Amended in Assembly July 7, 2015

Amended in Senate June 2, 2015

Amended in Senate April 6, 2015

Senate Bill No. 765

Introduced by Senator Wolk

February 27, 2015

An act to amend Section 399 of, and to add Sections 399.5 and 399.6 to, the Public Utilities Code, relating to energy.

LEGISLATIVE COUNSEL’S DIGEST

SB 765, as amended, Wolk. Energy: California Market Transformation Administrator.

The Reliable Electric Service Investments Act requires the Public Utilities Commission (PUC), in evaluating energy efficiency investments, to ensure that local and regional interests, multifamily dwellings, and energy service industry capabilities are incorporated into program portfolio design and that local governments, community-based organizations, and energy efficiency service providers are encouraged to participate in program implementation where appropriate.

This bill would require the PUC, in ensuring that prudent investments in energy efficiency are made and produce cost-effective energy savings, reduce customer demand, and support the state’s greenhouse gas emissions reduction goals, to contract with an independent entity to serve as the California Market Transformation Administrator (CalMTA). The bill would require the PUC to require the CalMTA to take certain actions, including, among other actions, working in concert with other energy efficiency administrators that are carrying out energy efficiency activities under the PUC’s oversight to incorporate long-term market transformation strategies into the state’s energy efficiency portfolio and begin delete to work with the State Energy Resources Conservation and Development Commission end delete to encourage local publicly owned electric utilities to participate in the CalMTA’s planning efforts begin delete and provide funding for end delete and support the market transformation initiatives administered by the CalMTA to ensure statewide consistency and full market deployment. Because a violation of these requirements would be a crime, this bill would impose a state-mandated local program. The bill would require the PUC to consult with the CalMTA regarding demand-side energy management programs.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 399 of the Public Utilities Code is
amended to read:

399.  

(a) This article shall be known, and may be cited, as the
Reliable Electric Service Investments Act.

(b) The Legislature finds and declares that safe, reliable electric
service is of utmost importance to the citizens of this state, and its
economy.

(c) The Legislature further finds and declares that in order to
ensure that the citizens of this state continue to receive safe,
reliable, affordable, and environmentally sustainable electric
service, it is essential that prudent investments continue to be made
in all of the following areas:

(1) To protect the integrity of the electric distribution grid.

(2) To ensure an adequately sized and trained utility workforce.

(3) To ensure cost-effective energy efficiency improvements.

(4) To achieve a sustainable supply of renewable energy.

(5) To advance public interest research, development, and
demonstration programs not adequately provided by competitive
and regulated markets.

(d) It is the intent of the Legislature to reaffirm, without
requiring revision, California’s doctrine, as reflected in regulatory
and judicial decisions, regarding electrical corporations’ reasonable
opportunity to recover costs and investments associated with their
electric distribution grid and the reasonable opportunity to attract
capital for investment on reasonable terms.

(e) The Legislature further finds and declares all of the
following:

(1) Acting under applicable constitutional and statutory
authorities, the Public Utilities Commission and the boards of local
publicly owned electric utilities have included in regulated
electricity prices, investments that are essential to maintaining
system reliability, reducing California electricity users’ bills, and
mitigating environmental costs of California users’ electricity
consumption.

(2) Among the most important of these “system benefits”
investments categories are energy efficiency, renewable energy,
and public interest research, development and demonstration
(RD&D).

(3) Energy efficiency investments funded from California’s
usage-based charges on electricity distribution help improve
systemwide reliability by reducing demand in times and areas of
system congestion, and at the same time reduce all California
electricity users’ costs. These investments also significantly reduce
environmental costs associated with California’s electricity
consumption, including, but not limited to, degradation of the
state’s air, water, and land resources.

(4) California’s in-state renewable energy resources help
alleviate supply deficits that could threaten electric system
reliability, reduce environmental costs associated with California’s
electricity consumption, and increase the diversity of the electricity
system’s fuel mix, reducing electricity users’ exposure to fossil
fuel price volatility.

(5) California’s public interest RD&D investments enhance
private and regulated sector investment in electricity system
technologies, and are designed specifically to help ensure sustained
improvement in the economic and environmental performance of
the distribution, transmission, and generation and end-use systems
that serve California electricity users.

(6) California has established a long tradition of recovering
system benefits investments through usage-based electricity
charges, which is reflected in at least two decades of electricity
price regulation by the commission, the boards of local publicly
owned electric utilities, and the mandate of the Legislature in
Chapter 854 of the Statutes of 1996 (Assembly Bill 1890 of the
1995-96 Regular Session of the Legislature) and Chapter 905 of
the Statutes of 1997 (Senate Bill 90 of the 1997-98 Regular Session
of the Legislature).

(7) Unless the Legislature acts to extend the mandate of this
article for minimum levels of usage based system benefits charges,
California electricity users are at substantial risk of higher
economic and environmental costs and degraded reliability.

(f) (1) The Legislature further finds and declares all of the
following:

(A) Targeted energy efficiency market transformation initiatives
aimed at long-term transformation of defined markets are a
necessary component of a comprehensive, balanced, and
cost-effective energy efficiency portfolio.

(B) Because tensions can exist between market transformation
initiatives and energy efficiency resource acquisition strategies, it
is important to recognize the differences between what each of
these strategies can accomplish and to pursue both in California.

(C) The existing energy efficiency portfolio overseen by the
commission focuses on energy efficiency resource acquisition.

(D) The creation of a single entity with responsibility for
planning, coordinating, and managing the execution of statewide
energy efficiency market transformation initiatives in concert with
other state energy efficiency activities, subject to the commission’s
oversight and that carries out its duties in consultation with the
Energy Commission and all interested local publicly owned electric
utilities, would assist the state in advancing its energy efficiency
and greenhouse gas reduction goals without increasing the overall
funding for the energy efficiency portfolio overseen by the
commission.

(2) It is the intent of the Legislature that demand-side energy
management programs should be coordinated, to the extent
practicable, to support utility customers in making well-informed,
cost-effective decisions about investments in onsite energy
efficiency, demand response, and renewable distributed generation,
and to provide efficiencies in the administration and delivery of
ratepayer-funded demand-side energy management programs in
California.

SEC. 2.  

Section 399.5 is added to the Public Utilities Code, to
read:

399.5.  

(a) For purposes of this section and Section 399.6, the
following terms mean the following:

(1) “Demand-side energy management programs” has the same
meaning as set forth in Section 323.5.

(2) “California Market Transformation Administrator” or
“CalMTA” means a private contractor selected by the commission
to coordinate the planning and execution of the state’s efforts to
advance electricity and natural gas energy efficiency through
long-term market transformation strategies.

(3) “Market transformation” means a strategic process to
intervene in a market to create lasting change in market behavior
by removing identified barriers or exploiting opportunities to
accelerate the adoption of all cost-effective energy efficiency as
a matter of standard practice.

(4) “Resources acquisition” means the generation of electricity
or natural gas savings that are sufficiently reliable, predictable,
and measurable to replace electricity or natural gas supplies in the
utility energy resource planning process.

(b) (1) In carrying out its responsibilities to ensure that prudent
investments in energy efficiency are made and produce
cost-effective energy savings, reduce customer demand, and
support the state’s greenhouse gas emissions reduction goals, the
commission, on or before July 1, 2017, shall contract with an
independent entity to serve as the California Market Transformation
Administrator that will coordinate the planning and execution of
the state’s efforts to advance energy efficiency through long-term
market transformation strategies, as well as advise on and otherwise
assist the commission with the coordination of demand-side energy
management programs under the commission’s jurisdiction.

(2) The initial CalMTA contract shall be for a period of not less
than five years and may be terminated if the CalMTA fails to meet
the performance benchmarks established in the contract.

(c) (1) An entity eligible to be a CalMTA shall have a mission
that is fully aligned with promoting energy efficiency and
conservation, including market transformation.

(2) The begin delete CalMTA shall carry out its end delete marketing, education, and
begin delete outreach-related energy efficiency end delete begin insert outreach plans for the CalMTA’s end insert
market transformation begin delete and the coordination of demand-side energy
management programs under end delete begin insert initiatives shall be developed and
implemented as part of end insert the Energy Upgrade California begin delete brand
name. end delete begin insert statewide marketing, education, and outreach efforts, where
practical. end insert

(d) The commission shall require the CalMTA, at a minimum,
to do all of the following:

(1) Work in concert with other energy efficiency administrators
carrying out energy efficiency activities under the commission’s
oversight to incorporate long-term market transformation strategies
into the state’s portfolio.

(2) Create market conditions that will accelerate and sustain the
market adoption of emerging energy efficiency products, services,
and practices in California.

(3) Meet interim and long-term targets adopted by the
commission related to the transformation of targeted markets, as
well as provide a cost-effective portfolio of market transformation
initiatives over the life of the contract.

(4) Submit to the commission quarterly reports detailing
begin delete expenditures, end delete begin insert expenditures end insert and annual reports showing
expenditures and progress towards commission-established interim
and long-term targets.

(5) Contribute improved efficiencies in the delivery of
ratepayer-funded energy efficiency activities in California by taking
a statewide approach to defined markets targeted for
transformation.

(6) Coordinate the planning for and execution of market
transformation initiatives, as appropriate, with utility administered
energy efficiency activities, other energy efficiency activities under
the commission’s jurisdiction, including, but not limited to, energy
efficiency activities administered by community choice aggregators
pursuant to Section 381.1, and low-income energy efficiency
programs in California, including the rate-payer funded program
required by Section 2790 and overseen by the commission, as well
as the federal Low-Income Home Energy Assistance Program
administered by the Department of Community Services and
Development.

(7) Build upon the energy efficiency expertise and capabilities
developed in the state, such as by providing flexibility for other
energy efficiency administrators to carry out some of the market
transformation activities identified by the CalMTA, so as to
minimize confusion and leverage existing relationships between
utilities, community choice aggregators, and other providers of
energy efficiency services, and their customers.

(8)  begin delete Work with the Energy Commission to encourage end delete begin insert Encourage end insert
local publicly owned electric utilities to participate in the
CalMTA’s planning efforts begin delete and provide funding for end delete and otherwise
support the market transformation initiatives administered by the
CalMTA to ensure statewide consistency and full market
deployment.

(9) Collaborate with regional and national energy efficiency
entities on market transformation efforts.

(e) The commission shall protect ratepayers from performance
risks inherent in market transformation initiatives by, at a
minimum, doing all of the following:

(1) Requiring a rigorous upfront vetting process for program
concepts, to be conducted either by the commission as part of its
oversight function or by the CalMTA. The CalMTA shall make a
convincing case that each proposed market intervention would
produce lasting energy efficiency benefits that would more than
pay for the long-term costs of the market intervention.

(2) Balancing the level of ratepayer investment in market
transformation initiatives against resources acquisition initiatives,
such that:

(A) The budget for market transformation initiatives, including
the budget to be managed by the CalMTA and the commission’s
costs associated with managing the contract with the CalMTA, is
initially set by the commission at a level not more than 10 percent
of the total budget for energy efficiency activities overseen by the
commission, excluding low-income energy efficiency programs.

(B) The reasonableness of the initial funding level for market
transformation initiatives is evaluated by the commission over the
course of the initial contract term with the CalMTA and adjusted
as the commission deems appropriate to support the objectives of
this section.

(3) Continuously evaluating the market transformation initiatives
administered by the CalMTA and focusing on whether the targeted
markets are evolving in the manner intended, such that the
initiatives can be corrected mid-course or abandoned, as necessary,
to maximize long-term energy savings from the CalMTA’s
portfolio of initiatives.

(f) In implementing this section, the commission shall consult
with the Energy Commission to ensure that functions carried out
by the CalMTA are appropriately coordinated with the energy
efficiency related activities conducted or overseen by the Energy
Commission.

(g) The commission shall evaluate and adopt, as necessary, new
criteria to support and accurately evaluate the benefits of market
transformation.

(h) The commission, in consultation with the Energy
Commission and the CalMTA, shall determine when and how to
reflect potentially achievable cost-effective electricity and natural
gas savings from energy efficiency market transformation
initiatives in carrying out its obligations pursuant to Sections
454.55 and 454.56. In setting energy efficiency targets for electrical
or gas corporations pursuant to Section 454.55 or 454.56, the
commission shall consider whether energy savings expected to be
delivered through market transformation initiatives administered
by the CalMTA should be excluded from the targets established
for the electrical or gas corporations.

SEC. 3.  

Section 399.6 is added to the Public Utilities Code, to
read:

399.6.  

(a) The commission shall consult with the CalMTA on
how best to integrate demand-side energy management programs
to support utility customers in making well-informed, cost-effective
decisions about investment in onsite energy efficiency, demand
response, and renewable distributed generation, as well as
customer-sited energy storage systems, and to provide economic
and organizational efficiencies in the administration and delivery
of ratepayer-funded demand-side energy management programs
in California.

(b) The commission shall consult with the CalMTA on how
best to design and deploy demand-side energy management
programs and encourage customer-sited energy storage systems
so as to provide the most cost-effective environmental and
economic benefits from an electric system planning and operation
perspective.

(c) The commission shall include in the contract executed with
a CalMTA pursuant to Section 399.5 the advisory functions
specified in this section related to integrating demand-side energy
management programs.

SEC. 4.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.