BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2363 (Dahle) - Electricity procurement.
Amended: August 4, 2014 Policy Vote: EU&C 10-1
Urgency: No Mandate: No
Hearing Date: August 4, 2014 Consultant:
Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: This bill would require each electrical
corporation (investor-owned utilities, IOUs) to include in its
annual renewable energy procurement plan an estimate of expenses
resulting from integrating and operating eligible renewable
energy resources. The Public Utilities Commission (CPUC) would
be required to approve a methodology to determine these
integration costs no later than October 1, 2015.
Fiscal Impact: One-time costs of $600,000 to the Public
Utilities Reimbursement Account (special) for the CPUC for
contracts to develop necessary models.
Background: The Renewable Portfolio Standard (RPS) requires that
that IOUs and public utilities must meet or exceed a target of
33% renewable generation in their electricity supply portfolios
by 2020. IOUs are required to procure eligible resources based
on a "least-cost, best-fit" methodology rather than directing
procurement of specific energy resource types (PUC �399.11 et
seq.) To track progress towards the RPS requirements, the CPUC
is directed by PUC �399.13 to require each IOU to annually
prepare a renewable energy procurement plan. The CPUC then must
review and adopt that plan in an RPS proceeding.
Section 454.5 of the CPUC also requires IOUs to file, and the
CPUC to review and approve, long-term procurement plans to
ensure that the IOUS have sufficient and diverse short- and
long-term electricity and demand reduction resources that are
cost-effective, reliable, and feasible to serve its customers.
The long-term procurement plan is required to look at least ten
years into the future. The procurement plan includes the
renewable energy procurement plan to illustrate that the IOUs
will achieve the RPS targets and first meet unmet resources
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needs with energy efficiency and demand response resources that
are cost effective, reliable, and feasible. Long-term
procurement plans are reviewed and approved every two years.
In 2004, the CPUC recognized that integration costs for
intermittent renewables (e.g. solar and wind) should be
considered to inform and improve procurement decisions. At that
time, the CPUC approved that cost of integrating any
intermittent renewable resources were zero (D 04-09-029). The
CPUC has re-evaluated this decision in 2008, 2011, 2012, and
2013 and found that no evidence had been presented to determine
that integration costs are not negligible. However, the CPUC has
invited comments on integration costs in a LTPP proceeding, R
12-03-014, which started in March 2012 and is still underway.
Additionally, the CPUC is considering integration costs in the
proceeding opened for the 2014 review of renewable energy
procurement plans, R 11-05-005. Unless and until the CPUC
determines that the integration cost is no longer zero in their
LCBF analysis, all renewables, whether intermittent or baseload
(e.g. geothermal and biopower) must be treated the same.
Proposed Law: This bill would require the CPUC to approve a
methodology for determining the costs of integrating and
operating eligible renewable energy resources, such as
additional wholesale energy and capacity costs, by October 1,
2015. IOUs would be required to include estimates of integration
costs into their renewable energy procurement plan and their
long-term procurement plans.
Related Legislation: AB 177 (V.M. Perez) would have required the
CPUC to include a value for renewable integration when
authorizing electricity procurement by electrical corporations,
among other provisions. (Assembly inactive file.)
Staff Comments: The CPUC can develop the methodology required by
this bill as part of its existing proceeding regarding renewable
energy procurement. However, the CPUC will necessitate
approximately $600,000 in consultant costs to develop necessary
electrical system models, run electrical system constraint
scenarios, analyze the results, and conduct workshops to develop
the integration costs methodology.
This bill requires that the CPUC develop the methodology to
calculate integration costs be developed by October 1, 2015. The
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CPUC indicates that while they have already opened up
proceedings regarding this methodology, they do not anticipate
being able to complete the proceeding by October 1, 2015 nor do
they believe that this work can be completed in a separate
proceeding by that deadline.
Recommended Amendments: The bill requires the IOUs to include
integration costs in their renewable energy procurement plans
and long-term procurement plans. However, the CPUC would not be
required to develop the methodology for making that calculation
until October 1, 2015. Staff recommends that the requirement for
IOUs to include integration costs in their plans be delayed to
allow for the CPUC to complete its methodology first, or earlier
as specified by the CPUC.