BILL NUMBER: AB 44 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 1, 2009
AMENDED IN ASSEMBLY MARCH 31, 2009
AMENDED IN ASSEMBLY MARCH 18, 2009
INTRODUCED BY Assembly Member Blakeslee
(Coauthor: Assembly Member Harkey)
(Coauthor: Senator Benoit)
DECEMBER 1, 2008
An act to amend Section 454.5 of, to add Section 454.35
to, and to add Chapter 7.7 (commencing with Section 2835) to Part 2
of Division 1 of, the Public Utilities Code, relating to energy.
LEGISLATIVE COUNSEL'S DIGEST
AB 44, as amended, Blakeslee. Energy storage facilities.
(1) Under existing law, the Public Utilities Commission is vested
with regulatory authority over public utilities, including electrical
corporations, and the commission is authorized to fix the rates and
charges for every public utility. Existing law authorizes the
commission to approve an increase of one-half of 1 percent
to 1 percent 1/2 of 1% to 1% in the
rate of return otherwise allowed an electrical corporation for
investment by the corporation in generation facilities using
renewable resources.
This bill would authorize the commission, after a hearing, to
approve a similar increase in the rate of return for investment by a
corporation in energy storage facilities
systems , as defined, that (A) are used and useful, (B) have
costs of construction and operation over their useful life that are
less than other facilities that provide load shifting, voltage
support, and scheduling and shaping services for intermittent
renewable energy resources, and (C) perform any of 4 specified
purposes.
The bill would require the commission to develop a time-variant
tariff that creates incentives for eligible energy storage
facilities.
(2) The existing Public Utilities Act requires the commission to
review and adopt a procurement plan for each electrical corporation
in accordance with specified elements, incentive mechanisms, and
objectives. The elements, among other things, require that the plan
include a showing that the electrical corporation will, in order to
fulfill its unmet resource needs, until a 20% renewable resources
portfolio is achieved, procure renewable energy resources with the
goal of ensuring that at least an additional 1% per year of the
electricity sold by the electrical corporation is generated from
eligible renewable energy resources, provided sufficient funds are
made available to cover certain above-market costs.
This bill would require that an electrical corporation's proposed
procurement plan include a showing that the electrical corporation
will, in order to fulfill its unmet resource needs, procure resources
from eligible renewable energy resources in an amount sufficient to
meet its procurement requirements pursuant to the renewables
portfolio standard established pursuant to the California Renewables
Portfolio Standard Program. The bill would add a requirement that the
procurement plan include a showing that the electrical corporation
will incorporate cost-effective, reliable, and feasible energy
storage systems, both centralized and distributed, that reduce
emissions of greenhouse gases, or reduce demand for peak electrical
generation, or improve the reliable operation of the electrical grid.
Under
(3) Under existing law, a
violation of the Public Utilities Act or an order or
direction , decision, rule, direction,
demand, or requirement of the commission is a crime. Because
certain of the provisions of this bill would
require an order or other action of the commission to implement, and
a violation of that order or action would be a crime, the bill would
impose a state-mandated local program by creating a new crime
are within the act and require action by the
commission to implement its requirements, a violation of these
provisions would impose a state-mandated local program by creating a
new crime .
(2) 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 454.35 is added to the Public Utilities Code,
to read:
454.35. The commission, after a hearing, may approve an increase
of one-half of 1 percent to 1 percent in the rate of return
otherwise allowed an electrical corporation for investment by the
corporation in energy storage facilities
systems that meet all of the following requirements:
(a) The facility energy storage system
is used and useful.
(b) The facility's energy storage system's
costs of construction and operation over its useful life are
less than the costs of construction and operation of other facilities
that provide load shifting, voltage support, and scheduling and
shaping services for intermittent renewable energy resources, taking
into account the costs of emissions of greenhouse gases and other air
emissions from those other facilities.
(c) The facility energy storage system
does one of the following:
(1) The facility energy storage system
stores energy generated from an eligible renewable energy
resource pursuant to Article 16 (commencing with Section 399.11) of
Chapter 2.3.
(2) The facility is capable of responding to Independent
System Operator commands to either absorb or dispatch energy from the
grid energy storage system is capable of responding
to dispatch and market protocols for grid reliability and stability
and is capable of storing the energy for a minimum of two
hours.
(3) The facility energy storage
system is capable of providing frequency or area control error
regulation required to integrate intermittent renewable resources
and maintain reliable operation of the electrical grid.
(4) The facility energy storage system
stores energy during off-peak periods and dispatches the energy
during on-peak periods or to provide ancillary services .
SEC. 2. Section 454.5 of the Public
Utilities Code is amended to read:
454.5. (a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of each
electrical corporation, which shall be reflected in the electrical
corporation's proposed procurement plan. Each electrical corporation
shall file a proposed procurement plan with the commission not later
than 60 days after the commission specifies the allocation of
electricity. The proposed procurement plan shall specify the date
that the electrical corporation intends to resume procurement of
electricity for its retail customers, consistent with its obligation
to serve. After the commission's adoption of a procurement plan, the
commission shall allow not less than 60 days before the electrical
corporation resumes procurement pursuant to this section.
(b) An electrical corporation's proposed procurement plan shall
include, but not be limited to, all of the following:
(1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.
(2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
(3) The duration of the plan.
(4) The duration, timing, and range of quantities of each product
to be procured.
(5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services,
including the format and criteria of that procurement process.
(6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
(7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
(8) Procedures for updating the procurement plan.
(9) A showing that the procurement plan will achieve the
following:
(A) The electrical corporation will, in order to fulfill its unmet
resource needs and in furtherance of Section 701.3, until a
20 percent renewable resources portfolio is achieved, procure
renewable energy resources with the goal of ensuring that at least an
additional 1 percent per year of the electricity sold by the
electrical corporation is generated from renewable energy resources,
provided sufficient funds are made available pursuant to Sections
399.6 and 399.15, to cover the above-market costs for new renewable
energy resources needs, procure resources from
eligible renewable energy resources in an amount sufficient to meet
its procurement requirements and goals pursuant to the renewables
portfolio standard .
(B) The electrical corporation will create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand reduction
products.
(C) The electrical corporation will first meet its unmet resource
needs through all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible.
(D) The electrical corporation will incorporate cost-effective,
reliable, and feasible energy storage systems, both centralized and
distributed, that reduce emissions of greenhouse gases, or reduce
demand for peak electrical generation, or improve the reliable
operation of the electrical grid.
(10) The electrical corporation's risk management policy,
strategy, and practices, including specific measures of price
stability.
(11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
(12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
(c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement plan. The commission's review
shall consider each electrical corporation's individual procurement
situation, and shall give strong consideration to that situation in
determining which one or more of the features set forth in this
subdivision shall apply to that electrical corporation. A procurement
plan approved by the commission shall contain one or more of the
following features, provided that the commission may not approve a
feature or mechanism for an electrical corporation if it finds that
the feature or mechanism would impair the restoration of an
electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
(1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
(2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
(3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either approve
or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To the
extent the commission rejects a proposed contract pursuant to this
criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable for
ratemaking purposes.
(d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
(1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
(2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and assure that each
contract was administered in accordance with the terms of the
contract, and contract disputes which may arise are reasonably
resolved.
(3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account, according to a schedule determined by the
commission. Until January 1, 2006, the commission shall ensure that
any overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation's actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule for
amortizing the overcollection or undercollection in the balancing
account to ensure that the 5 percent threshold is not exceeded. After
January 1, 2006, this adjustment shall occur when deemed appropriate
by the commission consistent with the objectives of this section.
(4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term supply
contracts, by authorizing an electrical corporation to enter into
financial and other electricity-related product contracts.
(5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation's procurement plan.
(e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
(f) The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.
(g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any combination,
provided that the Office of Ratepayer Advocates and other consumer
groups that are nonmarket participants shall be provided access to
this information under confidentiality procedures authorized by the
commission.
(h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the State Energy Resources Conservation and
Development Commission's existing authority and responsibilities as
set forth in Sections 25216, 25216.5, and 25323 of the Public
Resources Code.
(i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
(j) (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
(2) Any electrical corporation's procurement necessitated as a
result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.
(3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
SEC. 2. SEC. 3. Chapter 7.7
(commencing with Section 2835) is added to Part 2 of Division 1 of
the Public Utilities Code, to read:
CHAPTER 7.7. ENERGY STORAGE SYSTEMS
2835. This chapter shall be known and may be cited as the
Integration of Renewable Energy Act.
2835.2. 2835. For the purposes of
this chapter the following terms have the following meanings:
(a) "Energy storage system" means any technology that is capable
of absorbing energy from a generation facility, storing it for a
period of time, and dispatching the energy onto the grid. Energy
storage systems include, but are not limited to, hydrogen storage,
pumped hydroelectricity storage, compressed air energy storage,
thermal storage, solar thermal storage superconducting magnetic
energy storage, batteries, super capacitors, and flywheels.
(b) "Eligible storage facility" or "eligible facility"
system" means any facility that employs an
energy storage technology that meets at least one of the following
requirements:
(1) The facility energy storage system
stores energy generated from an eligible renewable energy
resource pursuant to Article 16 (commencing with Section 399.11) of
Chapter 2.3.
(2) The facility is capable of responding to Independent
System Operator commands to either absorb or dispatch energy from the
grid energy storage system is capable of responding
to dispatch and market protocols for grid reliability and stability
and is capable of storing the energy for a minimum of two
hours.
(3) The facility energy storage system
provides frequency or area control error regulation required to
integrate intermittent renewable resources and maintain reliable
operation of the electrical grid.
(4) The facility energy storage system
stores energy during off-peak periods and dispatches the energy
as electricity during on-peak periods or to provide ancillary
services .
2835.4. 2835.2. The Legislature
finds and declares all of the following:
(a) Energy storage systems can potentially enable higher
percentages of renewable energy to be included in California's power
supply portfolio by transforming intermittent generation, such as
wind and solar power, into dispatchable resources, allowing the state
to more fully utilize its abundant renewable resources.
(b) Energy storage systems can serve as load shifting technologies
by absorbing energy during off-peak periods
intermittent energy , such as from wind resources at
night, and delivering the energy when demand is greatest, thereby
potentially reducing the need for, and associated greenhouse gas
emissions from, gas-fired peaker plants.
(c) Energy storage systems can greatly enhance the flexibility of
the operation of the power grid by quickly absorbing or dispatching
energy when needed.
(d) Energy storage systems that have an inverter can deliver
reactive power as well as real power. This is particularly useful
when the storage systems are located in load centers as they can help
support the voltage in a transmission-constrained area.
(e) It is the intent of the Legislature to facilitate the
expansion and deployment of both customer-owned
customer-owned, third-party-owned, and utility-owned
energy storage systems, which are critical to the timely and
cost-effective achievement of the state's ambitious renewables
portfolio standard, greenhouse gas emissions reduction targets, and
regional air quality objectives while maintaining reliable operation
of the power grid.
2835.6. The commission shall develop a time-variant tariff that
creates appropriate incentives for eligible storage facilities and
provides incentives to invest in energy storage facilities. The
tariff developed pursuant to this section shall not result in
ratepayers paying increased costs for energy storage facilities that
exceed the economic benefits provided by the energy storage
facilities through load shifting, voltage support, and scheduling and
shaping services for renewable energy resources.
2835.4. Electricity generated by an eligible renewable energy
resource meeting the requirements of the California Renewables
Portfolio Standard Program (Article 15 (commencing with Section
399.11) of Part 1 of Division 1) that is stored by an eligible
storage system prior to its use to serve end-use retail customers
located within the state is "delivered" electricity pursuant to that
program.
SEC. 3. 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.