BILL ANALYSIS                                                                                                                                                                                                    

                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 723 (Pavley) - Energy efficiency:  United States Armed Forces  
          bases and facilities
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          |Version: April 27, 2015         |Policy Vote: E., U., & C. 11 -  |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 4, 2015       |Consultant: Marie Liu           |
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          This bill meets the criteria for referral to the Suspense File. 

          Summary:  SB 723 would require the California Public Utilities  
          Commission (CPUC), to authorize a pilot program that would allow  
          an alternative energy savings calculation to be used to evaluate  
          energy efficiency projects located on Armed Forces bases and  
          facilities until January 1, 2020.  

           Ongoing costs of up to $130,000, but potentially minor, from  
            the Public Utilities Reimbursement Account (special) for the  
            CPUC to design, provide oversight, and evaluate the required  
            pilot project.
           Ongoing costs of up to $140,000 from the Energy Resources  
            Programs Account (General Fund) to the California Energy  
            Commission (CEC) to consult with the CPUC on evaluating the  
            effects of the pilot program.


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           Unknown, but likely minor, impacts to various special funds  
            and the General Fund to the state as an electricity and  
            natural gas ratepayer for changes to the energy efficiency  
            program budget.

          Background:  PUC 454.55 and 454.56 requires the 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. 
          Under existing CPUC-approved investor-owned utility (IOU) energy  
          efficiency projects, the project's energy savings is calculated  
          as the amount of savings generated above the baseline, which is  
          the amount of energy a building would use if it met the current  
          building code requirements. As building code requirements are  
          generally not applied retroactively, the actual savings are  
          likely greater than this calculation because the actual energy  
          use is greater than the baseline.

          Proposed Law:  
            This bill would create a pilot program for energy efficiency  
          projects located on Armed Forces bases and facilities that would  
          allow the energy savings to be calculated using the facilities'  
          existing energy usage (as opposed to the energy usage that the  
          facility should have if it met current building standards). The  
          CPUC would be required to approve financial incentives based on  
          this alternative energy savings calculation. The CPUC would be  
          required to consult with the California Energy Commission and  
          the United States Armed Forces in authorizing the pilot program.
          The pilot program would sunset on January 1, 2020.

          Legislation:  AB 2229 (Bradford, 2014) would have required the  
          CPUC to approve financial incentives for energy efficiency  
          upgrades at military bases and facilities in a manner  
          substantially similar to this bill. The April 21st version of AB  
          2229 required the CPUC to authorize a separate energy efficiency  


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          program for military projects. AB 2229 was held by the Senate  
          Energy, Utilities, and Communication Committee.

          Comments:  Based on calculations made in connection with AB 2229  
          last year, the CPUC estimates that a pilot program for the  
          military could involve up to $36 million in project funding for  
          energy efficiency projects on military bases and facilities,  
          depending on the design of the pilot program. The CPUC estimates  
          that it could design, evaluate and provide oversight to the  
          pilot program required by this bill within existing resources  
          since it would not be a large program. However, staff notes that  
          the CPUC estimated annual costs of approximately $130,000 to  
          implement the military-specific energy efficiency program that  
          would have been required under the April 21st version of AB  
          2229. The only appreciable difference between the April 21st  
          version of AB 2229 and this bill seem to be that AB 2229  
          included Coast Guard facilities.
          The CEC estimates that it would need up to one position at an  
          annual cost of $140,000 to consult with the CPUC to design and  
          evaluate the pilot program. 

          Staff notes that there are unknown potential impacts to the  
          state as a ratepayer. As mentioned above, the CPUC is required  
          to identify all energy efficiency savings and targets to reach  
          those savings. Under the energy savings calculation methodology  
          that would be allowed by this bill, more military projects will  
          become cost effective. On the one hand, these projects will  
          allow IOUs to meet their existing energy efficiency savings  
          targets with less money resulting in savings to ratepayers; on  
          the other hand, the CPUC could also raise those targets as  
          additional cost effective projects are now identified. Higher  
          targets would require additional ratepayer funds to achieve.  
          Ultimately staff believes that this bill's impact to the state  
          as a ratepayer, as either a cost or a savings, is speculative  
          but likely to be small given the size of the pilot program. 

                                      -- END --


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