BILL ANALYSIS �
SB 870
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Date of Hearing: September 7, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 870 (Padilla) - As Amended: September 6, 2011
SENATE VOTE : Not relevant
SUBJECT : Energy: Clean Energy Innovation Program: natural gas
surcharge
SUMMARY : Establishes the California Energy Innovation Program
(CEIP) for the purpose of funding energy-related research,
development, and demonstration (RD&D), contingent on
reauthorization of public goods charge (PGC) funding for RD&D.
Specifically, this bill :
1)Establishes CEIP as a successor to the California Energy
Commission's (CEC) Public Interest Energy Research Program
(PIER). CEIP's purpose is to fund RD&D projects that may lead
to technological advancement and breakthroughs to overcome the
barriers that prevent the achievement of the state's energy
policy goals.
2)Requires the CEC to convene twice-yearly meetings of a 27-plus
member coordinating council consisting of:
a) The chair of the CEC, who serves as the chair of the
council.
b) One representative each from utilities, including
Pacific Gas and Electric, Southern California Edison, San
Diego Gas and Electric, Southern California Gas, and any
participating publicly owned utility.
c) One representative each from the Public Utilities
Commission (PUC), the Independent System Operator, the Air
Resources Board, and the PUC's Division of Ratepayer
Advocates.
d) Two representatives each from the building industry,
consumer organizations, environmental organizations,
environmental justice groups, and research institutions,
with appointment divided between the Senate Rules Committee
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and the Speaker of the Assembly.
e) Two representatives of clean energy businesses,
associations, or investors appointed by the Governor.
f) Two representatives of labor organizations appointed by
the Governor.
g) Two at-large members appointed by the Governor.
h) A Senator appointed by the Senate Rules Committee and an
Assembly Member appointed by the Speaker of the Assembly,
who may participate on the council to the extent
participation is not incompatible with their positions as
legislators.
3)Requires the council to annually identify energy barriers for
which CEIP funding is most warranted, identify opportunities
for leveraged funding, and make recommendations to avoid
duplicative funding of projects.
4)Requires the CEC to spend CEIP funds for projects and program
implementation that results in a portfolio of awards that does
all of the following:
a) Is strategically focused and sufficiently narrow to make
advancement on the most significant barriers to achieving
the state's energy policy goals, including energy storage,
renewable energy and its integration into the electrical
grid, energy efficiency, integration of electric vehicles
into the electrical grid, accurately forecasting the
availability of renewable energy for integration into the
grid, impacts of energy generation, and other significant
technological barriers identified by the coordinating
council.
b) Ensures that prior, current, and future RD&D projects
are not unnecessarily duplicated.
c) Invests in projects of California-based entities unless
there is a unique need that can be met only by an entity
based outside of California.
d) Results in a reasonably equitable distribution of awards
to various geographic regions of California.
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e) Maximizes expenditure of funds for RD&D projects and
minimizes expenditure of funds for administration and
overhead costs.
5)Permits a utility to receive CEIP funds only if it
participates in the program.
6)Requires the CEC to adopt regulations, or modify existing
regulations, for the solicitation of award applications,
evaluation of applications, and award of funds.
7)Requires the CEC, prior to awarding any CEIP funds, to
establish a process for tracking the progress and outcomes of
each funded project and terms for the state to accrue any
intellectual property interest or royalties that may derive
from CEIP funding.
8)Authorizes the CEC to solicit applications and award CEIP
funds using a sealed competitive bid, interagency agreement,
or sole source method.
9)Requires uses of sealed competitive bid in all cases in which
project bids are specific enough to be evaluated against
solicitation criteria.
10)Prohibits the CEC from awarding funds to the University of
California (UC) through sole source or interagency agreement
for a project for which funds could be awarded through a
sealed competitive bid.
11)If an award cannot be made using competitive bid, authorizes
the CEC to award funds on a sole source basis when the cost to
the state is reasonable and the proposal is either
unsolicited, unique, or is a continuation of an existing,
multi-phased project.
12)Prohibits the CEC from making a sole source award, or a sole
source or interagency agreement with the UC, unless the CEC
notifies the Joint Legislative Budget Committee (JLBC) and
relevant policy committees at least 60 days prior to making
the award, and the JLBC either approves or does not disapprove
the award with the 60 days.
13)Provides that the provisions of the section containing these
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bidding requirements are severable.
14)Requires the CEC to give priority to California-based
entities.
15)Requires the CEC to submit an annual report to the
Legislature describing projects awards and outcomes of
previously-funded projects.
16)Requires the CEC to establish procedures to protect
confidential or proprietary information in public reports.
17)Repeals the requirement that the natural gas surcharge
collected by PUC-regulated gas utilities natural gas public
purpose programs, be remitted to the Board of Equalization
(BOE), thereby removing the availability of these monies for
redirection by the Legislature to the General Fund.
18)Provides that existing PIER statutes apply to the expenditure
of PGC funds collected for RD&D before January 1, 2012.
19)Provides that enactment of the bill is contingent on
enactment of AB 724 (Bradford), which reauthorizes the PGC,
including dedicating $75 million per year for eight years for
RD&D.
EXISTING LAW :
1)Requires electric utilities to collect until January 1, 2012 a
"nonbypassable" surcharge on bills based on electricity usage
to fund energy efficiency, renewable energy, and energy RD&D
(i.e., the "public goods charge").
2)Establishes specific minimum annual collection amounts for the
three largest investor-owned utilities (Pacific Gas and
Electric, Southern California Edison and San Diego Gas and
Electric) and provides for adjustment according to the lesser
of sales growth or inflation:
a) $228 million for energy efficiency.
b) $65.5 million for renewable energy.
c) $62.5 million for RD&D.
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3)Provides the CEC at least $62.5 million per year to administer
PIER. Funds are allocated by the CEC according general
statutory guidelines and more specific CEC-developed
investment plans. PIER funds support investments in RD&D for
energy technologies that provide tangible benefits to the
utility customers who fund the program. Collection of
ratepayer funds for these and other purposes, and the CEC's
authority to spend the funds it administers, is authorized
until 2012.
4)Requires gas utilities to collect a natural gas surcharge from
customers and remit the money to the BOE. Requires natural
gas surcharge funds be used to fund low-income assistance,
energy efficiency and conservation activities, and public
interest RD&D.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. As part of California's experiment with electric
deregulation, AB 1890 (Brulte), Chapter 854, Statutes of 1996,
required ratepayers to fund a variety of system reliability,
in-state benefit and low-income customer programs at specified
levels from 1998 through 2001. This funding was intended to
ensure that these "public goods" programs continued (at least
in the short term) in the restructured electric industry.
Among the public goods programs established by AB 1890 was
public interest energy RD&D. Prior to awarding any of the
money collected from ratepayers, the CEC was required to
submit reports to the Legislature describing the programs it
would support and the levels of support those programs would
receive. This original CEC investment plan was adopted in
1997 and has been extended twice since. SB 1194 (Sher),
Chapter 1050, Statutes of 2000, extended the collection of
a public goods charge from ratepayers until 2012 and again
required the CEC to develop investment plans for renewable
energy and public interest RD&D. This bill creates a new RD&D
program to succeed PIER, contingent on enactment of PGC
funding for this purpose, which is in AB 724, pending in the
Senate.
Prior to enactment of AB 1002, (Wright), Chapter 932, Statutes
of 2000, gas surcharge revenues used to fund public purpose
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programs were collected and held by the gas utilities. AB
1002, in part to ensure that customers of non-PUC regulated
gas pipeline companies paid their fair share toward the gas
public purpose programs, required all gas surcharge monies
from all companies to be remitted to the BOE. The BOE would
then return the funds to the gas companies to carry out the
public purpose programs. The 2010-11 Budget Act includes a
transfer of $155 million from these natural gas surcharge
funds to the General Fund. The gas provisions of this bill
return the handling of gas surcharge funds by the utilities to
the pre-AB 1002 process, so the funds could not be
appropriated to the General Fund. The non-PUC regulated gas
companies would still remit surcharge revenues to the BOE.
2)Energy research may be defunded for six months or more. While
this bill provides that PGC funds collected before January 1,
2012 can be spent according to the existing PIER statutes, its
companion, AB 724 repeals the PIER fund and transfers residual
funds to a PIER "wrap up" account. Funds from this account
would not be available until an appropriation is enacted by
the Legislature, which may not be until the 2012-13 Budget Act
is enacted. Meanwhile, if AB 724 is enacted as currently
proposed, it would take effect immediately as an urgency
statute, defunding PIER projects and CEC staff until a new
appropriation is enacted.
3)Is the composition of the coordinating council appropriate for
CEIP's purpose? The council created by this bill has an
indeterminate number of members and no provision for
appointment of the non-governmental members other than
self-selection. In addition to the 27 members designated in
the bill, the bill gives a seat to any "participating"
publicly-owned utility (POU). The bill does not define
"participate," so it's conceivable that any POU contributing
funds, seeking awards, or even just showing up to a meeting
could appoint itself to the council. There are about 45
electric POUs in California. It's not clear how the council
would make decisions, what authority it has, or what authority
the CEC has over it, but to the extent the council would have
any influence over the CEC's decisions regarding expenditure
of CEIP funds, it seems inappropriate that it could be
dominated by self-appointed utility representatives, including
POUs that don't even contribute funds to the program.
4)Why single out UC for bidding and contracting restrictions?
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The author has cited high overhead and lack of transparency in
the contracting process with UC. However, the bill does not
limit overhead for UC or anyone else. Instead, the bill makes
UC subject to specific restrictions which may operate to favor
other research institutions or the private sector. The bill
prohibits the CEC from awarding CEIP funds to the UC through
either a sole source or interagency agreement if the funds
could be awarded through a competitive bid (including to
another entity). The bill suggests that the only way UC can
get funds through sole source or interagency agreement is if
it's impossible to award funds to UC or any other entity
through competitive bid. It's not clear that such a rigid
preference for competitive bid fits the type of research
projects CEIP will fund, or why the restrictions should apply
only to UC and not to other agencies, research institutions,
and private sector entities.
REGISTERED SUPPORT / OPPOSITION :
Support
California Building Industry Association
Opposition
University of California (unless amended)
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092