BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1295 - Hernández Hearing Date:
July 2, 2013 A
As Amended: June 25, 2013 FISCAL B
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DESCRIPTION
Current law authorizes individual retail, non-residential,
end-use customers to acquire electric service from other
providers in each electrical corporation's (IOU) distribution
service territory, up to the historically highest amount of
kilowatt-hours (kWh) of annual sales for each utility.
Increases authorized in 2009 require a phase-in period for new
customer enrollments of not less than three years and not more
than five years. The program is commonly referred to as "direct
access." (Public Utilities Code 365 et seq.)
Current law establishes a general exception to the cap on direct
access for community choice aggregation (CCA) undertaken by
cities and counties serving their own residents and businesses,
with electricity secured from the market or energy producers
under contract with the CCA to provide service to IOU customers
choosing to enroll." (Public Utilities Code 366.2)
Current law requires an electric service provider (ESP) that is
a non-utility entity that offers electric service to customers
within the service territory of an IOU to register with, and be
subject to, the jurisdiction of the CPUC. The ESP is required
to undergo background checks and provide proof of financial
viability and technical and operational ability in addition to
other fees, bonds, and reporting requirements to the CPUC and to
the customer's served. (Public Utilities Code 394 et seq.)
This bill requires IOUs to establish a program, by advice letter
or an application approved by the commission, under which the
customers of the state's IOUs can purchase generation directly
from a "community renewable facility" (facility) at a rate
determined between the facility and the customer. The total
capacity cap of interconnected resources would be 600 MWs
allocated between the IOUs in proportion to the statewide peak
electricity demand and distributed over the life of six-year
program.
This bill requires all IOUs operating in the state to:
Charge subscribing customers a community renewables
rate, in lieu of the generation rate normally charged to a
customer, which is equal to the customer's kilowatt hour
subscription with a facility times a rate that includes the
competitively bid contract price for renewable generation
and charges for departing load, renewable integration,
procurement of sufficient resources to adequately serve
subscribing customers, and program administration while
ensuring that non-subscribing customers are unaffected;
Continue to charge subscribing customers for all
transmission, distribution, and public purpose programs;
Purchase the unsubscribed output of any facility at the
competitively bid contract price for renewable generation;
Recover from a facility any procurement costs above
those that would otherwise be incurred under the RPS
program;
Pay any facility for any unsubscribed output from the
facility at the original RPS contract price; and
Subtract from its retail sales the amount of generation
a customer subscribes to from a facility thereby reducing
the denominator in the calculation used to determine the
IOU's RPS procurement obligations.
This bill permits any customer of any IOU to subscribe for
generation from a facility if the facility:
Has contracted with the IOU to deliver renewable
generation under a competitively bid program and has
elected to become a community renewable facility;
Is an eligible renewable resource that comes begins
commercial operation on or after January 1, 2012;
Is less than 20 MW in size; and
Is located in the service territory of the IOU and its
customer and optimizes the delivery of electricity by the
facility to load centers.
This bill requires the CPUC to:
Authorize the tariff required by the program;
Ensure that customers that do not subscribe in the
community renewables option are indifferent to whether
other customers subscribe in the community renewables
option, and no costs are shifted from subscribing customers
to non-subscribing customers;
Evaluate the program after January 1, 2016 and consider
whether it should continue; and
Terminate the program by January 1, 2020.
This bill permits a POU which offers a community renewable
option to reduce its obligation to offer a feed-in-tariff in its
territory under current law.
BACKGROUND
Deregulation - California's experiment with deregulation was
launched in 1996 when the Legislature passed AB 1890 (Brulte,
1996), to restructure the electric industry. One of the key
features of electrical restructuring was the authorization of
retail competition within IOU service areas. AB 1890 ended the
service monopoly of utilities and authorized retail customers to
purchase energy directly from suppliers. These transactions are
known as "direct access." Community aggregation is a form of
direct access where, for example, a city may act as a purchasing
agent on behalf of its residents.
Before the energy crisis in 2001, non-IOU providers (direct
access providers) had enrolled customers but then failed to
provide the power ordered. The customers returned to the IOUs
for service but the utilities did not have the electric
generation resources to serve those customers because they had
left IOU service. In response a comprehensive framework has
been developed by the Legislature and the CPUC to ensure that,
in the case of direct transactions between energy suppliers and
utility customers, sufficient electric resources are maintained
to serve all customers, that IOU customers not served by
independent suppliers are held indifferent as to the cost
impacts of those transactions, and that the grid is reliable.
Post Deregulation - Two programs remain available for electric
customers to secure power from an entity other than an IOU -
Direct Access and Community Choice Aggregation. It is critical
to note that under these programs the utility is ultimately and
always responsible for providing electricity to every customer
in its service territory if the customer changes his/her mind or
the alternative avenue of purchase used by the customer
terminates or fails to provide service. Consequently both the
CCA and DA programs have been subject to years of painstaking
review, analysis, and litigation at the CPUC to try to provide a
framework under which these alternative mechanisms can operate
and the remaining ratepayers of the IOU are held indifferent as
to the financial impacts of the departing load.
As a result all customers participating in CCAs pay a customer
reliability surcharge; all direct access customers pay a power
charge indifference amount.
IOU "Green Options" - In response to the increasing attention of
the Legislature to institute enhanced renewable purchase options
for electric ratepayers, the three largest IOUs have programs at
varying stages of development to provide customers with greater
access to renewable electricity or renewable energy credits.
San Diego Gas & Electric (SDG&E) and Pacific Gas & Electric
(PG&E) have each have filed applications with the CPUC. Edison
plans to do so later this year.
PG&E - In April 2012 PG&E requested authority from the CPUC
to establish "Green Option" available to all bundled
electricity customers under which customers could
voluntarily choose to pay a rate to purchase Green-e Energy
certified renewable energy credits ("RECs") for a premium
on their utility bill. A heavy amount of criticism was
levied against the program. There was no evidence that the
REC purchases would result in any additional renewable
generation since they would be purchased from existing
in-state solar generators and from wind projects located
elsewhere in the west. It was argued that the plan would
not stimulate new development, or that these purchases
would cause any existing project to generate renewable
electricity that would not have otherwise been produced
and, in short, make no difference. Customers who
subscribed based on the belief that they would cause a net
increase in renewable power production would, in fact, be
misinformed.
The parties in the proceeding (including TURN and the
Sierra Club) negotiated a settlement agreement with PG&E
which was filed in early April to allow PG&E's residential
and commercial customers to voluntarily elect to purchase
renewable power to satisfy up to 100% of their electrical
demand. Under the program, PG&E will execute contracts for
new renewable generation from facilities to be built within
the PG&E service territory sufficient to serve the
electrical demand of customers participating in the
program. The amount paid by participating PG&E customers
will be based on the actual cost of procuring new renewable
generation, thereby providing them with a fair price and a
long-term hedge against rising conventional supply costs.
Non-participating customers will pay no portion of the
costs of the program. The agreement is pending review by
the CPUC.
SDG&E - In January 2012, SDG&E requested authority from the
CPUC to launch a pilot program with two elements designed
to gauge the level of interest among customers for whom
rooftop solar may not be a viable option. Its Share the
Sun? proposal would make up to 10 megawatts (MW) of solar
power available from projects owned by solar developers.
Customers could acquire a portion of the power produced by
a solar-energy system in SDG&E's service area to cover all
or part of their electricity use and receive a bill credit
for the value of the solar power their portion generates.
The "green attributes" of the solar power would belong to
the customer and would not be applied toward SDG&E's
renewable portfolio goals. However, SDG&E would take
delivery of all the energy from these projects, and any
unsubscribed energy will be added to SDG&E's renewable
portfolio, but will be over and above what is procured to
meet the 33 percent renewables target. The second phase of
the program would initiate the "SunRate" in which customers
could have their energy supplied from local solar projects
already under contract to SDG&E. As much as 10 MW would be
available under this "green" rate. Customers would buy the
solar energy from SDG&E to cover 50 percent, 75 percent, or
all of their energy use. The price will be based on the
cost of the solar energy from the local solar projects.
Edison - Is running different models and expects to file an
application for a green option with the CPUC later this
year.
COMMENTS
1. Author's Purpose . California electricity customers have
shown a desire to source a greater amount of their personal
electricity consumption from renewable energy sources.
While California electric utilities continue to invest in
utility-scale renewables, many customers are unable to
participate in the customer-side renewable energy
experience; this may be because they do not own property,
do not have sufficient upfront funds, or do not have an
optimally-sited roof in order to install their own solar
systems. A solution to this problem is a community
renewables program, which would allow an electricity
customer to source a greater proportion of their
electricity from renewable energy resources by subscribing
to the output of a third party renewable energy facility,
with that subscription accounted for on the customer's
electricity bill.
2. It's Not Easy Being Green . There has been great
interest in the Legislature to establish an option for
customers to purchase renewable generation who are
precluded from self-generation through programs such as
rooftop solar due to finances, shade, or because they are
apartment dwelllers and/or renters without the space or
authority to install generation. Debate has centered on
three critical elements to ensure that the costs of being
green are not shifted to non-subscribing customers, there
are no adverse impacts to grid reliability, and that there
is ease of program administration for the CPUC and IOUs.
After extensive amendments those goals were achieved in SB
43 (Wolk) which the Senate adopted in May. After further
debate and refinements the Assembly Utilities & Commerce
Committee approved SB 43 on June 24th. After three years
of debate and several bills, there appears to be great
support for SB 43 and little or no opposition. However, AB
1295 proposes a different financing model, would result in
two separately administered program structures adding
greater complexity to CPUC and IOU administration, and
double the capacity of generation available for direct
purchase by customers in a model that has yet to be tested
for impacts.
The specific framework in this bill also lacks key elements
that are in SB 43 including a set-aside strictly for
residential customers coupled with an enrollment cap per
customer to ensure that just a few large customers don't
dominate the program's available capacity and accommodation
of pending applications under review by the CPUC for IOU
programs in the territories of SDG&E and PG&E. This model
also permits the subscriber to pay additional costs for
renewable generation directly to the facility which would
be on top of the contract rate and market rate for
renewable generation. Most significantly this bill ties
the hands of the CPUC in considering where cost shifts
occur in the program structure and actually goes in the
opposite direction by mandating charges on subscribing
customers that may not be justified.
3. Charges to Subscribers Appear Excessive . Under this
bill IOUs would be mandated to charge subscribing customers
for several explicit costs including those for departing
load whether applicable or not. The CPUC should make those
determinations and not presuppose that they are applicable
to this new program model. Departing load charges are
applied to customers in direct access and community choice
aggregation programs but those programs differ
significantly because the generation facilities have no
contractual relationship with the IOUs. When a customer
enrolls in those programs, they truly depart from IOU
service for generation. In AB 1295 the IOU has a contract
with the facility and has an obligation to purchase
electricity from that facility regardless of whether the
customer stays enrolled in the program and the facility
will be used to serve IOU customers regardless of the
subscriptions.
4. RPS Impacts . Concern has been expressed by renewable
developers that this bill could "double-count" renewables
under this program and the RPS program and therefore not be
incremental or additive to the RPS. This does not appear
to the case. If a customer subscribes to the community
renewables program, then the IOU would no longer be selling
them electricity and so that subscription amount would
reduce the denominator for the IOU when calculating the
retail sales for its RPS requirement. If the customer
terminates their subscription then they would come back to
IOU service and their electrical load would be added back
to the IOU's RPS denominator. At that point the IOU also
has to buy the renewable output from the facility and can
then, and only then, count that generation toward its RPS
obligation. However, if the facility can't attract
subscribers, then the program MWs would no longer be
incremental to the RPS but would be part of the IOU's RPS
portfolio.
There does not appear to be double-counting but there is a
renewable shuffle authorized that could leave a hole in an
IOU's RPS procurements. Until the tariff permitted by this
bill is available to customers, any renewable facility that
is less than 20 MWs and has a PPA with an IOU could make an
election that all or a portion of its renewable generation
is for community renewables. That would allow customers
the green option but it would reduce the eligible
procurement in the IOU's RPS portfolio potentially leaving
them short of their compliance obligation. And why
shouldn't the facility try to enroll subscribers? The IOU
must buy the power regardless of subscriptions and the
facility could continue to get the contract rate for
generation as well as raise additional revenue through
direct charges to subscribers.
5. Inequity Between POUs & IOUs . This bill allows POUs to
offset the statutory feed-in-tariff obligations for
renewable generation less than three megawatts in size if
those projects are for a community renewable tariff. As a
result POU programs would not be incremental to the RPS
obligations and a mandate for the program would only exist
for IOUs. This creates a program inequity for POU
customers since the program would be optional in POU
territories and where utilized establish uneven renewable
program requirements for POUs and IOUs.
6. Related Legislation . Each of these bills proposes (or
proposed) green tariff shared renewable programs for the
customers of the three largest IOUs:
AB 1014 (Williams, 2013) held in Senate Rules
Committee;
SB 43 (Wolk, 2013) passed Assembly Utilities &
Commerce Committee June 24, 2013;
SB 843 (Wolk, 2012) failed passage in the Assembly
Utilities & Commerce Committee August 30, 2012; and
SB 383 (Wolk) held in Senate Appropriations
Committee, May, 2011 (bill later amended to address an
unrelated issue).
ASSEMBLY VOTES
Assembly Floor (72-3)
Assembly Appropriations Committee (17-0)
Assembly Utilities and Commerce Committee
(14-0)
POSITIONS
Sponsor:
Southern California Edison
Support:
None on file
Concerns:
Pacific Power
Oppose:
California Wind Energy
Cascade Hydro, LLC
CleanPath Ventures
Environment California
Green Sanctuary Committee of the UU Church of Davis
Large-Scale Solar Association
Solar Advocate
SolarCity, unless amended
Solar Energy Industries Association
Sullivan Solar Power
The Utility Reform Network
The Vote Solar Initiative
Kellie Smith
AB 1295 Analysis
Hearing Date: July 2, 2013