BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 919|
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                                   THIRD READING 


          Bill No:  SB 919
          Author:   Hertzberg (D), et al.
          Amended:  4/14/16  
          Vote:     21 

           SENATE ENERGY, U. & C. COMMITTEE:  9-0, 4/5/16
           AYES:  Hueso, Morrell, Cannella, Hertzberg, Hill, Lara, Leyva,  
            McGuire, Pavley
           NO VOTE RECORDED:  Gaines, Wolk

           SENATE NATURAL RES. & WATER COMMITTEE:  8-0, 4/12/16
           AYES:  Pavley, Allen, Hertzberg, Hueso, Jackson, Monning,  
            Vidak, Wolk
           NO VOTE RECORDED:  Stone

           SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

           SUBJECT:   Water supply:  creation or augmentation of local  
                     water supplies


          SOURCE:    Independent Energy Producers Association

          DIGEST:   This bill requires the California Public Utilities  
          Commission (CPUC) to address the oversupply of renewable energy  
          resources through development of a tariff or other economic  
          incentive available to facilities that create or augment local  
          water supplies. 

          ANALYSIS:  

          Existing law:
          








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          1)Authorizes the CPUC to fix rates, establish rules, examine  
            records, issue subpoenas, administer oaths, take testimony,  
            punish for contempt, and prescribe a uniform system of  
            accounts for all public utilities, including electrical and  
            gas corporations, subject to its jurisdiction.  (Article 12 of  
            the California Constitution)

          2)Requires that all charges demanded or received by any public  
            utility for any product, commodity or service be just and  
            reasonable, and that every unjust or unreasonable charge is  
            unlawful.  (Public Utilities Code §451)

          3)Requires retail sellers of electricity - investor-owned  
            utilities (IOU), community choice aggregators, and energy  
            service providers - and publicly-owned utilities (POU) to  
            increase purchases of renewable energy such that at least 50  
            percent of retail sales are procured from renewable energy  
            resources by December 31, 2030.  This is known as the  
            Renewable Portfolio Standard (RPS).  (Public Utilities Code  
            §399.11 et seq.)

          4)Requires the CPUC to adopt a process for each IOU to file an  
            integrated resource plan to ensure IOUs meet the greenhouse  
            gas (GHG) emissions reduction targets for the electricity  
            sector; procure at least 50 percent eligible renewable energy  
            resources by December 31, 2030; enable each IOU to fulfill its  
            obligation to serve its customers at just and reasonable  
            rates; minimize impacts on ratepayers' bills; ensure system  
            and local reliability; strengthen the diversity,  
            sustainability, and resilience of the bulk transmission and  
            distribution systems, and local communities; enhance  
            distribution systems and demand-side energy management; and  
            minimize localized air pollutants and other GHG emissions,  
            with early priority on disadvantaged communities. (Public  
            Resources Code §454.52)

          This bill:

          1)Requires the CPUC, by January 1, 2018, in consultation with  
            the California Independent System Operator (CAISO), to address  
            the oversupply of renewable energy resources through a tariff  
            or other economic incentive for the electricity purchased by  
            customers operating facilities that create or augment local  
            water supplies to reduce the cost of electricity to those  







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            facilities.

          2)States the intent of the Legislature to expedite funding made  
            available by the Water Quality, Supply, and Infrastructure  
            Improvement Act of 2014.

          Background

          An embarrassment of riches.  California utilities have procured  
          increasing amounts of electricity from renewable resources, in  
          response to the state's RPS mandates.  Much of this electricity  
          has come from solar and wind energy resources.  Such resources  
          can be described as intermittent, meaning that they are not  
          available at all times of the day and can experience  
          difficult-to-predict upward or downward swings in electricity  
          production.  This intermittency creates challenges for  
          management of the electric grid, one of which is the oversupply  
          of electricity during some times of the day under certain  
          conditions.  

          The CAISO depicted such oversupply in its now-famous (or  
          infamous) calculation of net electricity load, that is,  
          forecasted load minus forecasted electricity production from  
          wind and solar generation resources.  The chart has become known  
          as the "the duck curve," in which the duck's belly represents an  
          overabundance of electricity resources in the early afternoon,  
          whereas the duck's "neck" represents an increase in the relative  
          demand for electricity in the late afternoon and early evening.



          According to CAISO  
          (https://www.caiso.com/Documents/FlexibleResourcesHelp
          Renewables_FastFacts.pdf), the phenomena that result in the duck  
          create a number of challenging conditions for grid management: 

           Short, Steep Ramps-when CAISO must bring on or shut down  
            generation resources to meet an increasing or decreasing  
            electricity demand quickly, over a short period of time.

           Overgeneration Risk-when more electricity is supplied than is  
            needed to satisfy real-time electricity requirements.

           Decreased Frequency Response-when fewer resources are  







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            operating and available to automatically adjust electricity  
            production to maintain grid reliability.

          The CAISO reports that, to reliably manage the electricity grid  
          under increasingly duck-like conditions, it needs flexible  
          resources with certain characteristics.  According to CAISO,  
          those characteristics include the ability to perform the  
          following functions:

           Sustain upward or downward ramp.
           Respond for a defined period of time.
           Change ramp directions quickly.
           Store energy or modify use.
           React quickly and meet expected operating levels.
           Start with short notice from a zero or low-electricity  
            operating level.
           Start and stop multiple times per day.
           Accurately forecast operating capability.

          This bill requires the CPUC to take actions that the author and  
          bill proponents conclude will, in limited cases, create some of  
          the flexible conditions the CAISO says it needs.

          Duck?duck?(golden) goose.  As described above, the "duck curve"  
          creates challenges.  Managed smartly, it also creates  
          opportunities.  This bill seeks to take advantage of one of  
          those opportunities - the availability, at some times, of cheap  
          electric power.  

          In many areas of the state, local water supplies are  
          constrained.  Many processes to augment local water supplies,  
          such as desalination and water recycling, are expensive, partly  
          because of their energy intensity.  This bill seeks to balance  
          the oversupply of electricity caused by increasing amounts of  
          intermittent renewable energy against energy-intensive local  
          water supply augmentation.  A tariff or other economic  
          incentive, developed by the CPUC, is the balancing mechanism.

          Administration addressing oversupply of electricity and  
          energy-water nexus.  The state's energy agencies are well aware  
          of the "duck curve" and are working to address it.  Already, the  
          CPUC requires all nonresidential customers to use time-of-use  
          (TOU) rates, that is, rates for electric service that vary with  
          the time the customer uses the electricity according, in theory,  







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          to the cost of generating the electricity.  The CPUC  
          acknowledges that, largely because of the "duck curve"  
          phenomenon described above, existing TOU rates may not coincide  
          with the overabundance of electricity.  For this reason, as well  
          as the emergency situation created by the ongoing drought, the  
          CPUC has initiated proceedings to consider (1) adjusting TOU  
          rates to capture shifts in demand and electricity generation  
          costs and (2) encourage a shift in energy use by commercial,  
          industrial, and agricultural users to alternative times of the  
          day when abundant renewable energy and low-water-using energy  
          are produced at high (and growing) quantities. (See http://docs.
          cpuc.ca.gov/PublishedDocs/Published/G000/M157/K412/157412121.pdf  
          and  
          http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M159/K671/159671 
          432.pdf)

          According to the CPUC, it expects to complete its current  
          proceedings on TOU rates and demand shifting before July 1,  
          2017.  If the CPUC expectation holds true, it is not clear what  
          effect this bill would have were it to become law, beyond  
          explicitly pronouncing the state interest in maximizing the  
          development and expansion of facilities that create or augment  
          local water supplies.  This bill requires that the CPUC address  
          the oversupply of renewable energy resources through a tariff of  
          other economic incentive.  Should the CPUC issue its decisions  
          by before the start of 2018, it could declare its compliance  
          with this bill and be done with the matter.  Bill proponents  
          counter that establishing the "do-by" date in statute better  
          assures timely action by the CPUC.

          Water facilities have limited ability to absorb excess electric  
          generation.  According to staff of both the CPUC and the  
          California Energy Commission, local water supply augmentation  
          facilities currently present little potential to sop up excess  
          electricity supply.  True, desalination plants and similar  
          facilities are somewhat intensive energy users.  However,  
          currently, there are very few desalination plants in California.  
           Both operating needs and contractual obligations limit the  
          ability of such plants to quickly ramp production up or down.  

          That said, it is conceivable that future desalination plants and  
          similar facilities could be designed and operated to allow  
          greater amounts of ramping.  The tariff or other economic  
          incentive could encourage development of facilities better able  







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          to utilize excess electricity generation.

          Prior/Related Legislation
          
          SB 350 (De Leon, Chapter 547, Statutes of 2015) required, among  
          other things,  that IOUs and local POUs develop integrated  
          resource plans to ensure each utility meets the GHGs reduction  
          targets for the electricity sector; procures at least 50 percent  
          eligible renewable energy resources by December 31, 2030;  
          enables each IOU to fulfill its obligation to serve its  
          customers at just and reasonable rates; minimizes impacts on  
          ratepayers' bills; ensures system and local reliability;  
          strengthens the diversity, sustainability, and resilience of the  
          bulk transmission and distribution systems, and local  
          communities; enhances distribution systems and demand-side  
          energy management; and minimizes localized air pollutants and  
          other GHG emissions, with early priority on disadvantaged  
          communities.  The bill passed the Senate 26-14.

          AB 2363 (Dahle, Chapter 610, Statutes of 2014) directed the CPUC  
          to adopt estimates of expenses resulting from integrating and  
          operating eligible renewable energy resources.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes


          SUPPORT:   (Verified5/3/16)


          Independent Energy Producers Association (source)
          Association of California Water Agencies
          California Association of Sanitation Agencies
          California Municipal Utilities Association
          San Diego County Water Authority


          OPPOSITION:   (Verified5/3/16)


          None received

          ARGUMENTS IN SUPPORT:  According to the author, SB 919  







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          encourages the development and diversification of local water  
          supplies through water recycling, reclamation, and desalination  
          by directing renewable energy "oversupply" to those water  
          suppliers.  An ancillary benefit, the author continues, is that  
          this bill requires better coordination of California's renewable  
          energy resources and demand for power and enables better, more  
          cost-effective utilization of renewable power as it is  
          generated.


          Prepared by:Jay Dickenson / E., U., & C. / (916) 651-4107
          5/4/16 14:57:57


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