BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 29X - Kehoe Hearing Date:
March 29, 2001 A
As Amended: March 28, 2001 FISCAL/URGENCY B
X
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2
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DESCRIPTION
This bill creates a variety of new programs relating to energy
efficiency and distributed generation:
q Provides $23 million from the Proposition 98 Reversion Account
to fund energy efficiency and load management projects for
community college districts approved by the Department of
General Services (DGS) (Section 1);
q Directs the California Community College Board of Governors
to, in consultation with the California Energy Commission
(CEC), create a statewide energy management program with a
goal of completing 20 district energy management plans, 150
renewable energy systems, and 20 sustainable green buildings
on community college campuses statewide. No funding is
provided for this provision (Section 2);
q Provides $40 million for a loan guarantee program, to be
administered by the Trade & Commerce Agency, for loans to help
eligible businesses permit, manufacture, construct, or install
renewable energy systems (Section 3);
q Provides $40 million to the California Conservation Corps to
purchase and install subcompact fluorescent lights and water
saving devices throughout the state (Section 4);
q Provides $25 million for a loan program to shopping centers to
help finance energy efficiency improvements (Section 5);
q Provides $50 million for a grant and loan program for
low-income residents, small businesses, and residential
property owners for constructing and retrofitting buildings to
be more energy efficient by using energy efficient siding,
insulation, and double-paned windows (Section 6);
q Provides $50 million for a loan program for small businesses
to purchase and install energy efficient refrigeration
equipment (Section 6);
q Provides $50 million - $25 million in grants, $25 million in
loans - for programs to help cities, counties, and special
districts fund energy efficiency and conservation programs
(Section 7);
q Provides $25 million for a loan program administered by the
California Alternative Energy and Advanced Transportation
Financing Authority to provide financial assistance for new
and renewable energy sources, clean and efficient distributed
generation, and demonstrate the economic feasibility of new
technologies (Section 8);
q Requires the California Public Utilities Commission (CPUC) to
establish a three-tiered rate structure for residential
electric customers and prohibits the CPUC from imposing any
new charges on residential customers which aren't
consumption-based (Section 11);
q Requires the CPUC to undertake any necessary measures to allow
for replacement of standard meters with time-of-use meters for
non-residential customers with demand of greater than 100kw
(Section 13);
q Changes the existing net metering program for solar- and
wind-produced electricity by expanding the eligibility to
include business and agricultural customers, removing the cap
on eligible net metered capacity, and permitting stand-by
charges to be assessed (Section 14);
q Provides $2 million from the Proposition 98 Reversion Account
to the Board of Governors of the California Community Colleges
for a community college district to construct a sustainable
green instructional building (Page 48, Line 7);
q Provides a $150,000 grant to the Community College League of
California to establish a statewide database of community
college district utility usage (Page 48, Line 19);
q Provides $50 million for the purchase of time-of-use meters
for customers with usage greater than 100 kw (Page 49, Line
29);
q Provides $30 million to increase the rebate for small
distributed emerging technologies with a generation capacity
of not more than 10 kw, of which $8 million goes to customers
located in municipal utility service territories (Page 51,
Line 25);
q Provides $20 million to the Department of Community Services
and Development (DCSD) for low-income weatherization programs
(Page 52, Line 26);
q This bill also contains numerous legislative findings and
declarations regarding energy.
BACKGROUND
Increased energy efficiency and conservation are essential to
help reduce the demand for electricity in California, both this
summer and in the future. SB 5X (Sher), which is pending in the
Assembly Appropriations Committee, contains approximately $733
million of energy efficiency initiatives. SB 28X (Sher) is a
package of generation initiatives, including limited waivers of
standby charges for customer-owned generation.
COMMENTS
1)Amendments To Be Offered
The author will offer a number of amendments in committee:
q The first set incorporates the contents of AB 64X
(Strom-Martin) into this bill. This will require DGS to
identify each state building where it's feasible to reduce
energy consumption and produce electricity onsite. The
Director of DGS will be authorized to enter into agreements
to implement energy efficiency projects and onsite
generation. The amendments require all feasible retrofits
to be performed, but no appropriation is provided. These
amendments also appropriate $4.5 million to complete a
publicly-owned geothermal electric generation project in
Lake County which will produce an incremental 10 MW of
power which will be sold to the state at cost.
q The second set attempts to clarify the payment
provisions to non-residential customers who net-meter.
q A third set, noted below, will permit local governments
to apply for both the loan and grant programs created by
this bill.
1)Cities and Counties
SB 5X contains $20 million to encourage the installation of
demand-responsive and energy-efficient technologies in
buildings owned and operated by cities and counties located in
municipal utility districts.
SB 5X contains $20 million to encourage the installation of
demand-responsive and energy-efficient technologies in
buildings owned and operated by counties and cities located in
investor-owned utility territories.
This bill has $25 million for a grant program to a city,
county, or special district to fund energy efficiency and
conservation programs and $25 million for a loan program to a
city, county, or special district to fund energy efficiency
and conservation programs.
This bill permits grantees to solicit applications for
contracts using a competitive bid or a sole-source bid
process, allows the grantee to use an unlimited amount of
money from the grant for "administrative expenses," and
requires the CEC to contract on a sole-source basis to
evaluate the effectiveness of this bill.
The author is proposing to amend the bill to permit a local
government entity to be eligible for both the grant program
and the loan program. In that event, it's possible a local
government that covers 50% of its project costs from the grant
program and 50% of its costs from the loan program wouldn't
have to provide any upfront money for a project from which it
will reap 100% of the energy savings in future years.
Furthermore, to the extent the CEC awards grants from both
pots of money to a single local government, the number of
communities that are eligible to receive funding will be
reduced.
The author and committee may wish to consider whether it would
be more appropriate to limit a local government to a single
grant or loan in order to require the local government to
invest some of its own money in the program.
The author and committee may wish to consider whether the
sole-source contracting provisions of the bill are necessary
or appropriate.
The author and committee may wish to consider resolving the
overlap and duplication with the program envisioned by this
bill and the program created in SB 5X.
2)Community Colleges
SB 5X contains $50 million to implement a low-energy usage
building materials program and other measures to lower air
conditioning usage in schools, colleges, and other
non-residential buildings.
This bill appropriates $23 million from the Proposition 98
Reversion Account to fund energy efficiency and load
management projects that are approved by DGS for community
college districts.
This bill appropriates $2 million from the Proposition 98
Reversion Account to the Board of Governors of the California
Community Colleges for a community college district to
construct a sustainable green instructional building.
The author and committee may wish to consider discussing
whether, if the $23 million in this bill is to be set aside
for community colleges, SB 5X should be amended so that the
$50 million in that bill is only used for K-12, CSU, and UC
institutions.
The author and committee may wish to consider the
appropriateness of setting aside $2 million in a conservation
bill to fund a specific project at a community college that
will be used for teaching and developing sustainable building
practices.
3)Real Time Meters
SB 5X appropriates up to $35 million for installation of
real-time meters.
This bill appropriates $50 million for the purchase of
time-of-use meters for customers with usage greater than 100
kw.
This bill requires the CPUC to undertake any necessary
measures to allow for replacement of standard meters with
time-of-use meters for non-residential customers with demand
of greater than 100kw.
No funding is provided to accomplish this latter goal, so
presumably any costs will be born either by the specific
customer or otherwise allocated among all customers. Page 49,
Line 29 of the bill appropriates $50 million for a voluntary
time-of-use metering program for nonresidential customers with
usage greater than 100kw.
Time-of-use metering is distinct from real time metering.
Under time-of-use metering as practiced today, a customer's
usage is accounted for by time interval. Typically, the day
will be divided into three intervals - peak, partial peak, and
off-peak, with rates established in advance for each of those
intervals. Under real-time metering, a customer's usage is
priced on a real-time basis where pricing is dynamic, changing
perhaps every hour or even more frequently.
The author and committee may wish to consider harmonizing the
two provisions regarding metering to provide flexibility for
either time-of-use or real-time meters and to ensure that the
CPUC creates a rate structure compatible with the metering.
Furthermore, the staff of the CEC indicates that the 100 kw
threshold may be too low and that a 200 kw threshold is more
cost effective (Customers with demand of 500 kw or greater
already have time of use meters).
The author and committee may wish to consider resolving the
overlap and duplication with the program envisioned by this
bill and the program created in SB 5X to ensure that $85
million isn't spent on this program.
4)Low-Income Weatherization
SB 5X provides $20 million to augment funding for low-income
weatherization programs for customers of investor-owned
utilities.
SB 5X appropriates $120 million for supplemental funding of
the Low Income Home Energy Assistance Program (LIHEAP)
low-income energy assistance program, including
weatherization, which is administered by the Department of
Community Services and Development (DCSD).
This bill provides $20 million to the DCSD for low-income
weatherization programs
When SB 5X was heard by this committee, the committee
specifically removed a set-aside for LIHEAP weatherization
programs, opting instead to provide the money to LIHEAP and
allow it to administer the money in the places it felt it
would be the most appropriate. As such, the author and
committee may wish to consider harmonizing these provisions by
removing the $20 set aside for LIHEAP weatherization programs
in this measure.
5)Distributed Generation
On March 27, 2001 the CPUC approved spending $125 million to
buy down the cost of clean distributed generation (DG).
SB 28X contains a provision that provides for a waiver of up
to ten years of standby charges for certain types of DG
installed no later than June 30, 2003.
This bill provides $30 million to increase the rebate for
small distributed emerging technologies with a generation
capacity of not more than 10 kw. Of the $30 million, $8
million is directed to assist customers located in municipal
utility districts.
The buyers of DG technology will be able to benefit from a
number of subsidies - the $125 million program at the CPUC, a
potential waiver of standby charges pursuant to SB 28X, net
metering if the DG is solar electric or wind (see below), and
existing cost incentives through the CEC - not to mention
dramatically higher utility electric rates against which DG
competes.
Considering the fact that this is primarily a conservation
bill, not a generation bill, and considering the subsidies
noted above, the author and committee may wish to consider
whether the additional subsidy provided by this bill is
necessary.
6)Net Metering
This bill changes the existing net metering program for solar-
and wind-produced electricity by expanding the eligibility to
include business and agricultural customers, removing the cap
on eligible net metered capacity, and permitting assessment of
stand-by charges.
The net metering changes proposed in the bill are significant.
First, net metering is expanded to allow all customers, not
just residential customers, to participate.
Second, it lifts the cap on the amount of net-metered load.
Third, the bill extends standby charges to net-metered
customers, who previously had not been subject to them.
The author and committee may wish to consider , as a matter of
fairness, whether it's appropriate to continue waiving standby
charges for existing net-metered customers but apply them to
new customers who sign up after the effective date of this
bill.
This bill, and current law (Page 45, Lines 2-6), requires that
when a net metering customer is actually a net energy producer
(putting more kilowatts on the grid than he or she uses for
their own consumption), that customer is paid for the energy
produced at the retail rate for electricity, not at the lower
cost of the energy provided. The author and committee may
wish to consider whether continuing this higher amount is
appropriate.
7)Two Loan Guarantee Programs
Section 3 of the bill (beginning on Page 15) establishes a $40
million renewable energy loan guarantee program that allows
for loans from $25,000 to $2 million to be issued by the Trade
and Commerce Agency. Electricity generated by these projects
shall be available to Californians at "just and reasonable
rates."
Section 8 of the bill (beginning on Page 32) establishes a $25
million renewable energy loan guarantee program that has no
loan cap through the Treasurer's office. The author and
committee may wish to consider whether these two programs
should be combined and whether a borrower should be required
to make the power produced by the project available to
California at cost-based rates.
8)Rate Design
The bill requires the CPUC to establish a three-tiered
increasing block rate design of which the first tier is the
baseline quantity, the second tier is between the baseline and
at least 200% of baseline, and the third tier is above 200% of
baseline usage. The bill further bars any new charges for
residential customers that aren't based on usage until at
least December 31, 2003.
On March 26, 2001, the President of the CPUC proposed a
three-tiered rate design for residential customers which is
similar to the proposal in this bill. However, mandating a
three-tiered structure in statute may unnecessarily tie the
hands of the CPUC in that additional tiers may be appropriate
or, if rates ever return to historic levels, a two-tiered
system may again become appropriate. The author and committee
may wish to consider deleting the specific provisions of this
section dealing with tiering and instead simply clarify that
the CPUC has authority to create a multiple-tier rate design.
The provision barring additional non-usage based charges
appears to be an effort to further encourage conservation by
forcing all charges to be usage-based. Southern California
Edison at one point last year was proposing to increase its
fixed customer charge to somewhere in the neighborhood of $17,
which some believe would have the effect of shifting some
electricity charges from high-volume users to low-volume
users. This bill bars those charges, but only as they apply
to new users. The author and committee may wish to consider
whether it's appropriate to permit some users to be forced to
pay such a charge while others who sign up for service after
the effective date of this bill are exempt from paying this
charge.
Section 12 of the bill is intended to require the CPUC to
periodically "true up" utility rates to ensure the utility
receives the revenues it's entitled to, but no more. This
section recognizes that the CPUC's recently proposed rate
design makes electric rates higher than they have ever been,
making historic data relative to price elasticity less
accurate. Consequently, it's likely the rates will bring in
revenues that are different from the utility's revenue
requirement. Rather than create a windfall for either the
utility or ratepayers, this section is intended to assure the
rates are trued up, so no one receives a windfall. This has
been the practice of the CPUC over the years, so it's unclear
why such a provision is necessary in statute. However, if
there is a desire to ensure the CPUC continues its true up
process, the author and committee may wish to consider
clarifying the language to require the CPUC to periodically
adjust rates to ensure that the utility revenue requirement is
met.
Furthermore, the author and committee may also wish to
consider placing a sunset on this portion of the bill because
requiring the true up makes it difficult to create a
performance-based ratemaking process, where the utility is
rewarded if it performs better than specified performance
benchmarks. This is a system that has been successfully used
with telecommunications utilities.
9)Shopping Centers Only
The Energy Conservation Loans to Shopping Centers program
provides $25 million to assist shopping centers with energy
audits and loans to make the investments in the projects
identified in the audits.
SB 5X provides $100 million to encourage the use of
high-efficiency lighting and $70 million to improve
demand-responsiveness in HVAC systems. The author and
committee may wish to consider whether the more general
programs proposed in SB 5X are more appropriate for meeting
the needs of business customers, including shopping centers,
and, consequently, whether this narrow program should be
removed.
10) Functional for This Summer?
Most of the programs in SB 5X were extensions of existing
programs, making it more likely those programs could and would
be implemented by this summer. The programs in this bill
aren't existing programs, but most of the specific
expenditures in the bill are intended to provide savings
beginning this summer. The following programs have special
provisions to help ensure response by this summer:
q The funds for the Community College Program (Section 1)
revert to the General Fund if they aren't encumbered by
October 30, 2001.
q The Mobile Efficiency Brigade (Section 4) has intent
language that the light bulb distribution be completed by
August 31, 2001 and requires a report to the Legislature by
October 31, 2001.
q The Energy Conservation Loans to Shopping Centers
program (Section 5) limits eligibility to projects
implemented no later than October 31, 2001.
Many of the programs in this bill provide for exemption from
various state contracting codes, including competitive bidding
and low-bid requirements.
1)Technical Amendments
Page 21, Line 13; The reference to Energy Star standards needs
to be defined.
Page 30, Line 25; delete "school districts."
Page 48, Line 38; After "lights" insert ", other energy
savings measures,".
Page 50, Lines 18 and 23; the reference should be corrected to
Chapter 5.35.
ASSEMBLY VOTES
Assembly Floor (69-8)*
Assembly Appropriations Committee (16-4)*
Assembly Energy Costs & Availability Committee
(14-0)*
Assembly Revenue & Taxation Committee (7-0)*
*votes are on a previous, unrelated version of the bill.
POSITIONS
Sponsor:
Author
Support:
Clean Power Campaign
Oppose:
None on file
Randy Chinn
AB 29X Analysis
Hearing Date: March 29, 2001