Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations and gas corporations, as defined. The Public Utilities Act requires the Public Utilities Commission to review and adopt a procurement plan for each electrical corporation in accordance with specified elements, incentive mechanisms, and objectives. The act requires that an electrical corporations proposed procurement plan include certain elements, including a showing that the electrical corporation will first meet its unmet needs through all available energy efficiency and demand reduction resources that are cost effective, reliable, and feasible. Existing law requires the Public Utilities Commission, in consultation with the State Energy Resources Conservation and Development Commission, to identify all potentially achievable cost-effective electricity efficiency savings, and to establish efficiency targets for electrical corporations to achieve pursuant to their procurement plan.

The act requires the Public Utilities Commission, in consultation with the State Energy Resources Conservation and Development Commission, to identify all potentially achievable cost-effective natural gas efficiency savings and to establish efficiency targets for gas corporations to achieve, and requires that a gas corporation first meet its unmet resource needs through all available gas efficiency and demand reduction resources that are cost effective, reliable, and feasible.

This bill would require the Public Utilities Commission to encourage electrical corporations and gas corporations to expedite implementation of energy efficiency measures and enable the achievement of additional energy goals Commission, in consultation with the State Energy Resources Conservation and Development Commission and the United States Armed Forces, to authorize a pilot program designed to evaluate the effects of using an alternative baseline energy efficiency methodology at United States Armed Forces bases and facilities. The bill would require electrical and gas corporations, using existing military contracting procedures, to the extent feasible, or new partnership with the federal government, to accomplish the goals of the pilot program.

This bill would require the Public Utilities Commission to approve financial incentives for energy efficiency upgrades measures implemented at Armed Forces bases and facilities pursuant to the pilot program through existing energy efficiency programs administered by electrical corporations and gas corporations. Because a violation of an order or a direction of the commission is a crime, this bill would impose a state-mandated local program.

This bill would repeal the above requirements pilot program on January 1, 2020.

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.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations and gas corporations, as defined. The Public Utilities Act requires the Public Utilities Commission to review and adopt a procurement plan for each electrical corporation in accordance with specified elements, incentive mechanisms, and objectives. The act requires that an electrical corporations proposed procurement plan include certain elements, including a showing that the electrical corporation will first meet its unmet needs through all available energy efficiency and demand reduction resources that are cost effective, reliable, and feasible. Existing law requires the Public Utilities Commission, in consultation with the State Energy Resources Conservation and Development Commission, to identify all potentially achievable cost-effective electricity efficiency savings, and to establish efficiency targets for electrical corporations to achieve pursuant to their procurement plan.

The act requires the Public Utilities Commission, in consultation with the State Energy Resources Conservation and Development Commission, to identify all potentially achievable cost-effective natural gas efficiency savings and to establish efficiency targets for gas corporations to achieve, and requires that a gas corporation first meet its unmet resource needs through all available gas efficiency and demand reduction resources that are cost effective, reliable, and feasible.

This bill would require the Public Utilities Commission to encourage electrical corporations and gas corporations to expedite implementation of energy efficiency measures and enable the achievement of additional energy goals at United States Department of Defense military bases and facilities and United States Coast Guard Armed Forces bases and facilities.

This bill would require the Public Utilities Commission to approve financial incentives for energy efficiency upgrades at military Armed Forces bases and facilities and United States Coast Guard facilities through existing energy efficiency programs administered by electrical corporations and gas corporations. Because a violation of an order or a direction of the commission is a crime, this bill would impose a state-mandated local program.

This bill would repeal the above requirements on January 1, 2020.

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.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations and gas corporations, as defined. The Public Utilities Act requires the Public Utilities Commission to review and adopt a procurement plan for each electrical corporation in accordance with specified elements, incentive mechanisms, and objectives. The act requires that an electrical corporations proposed procurement plan include certain elements, including a showing that the electrical corporation will first meet its unmet needs through all available energy efficiency and demand reduction resources that are cost effective, reliable, and feasible. Existing law requires the Public Utilities Commission, in consultation with the State Energy Resources Conservation and Development Commission, to identify all potentially achievable cost-effective electricity efficiency savings, and to establish efficiency targets for electrical corporations to achieve pursuant to their procurement plan.

The act requires the Public Utilities Commission, in consultation with the State Energy Resources Conservation and Development Commission, to identify all potentially achievable cost-effective natural gas efficiency savings and to establish efficiency targets for gas corporations to achieve, and requires that a gas corporation first meet its unmet resource needs through all available gas efficiency and demand reduction resources that are cost effective, reliable, and feasible.

This bill would require the Public Utilities Commission to encourage electrical corporations and gas corporations to expedite implementation of energy efficiency measures and enable the achievement of additional energy goals at United States Department of Defense military bases and facilities and United States Coast Guard facilities.

This bill would require the Public Utilities Commission to approve financial incentives for energy efficiency upgrades at military bases and facilities and United States Coast Guard facilities through existing energy efficiency programs administered by electrical corporations and gas corporations. Because a violation of an order or a direction of the commission is a crime, this bill would impose a state-mandated local program.

This bill would repeal the above requirements on January 1, 2020.

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.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 723 (Pavley) - Energy efficiency: United States Armed Forces bases and facilities

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 723 would require the California Public Utilities Commission (CPUC), to authorize a pilot program that would allow an alternative energy savings calculation to be used to evaluate energy efficiency projects located on Armed Forces bases and facilities until January 1, 2020.

Fiscal Impact:

• Ongoing costs of up to $130,000, but potentially minor, from the Public Utilities Reimbursement Account (special) for the CPUC to design, provide oversight, and evaluate the required pilot project.

• Ongoing costs of up to $140,000 from the Energy Resources Programs Account (General Fund) to the California Energy Commission (CEC) to consult with the CPUC on evaluating the effects of the pilot program.

• Unknown, but likely minor, impacts to various special funds and the General Fund to the state as an electricity and natural gas ratepayer for changes to the energy efficiency program budget.

Background:

PUC §§454.55 and 454.56 requires the CPUC to identify all potentially achievable cost-effective electricity and natural gas efficiency savings and to establish energy efficiency procurement targets and ratepayer-funded programs for electrical and gas corporations.

Under existing CPUC-approved investor-owned utility (IOU) energy efficiency projects, the project’s energy savings is calculated as the amount of savings generated above the baseline, which is the amount of energy a building would use if it met the current building code requirements. As building code requirements are generally not applied retroactively, the actual savings are likely greater than this calculation because the actual energy use is greater than the baseline.

Proposed Law:

This bill would create a pilot program for energy efficiency projects located on Armed Forces bases and facilities that would allow the energy savings to be calculated using the facilities’ existing energy usage (as opposed to the energy usage that the facility should have if it met current building standards). The CPUC would be required to approve financial incentives based on this alternative energy savings calculation. The CPUC would be required to consult with the California Energy Commission and the United States Armed Forces in authorizing the pilot program.

The pilot program would sunset on January 1, 2020.

Related Legislation:

AB 2229 (Bradford, 2014) would have required the CPUC to approve financial incentives for energy efficiency upgrades at military bases and facilities in a manner substantially similar to this bill. The April 21^st version of AB 2229 required the CPUC to authorize a separate energy efficiency program for military projects. AB 2229 was held by the Senate Energy, Utilities, and Communication Committee.

Staff Comments:

Based on calculations made in connection with AB 2229 last year, the CPUC estimates that a pilot program for the military could involve up to $36 million in project funding for energy efficiency projects on military bases and facilities, depending on the design of the pilot program. The CPUC estimates that it could design, evaluate and provide oversight to the pilot program required by this bill within existing resources since it would not be a large program. However, staff notes that the CPUC estimated annual costs of approximately $130,000 to implement the military-specific energy efficiency program that would have been required under the April 21^st version of AB 2229. The only appreciable difference between the April 21^st version of AB 2229 and this bill seem to be that AB 2229 included Coast Guard facilities.

The CEC estimates that it would need up to one position at an annual cost of $140,000 to consult with the CPUC to design and evaluate the pilot program.

Staff notes that there are unknown potential impacts to the state as a ratepayer. As mentioned above, the CPUC is required to identify all energy efficiency savings and targets to reach those savings. Under the energy savings calculation methodology that would be allowed by this bill, more military projects will become cost effective. On the one hand, these projects will allow IOUs to meet their existing energy efficiency savings targets with less money resulting in savings to ratepayers; on the other hand, the CPUC could also raise those targets as additional cost effective projects are now identified. Higher targets would require additional ratepayer funds to achieve. Ultimately staff believes that this bill’s impact to the state as a ratepayer, as either a cost or a savings, is speculative but likely to be small given the size of the pilot program.

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2015 - 2016 Regular

Bill No: SB 723 Hearing Date: 4/21/2015

SUBJECT: Energy efficiency: United States Armed Forces bases and facilities

DIGEST: This bill seeks to increase the availability of funds for energy efficiency upgrades at military facilities. Most significantly, this bill authorizes military facilities to calculate the savings from energy efficiency measures on military facilities differently than savings for other energy efficiency projects are calculated.

ANALYSIS:

Existing law requires the California Public Utilities Commission (CPUC) to identify all potentially achievable cost-effective electricity and natural gas efficiency savings and to establish energy efficiency procurement targets and ratepayer-funded programs for electrical and gas corporations. (Public Utilities Code §§ 454.55 and 454.56.)

This bill:

1. Requires the CPUC to approve financial incentives for energy efficiency upgrades at military facilities through existing energy efficiency programs administered by the investor-owned utilities (IOUs). The bill also requires the CPUC to encourage the IOUs to expedite implementation of energy efficiency measures at military facilities and to enable achievement of additional energy goals by the military, including demand response, self-generation, and energy storage. The bill directs the CPUC to identify other potential sources of funding to achieve energy efficiency goals in military facilities, should it determine there are insufficient ratepayer funds available to achieve the military’s energy efficiency goals.

2. Authorizes military facilities to calculate their energy savings by comparing the facilities’ existing energy usage, as a whole, with the facilities’ projected energy usage that would be achieved from the implementation of the energy efficiency measures.

Background

Energy Efficiency Sits Atop California Energy Policy. The “loading order” guides the state’s energy policies and decisions according to the following order of priority: (1) decreasing electricity demand by increasing energy efficiency; (2) responding to energy demand by reducing energy usage during peak hours; (3) meeting new energy generation needs with renewable resources; and (4) meeting new energy generation needs with clean fossil-fueled generation. This policy has been adopted by the energy agencies – the California Energy Commission (CEC) and CPUC – and its principles guide all energy programs.

California’s IOUs administer energy efficiency programs with ratepayer funds approved by the CPUC. Currently funded at about $1 billion per year, the programs include a portfolio of financial incentives, loans, and rebates for installing energy efficient appliances, lighting, windows, HVAC systems, whole-house retrofits, and specialized programs aimed at a variety of sectors.

Military Receives Ratepayer Support for Energy Efficiency. According to the CPUC, existing IOU programs already target military facilities for efficiency improvements.  In the 2010–2012 program cycle, military facilities in California received over $3 million dollars in energy efficiency incentives resulting in almost 4,000 kW in peak savings and almost 350,000 therm in natural gas savings.  The table below breaks out, by IOU, the level of incentives, number of projects, amount of anticipated savings, and number of military participants. 

Note:  For the 2013 – 2014 (and the SB 723 DA) staff is waiting for the results of a data request to confirm expenditures which are expected to be similar annually to the 2010 – 2012 program cycle.

A Different Measure. This bill has four provisions, all related to energy efficiency projects on military bases.

• First, it allows military facilities to calculate their energy efficiency savings by comparing the facilities’ existing energy usage, as a whole, with the facilities’ projected energy usage that would be achieved from the implementation of the energy efficiency measures.

• Second, it directs the CPUC to encourage electrical and gas IOUs to expedite the implementation of energy efficiency measures on military facilities and to enable the achievement of additional energy goals, for example, microgrids, demand response, self-generation, and energy storage, at Armed Forces bases and facilities.

• Third, it directs the CPUC to approve financial incentives for energy efficiency upgrades at military facilities through existing energy efficiency programs administered by electrical and gas IOUs.

• Finally, it directs the CPUC, working with the CEC and United States Armed Forces, to identify other potential sources of funding to supplement funds collected from ratepayers to achieve energy savings goals.

Of these four provisions, the first is, by far, the most significant. The third provision is, essentially, existing CPUC practice, consistent with existing law. The second and fourth provisions are not inconsequential and may be helpful to efforts by the military to increase energy efficiency at its facilities. But the first provision is the heart of the bill.

The bill requires a calculation of the savings from IOU-funded energy efficiency projects at military bases that differs from the methodology by which other IOU-funded energy efficiency projects calculate such savings. As explained by the CPUC, the current method for calculating energy savings for a given energy efficiency measure compares energy use in absence of the energy efficiency measure and energy use with the energy efficiency measure. In contrast, this bill requires, for military facilities only, comparison of current energy use with projected usage that would follow implementation of the efficiency measure. In other words, the bill requires use of a special energy efficiency baseline for military facilities.

Use of a different baseline at military facilities has consequences. Existing law requires the IOUs to capture all cost-effective energy efficiency. Use of the more-generous measurement required by this bill would likely result in more energy efficiency projects at military facilities being “cost effective.”

There is a good argument for changing the methodology for calculating the energy savings from efficiency measures. In fact, the CPUC is considering such a change as part of its current energy efficiency proceeding. However, there is nothing to that argument that is specific to military facilities. If it makes sense to measure the energy efficiency savings of measures based upon current use, then it makes sense generally.

That said, the military can be an effective partner in pursuit of California’s energy and environmental goals. As the author notes, the US military is undertaking ambitious, mission-driven energy efficiency and alternative energy efforts.

The author also notes that the CPUC has authorized the IOUs to undertake pilot projects that will use a baseline measurement similar to that required by this bill. Those pilot projects – still under development – are very limited in scope and designed to evaluate the effects of using an alternative baseline energy efficiency methodology. The author and the committee may wish to require the CPUC to authorize a similar IOU-funded pilot project for military facilities.

Prior/Related Legislation

AB 2229 (Bradford, 2014) was identical in effect to this bill. AB 2229 was held by this committee.

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

SUPPORT:

Sierra Club California

US Air Force

US Army

US Marine Corps

US Navy

OPPOSITION:

Office of Ratepayer Advocates, unless amended

ARGUMENTS IN SUPPORT: The author and supporters contend this bill will allow achievement of additional energy efficiency and related projects at California military facilities, thereby helping California reach its energy and environmental goals.

ARGUMENTS IN OPPOSITION: Opponents protest the use of a measure of energy efficiency savings for projects at military facilities that differs from the measure used for similar IOU-funded projects. ORA fears the use of the military-specific measure may reduce funding for non-military projects that, when consistently measured, are more cost effective.

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