BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 719 - Hernández Hearing Date:
June 18, 2013 A
As Amended: April 16, 2013 FISCAL B
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DESCRIPTION
Current law requires California's electric utilities to first
meet their energy needs through cost effective energy efficiency
measures. (Public Utilities Section 454.5)
Current decisions of the California Public Utilities Commission
(CPUC) require investor-owned utilities (IOUs) to administer
energy efficiency programs in multi-year portfolios designed to
meet pre-established energy savings goals which are funded by
ratepayer charges, currently at about $1 billion per year.
Current decisions of the CPUC approve energy efficiency
portfolio programs that include, among many others, on-bill
repayment (OBR) and on-bill financing (OBF) so customers can pay
off a loan for an energy efficiency project through monthly bill
payments, and incentives for owners of streetlights to upgrade
to more efficient streetlights.
This bill states the intent of the Legislature that
utility-owned street light poles, whose electricity use is paid
by local governments, be converted to use cost-effective
technology that reduces electricity consumption so the agency
may achieve lower utility bills.
This bill requires the CPUC, on or before March 1, 2014, to
order IOUs to submit a tariff that a local government may use to
fund energy efficiency improvements in street light poles owned
by the utility in order to reduce energy bills, but with no cost
shifts to nonparticipating ratepayers.
This bill provides that a local government financing an
improvement through such a tariff shall be eligible to use any
energy efficiency rebate or incentive available for that
improvement.
BACKGROUND
Energy Efficiency Focus on Financing - Energy efficiency is
California's top strategy for reducing energy use and meeting
the state's energy needs. California's utilities are required to
first meet their energy needs through cost-effective energy
efficiency measures before renewable and conventional
generation. The state's IOUs and, to a lesser extent, the local
publicly owned utilities (POUs), administer hundreds of energy
efficiency programs that provide financial incentives and
rebates for installing energy efficient appliances, lighting,
windows, HVAC systems and other technologies or measures. A
major focus is providing financing mechanisms that will entice
consumers to invest in measures that will provide energy savings
over time. In the CPUC's November 2012 decision approving $1.9
billion in ratepayer funds for IOU energy efficiency programs
for 2013-2014, the CPUC approved $220 million for financing.
These include OBF and OBR, where a utility or private lender,
respectively, fronts the cost of an efficiency measure and the
customer pays off the loan with monthly payments added to the
charge for service on the utility bill.
Street Lights - Each local agency pays the energy bill for the
street lights in its jurisdiction, although many agencies do not
own the street light poles and fixtures. According to the CPUC,
local governments and IOUs own the following number of street
light poles:
------------------------------------------
|Utility | IOU owned | Local |
| | | Government |
| | | Owned |
|----------------+-----------+-------------|
|PG&E | 175,585 | 554,000 |
|----------------+-----------+-------------|
|SCE | 653,209 | 115,460 |
|----------------+-----------+-------------|
|SDG&E | 27,981 |119,469 |
------------------------------------------
Local agencies that own the poles can convert those to more
efficient street lights, thereby reducing their energy use and
monthly bills. Many California cities received loans and grants
to fund energy efficient streetlight replacements through the
American Recovery and Reinvestment Act of 2009 (AARA). The IOU
energy efficiency portfolios include rebates and incentives to
street light owners to upgrade to more efficient lights. Of the
local government-owned poles, roughly 20% in Pacific Gas and
Electric (PG&E) area have been converted, about 1% in Southern
California Edison's (SCE's) area have been converted, and about
40% of San Diego Gas & Electric (SDG&E) area poles have been
converted.
Utilities may have little incentive to make energy efficiency
retrofits to street lights when they do not own the poles. When
they do make such improvements, utilities can recover those
costs through rates paid by all ratepayers. Very few
utility-owned poles (less than 40 total) have been converted to
more efficient lighting.
COMMENTS
1. Author's Purpose . According to the author, "the purpose
of this bill is to encourage local agencies to install
high-efficiency light bulbs in street light fixtures. Our
street lights are neglected public facilities that are
operating on outdated energy technology with cities footing
the higher energy costs associated with this old
technology. Corporate utilities that stand by without
making energy efficiency retrofits profit from the status
quo when more energy is consumed by their customers, at the
expense of the taxpayers and the environment. In my
district, of the 653,209 street lights that the servicing
utility company owns, only 16 of those have been replaced
with energy efficiency lighting. This bill provides a way
for cities and counties to achieve reduced energy use and
lower energy bills."
2. Filling a Gap in Energy Efficiency Programs . A major
focus of California's energy efficiency programs is to
provide consumers with inexpensive and convenient ways to
finance new appliances, building retrofits, and other
technologies that will reduce energy use and lower monthly
bills. Customers generally have an incentive to make
improvements that reduce their energy bills, but with local
agencies that pay for energy used by inefficient older
street lights, converting to efficient street lights is not
an option if they do not own the light poles. This bill
fills a gap in current energy efficiency programs where
local agencies pay for street lighting from poles owned by
the utility.
3. Ensuring Transparency of Financing Charge . According to
information from the CPUC and Pacific Gas and Electric, a
tariff that meets the requirements of this bill could
include a higher rate for service for a period of time
(probably two to three years) until the utility recovers
the cost of the street light improvement. After that time,
the agency would revert to the regular rate for service,
which presumably would result in a lower total bill because
of the more efficient light. This approach is similar to
OBR and OBF in that it allows a customer to pay for an
energy efficiency improvement through an additional payment
in the monthly bill. However, OBR and OBF programs require
that the loan or financing payment be listed as a separate
line item on a customer bill rather than built into the
cost of service. This allows the customer to determine the
cost-effectiveness of the improvement by comparing the cost
of financing the improvement with the savings from the
increased efficiency measure. In addition, separating out
the cost of the improvement is essential if an agency uses
an energy efficiency rebate or incentive to pay the cost of
the improvement, which this bill allows. In order to
ensure transparency and enable local agency customers to
apply incentives and evaluate cost-effectiveness of street
light improvements, the author and committee may wish to
consider amending the bill to require that any charge for
financing street light improvements be identified
separately rather than included within the charge for
service.
4. Bills May Temporarily Increase . This bill refers to
energy efficiency improvements for street light poles "to
ensure reduced energy consumption and lower electricity
bills." The bill requires a tariff that allows payment of
the improvement over time. As noted above, more efficient
lights will reduce energy consumption, but a lower
electricity bill likely will not result for the period of
time that the customer's bill includes the repayment of the
upgrade cost. Thus, the author and committee may wish to
consider amending the bill to strike the references to
"lower electricity bills."
5. Timing of CPUC Action . This bill requires the CPUC, on
or before March 1, 2014, to order IOUs to submit a tariff
that offers the light pole financing option to local
agencies. The CPUC states that it needs 18 months "to
ensure that a well-designed tariff is made available to
local governments." In October 2012, PG&E submitted a
tariff proposal in its pending rate case that would likely
meet the requirements of this bill. Perhaps the CPUC's and
stakeholders' review of that tariff, which is ongoing now,
will enable the CPUC to meet the deadline in this bill.
6. Technical Amendments .
On page 2, lines 3 to 13 - move intent language to an
uncodified section of the bill.
On page 3, line 23 - change "conversion" to "improvement"
for internal consistency.
7. Ratepayer Impact . This bill requires that tariffs
benefit local agency energy customers without shifting
costs to nonparticipating ratepayers.
8. Double Referral . Should this bill be approved by the
committee, it will be re-referred to the Senate Committee
on Rules for its consideration.
ASSEMBLY VOTES
Assembly Floor (53-18)
Assembly Appropriations Committee (12-5)
Assembly Utilities and Commerce Committee
(10-3)
POSITIONS
Sponsor:
Author
Support:
California Public Utilities Commission, if amended
Pacific Gas and Electric Company
Sierra Club California
Oppose:
None on file.
Jacqueline Kinney
AB 719 Analysis
Hearing Date: June 18, 2013