sense generally.

          That said, the military can be an effective partner in pursuit of  
          California's energy and environmental goals.  As the author notes,  
          the US military is undertaking ambitious, mission-driven energy  
          efficiency and alternative energy efforts.

          The author also notes that the CPUC has authorized the IOUs to  
          undertake pilot projects that will use a baseline measurement  
          similar to that required by this bill.  Those pilot projects -  
          still under development - are very limited in scope and designed  
          to evaluate the effects of using an alternative baseline energy  
          efficiency methodology.  The author and the committee may wish to  
          require the CPUC to authorize a similar IOU-funded pilot project  
          for military facilities.  

          Prior/Related Legislation
          
          AB 2229 (Bradford, 2014) was identical in effect to this bill.  AB  
          2229 was held by this committee. 

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


            SUPPORT:  

          Sierra Club California
          US Air Force
          US Army
          US Marine Corps
          US Navy

          OPPOSITION:

          Office of Ratepayer Advocates, unless amended

          ARGUMENTS IN SUPPORT:  The author and supporters contend this bill  
          will allow achievement of additional energy efficiency and related  
          projects at California military facilities, thereby helping  
          California reach its energy and environmental goals.
          
          ARGUMENTS IN OPPOSITION:   Opponents protest the use of a measure  
          of energy efficiency savings for projects at military facilities  
          that differs from the measure used for similar IOU-funded  








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          projects.  ORA fears the use of the military-specific measure may  
          reduce funding for non-military projects that, when consistently  
          measured, are more cost effective. 

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