BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 919 Hearing Date: 4/5/2016
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|Author: |Hertzberg |
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|Version: |3/7/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Water supply: creation or augmentation of local water
supplies
DIGEST: This bill requires the California Public Utilities
Commission (CPUC) to address the oversupply of renewable energy
resources through development of a tariff or other economic
incentive available to facilities that create or augment local
water supplies.
ANALYSIS:
Existing law:
1.Authorizes the CPUC to fix rates, establish rules, examine
records, issue subpoenas, administer oaths, take testimony,
punish for contempt, and prescribe a uniform system of accounts
for all public utilities, including electrical and gas
corporations, subject to its jurisdiction. (Article 12 of the
California Constitution)
2.Requires that all charges demanded or received by any public
utility for any product, commodity or service be just and
reasonable, and that every unjust or unreasonable charge is
unlawful. (Public Utilities Code §451)
3.Requires retail sellers of electricity - investor-owned
utilities (IOU), community choice aggregators (CCAs), and energy
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service providers (ESPs) - and publicly-owned utilities (POU) to
increase purchases of renewable energy such that at least 50
percent of retail sales are procured from renewable energy
resources by December 31, 2030. This is known as the Renewable
Portfolio Standard (RPS). (Public Utilities Code §399.11 et
seq.)
4.Requires the CPUC to adopt a process for each IOU to file an
integrated resource plan to ensure IOUs meet the greenhouse gas
(GHG) emissions reduction targets for the electricity sector;
procure at least 50 percent eligible renewable energy resources
by December 31, 2030; enable each IOU to fulfill its obligation
to serve its customers at just and reasonable rates; minimize
impacts on ratepayers' bills; ensure system and local
reliability; strengthen the diversity, sustainability, and
resilience of the bulk transmission and distribution systems,
and local communities; enhance distribution systems and
demand-side energy management; and minimize localized air
pollutants and other GHG emissions, with early priority on
disadvantaged communities. (Public Resources Code §454.52)
This bill:
1.Requires the CPUC, by July 1, 2017, in consultation with the
California Independent System Operator (CAISO), to address the
oversupply of renewable energy resources through a tariff or
other economic incentive for the electricity purchased by
customers operating facilities that create or augment local
water supplies to reduce the cost of electricity to those
facilities.
2.States the intent of the Legislature to expedite funding made
available by the Water Quality, Supply, and Infrastructure
Improvement Act of 2014.
Background
An embarrassment of riches. California utilities have procured
increasing amounts of electricity from renewable resources, in
response to the state's RPS mandates. Much of this electricity
has come from solar and wind energy resources. Such resources can
be described as intermittent, meaning that they are not available
at all times of the day and can experience difficult-to-predict
upward or downward swings in electricity production. This
intermittency creates challenges for management of the electric
grid, one of which is the oversupply of electricity during some
SB 919 (Hertzberg) PageC of?
times of the day under certain conditions.
The CAISO depicted such oversupply in its now-famous (or infamous)
calculation of net electricity load, that is, forecasted load
minus forecasted electricity production from wind and solar
generation resources. The chart has become known as the "the duck
curve," in which the duck's belly represents an overabundance of
electricity resources in the early afternoon, whereas the duck's
"neck" represents an increase in the relative demand for
electricity in the late afternoon and early evening.
According to CAISO<1>, the phenomena that result in the duck
create a number of challenging conditions for grid management:
Short, Steep Ramps-when CAISO must bring on or shut down
generation resources to meet an increasing or decreasing
electricity demand quickly, over a short period of time.
Overgeneration Risk-when more electricity is supplied than
is needed to satisfy real-time electricity requirements.
Decreased Frequency Response-when fewer resources are
operating and available to automatically adjust electricity
production to maintain grid reliability.
The CAISO reports that, to reliably manage the electricity grid
under increasingly duck-like conditions, it needs flexible
resources with certain characteristics. According to CAISO, those
characteristics include the ability to perform the following
functions:
Sustain upward or downward ramp.
Respond for a defined period of time.
Change ramp directions quickly.
Store energy or modify use.
React quickly and meet expected operating levels.
Start with short notice from a zero or low-electricity
operating level.
Start and stop multiple times per day.
Accurately forecast operating capability.
This bill requires the CPUC to take actions that the author and
bill proponents conclude will, in limited cases, create some of
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<1>
https://www.caiso.com/Documents/FlexibleResourcesHelpRenewables_Fas
tFacts.pdf .
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the flexible conditions the CAISO says it needs.
Duck?duck?(golden) goose. As described above, the "duck curve"
creates challenges. Managed smartly, it also creates
opportunities. This bill seeks to take advantage of one of those
opportunities - the availability, at some times, of cheap electric
power.
In many areas of the state, local water supplies are constrained.
Many processes to augment local water supplies, such as
desalination and water recycling, are expensive, partly because of
their energy intensity. This bill seeks to balance the oversupply
of electricity caused by increasing amounts of intermittent
renewable energy against energy-intensive local water supply
augmentation. A tariff or other economic incentive, developed by
the CPUC, is the balancing mechanism.
Administration addressing oversupply of electricity and
energy-water nexus. The state's energy agencies are well aware of
the "duck curve" and are working to address it. Already, the CPUC
requires all nonresidential customers to use time-of-use (TOU)
rates, that is, rates for electric service that vary with the time
the customer uses the electricity according, in theory, to the
cost of generating the electricity. The CPUC acknowledges that,
largely because of the "duck curve" phenomenon described above,
existing TOU rates may not coincide with the overabundance of
electricity. For this reason, as well as the emergency situation
created by the ongoing drought, the CPUC has initiated proceedings
to consider (a) adjusting TOU rates to capture shifts in demand
and electricity generation costs and (b) encourage a shift in
energy use by commercial, industrial, and agricultural users to
alternative times of the day when abundant renewable energy and
low-water-using energy are produced at high (and growing)
quantities.<2>
According to the CPUC, it expects to complete its current
proceedings on TOU rates and demand shifting before July 1, 2017.
If the CPUC expectation holds true, it is not clear what effect
this bill would have were it to become law, beyond explicitly
pronouncing the state interest in maximizing the development and
expansion of facilities that create or augment local water
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<2> See
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M157/K412/1574
12121.pdf and
http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M159/K671/15967143
2.PDF .
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supplies. This bill requires that the CPUC address the oversupply
of renewable energy resources through a tariff of other economic
incentive. Should the CPUC issue its decisions by the middle of
2017, it could declare its compliance with this bill and be done
with the matter. Bill proponents counter that establishing the
"do-by" date in statute better assures timely action by the CPUC.
It is not clear, however, that it is realistic to require the CPUC
to complete the work required by this bill within six months of
the bill becoming law. The author, in other contexts, has
frequently noted the need for governmental regulators to keep pace
with private sector innovation. And, it appears at this point
that Southern California water supplies will continue to be tight
at least through this summer and fall. In this light, this bill
can be seen an as an effort to push the CPUC's pace of regulation
to better match real-world imperatives. Nonetheless, CPUC
proceedings are slow, to an extent, by necessity: they are
complex, multiparty legalistic proceedings. The author and
committee may wish to push the date by which the CPUC must address
the oversupply of renewable energy resources through a tariff or
other economic incentive to January 1, 2018.
Water facilities have limited ability to absorb excess electric
generation. According to staff of both the CPUC and the CEC,
local water supply augmentation facilities currently present
little potential to sop up excess electricity supply. True,
desalination plants and similar facilities are somewhat intensive
energy users. However, currently, there are very few desalination
plants in California. Both operating needs and contractual
obligations limit the ability of such plants to quickly ramp
production up or down.
That said, it is conceivable that future desalination plants and
similar facilities could be designed and operated to allow greater
amounts of ramping. The tariff or other economic incentive could
encourage development of facilities better able to utilize excess
electricity generation.
What kind of water supplies? The author and committee may wish to
amend the bill, as shown below, for accuracy:
(a) Before July 1, 2017, the commission, in consultation
with the Independent System Operator, shall address the
oversupply of renewable energy resources through a tariff
or other economic incentive, such as time-of-use or demand
response, for the electricity purchased by customers
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operating facilities that create or augment local water
supplies , such as time-of-use or demand response, to apply
at the option of the customer, to reduce the cost of
electricity to those facilities.
Double-referred. Should this bill be approved by this committee,
it has been referred to the Senate Committee on Natural Resources
and Water.
Prior/Related Legislation
SB 350 (De Leon, Chapter 547, Statutes of 2015) required, among
other things, that IOUs and local POUs develop integrated
resource plans to ensure each utility meets the GHGs reduction
targets for the electricity sector; procures at least 50 percent
eligible renewable energy resources by December 31, 2030; enables
each IOU to fulfill its obligation to serve its customers at just
and reasonable rates; minimizes impacts on ratepayers' bills;
ensures system and local reliability; strengthens the diversity,
sustainability, and resilience of the bulk transmission and
distribution systems, and local communities; enhances distribution
systems and demand-side energy management; and minimizes localized
air pollutants and other GHG emissions, with early priority on
disadvantaged communities. The bill passed the Senate 26-14.
AB 2363 (Dahle, Chapter 610, Statutes of 2014) directed the CPUC
to adopt estimates of expenses resulting from integrating and
operating eligible renewable energy resources.
FISCAL EFFECT: Appropriation: No Fiscal Com.:
Yes Local: Yes
SUPPORT:
Independent Energy Producers Association (Source)
Association of California Water Agencies, if amended
California Association of Sanitation Agencies
California Municipal Utilities Association, if amended
San Diego County Water Authority
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: According to the author, SB 919 encourages
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the development and diversification of local water supplies
through water recycling, reclamation, and desalination by
directing renewable energy "oversupply" to those water suppliers.
An ancillary benefit, the author continues, is that this bill
requires better coordination of California's renewable energy
resources and demand for power and enables better, more
cost-effective utilization of renewable power as it is generated.
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