BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 919|
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THIRD READING
Bill No: SB 919
Author: Hertzberg (D), et al.
Amended: 4/14/16
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 9-0, 4/5/16
AYES: Hueso, Morrell, Cannella, Hertzberg, Hill, Lara, Leyva,
McGuire, Pavley
NO VOTE RECORDED: Gaines, Wolk
SENATE NATURAL RES. & WATER COMMITTEE: 8-0, 4/12/16
AYES: Pavley, Allen, Hertzberg, Hueso, Jackson, Monning,
Vidak, Wolk
NO VOTE RECORDED: Stone
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Water supply: creation or augmentation of local
water supplies
SOURCE: Independent Energy Producers Association
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:
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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, and energy
service providers - 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 January 1, 2018, 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
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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 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
(https://www.caiso.com/Documents/FlexibleResourcesHelp
Renewables_FastFacts.pdf), 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
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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
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,
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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 (1) adjusting TOU
rates to capture shifts in demand and electricity generation
costs and (2) 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. (See http://docs.
cpuc.ca.gov/PublishedDocs/Published/G000/M157/K412/157412121.pdf
and
http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M159/K671/159671
432.pdf)
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 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 before the start of 2018, 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.
Water facilities have limited ability to absorb excess electric
generation. According to staff of both the CPUC and the
California Energy Commission, 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
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to utilize excess electricity generation.
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.:YesLocal: Yes
SUPPORT: (Verified5/3/16)
Independent Energy Producers Association (source)
Association of California Water Agencies
California Association of Sanitation Agencies
California Municipal Utilities Association
San Diego County Water Authority
OPPOSITION: (Verified5/3/16)
None received
ARGUMENTS IN SUPPORT: According to the author, SB 919
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encourages 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.
Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
5/4/16 14:57:57
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