BILL ANALYSIS
SB 488
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Date of Hearing: July 6, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
SB 488 (Pavley) - As Amended: June 15, 2009
SENATE VOTE : 34-3
SUBJECT : Energy: energy usage information
SUMMARY : Requires electric and gas utilities with over 55,000
residential service connections to conduct a pilot program that
periodically notifies consumers of their energy consumption in
comparison to similar residences.
EXISTING LAW :
1)Requires each investor-owned utility (IOU) and each local
publicly-owned utility (POU) in procuring energy to serve the
load of its retail end-use customers to first acquire all
available energy efficiency and demand reduction resources
that are cost effective, reliable, and feasible before
procuring other resources.
2)Requires the California Energy Commission (CEC) and the
California Public Utilities Commission (PUC) to develop a
statewide estimate of all potentially achievable
cost-effective electricity and natural gas efficiency savings
and establish targets for statewide annual energy efficiency
savings and demand reduction for a 10-year period for both
POUs and IOUs.
3)Establishes a Public Goods Charge (PGC) that consumers pay
through their utility bills for cost-effective energy
efficiency, renewable technologies, public interest energy
research, and low income assistance programs.
THIS BILL :
1)Requires each IOU and each POU with more than 55,000
residential service connections to crate a pilot program to
periodically disclose information documenting the amount of
energy used by each metered residence compared to similar
residences by July 1, 2010, exempts utilities that already
have a similar program.
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2)Requires that the utilities conducting the pilot program
identify those residences that used significantly more energy
during the period than was used by similar residences and
provide these residences with information regarding energy
efficiency strategies and programs.
3)Requires the PUC to assess the energy savings resulting from
the pilot program using the methodologies meeting the
suggestions of the National Action Plan for Energy Efficiency.
4)Requires that the costs of the pilot program be recovered only
from residential ratepayers.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author's office, the purpose of
this bill is to induce the "types of changes in human behavior
that will be necessary in order to achieve the ambitious
greenhouse gas emission reduction targets of the Global Warming
Solutions Act, AB 32 (N??ez), Chapter 488, Statutes of 2006."
1) Background : In response to the oil shocks of the 1970's
California implemented stringent Energy Efficiency Standards for
Residential and Nonresidential Buildings (Title 24, California
Code of Regulations) and California's Appliance Efficiency
Regulations (Title 20, California Code of Regulations). These
policies led the state to become a national leader in energy
efficiency. Since 1974 California has held its per-capita energy
consumption nearly constant while energy use per person for the
United States as a whole has increased 50 percent. According to
the CEC, California's building and appliance standards have
saved consumers more than $56 billion in electricity and natural
gas costs since 1978 and averted building 15 large power plants.
After the 2001 electricity crisis, California implemented even
more aggressive policies with respect to energy efficiency. The
Legislature authorized over $225 million in spending on new
energy efficiency and conservation programs to reduce overall
electrical demand and eliminate the threat of blackouts in the
summer of 2001. In 2003 the PUC and CEC adopted the Energy
Action Plan (EAP) to move forward from the energy crisis and
bring stability to California's electricity market. The EAP
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contained a "loading order," that prioritized how utilities
should procure electricity to meet future demands. The loading
order established that the state, in meeting its energy needs,
would invest first in energy efficiency and demand-side
resources, followed by renewable resources, and then clean
conventional electricity. SB 1037(Kehoe), Chapter 366, Statutes
of 2005, codified that utilities should first procure energy
efficiency before building new generation.
In 2003, the CEC estimated that there were 30,000 gigawatt hours
of achievable cost effective efficiency savings over the next 10
years in its Integrated Energy Policy Report. Assembly Bill 2021
(Levine), Chapter 734, Statutes of 2006, set a statewide goal of
reducing total forecasted electricity consumption by 10 percent
over the next 10 years. According to the CEC, IOUs reached 82
percent of their AB 2021 goal for electricity and 61 percent for
natural gas in 2008, and publicly-owned utilities ranged between
65-75 percent.
AB 32 (N??ez), Chapter 488, Statutes of 2006, known as the
Global Warming Solutions Act, required that the state reduce its
greenhouse gas emissions to 1990 levels by 2020. Due to the fact
that electricity production is the second largest source of
carbon emissions in the state, the California Air Resources
Board has made energy efficiency an integral part of its plan to
meet the objectives of AB 32. According to the McKinsey Global
Institute, energy efficiency is the lowest-cost measure to
achieving large-scale greenhouse-gas reduction.
2) The residential energy sector : The residential sector
represents approximately 32% of total state electricity
consumption and 36% of its total natural gas consumption.
According to a recent white paper by the California Clean Energy
Fund the market for residential energy efficiency is
under-served due to the high up-front costs and the time that it
takes to achieve the savings that would defray those initial
costs.
In the past energy efficiency programs have focused on
residential lighting because lighting accounts for the largest
electricity use in the residential sector. Many energy
efficiency advocates believe there are other untapped
cost-effective programs that could impact the residential market
including rebates for efficient products such as air
conditioners and refrigerators, training and education for
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architects, engineers, building managers and building inspectors
and work to enhance and implement California's building and
appliance codes and standards.
3) Keeping up with the Jones' : Numerous studies have shown that
a significant amount of the residential energy efficiency
savings could come from changes in behavior instead of new
technologies. Research indicates that the desire to keep up with
one's peers can be highly effective in causing consumers to
lower their energy consumption. In fact, a 2004 study conducted
in San Diego that measured consumers' responsiveness to various
reasons to implement energy efficiency measures found that this
peer pressure was more effective in changing consumer behavior
than the desire to mitigate negative environmental impacts and
even the desire to obtain financial savings.
4) What is this? : Some utilities have experience with the type
of program mandated in this bill. San Diego Gas and Electric and
Southern California Edison are in the early stages of
implementing pilot programs. Sacramento Municipal Utility
District (SMUD) began a pilot program with 35,000 residents last
March. These customers receive notices relating how their energy
usage compares to that of customers with similarly-sized homes.
When compared to 50,000 homes that didn't receive the notices,
SMUD found that those who received the notices reduced their
energy use by 2.4 percent in April, which was one month after
the program started. Households with higher-than-average energy
use receive specific tips for reducing energy use, and
information about available programs.
Despite early indications of success with the SMUD program and
the willingness of other utilities to try similar programs, the
policy question remains as to whether these programs should be
mandated. The legislature set forth broad energy efficiency
policy goals with SB 1037 and AB 2021, and has allowed the state
energy agencies along with the utilities to determine how to
achieve those goals. Due to the fact that the relative costs and
benefits of various energy efficiency strategies may change
rapidly and often, mandating one type of program, even as a
pilot may create a slippery slope in which the Legislature
becomes overly-proscriptive. Additionally, due to the fact that
the SMUD program has not yet been completed, and the IOUs'
programs have not even started, it is unclear whether or not
these programs are truly cost-effective. Instead of mandating
that all of the mid to large-sized utilities in the state
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implement a program that may not be cost-effective, the
committee may wish to consider amending the bill to instead
require the utilities that have chosen to implement these pilot
programs to report back to their respective oversight agencies
to evaluate the value of these programs by December 31, 2009,
when the IOUs will have collected enough useful data.
5) Reports : This bill requires each affected investor-owned
utility to submit a report to the PUC and the legislature by
July 1 of each year regarding the results of the pilot program.
This requirement would result in a series of reports that would
add to the long list of already-mandated reports to the
legislature on various energy issues including the status of
energy efficiency programs as a whole. The committee may wish to
consider amending the bill to only require the utilities to
report the results of this program to the PUC so that they may
be reviewed along with existing programs. This bill also
requires each affected publicly-owned utility to submit a report
to the CEC by July 1 of each year regarding the results of the
pilot program. According to the CEC, this date is inconsistent
with the date on which publicly-owned utilities submit other
data regarding various programs, which is March 15. In order to
avoid this inconsistency, t he committee may wish to consider
changing the date by which the report is due to March 15 of each
year.
6) National Action Plan for Energy Efficiency: This bill
contains a provision that would require that the energy savings
resulting from these pilot programs to be measured using
methodologies meeting the suggestions of the National Action
Plan for Energy Efficiency (NAPEE). The National Action Plan for
Energy Efficiency is a private-public initiative with the stated
mission of creating a sustainable, aggressive national
commitment to energy efficiency through the collaborative
efforts of gas and electric utilities, utility regulators, and
other partner organizations, and facilitated by the United
States Department of Energy and the United States Environmental
Protection Agency. It is unclear whether or not this methodology
is consistent with the methodologies already being used to
measure existing energy efficiency programs in the state. The
use of different methodologies to measure the efficacy of
various efficiency programs has the potential to distort the
relative effectiveness of programs, therefore the committee may
wish to consider amending the bill to either require that all
energy efficiency programs be measured using the NAPEE
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methodology, or to remove the provision altogether.
7) New fee : This bill would create a new fee to fund the pilot
programs required by this bill that would be paid for by
residential ratepayers. Ratepayer advocates argue that energy
efficiency programs benefit all ratepayers, rather than just
residential ratepayers, by lowering overall demand. Residential
ratepayers currently subsidize a number of programs that provide
benefits to ratepayers of other classes due to the same logic.
Existing energy efficiency programs are funded through the
public goods charge (PGC) and procurement funds, the costs of
which are spread amongst all classes of ratepayers and result in
significant revenue. The committee may wish to consider amending
the bill to fund the pilot programs through PGC rather than a
new fee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors
Dr. Robert B. Cialdini, Arizona State University
Planning and Conservation League
Positive Energy, Inc.
San Mateo County Board of Supervisors
W.P. Carey, Distinguished Professor, Arizona State University
Wesley Schultz, Ph.D., Professor of Psychology, California State
University, San Marcos
Opposition
California Municipal Association (CMA)
City Council, City of Azusa
Southern California Public Power Authority (SCPPA)
California Municipal Utilities Association (CMUA)
Analysis Prepared by : Nina Kapoor / U. & C. / (916) 319-2083