BILL ANALYSIS 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 995 - Wright Hearing
Date: June 13, 2000 A
As Amended: June 8, 2000 FISCAL B
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DESCRIPTION
Current law states legislative findings that the
transmission and distribution of electric power are
essential services imbued with the public interest that are
provided over facilities owned and maintained by the
state's electrical corporations.
Current law declares the delivery of electricity over
transmission and distribution systems is currently
regulated, and will continue to be regulated to ensure
system safety, reliability, environmental protection, and
fair access for all market participants.
This bill states legislative intent that electrical
corporations continue to be responsible for operating and
controlling all facets of their electric distribution
grids.
This bill requires electrical corporations to continue
operating their electric distribution grid in their service
territories consistent with existing law.
This bill requires electric corporations to make reasonable
investments in their distribution grids and be afforded a
reasonable opportunity to recover the costs of those
investments from ratepayers.
Current law requires investor-owned (IOU) and municipal
utilities to collect a public goods surcharge from each
electricity customer to fund four specific programs: 1)
energy efficiency; 2) renewable energy sources; 3) research
and development of alternative energy supplies; and, 4)
assistance to low-income users.
Current law funds the first three programs at specific
amounts and sunsets on December 31, 2001 (the low-income
assistance program is a needs-based activity that doesn't
sunset).
This bill extends the collection of the public goods
program surcharge for each of these programs for ten years.
This bill requires the California Energy Commission (CEC)
to develop an investment plan for the renewable energy and
research & development programs. This plan must be
approved by the Legislature before any of the program money
can be spent.
This bill establishes a review panel, to be appointed by
the Governor by January 1, 2004, and requires the panel to
review the CEC's goals associated with the public goods
programs by January 1, 2005.
This bill transfers the administration of the research and
development funds for the energy efficiency program from
the California Public Utilities Commission (CPUC) to the
CEC.
BACKGROUND
Electrical corporations providing distribution services own
and operate the electric distribution grid connecting the
transmission lines to homes and businesses. The grid
provisions in this bill state legislative intent that these
electrical corporations are entitled to manage their own
grid systems and recover "reasonable" costs associated with
their investments in this portion of the distribution
system.
The second major part of the bill alters the public goods
charge program and extends it for ten years. The CEC is
required to develop and submit to the Legislature an
investment plan for both the renewable energy and research
& development programs - and the money collected pursuant
to the public goods charge can't be spent until the
Legislature approves the investment plan. At the five-year
mark, a panel appointed by the Governor must review the
programs and determine whether they're meeting their
prescribed goals. At that point, another investment plan
must be approved by the Legislature before money collected
pursuant to the public goods charge can be spent.
The public goods surcharge and accompanying programs were
created in the original electric restructuring legislation,
AB 1890 (Brulte), Chapter 854, Statutes of 1996. AB 1890
provided a transition to a competitive marketplace in
energy generation, recognizing certain energy activities
which provide a clear public benefit may not be invested in
or funded in a competitive environment. To support these
important activities, AB 1890 set up a per kilowatt hour
surcharge paid by all electric customers to fund four
public goods categories: 1) energy efficiency; 2) renewable
energy sources; 3) research and development of alternative
energy supplies; and, 4) assistance to low-income users.
The public goods surcharge amounts to less than 3% of an
electricity customer's bill. This surcharge was put in
place for a four-year period for three of the programs,
with the low-income program set aside as a needs-based
program with no sunset. The public goods surcharge for
energy efficiency, renewable energy, and the public
interest energy research & development programs will sunset
on December 31, 2001.
According to the CPUC, the energy efficiency programs
funded by the investor-owned utilities generated over $2.7
billion in net benefits between 1990-1997 and a March 2000
by the Rand Corporation noted similar benefits.
QUESTIONS
1.Do the provisions of the bill related to the utilities'
electric grids merely re-state existing law or do they
expand the power and authority of the utility companies
in a manner that may have a negative impact on
competition and on consumers?
2.Should the utilities be able to recover costs
specifically for telling customers about the CARE program
when those customers call the utility to establish
service?
3.Is the review panel established by this bill necessary or
is there a more cost-effective and efficient way to
achieve the author's goal of providing an outside look at
how the CEC is running the public goods programs? If a
new review panel is necessary, should its makeup and
operation be further defined?
4.Should public entities be precluded from receiving a
customer credit for the purchase of renewable energy?
5.Does this bill unfairly preclude providers of wind power
from being able to compete for public goods money?
6.Should utilities be precluded from offering rebates to
customers who purchase energy efficient refrigerators?
COMMENTS
1)Defining the Distribution Grid . The bill attempts to
reaffirm the electric corporations' role in the
distribution system and requires utility distribution
companies to continue to make reasonable investments in
their own distribution grid.
The distribution grid is defined in this bill as those
facilities owned and operated by an electrical
corporation used to deliver light, heat or power that
aren't under the control of the Independent System
Operator (ISO).
Whether this section of the bill is simply a reflection
of existing law and practice or whether it gives utility
distribution companies some authority that they don't
have today is a matter of some disagreement.
The Utility Reform Network (TURN) believes the CPUC must
continue to explore various options for distribution, and
by specifically defining the utility's role and
responsibilities in the manner that this bill does, it
could impair the CPUC's ability to promote competition.
The issue of competition and distributed generation is
addressed between Page 18, Line 37 and Page 19, Line 18
of the bill and it appears to give the CPUC wide latitude
to exercise the same authority it has the ability to
exercise today.
2)CARE Program . This bill requires utilities to provide
customers who call the utility to establish service with
information on the California Alternative Rates for
Energy (CARE) program and how to apply for it. This
requirement comes with a specific reimbursement authority
to the utility for any costs associated with telling new
customers about the CARE program. This information is
already provided in billing inserts and as such, the
author and committee may wish to consider whether a
separate reimbursement should be provided to utilities
for telling customers - who are already calling the
utility to set up service - about a particular program.
3)The Public Goods Charge Extension . The public goods
program was set up to fund projects to provide public
benefit through energy program investments for four
years, ending on December 31, 2001.
The amount of money required to be raised and spent is as
follows (in millions):
1998-2000 2001 2002 (proposed by
AB 995 )
Energy Efficiency $228 $188$228
Renewable Energy $62.5 $62.5$62.5
Research & Dev. $109.5 $136.5 $135
Low Income Need based - no sunset
The funding levels are adjusted each year to account for
a growth in electric commodity sales or inflation
(whichever is less).
4)Accountability: The Investment Plans . Rather than
simply extending the sunset date on the existing law, AB
995 sets up a series of sections dedicated to each
program category.
Two of the sections - renewable energy and public
interest research & development - require the CEC to
develop investment plans that must be approved by the
Legislature before any of the public goods surcharge
money can be spent in these areas.
This is similar to a requirement that was placed in AB
1890 as it pertained to the renewable energy program. In
that instance, it required the Legislature to pass a
bill, SB 90 (Sher), Chapter 905, Statutes on 1997, into
law authorizing the money to be spent on specific public
goods programs in a specified manner. This bill requires
"legislative action" to spend the money collected for the
public goods program, but it doesn't specify that the
action needed is to pass a bill into law. As such, the
author and committee may wish to consider clarifying AB
995 to require that a subsequent bill is needed to
authorize the public goods money to be spent.
5)Renewable Energy Investment Plan . The bill requires the
renewable energy investment plan to meet certain
objectives, including increasing California's in-state
generated renewable resources and obtaining the greatest
environmental benefits from these technologies. The CEC
is required to consider production incentives for new
renewable energy, incentives for emerging renewable
technologies, customer credits, customer education,
incentives for biomass, incentives for solar thermal
generation, and incentives for specified fuel cell
technologies. While the CEC is free to allocate the
dollars in any categories it sees fit, it should be noted
that the specific listing of particular technologies is a
departure from the more general guidance given under
existing law. The author and committee may wish to
consider whether such specificity will be beneficial by
encouraging the CEC to consider programs it may not have
considered in the past or whether it will inadvertently
be detrimental by encouraging the CEC to spread funding
across a wide range of programs in smaller amounts, thus
reducing the effectiveness of public goods funding.
6)Public Research Investment Plan . This initial investment
plan would address the recommendations of the CEC's
public interest review panel report issued in March 1999.
Both this and the renewable energy investment plan would
have to contain funding targets and projected impacts for
the market and for the environment. Once completed,
these plans would go to the Legislature for approval by
March 1, 2001 for five years and again on March 31, 2006
for an additional five years.
7)Mid-Term Exam: The Governor's Review Panel . This bill
requires the Governor to appoint an independent review
panel to review the operation of the programs before they
can be re-authorized in 2006. The panel, which must be
appointed by January 1, 2004, and must deliver a report
by January 1, 2005, is charged with considering whether
the CEC's funding of the various programs is consistent
with statutory goals and whether the programs are
optimizing costs.
The bill requires the panel to include, at a minimum,
"members with expertise on the energy service needs of
large and small electricity consumers, system reliability
issues, and energy-related public policy," but isn't
further defined. The author and committee may wish to
consider whether the review panel should be more formally
structured to address questions such as: 1) How large
should it be? 2) Should the makeup be more specifically
delineated to ensure a wide range of opinions and views
will be represented on the panel? 3) How will panel
members be compensated?
If the purpose of the panel is to provide an outside look
at how the CEC is operation the public goods programs,
the author and committee may wish to consider whether
having the Electricity Oversight Board, the Legislative
Analyst, or the State Auditor provide this review would
be more efficient.
8)Customer Credit for Renewables Purchases . Existing law
gives all customers who buy renewable power a purchase
credit as an incentive to buy green power. This credit,
which amounts to 14% (or up to $75.6 million of the new
and emerging renewable technologies funds), allows buyers
of renewable energy to receive a credit of up to
1.5-cents per kilowatt hour - not to exceed $1,000 per
customer.
This bill - Page 22, Lines 38-40 - precludes public
entities from receiving these customer credits after
January 1, 2002.
On the one hand, it could be argued that if public
entities want to buy green power, they should pay for it
with their own funds instead of buying it because they'll
receive a subsidy that will reduce their overall energy
costs.
On the other hand, it could be argued that if a subsidy
is going to exist to promote the use of renewable power -
a subsidy that could reduce the overall energy costs of
anyone who takes advantage of it - there shouldn't be a
limitation on who can tap the subsidy. Furthermore, many
believe it's beneficial to make as many people aware of
the pluses of renewable energy as possible and providing
public agencies with access to the credit is one way to
accomplish that goal.
The author and committee may wish to consider whether
such a limitation is appropriate.
9)Wind Grant Limitations . This measure makes wind
generators who are currently under contract with an
electric utility eligible for public goods subsidies only
for the incremental power that results from a re-powering
and only if the generator declines to accepts a higher
capacity payment. The capacity payment is costly and
adds to the stranded costs paid by ratepayers through the
competition transition charge (CTC). Payment of stranded
costs that stem from these higher capacity charges can be
extended beyond the statutory end of the rate freeze.
The rationale for such a limitation is to prevent a
wind-powered generator from receiving two subsidies - one
from the public goods charge and another from the higher
capacity payment. This bill takes a "pick your subsidy"
approach, requiring wind-powered generators to opt for
either the capacity payment (paid for by ratepayers out
of the CTC) or the public goods payments (paid for by
ratepayers via the public goods surcharge on their bill).
Non-wind powered generators don't have the option of
receiving a capacity payment, so their eligibility for
public goods monies isn't conditioned in the same manner.
Having said that, this bill appears to contain another
inconsistency in how it treats wind-powered generators
and other electric generators. That's because under this
bill, all of the electrical production (past and future)
from biomass and solar facilities is eligible for
consideration by the CEC for public goods charge
subsidies, but for wind-powered generators, only the
incremental electrical production (future) is eligible
for consideration by the CEC for the public goods charge
subsidy.
The author and committee may wish to consider whether
such a distinction is fair and appropriate.
10)Should Refrigerator Rebates Be Banned? This bill
precludes energy efficiency funds from being used to
finance "refrigerator rebate" programs run by many
utilities. While such programs may provide an incentive
for people to buy new, energy efficient refrigerators,
the author is concerned the old, energy inefficient
refrigerators they're supposed to replace may simply wind
up in a person's garage to be used for extra food or
beverage storage, meaning the rebate program could
actually lead to a net increase in energy usage, instead
of a net decrease .
Instead of simply eliminating the refrigerator rebate
program entirely, the author and committee may wish to
consider whether a better approach might be to condition
the award of any rebate on the buyer providing proof that
the old appliance has been properly disposed of or
donated to an organization.
ASSEMBLY VOTES
Assembly Utilities & Commerce Committee(11-0)*
Assembly Appropriations Committee (21-0)*
Assembly Floor (76-0)*
* Votes were on a prior, unrelated version of AB 995.
POSITIONS
Sponsor:
Author
Support:
American Association of Business Persons with Disabilities
American Lung Association of California
California Chamber of Commerce
California League of Conservation Voters
California Manufacturers & Technology Association
California Public Interest Research Group
California Retailers Association
Coalition of California Utility Employees
Consumers First
ELEY Associates
Episcopal Environmental Commission of the Diocese of
California & the Regeneration
Project
Global Green USA (opposed to amendment described in Comment
8)
Global Possibilities
Independent Energy Producers
National Energy Foundation
Natural Resources Defense Council
Next Generation
Pacific Gas and Electric Company
Planning and Conservation League
Positive Energy
Sacramento Municipal Utility District
Sacramento Tree Foundation
SeaWest
Southern California Edison
Union of Concerned Scientists
Three private individuals (all of whom oppose the amendment
described in Comment 8)
Oppose:
California Wind Energy Association
Office of Ratepayer Advocates
The Utility Reform Network (TURN)
Western Power Trading Forum
Anna Ferrera
AB 995 Analysis
Hearing Date: June 13, 2000