Bill Text: CA SB1414 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Electricity: demand response.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Passed) 2014-09-26 - Chaptered by Secretary of State. Chapter 627, Statutes of 2014. [SB1414 Detail]

Download: California-2013-SB1414-Amended.html

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BILL NUMBER: SB 1414	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JULY 2, 2014
	AMENDED IN ASSEMBLY  JUNE 18, 2014
	AMENDED IN SENATE  MAY 5, 2014
	AMENDED IN SENATE  MARCH 28, 2014

INTRODUCED BY   Senator Wolk
   (Coauthors: Assembly Members Mullin and Williams)

                        FEBRUARY 21, 2014

   An act to amend Sections 380 and 454.5  of  
of, and to add Section 380.5 to,  the Public Utilities Code,
relating to electricity.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1414, as amended, Wolk. Electricity: resources adequacy
requirements.
   (1) The Public Utilities Act requires the Public Utilities
Commission, in consultation with the Independent System Operator, to
establish resource adequacy requirements for all load-serving
entities, as defined, in accordance with specified objectives. The
definition of a "load-serving entity" excludes a local publicly owned
electric utility. The act requires each load-serving entity to
maintain physical generating capacity adequate to meet its load
requirements to provide reliable electric service. The act requires
the commission to determine the most efficient and equitable means
for achieving prescribed objectives.
   This bill would include facilitating the economic dispatch and use
of demand response as an objective for the resource adequacy
requirements referenced above. The bill would additionally require
each load-serving entity to maintain both electrical demand response
and physical generating capacity adequate to meet its load
requirements. The bill would require the commission to determine the
most efficient and equitable means to ensure that investments are
made in new and existing demand response resources that are cost
effective and help to achieve grid reliability and 
environmental   the state's greenhouse gas emissions
reduction  goals. The bill would require the commission to
establish a mechanism to value the development and deployment of load
modifying demand response resources that can reduce a load-serving
entity's resource adequacy obligation and ensure that changes in
demand caused by load modifying demand response are expeditiously and
comprehensively reflected in relevant forecasting and planning
proceedings and associated analyses and encourage reflection of these
changes in demand in the operation of the grid.  The bill would
require the commission, in establishing a demand response program, to
take certain actions. The bill would authorize the commission to
establish metering, monitoring, and consumer protection policies for
demand response programs involving third party demand response
providers. 
   (2) The act requires each electrical corporation to file with the
commission a proposed procurement plan with specified information,
including, among other things, a procurement process under which the
electric corporation may request bids for procurement-related
services, a showing that the procurement plan will achieve, among
other objectives, the creation or maintenance of a diversified
procurement portfolio, and the electric corporation's risk management
policy, strategy, and practices.
   This bill would require the proposed procurement plan to include a
competitive procurement process that would also allow the electric
corporation to request bids for demandside response services. The
bill would require that the plan's diversified procurement portfolio
include demand response products and tariffs that can either meet or
reduce an electrical corporation's resource adequacy requirements, as
determined by the commission.  The bill would require that
an electrical corporation's portfolio be cost effective and help to
achieve electrical grid reliability and environmental goals.

   (3) Under existing law, a violation of the Public Utilities Act or
an order or direction of the commission is a crime.
   This bill would be part of the act and an order or other action of
the commission would be required to implement the bill. Because a
violation of this bill or an order or other action of the commission
implementing those provisions would be a crime, and because the bill
would make certain violations by a load-serving entity a crime, this
bill would thereby impose a state-mandated local program by creating
new crimes and by expanding the definition of existing crimes.
   (4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  (a) The Legislature finds and declares all of the
following:
   (1) Demand response programs and tariffs empower customers to save
money and reduce pollution by making electrical demand smart,
dynamic, and responsive.
   (2) Demand response allows for a smarter electrical grid that
reduces demand for electricity during peak hours when the grid
operator would otherwise often be forced to rely on quite inefficient
fossil fuel peaking plants.
   (3) Demand response can play a pivotal role in integrating clean
energy resources onto the electrical grid by shifting electricity
usage to times when there is abundant electricity generated by
renewable energy resources available and can help provide electrical
capacity in southern California following the closure of San Onofre
Nuclear Generation Station and the phase out of natural gas fired
powerplants that employ once-through cooling.
   (4) Reducing and shifting demand for electricity through demand
response can negate the need for more costly investments in
powerplants and transmission lines.
   (5) Increasing the role of demand response will reduce emissions
of greenhouse gases and other pollutants from the electricity sector.

   (6) Other regions of the United States have achieved substantial
reductions in peak demand through deployment of demand response.
   (7) California lags far behind the goal established in the 2005
Energy Action Plan of reducing 5 percent of peak demand using demand
response.
   (b) In enacting this act, it is the intent of the Legislature to
ensure that California and the Public Utilities Commission meet the
state's  environmental   greenhouse gas
emissions reduction  and energy goals by increasing the
utilization of  clean  demand response.
   (c) It is further the intent of the Legislature, in enacting this
act, to ensure that the procurement, programmatic, rate-based, and
other options that the Public Utilities Commission is pursuing or may
pursue in furtherance of demand response are in no way hindered or
superseded by the provisions in this act.
  SEC. 2.  Section 380 of the Public Utilities Code is amended to
read:
   380.  (a) The commission, in consultation with the Independent
System Operator, shall establish resource adequacy requirements for
all load-serving entities.
   (b) In establishing resource adequacy requirements, the commission
shall achieve all of the following objectives:
   (1) Facilitate development of new generating capacity, the
retention of existing generating capacity, and demand response that
are economic, needed, and maintain and help achieve the state's
energy and  environmental   greenhouse gas
emissions   reduction  goals.
   (2) Equitably allocate the cost of generating capacity and demand
response in a manner that prevents the shifting of costs between
customer classes.
   (3) Minimize enforcement requirements and costs.
   (4) Maximize the ability of community choice aggregators to
determine the generation resources used to serve their customers.
   (5) Facilitate the economic dispatch and use of demand response,
as determined by commission.
   (c) Each load-serving entity shall maintain physical generating
capacity and electrical demand response adequate to meet its load
requirements, including, but not limited to, peak demand and planning
and operating reserves. The generating capacity or electrical demand
response shall be deliverable to locations and at times as may be
necessary to maintain electric service system reliability and local
area reliability.
   (d) Each load-serving entity shall, at a minimum, meet the most
recent minimum planning reserve and reliability criteria approved by
the Board of Directors of the Western Systems Coordinating Council or
the Western Electricity Coordinating Council.
   (e) The commission shall implement and enforce the resource
adequacy requirements established in accordance with this section in
a nondiscriminatory manner. Each load-serving entity shall be subject
to the same requirements for resource adequacy and the renewables
portfolio standard program that are applicable to electrical
corporations pursuant to this section, or otherwise required by law,
or by order or decision of the commission. The commission shall
exercise its enforcement powers to ensure compliance by all
load-serving entities.
   (f) The commission shall require sufficient information,
including, but not limited to, anticipated load, actual load, and
measures undertaken by a load-serving entity to ensure resource
adequacy, to be reported to enable the commission to determine
compliance with the resource adequacy requirements established by the
commission.
   (g) An electrical corporation's costs of meeting resource adequacy
requirements, including, but not limited to, the costs associated
with system reliability and local area reliability, that are
determined to be reasonable by the commission, or are otherwise
recoverable under a procurement plan approved by the commission
pursuant to Section 454.5, shall be fully recoverable from those
customers on whose behalf the costs are incurred, as determined by
the commission, at the time the commitment to incur the cost is made,
on a fully nonbypassable basis, as determined by the commission. The
commission shall exclude any amounts authorized to be recovered
pursuant to Section 366.2 when authorizing the amount of costs to be
recovered from customers of a community choice aggregator or from
customers that purchase electricity through a direct transaction
pursuant to this subdivision.
   (h) The commission shall determine and authorize the most
efficient and equitable means for achieving all of the following:
   (1) Meeting the objectives of this section.
   (2) Ensuring that investment is made in new generating capacity.
   (3) Ensuring that existing generating capacity that is economic is
retained.
   (4) Ensuring that the cost of generating capacity and demand
response is allocated equitably.
   (5) Ensuring that community choice aggregators can determine the
generation resources used to serve their customers.
   (6) Ensuring that investments are made in new and existing demand
response resources that are cost effective and help to achieve grid
reliability and  environmental   the state's
  greenhouse gas emissions reduction  goals.
   (i) In making the determination pursuant to subdivision (h), the
commission may consider a centralized resource adequacy mechanism
among other options.
   (j) The commission, in an existing or new proceeding, shall
establish a mechanism to value the development and deployment of load
modifying demand response resources that can reduce a load-serving
entity's resource adequacy obligation pursuant to this section. In
determining this value, the commission shall consider how these
resources further the state's electrical grid reliability and
 environmental   the state's  
greenhouse gas emissions reduction  goals. The commission shall
ensure that changes in demand caused by load modifying demand
response are expeditiously and comprehensively reflected in relevant
forecasting and planning proceedings and associated analyses and
encourage reflection of these changes in demand in the operation of
the grid.
   (k) For purposes of this section, "load-serving entity" means an
electrical corporation, electric service provider, or community
choice aggregator. "Load-serving entity" does not include any of the
following:
   (1) A local publicly owned electric utility.
   (2) The State Water Resources Development System commonly known as
the State Water Project.
   (3)  Customer generation located on the customer's site or
providing electric service through arrangements authorized by Section
218, if the customer generation, or the load it serves, meets one of
the following criteria:
   (A) It takes standby service from the electrical corporation on a
commission-approved rate schedule that provides for adequate backup
planning and operating reserves for the standby customer class.
   (B) It is not physically interconnected to the electrical
transmission or distribution grid, so that, if the customer
generation fails, backup electricity is not supplied from the
electrical grid.
   (C) There is physical assurance that the load served by the
customer generation will be curtailed concurrently and commensurately
with an outage of the customer generation.
   SEC. 3.    Section 380.5 is added to the  
Public Utilities Code   , to read:  
   380.5.  (a) In establishing a demand response program, the
commission shall do all of the following:
   (1) Establish rules for how and when back-up generation may be
used within the program and establish reporting and data collection
requirements to verify compliance with those rules.
   (2) Ensure the program approved for resource adequacy requirements
will deliver the expected results and ensure customers that benefit
from promoting and maintaining grid reliability share in the costs of
the demandside resources.
   (3) Require monitoring of technologies used in the program to
ensure compliance with applicable federal and state environmental
laws.
   (4) Before the implementation of third-party programs for
residential customers, establish customer protection rules regarding
the participation, cost of participation, and ability to opt out of
the program without cost.
   (5) Establish a method to calculate the customer's average level
for peak consumption at time intervals in which the customer would be
eligible for demand response program payments or credits.
   (b) The commission may establish metering, monitoring, and
consumer protection policies for demand response programs involving
third party demand response providers. 
   SEC. 3.   SEC. 4.   Section 454.5 of the
Public Utilities Code is amended to read:
   454.5.  (a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of each
electrical corporation, which shall be reflected in the electrical
corporation's proposed procurement plan. Each electrical corporation
shall file a proposed procurement plan with the commission not later
than 60 days after the commission specifies the allocation of
electricity. The proposed procurement plan shall specify the date
that the electrical corporation intends to resume procurement of
electricity for its retail customers, consistent with its obligation
to serve. After the commission's adoption of a procurement plan, the
commission shall allow not less than 60 days before the electrical
corporation resumes procurement pursuant to this section.
   (b) An electrical corporation's proposed procurement plan shall
include, but not be limited to, all of the following:
   (1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.
   (2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
   (3) The duration of the plan.
   (4) The duration, timing, and range of quantities of each product
to be procured.
   (5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services and
demand response services, including the format and criteria of that
procurement process.
   (6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
   (7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
   (8) Procedures for updating the procurement plan.
   (9) A showing that the procurement plan will achieve the
following:
   (A) The electrical corporation, in order to fulfill its unmet
resource needs, shall procure resources from eligible renewable
energy resources in an amount sufficient to meet its procurement
requirements pursuant to the California Renewables Portfolio Standard
Program (Article 16 (commencing with Section 399.11) of Chapter
2.3).
   (B) The electrical corporation shall create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand-side
products, including demand response products and tariffs that can
either meet or reduce an electrical corporation's resource adequacy
requirements, as determined by the commission.  An electrical
corporation's portfolio must be cost effective and help to achieve
electrical grid reliability and environmental goals. 
   (C) The electrical corporation shall first meet its unmet resource
needs through all available energy efficiency and demand response
resources that are cost effective, reliable, and feasible.
   (10) The electrical corporation's risk management policy,
strategy, and practices, including specific measures of price
stability
   (11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
   (12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement plan. The commission's review
shall consider each electrical corporation's individual procurement
situation, and shall give strong consideration to that situation in
determining which one or more of the features set forth in this
subdivision shall apply to that electrical corporation. A procurement
plan approved by the commission shall contain one or more of the
following features, provided that the commission may not approve a
feature or mechanism for an electrical corporation if it finds that
the feature or mechanism would impair the restoration of an
electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
   (1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
   (2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
   (3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either approve
or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To the
extent the commission rejects a proposed contract pursuant to this
criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable for
ratemaking purposes.
   (d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
   (1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
   (2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and ensure that each
contract was administered in accordance with the terms of the
contract, and contract disputes that may arise are reasonably
resolved.
   (3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account, according to a schedule determined by the
commission. Until January 1, 2006, the commission shall ensure that
any overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation's actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule for
amortizing the overcollection or undercollection in the balancing
account to ensure that the 5 percent threshold is not exceeded. After
January 1, 2006, this adjustment shall occur when deemed appropriate
by the commission consistent with the objectives of this section.
   (4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term supply
contracts, by authorizing an electrical corporation to enter into
financial and other electricity-related product contracts.
   (5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation's procurement plan.
   (e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
   (f) The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.
   (g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any combination,
provided that the Office of Ratepayer Advocates and other consumer
groups that are nonmarket participants shall be provided access to
this information under confidentiality procedures authorized by the
commission.
   (h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the State Energy Resources Conservation and
Development Commission's existing authority and responsibilities as
set forth in Sections 25216, 25216.5, and 25323 of the Public
Resources Code.
   (i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
   (j) (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
   (2) Any electrical corporation's procurement necessitated as a
result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.
   (3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
   SEC. 4.   SEC. 5.   No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.