BILL ANALYSIS
SB 1976
Page 1
Date of Hearing: June 17, 2002
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
SB 1976 (Torlakson) - As Amended: April 30, 2002
AS PROPOSED TO BE AMENDED
SENATE VOTE : 38-0
SUBJECT : State Energy Resources Conservation and Development
Commission: report: real-time pricing.
SUMMARY : Requires the California Energy Commission (CEC) to
report on real-time electricity pricing tariffs. Specifically,
this bill :
1)Requires CEC to consult with the California Public Utilities
Commission (PUC) and report, by March 2003, to the Legislature
and the Governor regarding the feasibility of implementing
real-time pricing tariffs for electricity in California.
2)Specifies that the report shall consider:
a) How wholesale real-time prices would be calculated and
made available to customers;
b) Options for day-ahead and hour-ahead retail prices;
c) Options for facilitating customer response to real-time
prices and managing total customer costs;
d) Estimates of potential peak load reductions, including
shifting of peak load demand to off-peak periods;
e) Options for incorporating demand responsiveness into the
wholesale competitive market and operations of the
California Independent System Operator; and
f) Options for ensuring customer protection under a
real-time pricing scenario, including identifying how to
safeguard groups who may be disproportionately vulnerable
to the impact of volatile prices.
EXISTING LAW :
SB 1976
Page 2
Requires CEC to conduct an ongoing assessment of the
opportunities and constraints presented by all forms of energy.
FISCAL EFFECT : Unknown.
COMMENTS :
Restructuring of the electricity markets over the last years
throughout the nation has brought about new challenges to
electric utilities. In the past in a regulated environment,
electric utilities usually had guaranteed profit on every
kilowatt-hour of electricity sold. A market-based electricity
market no longer guaranties profit.
Real-time pricing (RTP) is aimed at businesses using more than
200 kilowatt-hours. Facilities affected would range from
smaller factories to expansive office complexes. To put RTP in
motion, CEC has awarded $35 million to the state's three major
investor-owned utilities (IOUs) to buy 20,000 sophisticated
meters that track price in 15-minute intervals. The meters
would be distributed free.
Under RTP, the electricity price is no longer constant over the
day but it changes every hour. The customer usually receives
the next day's hourly prices one day in advance. The utility
bases the next day's hourly prices on the expected hourly
electricity production cost for the next day. Real-time prices
vary greatly because the production costs of a utility vary
greatly from hour to hour depending on the utility's load and
the different types of power plants that have to be operated to
satisfy the demand.
Commercial, industrial and agricultural customers, as well as a
small number of residential customers currently have time of use
tariffs in place. Time of use rates set two or three different
prices for different times of the day, with differing rates
depending on the season. The time of use tariff does not
reflect actual day-to-day variations in demand and price.
Puget Sound Energy in Bellevue, Washington, was the first
electricity distribution utility in the nation to provide a
SB 1976
Page 3
time-of-use price and comparative time-of-day consumption
information to all customers. This program exposes customers to
the cost savings and efficiency benefits of shifting electricity
demand to off-peak periods. In a review of Puget's program, the
U.S. Department of Energy reports that 89% of Puget's customers
using real-time metering and the time of use tariff shifted at
least some of their energy use from peak hours to off-peak
hours. On average, customers shifted five percent of their peak
period load to off-peak hours.
This bill requires CEC to determine exactly how prices would be
calculated, the options for managing a RTP program, estimates of
potential peak load reductions, and how that will all work in
harmony with the grid operation.
RTP for customers of IOUs requires PUC to adopt an RTP tariff.
Last May, CEC petitioned PUC to implement an RTP tariff as an
alternative to PUC-administered interruptible program for
customers with loads greater than 200 kilowatts. Many of these
customers have received real-time meters pursuant to a program
established by AB X1 29 (Kehoe), Chapter 8, Statutes of 2001,
which appropriated $35 million to CEC for installation of
real-time meters. According to CEC, this program will result in
the installation of 22,000 meters statewide, but without a RTP
tariff, little else can happen in the program.
In August, PUC rejected CEC's proposed RTP tariff and instead
ordered IOUs to propose RTP tariffs. Each of the IOUs filed RTP
proposals in August. PUC has not taken any further action on
the proposed RTP tariffs, but with increasing amounts of power
purchased in longer-term bilateral contracts, it becomes
increasingly difficult to find a benchmark reflecting the real
time price of electricity.
There are two legislatively mandated reports outstanding on the
subject of real-time pricing. One was due March 31, 2002, SB
1388 (Peace), Chapter 1040, Statutes of 2000. The other is due
June 30, 2002, AB X1 29 (Kehoe), Chapter 8, Statutes of 2001.
The first has not been completed because it is contingent on the
end of IOUs' rate freeze. The second has not been funded. Both
address the feasibility and efficacy of real-time pricing by
requiring pilot studies. The report required by this bill could
be regarded as duplicating these required studies.
SB 1976
Page 4
REGISTERED SUPPORT / OPPOSITION :
Support
Air Conditioning and Refrigeration Institute
Building Owners and Managers Association (if amended to provide
for sub-metering)
Charles River Associates
Office of Ratepayer Advocates
CPUC
SchlumbergerSema
Opposition
None on file.
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083