Updates to Energy Related Bills in the 2017-2018 California Legislative Session

Stoel Rives’ Energy Team has been monitoring and providing summaries of key energy-related bills introduced by California legislators since the beginning of the 2017-2018 Legislative Session. June 2, 2017 was the deadline by which the legislature was required to pass bills out of the house of origin.  Failing to meet that deadline does not automatically prevent a bill from proceeding through the legislative process; however, such failure will prevent the bill from being considered by the full legislature or the Governor during the first half of the Legislative Session.  Below is a summary of bills we have been following that have most recently changed.  We will continue to monitor and update these energy-related bills as the legislative session proceeds.

Assembly Bills

AB 79 (Levine, D): Electrical generation: hourly greenhouse gas emissions: electricity from unspecified sources.
STATUS: Ordered to Senate June 1, 2017.

  • Initially introduced as a bill to decrease the amount energy consumed from coal-fired generation resources, AB 79 was revamped to require, by January 1, 2019, the State Air Resources Board (CARB), in consultation with the Independent System Operator (ISO), to regularly update its methodology for the calculation of emissions of greenhouse gases associated with electricity from unspecified sources. The bill would require the CPUC and the CEC to incorporate the methodology into programs addressing the disclosure of the emissions of greenhouse gases and the procurement of electricity by entities under the respective jurisdiction of each.

AB 457 (Cunningham, R): Saline water conversion: Diablo Canyon Nuclear Plant.
STATUS: Ordered to Senate June 1, 2017.

  • AB 457 was introduced solely to enact legislation requiring a feasibility study of repurposing of local water produced by water desalinization facility at Diablo Canyon Nuclear Power Plant.
    • As amended, this bill now proposes to require the CPUC, as part of the commission’s regulatory actions related to the proposed decommissioning of the Diablo Canyon Nuclear Power Plant and consistent with the goal to mitigate negative impacts to ratepayers, to cause a study to be conducted on the feasibility of repurposing the water desalination facility at the Diablo Canyon nuclear power plant for purposes of desalinating water for local use.

AB 546 (Chiu, D): Land use: local ordinances: energy systems.
STATUS: Ordered to Senate June 1, 2017.

  • Existing law, the Planning and Zoning Law, among other things, requires the legislative body of each county and city to adopt a general plan for the physical development of the county or city and authorizes the adoption and administration of zoning laws, ordinances, rules, and regulations by counties and cities and requires a city, county, or city and county to approve an application for the installation of electric vehicle charging stations, as defined, through the issuance of specified permits unless the city or county makes specified written findings. Existing law further provides that the implementation of consistent statewide standards to achieve the timely and cost-effective installation of electric vehicle charging stations is a matter of statewide concern.
    • If passed, AB 546 would require on or before September 30, 2018, for a city, county, or city and county with a population of 200,000 or more residents, or January 31, 2019, for a city, county, or city and county with a population of less than 200,000 residents, require the city, county, or city and county to make all documentation and forms associated with the permitting of advanced energy storage available on a publicly accessible Internet Web site.
    • In addition, AB 546 would authorize the Governor’s Office of Planning and Research to provide guidance on energy storage permitting, including streamlining, best practices, and potential factors for consideration by local government in establishing fees for permitting and inspection.

AB 634 (Eggman, D) Real property; solar energy systems.  
STATUS: Ordered to Senate May 15, 2017.

  • Previously a bill related to employment agencies, now AB 634 specifies that an association may not establish a general policy prohibiting the installation or use of a rooftop solar energy system for household purposes on the roof of the building in which the owner resides and, an association may not require approval by a vote of members owning separate interests in the common interest development in those circumstances.

AB 797 (Irwin, D): Solar thermal systems.
STATUS: Ordered to Senate May 15, 2017.

  • The Solar Water Heating and Efficiency Act of 2007, until August 1, 2018, requires the Public Utilities Commission, if it determines that a solar water heating program is cost effective for ratepayers and in the public interest, to implement a program to promote the installation of 200,000 solar water heating systems.
    • AB 797 would revise the program to, among other things, promote the installation of solar thermal systems throughout the state, reserve 50 percent of the total program budget for the installation of solar thermal systems in low-income residential housing or in buildings in disadvantaged communities, and extend the operation of the program through July 31, 2020.

AB 1400 (Friedman, D): Public Interest Research, Development, and Demonstration Program and Electric Program Investment Charge program: microgrid projects: diesel backup generators.    
STATUS: Ordered to Senate May 30, 2017.

  • AB 1400 was originally introduced as a bill related to migratory birds and urban wildlife. However, on March 28, the bill was completely revised.  Existing law creates in the State Treasury the Electric Program Investment Charge Fund to be administered by the Energy Commission and requires the CPUC to forward to the Energy Commission at least quarterly moneys for those EPIC programs the CPUC has determined should be administered by the Energy Commission for deposit in the fund.
    • This bill would prohibit recipients of moneys awarded under the above two programs from expending those moneys for the purchase of fossil fuel generators.

Senate Bills

SB 71 (Wiener, D):  Electricity: solar energy systems.
STATUS:  Ordered to Assembly June 1, 2017

  • Originally introduced as a bill relating to the installation of solar photovoltaic systems or solar water heating systems in solar zones, SB 71 was revised and now focuses on the requirement of solar electric or solar thermal systems to be installed in the solar zone. Existing regulations on building standards require certain residential and nonresidential buildings to have a solar zone, as defined, on the roof of the building that is designated and reserved for solar electric or solar thermal systems and that meets certain specifications relating to minimum area, orientation, and shading, among other things.
    • If passed into law, SB 71 would require the Energy Commission to consider requiring, and would authorize the Energy Commission to update the building efficiency standards to require, a rooftop solar energy generation system, appropriately sized to be cost effective, to be installed in the solar zone of those buildings, during the construction of those buildings, by January 1, 2020, for residential buildings, and by January 1, 2023 for non-residential buildings.

SB 338 (Skinner, D):  Net-load peak energy.
STATUS: Ordered to Senate May 30, 2017.

  • Existing law requires the CPUC to adopt a process for each load-serving entity to file an integrated resource plan and a schedule for periodic updates to the plan to ensure that the load-serving entity meets, among other things, the state’s greenhouse gas emissions reduction targets and the requirement to procure at least 50 percent of its electricity from eligible renewable resources by December 31, 2030. Existing law requires a local publicly owned electric utility with an annual electrical demand exceeding 700 gigawatt hours, on or before January 1, 2019, to adopt an integrated resources plan and a process for updating the plan at least once every five years to ensure that the utility satisfies, among other things, the state’s greenhouse gas emissions reduction targets and the requirement to procure at least 50 percent of its electricity from eligible renewable resources by December 31, 2030.
    • This bill would require the CPUC and the governing boards of local publicly owned electric utilities to consider establishing policies and procedures to ensure that load-serving entities or local publicly owned electric utilities meet net-load peak energy and reliability needs while reducing the need for new electricity generation and new transmission in achieving the state’s energy goals at the least cost to ratepayers.

SB 518 (De León, D): California Clean Energy Jobs Act: citizen oversight board.
STATUS: Ordered to Assembly May 31, 2017.

  • The California Clean Energy Jobs Act made changes to corporate income taxes and provided for the transfer of $550,000,000 annually from the General Fund to the Clean Energy Job Creation Fund for five fiscal years beginning with the 2013–14 fiscal year. Moneys in the fund are available, upon appropriation by the Legislature, for purposes of funding eligible projects that create jobs in California improving energy efficiency and expanding clean energy generation.
    • This bill would appropriate otherwise unallocated moneys in the Job Creation Fund, as determined by the Energy Commission as of Mary 1, 2018 relating to improving energy efficiency at public schools, and community colleges.
    • In addition, commencing with the 2018-2019 fiscal year, this bill would establish the Clean Energy Job Creation Program with the purpose of funding specified projects in public schools, universities, and colleges that create jobs in California improving energy efficiency and expanding clean energy generation and would subject those projects to requirements similar to those imposed under the California Clean Energy Jobs Act.
    • Finally, the bill would extend the operation of the board and of its authority and duties indefinitely.

SB 549 (Bradford D) Public utilities: reports: moneys for maintenance, safety and reliability.
STATUS: Ordered to Assembly April 20, 2017; amended in Assembly May 31, 2017.

  • Existing law places various responsibilities upon the CPUC to ensure that public utility services are provided in a manner that protects the public safety and the safety of utility employees.
    • SB 549 would require an electrical or gas corporation to annually report to the CPUC each time that capitol or expense revenue authorized by the CPUC for maintenance,  safety  or reliability is redirected for other purposes and require the CPUC to include the report in the docket of an appropriate proceeding and serve the report pursuant to the service list of that proceeding.

SB 584 (De León). California Renewables Portfolio Standard Program.
STATUS: REVISED TO BE BUDGET ACT

  • The bill was revised on May 1, 2017 to state the intent of the Legislature to enact statutory changes relating to the Budget Act of 2017 and deletes all prior language relating to the requirement for all electricity to be generated by eligible renewable energy resources by December 31, 2045.
  • SB 584 was introduced as a bill that would require all electricity sold at retail to be generated by eligible renewable energy resources by December 31, 2045.  This proposed legislation is now reflected in Senate Bill 100.

California Agencies Hold En Banc on Retail and Customer Electricity Choice

On May 19, 2017, the California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) held a joint en banc on customer and retail choice in California. In attendance were CPUC Commissioners Guzman Aceves, Randolph, Peterman, and President Picker.  CEC Commissioners McAllister, Douglas, and Chair Weisenmiller attended.

The en banc was intended to address a seismic shift in the entities serving load in California. As noted in the CPUC Staff White Paper issued in connection with the en banc meeting, by the end of this year, as much as 25% of the retail load served by the investor-owned utilities (IOU) will obtain their electric generation service from an entity other than an IOU.  Some estimates project that by the middle of the 2020s, over 85% of retail load may be served by sources other than the IOUs.  These changes are driven by the explosive growth of both distributed generation, primarily rooftop solar, and Community Choice Aggregation (CCA).  Direct access customers also comprise a significant portion of the retail load served by non-IOUs.

California has been extremely successful in pursuing its greenhouse gas reduction goals and expanding renewable energy procurement in the electricity sector. The question arises, however, as to how California will continue to pursue these goals under a scenario where 85% of the retail load is served by entities other than IOUs, whose current procurement decisions are not reviewed or approved by the CPUC, unlike the IOUs.  How will California pursue its greenhouse gas reduction goals, while maintaining reliability and affordability, especially for low and middle income residents, under a regulatory and procurement regime that is far less centralized than the regime that resulted in California’s current successes?  The Commissioners acknowledged that they will need to examine the current business models for load-serving entities and determine whether they can achieve the state’s ultimate goals.

Among the topics discussed at the en banc was the issue of exit fees. In order to comply with California’s Renewable Portfolio Standard (“RPS”) mandate, IOUs procured renewable energy under power purchase agreements that are priced much higher than the current market.  As the IOUs’ retail load decreases, their RPS obligations similarly decrease, potentially leaving IOUs with highly-priced RPS contracts that are in excess of their RPS mandate.  Under the statute, implementation of a CCA cannot result in cost shifting between CCA customers and those customers choosing to remain with the IOU.  Thus, as these contracts were procured to serve customers who are now migrating to CCAs, arguably those costs should follow customers.  Other issues arise from potential “double procurement,” where CCAs procure renewable power for the same customers that IOUs have already signed long-term RPS contracts to serve.

The en banc consisted of four panels–a customer panel; a provider panel, consisting of distributed generation providers, direct access providers, and CCAs; a utility panel, and an industry expert panel. Though no clear answers emerged, the Commissioners will take the input from the meeting back to their respective Commissions as they address current and future proceedings dealing with the rapid expansion of retail choice.

MPUC Approves Multi-Year Rate Case Settlement, Opens Docket to Develop Performance Metrics

Yesterday, the Minnesota Public Utilities Commission (“MPUC”) approved a settlement between Xcel Energy and various intervening stakeholders, to resolve the revenue requirement issues in Xcel Energy’s pending multi-year rate increase.  The MPUC appeared to struggle with accepting the settlement in lieu of the full evidentiary record it is used to on financial issues.  Nonetheless, it ultimately agreed with stakeholders’ assessment that the deal was in the public interest, as well as an opportunity to break Xcel’s cycle of continuous rate cases over the last decade or so.

As part of the MPUC’s effort to get comfortable with the settlement, it resolved to open a new docket to develop and potentially apply performance metrics to Xcel Energy’s rates during the pendency of the approved multi-year rate increase.

In addition to approving the settlement, the MPUC addressed various revenue allocation and rate design issues.  With respect to revenue allocation, the MPUC deviated from prior practice of approving one class cost of service study (“CCOSS”), and using that MPUC-approved CCOSS as a starting point for revenue allocation.  Instead, the MPUC broadly commented on the various CCOSSs proposed by parties in the case and then chose a revenue allocation before any further in-depth discussion of the CCOSS or making any particular determination on the CCOSS.

The resulting table of increases by class for 2016 appears below:

 

Class Increased Revenue (000s) % Apportionment $ Increase (000s) % Increase
Residential $1,135,268 36.74% $63,812 5.96%
C&I Non-Demand $108,512 3.51% $3,063 2.90%
C&I Demand $1,818,873 58.86% $65,964 3.76%
Lighting $27,695 .90% $1,834 7.09%
Total $3,090,348 100% $134,673 4.56%

 

The MPUC further determined that the same percentage apportionment would be applied to the rate increases in 2017, 2018, and 2019. The MPUC then went on to rate design, making some minor changes to interruptible service and retained the existing residential fixed customer charges.  The MPUC concluded by making several specific determinations on the CCOSS.

A written order detailing the MPUC’s decision will follow.

Behind the Meter Energy Storage Gets a Boost in California

On April 6th, the energy storage market received a boost in California when state regulators authorized $196 million in new rebates for customers who install onsite (behind the meter) energy storage systems.

Background

The change occurs under the California Self Generation Incentive Program (“SGIP”). SGIP provides a financial rebate to energy customers who install new qualifying technologies that meet all or a portion of the customer’s on-site electricity needs. Qualifying technologies include wind turbines, waste heat to power technologies, pressure reduction turbines, internal combustion engines, microturbines, gas turbines, fuel cells, and advanced energy storage systems.

SGIP was established in 2001 and has been one of the longest-running and most successful distributed generation incentive programs in the country.  As of December 2016, SGIP has funded 2,178 completed projects representing over 450 MW of rated capacity. An additional 312 projects representing over 178 MW of rated capacity are in process towards completion.

A Win for Behind the Meter Storage

In 2016, a new California law authorized an increase in the total SGIP budget from $83 million per year to $166 million per year. On April 6, the California Public Utilities Commission (“CPUC”) formally approved this increase for years 2017, 2018, and 2019, raising the total SGIP incentive budget authorized through 2019 to $566,692,309.

The big winner in the decision was the behind the meter energy storage market. The CPUC allocated 85% of the new funds toward energy storage projects, with the remaining 15% allocated to renewable generation projects. That means the California energy storage market will receive a boost of $196 million over the next three years. In terms of the specific details, 90% of the allocation for energy storage projects must be used for projects greater than 10 kilowatts (“kW”) in capacity, with the remaining 10% available for projects less than or equal to 10 kW.

The win reflects the intent of the SGIP program to facilitate the state’s achievement of climate change goals through driving transformation of the energy system. Specifically, the decision finds that as “the proportion of renewable electricity on the grid increases, energy storage can play an increasingly important role in meeting California’s climate goals… and [i]ncentive programs can help facilitate market transformation.” This type of thinking represents continued leadership by California in the field of energy storage policy.

Next Steps

Applications for the new SGIP funding will be accepted beginning on May 1, 2017. Applications can be submitted through a portal on the SGIP portal page available here.

 

BLM Directed to “Try Again” on NEPA Analysis for Echanis Wind’s Transmission Line: Greater Sage-Grouse Remains Key Issue for Project Development Despite USFWS Decision Not to List Under ESA

In the continuing saga of the Echanis wind project in Eastern Oregon, U.S. District Court Judge Michael Mosman on April 18 vacated the Bureau of Land Management’s (BLM)’s Record of Decision (ROD) on a right-of-way grant decision under the Federal Land Policy and Management Act for a 230-kV transmission line conveying power generated from the wind project proposed for development on private land on the north side of Steens Mountain. The wind project would include between 40 and 69 wind turbines near Diamond, Oregon.

The case was before Judge Mosman on remand from the Ninth Circuit, which instructed Judge Mosman to vacate the BLM’s ROD unless he found it advisable that the ROD remain in place. The Ninth Circuit’s 2016 opinion followed Judge Mosman’s initial decision to grant the BLM’s motion for summary judgment. Judge Mosman had ruled that the BLM had adequately considered the impact of the project on fragmentation and connectivity of sage-grouse habitat, but the Ninth Circuit’s decision reversed that decision based on its determination that the BLM’s environmental review under the National Environmental Policy Act (NEPA) did not adequately assess baseline sage-grouse data during winter at the proposed project site. Continue Reading

Updates to Energy Related Bills in the 2017-2018 California Legislative Session

In our first post, the Stoel Rives’ Energy Team provided a summary of energy related bills introduced by California legislators during the first half of the 2017-2018 Legislative Session. Provided below is a summary of changes to bills we have been following, as well as a list of energy related bills not included in our previous entry. We will continue to monitor and update all energy related bills as the legislative session proceeds.

Amended Bills

AB 35 (Quirk, D): Residential and nonresidential buildings: energy savings program.  
STATUS: Introduced December 15, 2016;
amended March 23, 2017.

  • AB 35 was previously drafted to require agencies implementing energy efficiency programs to establish metrics and collect and use data systematically across those programs to increase the performance of those programs in low-income communities.
     
    • As amended, AB 35 now proposes changing the State Energy Resources Conservation and Development Commission’s program to achieve greater energy savings in California’s existing residential and nonresidential building stock by adopting an update to the program at least once every five years instead of every three years.

AB 655 (O’Donnell, D): California Renewables Portfolio Standard Program.    
STATUS: Introduced February 14, 2017; amended March 23, 2017.

  • The California Renewables Portfolio Standard Program requires the CPUC to establish a renewables portfolio standard requiring all retail sellers, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources, as defined, so that the total kilowatt hours of these resources sold to their retail end-use customers achieves 25 percent of retail sales by December 31, 2016, 33 percent by December 31, 2020, 40 percent by December 31, 2024, 45 percent by December 31, 2027, and 50 percent by December 31, 2030. The program additionally requires each local publicly owned electric utility, as defined, to procure a minimum quantity of electricity products from eligible renewable energy resources to achieve the procurement requirements established by the program. Further, existing law provides that a facility engaged in the combustion of municipal solid waste is not an eligible renewable energy resource, except as regards to generation before January 1, 2017, from a facility located in Stanislaus County prior to September 26, 1996.
     
    • This bill would provide that a facility engaged in the transformation of municipal solid waste is an eligible renewable energy resource, and can earn renewable energy credits, if it operates, on an annual basis, at not less than 20 percent below the permitted emissions of air contaminants, or toxic air contaminants concentration limits, for the facility and the operator of the facility has reported its emissions to the applicable air pollution control district or air quality management district for a period of not less than five years, as specified.

Continue Reading

Generator Receives Another Shot at Obtaining CAISO Congestion Revenue Rights

On April 4, 2017 (NextEra Desert Center Blythe, LLC v. FERC, Case No. 16-1003 (“NextEra”)), the DC Circuit issued a decision remanding back to the Federal Energy Regulatory Commission (“FERC”) orders denying NextEra Desert Center Blythe, LLC’s (“NextEra”) complaint against the California Independent System Operator Corporation (“CAISO”) regarding the allocation of congestion revenue rights (“CRRs”) under the CAISO tariff. The DC Circuit’s ruling was narrow, based on finding ambiguity in the relevant contract and tariff provisions where FERC determined there was none. The court’s decision highlights the importance of addressing potential regulatory cost recovery options in a FERC-jurisdictional contract. Continue Reading

Maryland Passes Bill to Allow 30% State Income Tax Credit for Energy Storage

In what some commentators are calling the first of its kind, Maryland’s legislature has passed a bill that would allow taxpayers to claim a state income tax credit equal to 30% of the installed cost of an energy storage system.  The bill would cap the credit amount at $75,000 for a commercial installation or $5,000 for a residential application and would define “energy storage system” as any “system used to store electrical energy, or mechanical, chemical, or thermal energy that was once electrical energy, for use as electrical energy at a later date or in a process that offsets electricity use at peak times.”  See Maryland S.B. 758.  This means that more than just battery storage technologies will be eligible for the credit.  The credit would not be refundable, so a taxpayer could not receive a refund check for any credit amount in excess of tax liability.  Moreover, a taxpayer could not claim any unused credit amount on a previous or future year’s state income tax return.

To claim the credit, a taxpayer would have to apply for and receive a tax credit certificate from the Maryland Energy Administration, which would review applications on a first-come, first-served basis.  The bill would authorize the issuance of tax credit certificates allowing up to only $750,000 in total credits each year.  The bill will become law if signed by Governor Larry Hogan and would apply to systems installed on or after January 1, 2018, and before the end of 2022.

A Model for Other States to Follow?

Though relatively modest, Maryland’s income tax credit program could expand and serve as an important early model for incentives targeted at the growing energy storage industry.  This is a potential trend to watch as states evaluate how best to spur improvement in their energy infrastructure.  We will continue to follow this act and similar developments affecting the energy storage industry closely.

California Community Solar Forum Points to Need for Reforms

The community solar program in California is off to a slow start. The reasons for this slow start were discussed at a solar developer’s forum held by the state’s major utilities and policymakers on April 5, 2017.

Background on Community Solar in California

California’s community solar program is formally known as the Enhanced Community Renewables (“ECR”) program. The ECR program is part of the larger Green Tariff Shared Renewables (“GTSR”) program. The GTSR program was signed into law in 2013, and final program rules were adopted in May 2016. Together, these programs require the California investor-owned utilities (“IOUs”) to procure 600 megawatts (“MW”) of new renewable energy.

Under the ECR component of the program, customers can enter into agreements directly with third party project developers to purchase new clean energy generated by a project located in their community. ECR projects are limited to sizes between 500 kW and 20 MW.

As we recently reported, the IOUs held their first request for offer (“RFO”) last fall, which sought to award power purchase agreements (“PPAs”) for 170 MW of new renewable energy from ECR projects. However, very few bids were submitted in the solicitation, and ultimately no PPAs were awarded. The developer forum was intended to discuss some of the reasons for this lackluster performance. Continue Reading

CPUC and CEC Announce Joint Policy Forum on Future of Retail Electricity in California

Today the California Public Utilities Commission (CPUC) and California Energy Commission (CEC) announced that they will hold a joint forum on May 19, 2017 to discuss the future of retail electricity in California.

According to the announcement, by around 2025, over 80% of all electricity customers of the state’s three main investor-owned utilities (IOUs) will be receiving some form of alternative electricity service. Primarily, this refers to customers participating in a Community Choice Aggregation program, installing rooftop solar, participating in Direct Access, or joining a community solar project. The retail policy landscape is changing organically as a result of declining prices for solar, energy storage, and other dynamics in the marketplace, rather than by the conscious choice of policymakers, according to the announcement.

As a result, the forum is intended to allow policymakers to grapple with some of the implications of these changes. The agenda will address a wide range of issues, including:

  • Principles to guide future regulatory and legislative reforms;
  • The current state of customer choice programs in California;
  • The IOUs’ “vision for the evolution of retail electricity choice and their role in its provision”; and
  • What customers want and consumer protection issues.

It will be particularly interesting to hear how the IOUs see their future role in a market where more than 80% of customers receive some form of retail electricity service from an outside provider. In point of fact, the IOUs have been discussing this future for many years. However, framing these changes as a near-term necessity that is being driven by outside forces seems to lend more immediacy to the discussion planned here. Furthermore, attendance is expected from the CPUC, CEC and Legislature, signaling that these issues have the attention of key decision-makers.

The event will be webcast. You can access the webcast here.

If you wish to attend in person, you are encouraged to register in advance due to high interest and limited space. Here is a link to RSVP.

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