BILL ANALYSIS �
AB 904
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 904 (Skinner) - As Amended: April 14, 2011
SUBJECT : Energy efficiency.
SUMMARY : Requires the California Public Utilities Commission
(PUC) to evaluate the efficacy of the energy efficiency
programs. Specifically, this bill :
1)Requires the PUC to ensure energy efficiency programs do the
following:
a. result in real reductions in energy consumption;
b. examine alternatives to traditional administration,
delivery, and evaluation mechanisms for energy efficiency
services, and
c. examine the establishment of a program for on-bill
financing for residential retrofit and improvement of
heating, ventilation, and air conditioning.
2)Requires the PUC to consult and coordinate with the California
Energy Commission (CEC) in achieving these results.
EXISTING LAW :
1)States that PUC has regulatory authority over public
utilities.
2)Authorizes PUC to fix the rates and charges for every public
utility and requires those rates and charges to be just and
reasonable.
3)States the Public Utilities Act requires the PUC to review and
adopt a procurement plan for each electrical corporation in
accordance with specified elements, incentive mechanisms, and
objectives.
4)States the Public Utilities Act requires that an electrical
corporation's proposed procurement plan include certain
elements, including a showing that the electrical corporation
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will first meet its unmet needs through all available energy
efficiency and demand reduction resources that are cost
effective, reliable, and feasible.
5)States the Public Utilities Act requires the PUC, in
consultation with the CEC, to identify all potentially
achievable cost-effective electricity efficiency savings and
to establish efficiency targets for electrical corporations to
achieve pursuant to their procurement plan.
6)Requires the CEC to establish, by March 1, 2010, a regulatory
proceeding to develop a comprehensive program to achieve
greater energy savings in the state's existing residential and
nonresidential building stock.
7)Requires the PUC, by March 1, 2010, to open a new proceeding
or amend an existing proceeding to investigate the ability of
electrical corporations and gas corporations to provide
various energy efficiency financing options to their customers
for the purposes of implementing the CEC program.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, this bill seeks to discover
whether energy efficiency programs, which encompass billions of
dollars for the investor-owned utilities, are run efficiently.
The author states that the IOUs have received incentive payments
on these energy efficiency dollars, even though in the view of
the Division of Ratepayer Advocates (DRA) and The Utility Reform
Network (TURN), they did not effectively and efficiently meet
their energy savings goals.
1)Background : Energy efficiency is the first priority in
California's loading order for energy
resources. Energy efficiency typically refers to the
installation of energy efficient technologies or tools to reduce
energy usage and eliminate energy losses in homes, businesses,
or in new construction. An energy efficient home or business
can help you reduce your energy usage while maintaining
comparable service, thereby saving money on your utility bill.
Since the 1970s, the PUC has overseen the funding and design of
energy efficiency programs in California. These programs promote
cost-effective, environmentally beneficial investments in energy
saving products and technologies. The energy efficiency
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programs provide numerous benefits to California and its
residents by reducing energy bills, conserving valuable
resources for future generations, and preserving the
environment.
California's energy efficiency programs have historically
encompassed some of the largest and most effective programs in
the United States, providing a model for utility programs across
the country. At their peak, the expenditures for California's
energy efficiency programs rose to $400 million in 1993 and
1994. Investments in energy efficiency declined during the '90s
as the electric utilities prepared for industry restructuring,
but are again increasing, from $247 million in 1999 to $292
million projected in 2000, with an additional $72 million for
the Summer Initiative.
With the restructuring of California's electricity market under
AB 1890 (Brulte, Chapter 854, Statutes of 1996) the PUC
established a new policy framework for energy efficiency
programs in 1998. Recognizing the need to reduce market barriers
for energy saving products and technologies, the PUC has focused
on developing a sustainable, competitive market for energy
efficient products and services, as well as saving energy and
peak demand.
2)Strategic plan : In 2008, the PUC adopted the landmark
California Energy Efficiency Long
Term Strategic Plan. The programs and budgets authorized in
this decision will make significant progress toward the PUC's
Strategic Plan goals and its adopted Big, Bold Energy Efficiency
Programmatic Initiatives, including taking the next steps
towards achieving zero net energy homes in California as
standard practice by 2020 and zero net energy commercial
buildings by 2030.
3)IOUs EE programs : Each of California's utilities administers
energy efficiency programs
designed specifically for their customers' needs. The utilities
oversee a set of programs to decrease energy use in lighting and
appliances, heating, ventilation, air conditioning (HVAC)
systems and motors.
The lighting and appliance programs are designed to improve
consumer awareness of the energy and non-energy benefits of
efficient lighting and appliances, increase the availability and
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demand for these products, and promote emerging technologies.
Programs focused on the HVAC systems seek to encourage the
replacement of inefficient systems with efficient ones, increase
consumer recognition of ENERGY-STAR products, increase training
of trade professionals in efficient HVAC systems, encourage
design using the "whole-systems" approach, and support the
improvement of efficiency standards. These programs accomplish
these goals by: 1) educating consumers through bill inserts and
call centers; 2) providing training and technical assistance to
HVAC contractors and distributors; 3) providing financial
incentives to distributors and installers for stocking and
installing efficient units, 4) managing Standard Performance
Contract (SPC) programs for commercial customers, and 5)
providing financing to residential customers for energy
efficient HVAC projects.
The motors programs endeavors to promote optimal motor system
design and sizing, facilitate consumer purchase of efficient
motors and increase the understanding of motor life-cycle costs.
These programs accomplish these goals by offering training and
technical assistance to encourage optimal system design and
life-cycle cost analysis, supplying on-site motor efficiency
tests, managing Standard Performance Contract (SPC) programs,
and providing financial incentives to motor distributors to
stock and sell greater numbers of high-efficiency motors.
The utilities also administer programs that target customers
when investment decisions are made during retrofits and
renovations and during the new construction on buildings and
homes. The retrofits and renovations programs are designed to:
1) increase energy efficient investments at the time of
retrofit, renovation, or sale of a home; 2) link interested
customers with providers of energy retrofit services, and 3)
increase the training of professionals who perform energy
efficient retrofits.
Many different market participants can increase the likelihood
of an energy efficiency retrofit. These programs not only
target residential and commercial customers who either own or
are buying a building (including multifamily houses, large
energy customers, and governments) but also trade professionals
(including engineers, designers, contractors, and energy
consultants), real estate agents, mortgage professionals, and
home inspectors.
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The utilities' retrofit and renovation programs include: 1)
providing information to customers planning to buy, sell, or
renovate a building on retrofit providers and ENERGY-STAR
windows, equipment, lighting, appliances, etc.; 2) making energy
audits available to customers to assist them in determining
their efficiency retrofit needs; 3) providing training and
technical assistance for trade professionals through libraries
and trade shows, and 4) provide financing and residential
customers for energy efficient projects.
The new construction programs seek to increase the number of
energy efficient new homes and buildings being built, promote
the ENERGY-STAR New Homes brand, raise awareness of the
existence and benefits of energy efficient home mortgages,
promote energy efficiency in the professions of architecture and
engineering, and promote construction exceeding Title 24
building standards.
This bill seeks to address whether there exists a more
innovative round of policies which can lead to actual reductions
in energy consumption throughout the system.
4)Incentive mechanism controversy : In 2005, the PUC approved
the utilities' request to spend
$2 billion of ratepayer dollars on energy efficiency programs
with the expectation that the investment would reap $2.7 billion
in net benefits for customers.
In December 2010, the PUC voted 3-2 to award Pacific Gas &
Electric Company (PG&E), Southern California Edison (Edison),
San Diego Gas & Electric Company (SDG&E) and Southern California
Gas Company (SoCalGas) a combined $68 million in shareholder
incentives for the utilities 2006-08 energy efficiency programs.
These bonuses came in addition to $143.7 million in incentives
already paid to the utilities for the same underperforming
programs.
An independent PUC staff report released in April 2010, found
that on average the utilities' reached only 70 percent of their
2006-08 PUC prescribed energy savings targets. According to a
press release issued by the Division of Ratepayer Advocates,
PG&E, Edison, and SDG&E underperformed enough to trigger
shareholder penalties. DRA's press release further notes that
the PUC's analysis showed that the portfolios of SDG&E and
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SoCalGas actually cost ratepayers more money than the benefits
they delivered, which is inconsistent with the PUC's obligation
to oversee cost-effective energy efficiency portfolios. In
contrast, the utilities' self-reported achievements claim they
achieved 160 percent of their goals. Despite the staff
analysis, the PUC awarded the additional bonuses and allowed the
utilities' shareholders to keep the previously awarded incentive
payments.
5)IOUs 2010-2012 EE portfolio : On September 24, 2009, the PUC
approved funding and
programs for the 2010-2012 energy efficiency program cycle. The
PUC authorized $3.1 billion in funding for energy efficiency
programs that are projected to save 7000GWh, 3460MW, and 150
MMTherms. The funding is 42% higher than the prior three-year
cycle and will support programs designed to produce deeper and
more comprehensive savings that the PUC believes California's
utilities can and will achieve. According to the PUC, these
programs and related energy savings are a key component of
California's broader energy policies and greenhouse gas
mitigation strategies.
6)Things to consider : This bill would require the PUC to ensure
energy efficiency programs
result in real reductions in energy consumption. It is unclear
how the author is defining "real reductions". Therefore, the
author and this committee may wish to amend the bill to direct
the PUC to seek to ensure real absolute reductions in energy
consumption . Furthermore, the author and this committee may
wish to amend this bill to clarify that the energy efficiency
programs to be evaluated are those within the jurisdiction of
the PUC. This bill should be amended to add clear definition of
terms, timeframes, the scale at which this mandate should be
assessed, and baseline year(s) against which to assess absolute
consumption reductions .
Presently, the PUC has ongoing proceedings which focus on
various aspects of energy efficiency. The author and this
committee may wish to amend this bill to require the PUC to
incorporate the provisions of this bill into an existing PUC
proceeding on energy efficiency .
Additionally, this bill requires the PUC to examine the
establishment of a program for on-bill financing for residential
retrofit and heating, ventilation, and air conditioning (HVAC).
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This provision may be duplicative of Public Utilities Code
Section 381.2 pursuant to AB 758 (Skinner, Chapter 470, Statutes
of 2009). This bill required the PUC to open a new or amend an
existing proceeding to investigate the ability of the utilities
to provide energy efficiency financing options for comprehensive
residential and commercial retrofit programs to be established
pursuant to Public Resources Code Section 25943. This has been
underway since September 2009 when Decision 09-09-047 directed
the PUC to undertake comprehensive research on energy efficiency
financing gaps and needs for California and to produce a
comprehensive energy efficiency financing report. The PUC has
hired new staff and secured consultant support in early 2010 in
order to advance this goal. The resulting comprehensive energy
efficiency financing report is expected out before the end June
2011. As such, the author and this committee may wish to strike
this provision that requires the PUC to establish a program for
on-bill financing for residential retrofit and HVAC .
REGISTERED SUPPORT / OPPOSITION :
Support
California Advocacy Committee of the United States Green
Building Council (USGBC CAC)
California Association of Realtors
Division of Ratepayer Advocates (DRA)
Opposition
PacifiCorp (unless amended)
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083