The Public Utilities Act requires the Public Utilities Commission to authorize and facilitate direct transactions between electricity suppliers and retail end-use customers, but suspends direct transactions except as expressly authorized. Existing law expressly requires the commission to authorize direct transactions for nonresidential end-use customers, subject to an annual maximum allowable total kilowatthour limit established, as specified, for each electrical corporation, to be achieved following a now completed 3-to 5-year phase-in period.

This bill would require the commission, on or before June 1, 2019, to issue an order specifying, among other things, an increase in the annual maximum allowable total kilowatthour limit by 4,000 gigawatthours and apportion that increase among the service territories of the electrical corporations.

This bill would require the commission to provide to the Legislature recommendations on the adoption and implementation of a 2nd direct transactions reopening schedule. The bill would require the commission, in developing the recommendations, to make certain findings.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by expanding the operation of a crime.

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.

The Public Utilities Act requires the Public Utilities Commission to authorize and facilitate direct transactions between electricity suppliers and retail end-use customers, but suspends direct transactions except as expressly authorized. Existing law expressly requires the commission to authorize direct transactions for nonresidential end-use customers, subject to an annual maximum allowable total kilowatthour limit established, as specified, for each electrical corporation, to be achieved following a now completed 3-to 5-year phase-in period.

This bill would require the commission, on or before June 1, 2019, to issue an order specifying, among other things, an increase in the annual maximum allowable total kilowatthour limit by 4,000 gigawatthours and apportion that increase among the service territories of the electrical corporations.

This bill would require the commission to provide to the Legislature recommendations on the adoption and implementation of a 2nd direct transactions reopening schedule. The bill would require the commission, in developing the recommendations, to make certain findings.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by expanding the operation of a crime.

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.

The Public Utilities Act requires the Public Utilities Commission to authorize and facilitate direct transactions between electricity suppliers and retail end-use customers, but suspends direct transactions except as expressly authorized. Existing law expressly requires the commission to authorize direct transactions for nonresidential end-use customers, subject to an annual maximum allowable total kilowatthour limit established, as specified, for each electrical corporation, to be achieved following a now completed 3-to 5-year phase-in period.

This bill would require the commission to provide to the Legislature recommendations on the adoption and implementation of a 2nd direct transactions reopening schedule. The bill would require the commission, in developing the recommendations, to make certain findings.

The Public Utilities Act requires the Public Utilities Commission to authorize and facilitate direct transactions between electricity suppliers and retail end-use customers, but suspends direct transactions except as expressly authorized. Existing law expressly requires the commission to authorize direct transactions for nonresidential end-use customers, subject to an annual maximum allowable total kilowatthour limit established, as specified, for each electrical corporation, to be achieved following a now completed 3-to 5-year phase-in period.

This bill would require the commission to adopt and implement a 2nd phase-in period for expanding direct transactions over a period of not more than 3 years, so that by the end of the 3-year period all nonresidential end-use customers may acquire electric service from other providers in each electrical corporations distribution service territory. provide to the Legislature recommendations on the adoption and implementation of a 2nd direct transactions reopening schedule. The bill would require the commission, in developing the recommendations, to make certain findings.

Prior to June 27, 2017, a court was authorized to notify the Department of Motor Vehicles when a person has failed to appear or failed to pay a fine or bail, with respect to various violations relating to vehicles. Existing law requires the department to suspend, and prohibits the department from issuing or renewing, a persons drivers license upon receipt of one of those notices, as specified.

This bill would invalidate any suspension placed on a drivers license pursuant to that law and reinstate a persons driving privileges if, and, on or before July 1, 2018, require the department to remove any suspension imposed before June 27, 2017, they were suspended for failure to make specified payments.

Existing law requires that a person arrested without a warrant be taken before a magistrate without unnecessary delay. Existing law also provides certain circumstances under which a person arrested without a warrant may be released from custody before being taken before a magistrate, including, among others, when the arresting officer believes that insufficient grounds exist to make a criminal complaint against the person arrested or when the person is arrested for intoxication only and no further proceedings are desirable.

This bill would authorize an arresting officer to release an arrested person from custody without taking him or her before a magistrate if the person is delivered, subsequent to being arrested, to a specified facility for the purpose of mental health evaluation and treatment and no further criminal proceedings are desirable. The bill would require a person arrested and released pursuant to this provision to be issued a certificate describing the action as a detention.

Existing law requires that a person arrested without a warrant be taken before a magistrate without unnecessary delay. Existing law also provides certain circumstances under which a person arrested without a warrant may be released from custody before being taken before a magistrate, including, among others, when the arresting officer believes that insufficient grounds exist to make a criminal complaint against the person arrested or when the person is arrested for intoxication only and no further proceedings are desirable.

This bill would authorize an arresting officer to release an arrested person from custody without taking him or her before a magistrate if the person is delivered, subsequent to being arrested, to a specified facility for the purpose of mental health evaluation and treatment and no further criminal proceedings are desirable.

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: Hearing Date: 8/31/2018

SUBJECT:

DIGEST: This bill would direct the California Public Utilities Commission (CPUC) to make changes to the existing direct access (DA) service program, which authorizes direct energy transactions between electricity suppliers and retail end-use customers. Among the proposed changes is a requirement to increase the annual maximum allowable limit of the DA service program by 4,000 gigawatt hour (GWH) for non-residential customers. This bill also directs the CPUC to provide recommendations to the Legislature, with specified findings, on the adoption and implementation of a second direct service transactions reopening schedule.

ANALYSIS:

Existing law:

1. Suspends the ability of retail end-use customers of the investor-owned utilities (IOU) to receive electrical service from an entity other than an IOU unless authorized by the Legislature. This arrangement commonly is referred to as DA. (Public Utilities Code §365.1(a))
2. Allows a limited enrollment into DA for new nonresidential customers based on historical enrollment volumes. (Public Utilities Code §365.1(b))
3. Requires DA providers to meet the same requirements as the IOUs for resource adequacy, the renewables portfolio standard (RPS) Program, and the requirements for the electricity sector adopted by the California Air Resources Board (ARB) pursuant to the California Global Warming Solutions Act of 2006. (Public Utilities Code §365.1 (c))
4. States the intent of the Legislature to prevent any shifting of recoverable costs between IOU customers. (Public Utilities Code §366.1(d)(1))
5. Defines "direct transaction" as a contract between any one or more electric generators, marketers, or brokers of electric power and one or more retail customers providing for the purchase and sale of electric power or any ancillary services. (Public Utilities Code §331)
6. Defines an electric service provider (ESP) as a non-utility entity that offers electric service to customers within the service territory of an electric utility and requires each ESP to register with the CPUC. (Public Utilities Code §394(a))
7. Makes ESPs subject to the same requirements that are applicable to the state’s three largest IOUs for resource adequacy, the RPS and the requirements for the electricity sector adopted by the ARB pursuant to the California Global Warming Solutions Act of 2006. (Public Utilities Code §356.1 et seq.)

This bill:

1. Requires the CPUC to expand the permissible capacity of the DA program by 4,000 GWH apportioned across the service territories of electrical corporations.
2. Requires that all DA customers enrolled in the program on January 1, 2019 remain eligible to participate in the program.
3. Requires the CPUC to report to the Legislature by June 1, 2020 on further expansion of the program and specifically include phase-in periods for all remaining nonresidential customer accounts.
4. Requires that the CPUC recommendations be conditioned on specified findings:
   1. Be consistent with the state's greenhouse gas (GHG) emission goals;
   2. Not increase criteria air pollutants and toxic air contaminants;
   3. Ensure electric system reliability; and
   4. Not cause undue cost shifting.

Background

Deregulation of electric investor-owned utilities. California’s experiment with deregulation was launched in 1996 when the Legislature passed AB 1890 (Brulte, 1996) to restructure the electric industry. One of the key features of electrical restructuring was the authorization of retail competition within IOU service areas. The electric industry redesign of the 1990s (often referred to as deregulation) was developed to create a competing retail electric market where the incumbent utilities would become a “wires company” to provide the transmission and distribution services but would compete with third party providers to provide the electrical generation service to both residential and commercial customers. AB 1890 ended the service monopoly of utilities and authorized retail customers to purchase energy directly from suppliers. These transactions are known as "direct access."

About Direct Access. DA service is retail electric service where customers purchase electricity directly from a competitive provider called an ESP, instead of from a regulated electric utility. The utility delivers the electricity that the customer purchases from the ESP to the customer over its distribution system. An ESP is a non-utility entity that offers electric service to customers within the service territory of an electric utility through bilateral contracts directly with the customer.  Existing statute requires ESPs to comply with many of the same requirements of other load-serving entities (LSE), including electrical corporations and community choice aggregators (CCAs).

DA customers left without power during energy crisis. Before the energy crisis in 2001, non-IOU providers (DA or ESPs) had enrolled customers but then failed to provide the power ordered. The customers returned to the IOUs for service but the utilities did not have the electric generation resources to serve those customers because they had left IOU service. In response, the Legislature mandated that the IOUs maintain enough resource adequacy for current customers and those customers that could return to IOU service. The ability to choose DA service was officially suspended on September 20, 2001. However, CPUC rules allowed certain "eligible" customers to begin DA service after the suspension date and switch between bundled service and DA service.

DA service capped, then, reopened. At the time of the energy crisis, enrollment was statutorily capped in the DA program out of concerns for reliability and also concerns regarding distributing sunk costs stemming from the energy crisis. If large electricity customers bypass purchasing electricity through a utility, then more of the sunk costs fall on the remaining customers. In 2010 the cap was revisited by the Legislature and expanded to its current level which is approximately 13 percent of retail electric load with 41,975 enrolled customers comprising 0.3 percent of customer accounts in the state according the CPUC. The majority of DA customer accounts are commercial customer accounts (about 17,223) with load between 20 and 500 kilowatts (kW) per month. However, industrial customers with load over 500 kW per month are the largest DA customers in terms of kilowatt hours provided (about 35.5 percent of total load served by ESPs). Since the cap on DA was expanded and re-opened in 2011, demand for DA service has remained high with requests for DA service outpacing availability. Any openings are filled in a matter of seconds. The vast majority of customers using DA are commercial businesses, including hospitals, grocery stores, schools, universities, and retailers.

Community Choice Aggregation. Community aggregation is similar to DA, except rather than a specific customer purchasing energy from an ESP, a local jurisdiction (city or county) who often form a joint powers agreement to act as a electricity load purchasing agent on behalf of its residents and businesses. The state Legislature has expressed the state’s policy to permit and promote CCAs by enacting AB 117 (Migden, Chapter 38, Statutes of 2001) which authorized the creation of CCAs at the time that DA was capped. AB 117 described essential CCA program elements, required the state’s IOUs to provide certain services, and established methods to protect existing utility customers from liabilities that they might otherwise incur when a portion of the IOU’s customers transfer their energy services to a CCA. The CCA program was revisited in the Legislature in 2011 at which time the definition of CCA was expanded, the CPUC was required to initiate a code of conduct rulemaking for IOUs, and CCAs were permitted to apply for public purpose funds to administer energy efficiency programs. Extensive growth in CCAs in recent years which, when coupled with rooftop solar, community and existing DAs were estimated to make up about 25 percent of retail in 2017; a number that is estimated to reach up to 85 percent by the mid-2020s.

IOU responsibility does not end. A critical driver of CCA and DA policies is that any CCA or DA customer can terminate service on a moment’s notice and return to IOU service. Should they do so, or should the DA or CCA provider fail to provide sufficient power, the IOU is always and ultimately responsible to provide that power, as the provider of last resort.

Customer cost indifference is a requirement. With departing load from an IOU to an ESP (or CCA for that matter) statute mandates there is no cost-shifting. Because power plants take a long time to build and IOUs enter into long-term power purchase contracts, Public Utility Code §§366.1 and 366.2 require the CPUC to make sure that customers leaving the utility do not burden remaining utility customers with costs which were incurred to serve them. To ensure this “customer indifference,” CCAs and DA customers are required to pay a power charge indifference adjustment (PCIA) to account for the costs associated with the energy load purchased on behalf of the departing customers which would need to be paid by the new LSEs. With the growth of CCAs, the PCIA has become a controversial and challenging endeavor, with all sides alleging the existing PCIA is inadequate. The CPUC has an active proceeding on the PCIA with a pending decision as early as next month.

SB 237. According to the CPUC, the existing DA cap represents about 13.25 percent of the total electric IOU territory load (aggregated for all retail sellers in the IOU territory). This bill would increase the current cap on DA service to 4,000 GWH and apportion those costs to each of the electrical corporations. The 4,000 GWH would increase the cap to about 15.4 percent of the total electric IOU territory load.

Increased competition or tangled web? DA provides additional competition in the retail electric service market with other LSEs, including IOUs and CCAs. The DA program serves mostly commercial and industrial customers who seek the opportunity to manage their own energy procurement decisions. One can imagine a university, hospital, or large corporation that has dedicated staff managing the corporation’s electricity and who have the capacity to enter into bilateral contracts with an ESP. These end-users may be looking for a better value, often driven by price. However, the increased competition can also introduce additional challenges to remaining customers for both IOUs and CCAs. As mentioned above, the CPUC has an active PCIA proceeding considering how best to address cost-shifts associated with customers departing from IOUs to other LSEs. The proceeding and deliberations are highly charged with most parties disagreeing as to how and whether the PCIA satisfies the statutorily required customer financial “indifference.” In theory, the PCIA formula is meant to ensure that the costs for load attributed to a given customer for load that was purchased by an IOU on their behalf follows the customer. However, an increase in the DA cap opens up new questions about load that may have been purchased by a CCA, beyond that which is attributed to the load purchased by the IOU. If a CCA customer migrates to DA service, it is, at best, unclear whether the CPUC would have the ability, or authority, to referee the costs borne by the CCA for that customer. If the CCA is not able to recoup those costs, as may likely be the case, then the remainder CCA customers will likely be required to absorb those costs.

Achieving state goals? One of the concerns raised by opponents against this bill is the implications for California’s energy policies, including reliability and RPS. ESPs are subject to the same requirements as other LSEs, including resource adequacy and RPS. However, recent activity raises concerns about ESPs. Specifically, related to resource adequacy, last fall, 11 LSEs filed waiver requests to cover deficiencies in local resource adequacy requirements, totaling roughly 270 megawatts. Of the 11 requests, 10 came from ESPs. It’s currently unclear whether the increase in waiver requests is a short-term issue due to the transitions in the energy landscape or whether these are signals of more to come. As it relates to the RPS, according to the CPUC, California had a total of 20 electricity retailers for Compliance Period 1 (2011-2013) and the RPS procurement quantity requirement was 20 percent.  California's overall RPS position in Compliance Period 1 was 20.3 percent. On December 20, 2017, the 20 electricity retailers were notified of Energy Division's determinations of their RPS Compliance.  The three large IOUs exceeded the 20 percent RPS procurement quantity requirement for Compliance Period 1 with an average of 20.9 percent RPS position.  The Small and Multi-jurisdictional Utilities exceeded the 20 percent RPS procurement quantity requirement with an average of 26.3 percent.  The only CCA in operation at the time, Marin Clean Energy, had an RPS procurement position of 30 percent.  Seven ESPs met or exceeded the 20 percent RPS procurement requirements, however, six ESPs were not compliant with the RPS requirements.

The Compliance Period 1 determinations are:

*The non-compliant retail sellers may request waiver of their respective penalty amounts through the process set forth in D.14-12-023.

The California Customer Choice Project. A project of the CPUC, a final paper entitled, California Customer Choice: An Evaluation of Regulatory Framework Options for an Evolving Electricity Market was issued in August. The report is designed to initiate a policy conversation among a wide range of stakeholders and interests about the future of California's electricity market, rather than make specific recommendations. The CPUC has noted the potential for benefits to result from these changes and from a more competitive electric service market. It has also expressed concerns, as such as those described the in the CPUC’s recently published “Customer Choice Book:” Over the past year, the CPUC has reviewed the history of competition and choice in California, including the California Energy Crisis, evaluated the current regulatory construct, and analyzed selected markets to provide lessons learned for California. The CPUC has stated that California must consider how to shape this new environment in a way that continues to ensure reliable, clean, and affordable electricity for customers and equitable treatment for all market participants. The CPUC warns that the state does not currently have a plan to address these issues.

Prior/Related Legislation

SB 695 (Kehoe, Chapter 337, Statutes of 2009) among the provisions, allowed the expansion of DA service to individual retail non-residential end-use customers up to the total annual kilowatt-hours supplied by electric service providers for any year after April 1, 1998 approximately doubling enrollment in the DA program.

AB 1X (Keely, Chapter 4, Statutes of 2001) suspended DA until the Department of Water Resources no longer provides power.

SB 286 (Hertzberg, 2015) would have required the CPUC to allow individual retail nonresidential end-use customers to contract directly for their electricity supplies, also known as DA. The bill was held in Assembly Committee on Appropriations.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

Building Owners and Mangers Association of California

California Business Properties Association

California Grocers Association

California League of Food Producers

California Manufacturers & Technology Association

California Retailers Association

Clean Energy

Direct Access Customer Coalition

EnerNOC, Inc.

Industrial Environmental Association

Shell Energy North America (US), LP

Silicon Valley Leadership Group

TechNet

Western States Petroleum Association

An Individual

OPPOSITION:

350 Bay Area Action

Asian Pacific Environmental Network

California Alliance for Community Energy

California Community Choice Association

California Environmental Justice Alliance

California Municipal Utilities Association

Californians for Energy Choice

Central Coast Energy Services

City of Berkeley

Climate Action Campaign

Center for Sustainable Energy

County for Climate Action

Design Avenues

Earthjustice

Indivisible CA-33

Indivisible Los Angeles, CA-43

KyotoUSA

Local Clean Energy Alliance

Mainstreet Moms Organize or Bust

Natural Resources Defense Council

Recólte Energy

San Diego 350 Climate Change Action

San Diego Community Choice Alliance

San Francisco Peninsula Energy Services

San Jose Community Energy Advocates

Sierra Club

SoCal 350 Climate Action

Sunflower Alliance

Sustainable Marin

Sustainable Novato

Sustainable Silicon Valley

The Nature Conservancy

The Utility Reform Network

ARGUMENTS IN SUPPORT: According to the author, “As the state’s electrical system continues to evolve, customers are learning to connect with and obtain the power mix they want when and where they need it. From roof-top solar and advanced battery systems to waste-heat generators, California’s businesses make cost-effective and environmental energy decisions every day, but lack the ability to fully customize their electricity mix to meet their unique needs

Senate Bill 237 allows commercial and industrial customers to choose alternative electricity service, called Direct Access, and sign contracts separate from the local utility company. The bill will encourage competition, which reduces prices. This, in turn, will give California businesses the necessary tools to make comprehensive cost-effective energy decisions and make California more business friendly, while providing new flexible options for meeting the state’s renewable energy and greenhouse gas reduction goals.”

ARGUMENTS IN OPPOSITION: Several of those opposed to the bill are concerned about the potential for backsliding on the state’s environmental policies, the implications for disadvantaged communities, and the potential for cost shifts to CCA customers. In opposition to this bill, TURN expresses numerous concerns, including: (1) an increased risk of another market crisis, (2) ESPs preference to cherry-pick customers, (3) potential for increased prices through the market actions of ESPs, (4) short-term purchases of ESPs undermine the state’s ambitious clean energy goals, and (5) the opaque nature of ESP transactions compared to those executed through the CPUC.

-- END --

 UNFINISHED BUSINESS  

Bill No: SB 237

Author:

:

Vote:

PRIOR VOTES NOT RELEVANT

SENATE ENERGY, U. & C. COMMITTEE: 6-3, 8/31/18 (Pursuant to Senate Rule 29.10)

AYES: Hueso, Morrell, Bradford, Cannella, Hertzberg, Vidak

NOES: Hill, McGuire, Wiener

NO VOTE RECORDED: Skinner, Stern

ASSEMBLY FLOOR: 48-17, 8/30/18 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill directs the California Public Utilities Commission (CPUC) to make changes to the existing direct access (DA) service program, which authorizes direct energy transactions between electricity suppliers and retail end-use customers. Among the proposed changes is a requirement to increase the annual maximum allowable limit of the DA service program by 4,000 gigawatt hour (GWH) for non-residential customers. This bill also directs the CPUC to provide recommendations to the Legislature, with specified findings, on the adoption and implementation of a second direct service transactions reopening schedule.

Assembly Amendments

gut-and-amend the language that was previously in the bill concerning procedures for arresting criminals and replace it with the language now in the bill concerning the DA service program.

ANALYSIS:

Existing law:

1. Suspends the ability of retail end-use customers of the investor-owned utilities (IOU) to receive electrical service from an entity other than an IOU unless authorized by the Legislature. This arrangement commonly is referred to as DA. (Public Utilities Code §365.1(a))
2. Allows a limited enrollment into DA for new nonresidential customers based on historical enrollment volumes. (Public Utilities Code §365.1(b))
3. Requires DA providers to meet the same requirements as the IOUs for resource adequacy, the renewables portfolio standard (RPS) Program, and the requirements for the electricity sector adopted by the California Air Resources Board (ARB) pursuant to the California Global Warming Solutions Act of 2006. (Public Utilities Code §365.1 (c))
4. States the intent of the Legislature to prevent any shifting of recoverable costs between IOU customers. (Public Utilities Code §366.1(d)(1))
5. Defines "direct transaction" as a contract between any one or more electric generators, marketers, or brokers of electric power and one or more retail customers providing for the purchase and sale of electric power or any ancillary services. (Public Utilities Code §331)
6. Defines an electric service provider (ESP) as a non-utility entity that offers electric service to customers within the service territory of an electric utility and requires each ESP to register with the CPUC. (Public Utilities Code §394(a))
7. Makes ESPs subject to the same requirements that are applicable to the state’s three largest IOUs for resource adequacy, the RPS and the requirements for the electricity sector adopted by the ARB pursuant to the California Global Warming Solutions Act of 2006. (Public Utilities Code §356.1 et seq.)

This bill:

1. Requires the CPUC to expand the permissible capacity of the DA program by 4,000 GWH apportioned across the service territories of electrical corporations.
2. Requires that all DA customers enrolled in the program on January 1, 2019 remain eligible to participate in the program.
3. Requires the CPUC to report to the Legislature by June 1, 2020 on further expansion of the program and specifically include phase-in periods for all remaining nonresidential customer accounts.
4. Requires that the CPUC recommendations be conditioned on specified findings:
   1. Be consistent with the state's greenhouse gas (GHG) emission goals;
   2. Not increase criteria air pollutants and toxic air contaminants;
   3. Ensure electric system reliability; and
   4. Not cause undue cost shifting.

Background

Deregulation of electric investor-owned utilities. California’s experiment with deregulation was launched in 1996 when the Legislature passed AB 1890 (Brulte, 1996) to restructure the electric industry. One of the key features of electrical restructuring was the authorization of retail competition within IOU service areas. The electric industry redesign of the 1990s (often referred to as deregulation) was developed to create a competing retail electric market where the incumbent utilities would become a “wires company” to provide the transmission and distribution services but would compete with third party providers to provide the electrical generation service to both residential and commercial customers. AB 1890 ended the service monopoly of utilities and authorized retail customers to purchase energy directly from suppliers. These transactions are known as "direct access."

About Direct Access. DA service is retail electric service where customers purchase electricity directly from a competitive provider called an ESP, instead of from a regulated electric utility. The utility delivers the electricity that the customer purchases from the ESP to the customer over its distribution system. An ESP is a non-utility entity that offers electric service to customers within the service territory of an electric utility through bilateral contracts directly with the customer.  Existing statute requires ESPs to comply with many of the same requirements of other load-serving entities (LSE), including electrical corporations and community choice aggregators (CCAs).

DA customers left without power during energy crisis. Before the energy crisis in 2001, non-IOU providers (DA or ESPs) had enrolled customers but then failed to provide the power ordered. The customers returned to the IOUs for service but the utilities did not have the electric generation resources to serve those customers because they had left IOU service. In response, the Legislature mandated that the IOUs maintain enough resource adequacy for current customers and those customers that could return to IOU service. The ability to choose DA service was officially suspended on September 20, 2001. However, CPUC rules allowed certain "eligible" customers to begin DA service after the suspension date and switch between bundled service and DA service.

DA service capped, then, reopened. At the time of the energy crisis, enrollment was statutorily capped in the DA program out of concerns for reliability and also concerns regarding distributing sunk costs stemming from the energy crisis. If large electricity customers bypass purchasing electricity through a utility, then the more of the sunk costs fall on the remaining customers. In 2010 the cap was revisited by the Legislature and expanded to its current level which is approximately 13 percent of retail electric load with 41,975 enrolled customers comprising 0.3 percent of customer accounts in the state according the CPUC. The majority of DA customer accounts are commercial customer accounts (about 17,223) with load between 20 and 500 kilowatts (kW) per month. However, industrial customers with load over 500 kW per month are the largest DA customers in terms of kilowatt hours provided (about 35.5 percent of total load served by ESPs. Since the cap on DA was expanded and re-opened in 2011, demand for DA service has remained high with requests for DA service outpacing availability. Any openings are filled in a matter of seconds. The vast majority of customers using DA are commercial businesses, including hospitals, grocery stores, schools, universities, and retailers.

Community Choice Aggregation. Community aggregation is similar to DA, except rather than a specific customer purchasing energy from an ESP, a local jurisdiction (city or county) may act as a purchasing agent on behalf of its residents. CCAs are governmental entities, often formed through joint powers agreement, by cities and/or counties to serve the electricity requirements of their local residents and businesses. The state Legislature has expressed the state’s policy to permit and promote CCAs by enacting AB 117 (Migden, Chapter 38, Statutes of 2001) which authorized the creation of CCAs at the time that DA was capped. This bill described essential CCA program elements, required the state’s IOUs to provide certain services, and established methods to protect existing utility customers from liabilities that they might otherwise incur when a portion of the IOU’s customers transfer their energy services to a CCA. The CCA program was revisited in the Legislature in 2011 at which time the definition of CCA was expanded, the CPUC was required to initiate a code of conduct rulemaking for IOUs, and CCAs were permitted to apply for public purpose funds to administer energy efficiency programs. Extensive growth in CCAs in recent years which, when coupled with rooftop solar, community and existing DAs were estimated to make up about 25 percent of retail in 2017; a number that is estimated to reach up to 85 percent by the mid-2020s.

IOU responsibility does not end. A critical driver of CCA and DA policies is that any CCA or DA customer can terminate service on a moment’s notice and return

to IOU service. Should they do so, or should the DA or CCA provider fail to provide sufficient power, the IOU is always and ultimately responsible to provide that power, as the provider of last resort.

Customer cost indifference is a requirement. With departing load from an IOU to an ESP (or CCA for that matter) statute mandates there is no cost-shifting. Because power plants take a long time to build and IOUs enter into long-term power purchase contracts, Public Utility Code §§366.1 and 366.2 require the CPUC to make sure that customers leaving the utility do not burden remaining utility customers with costs which were incurred to serve them. To ensure this “customer indifference,” CCAs and DA customers are required to pay a power charge indifference adjustment (PCIA) to account for the costs associated with the energy load purchased on behalf of the departing customers which would need to be paid the new LSEs. With the growth of CCAs, the PCIA has become a controversial and challenging endeavor. The CPUC has an active proceeding on the PCIA with a pending decision as early as next month.

SB 237. According to the CPUC, the existing DA cap represents about 13.25 percent of the total electric IOU territory load (aggregated for all retail sellers in the IOU territory). This bill would increase the current cap on DA service to 4,000 GWH and apportion those costs to each of the electrical corporations. The 4,000 GWH would increase the cap to about 15.4 percent of the total electric IOU territory load.

Increased competition or tangled web? DA provides additional competition in the retail electric service market with other LSEs, including IOUs and CCAs. The DA program serves mostly commercial and industrial customers who want the opportunity to manage their own energy procurement decisions. One can imagine a large corporation that has dedicated staff managing the corporation’s electricity and who have the capacity to enter into bilateral contracts with an ESP. These end-users may be looking for a better value, whether price and/or other attributes. However, the increased competition can also introduce additional challenges to remaining customers for both IOUs and CCAs. As mentioned above, the CPUC has an active PCIA proceeding considering how best to address cost-shifts associated with customers departing from IOUs to other LSEs. The proceeding and deliberations are highly charged with most parties disagreeing as to how and whether the PCIA satisfies the statutorily required customer financial “indifference.” In theory, the PCIA formula is meant to ensure that the costs for load attributed to a given customer for load that was purchased by an IOU on their behalf follows the customer. However, an increase in the DA cap opens up new questions about load that may have been purchased by a CCA, beyond that which

is attributed to the load purchased by the IOU. If a CCA customer migrates to DA service, it is, at best, unclear whether the CPUC would have the ability, or authority, to referee the costs borne by the CCA for that customer. If the CCA can not recoup those costs, as may likely be the case, then the remainder CCA customers will likely be required to absorb those costs.

Achieving state goals? One of the concerns raised by opponents against this bill is the implications for California’s energy policies, including reliability and RPS. While ESPs are subject to the same requirements as other LSEs, including resource adequacy and RPS. However, recent activity raises concerns about ESPs. Specifically, on resource adequacy, last fall, 11 LSEs filed waiver requests to cover deficiencies in local resource adequacy requirements, totaling roughly 270 megawatts (MW). Of the 11 requests, 10 came from ESPs. It’s currently unclear whether the increase in waiver requests is a short-term issue due to the transitions in the energy landscape or whether these are signals of more to come. As it relates to the RPS, according to the CPUC, California had a total of 20 electricity retailers for Compliance Period 1 (2011-2013) and the RPS procurement quantity requirement was 20 percent.  California's overall RPS position in Compliance Period 1 was 20.3 percent. On December 20, 2017, the 20 electricity retailers were notified of Energy Division's determinations of their RPS Compliance.  The three large IOUs exceeded the 20 percent RPS procurement quantity requirement for Compliance Period 1 with an average of 20.9 percent RPS position.  The Small and Multi-jurisdictional Utilities exceeded the 20 percent RPS procurement quantity requirement with an average of 26.3 percent.  The only CCA in operation at the time, Marin Clean Energy, had an RPS procurement position of 30 percent.  Seven ESPs met or exceeded the 20 percent RPS procurement requirements and six ESPs were not compliant with the RPS requirements.

The Compliance Period 1 determinations are:

*The non-compliant retail sellers may request waiver of their respective penalty amounts through the process set forth in D.14-12-023.

The California Customer Choice Project. A project of the CPUC, a final paper entitled, California Customer Choice: An Evaluation of Regulatory Framework Options for an Evolving Electricity Market was issued in August. The report is designed to initiate a policy conversation among a wide range of stakeholders and interests about the future of California's electricity market, rather than make specific recommendations. The CPUC has noted the potential for benefits to result from these changes and from a more competitive electric service market. It has also expressed concerns, as such as those described the in the CPUC’s recently published “Customer Choice Book:” Over the past year, the CPUC has reviewed the history of competition and choice in California, including the California Energy Crisis, evaluated the current regulatory construct, and analyzed selected markets to provide lessons learned for California. The CPUC has stated that California must consider how to shape this new environment in a way that continues to ensure reliable, clean, and affordable electricity for customers and equitable treatment for all market participants.

Related/Prior Legislation

SB 286 (Hertzberg, 2015) would have required the CPUC to allow individual retail nonresidential end-use customers to contract directly for their electricity supplies, also known as DA. The bill was held in Assembly Committee on Appropriations.

SB 695 (Kehoe, Chapter 337, Statutes of 2009) among the provisions, allowed the expansion of DA service to individual retail non-residential end-use customers up to the total annual kilowatt-hours supplied by electric service providers for any year after April 1, 1998 approximately doubling enrollment in the DA program.

AB 1X (Keely, Chapter 4, Statutes of 2001) suspended DA until the Department of Water Resources no longer provides power.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Committee on Appropriations:

The CPUC identifies the following new or increased activity resulting from this bill: (1) registering electric service providers (ESPs) and processing annual ESP requirements, (2) reviewing Renewable Portfolio Standard (RPS) compliance, (3) reviewing resource adequacy requirements, and (4) responding to ESP inquiries. For this work, the CPUC estimates it will need five new positions, including an administrative law judge, and outside consulting contracts, at an annual cost of approximately $775,000 and $200,000, respectively.

It is impractical to precisely asses the CPUCs’ costs estimate; however, the estimate seems exaggerated. In any case, it is reasonable to conclude this bill will result in substantial ongoing costs, likely in the hundreds of thousands of dollars annually (special fund) to the CPUC for staffing and contracting.

SUPPORT: (Verified 8/30/18)

Building Owners and Mangers Association of California

California Business Properties Association

California Grocers Association

California League of Food Producers

California Manufacturers & Technology Association

California Retailers Association

Clean Energy

Direct Access Customer Coalition

EnerNOC, Inc.

Industrial Environmental Association

Shell Energy North America (US), LP

Silicon Valley Leadership Group

TechNet

Western States Petroleum Association

An Individual

OPPOSITION: (Verified 8/30/18)

350 Bay Area Action

Asian Pacific Environmental Network

California Alliance for Community Energy

California Community Choice Association

California Environmental Justice Alliance

California Municipal Utilities Association

Californians for Energy Choice

Central Coast Energy Services

City of Berkeley

Climate Action Campaign

Center for Sustainable Energy

County for Climate Action

Design Avenues

Earthjustice

Indivisible CA-33

Indivisible Los Angeles, CA-43

KyotoUSA

Local Clean Energy Alliance

Mainstreet Moms Organize or Bust

Natural Resources Defense Council

Recólte Energy

San Diego 350 Climate Change Action

San Diego Community Choice Alliance

San Francisco Peninsula Energy Services

San Jose Community Energy Advocates

Sierra Club

SoCal 350 Climate Action

Sunflower Alliance

Sustainable Marin

Sustainable Novato

Sustainable Silicon Valley

The Nature Conservancy

The Utility Reform Network

ARGUMENTS IN SUPPORT: According to the author, “As the state’s electrical system continues to evolve, customers are learning to connect with and obtain the power mix they want when and where they need it. From roof-top solar and advanced battery systems to waste-heat generators, California’s businesses make cost-effective and environmental energy decisions every day, but lack the ability to fully customize their electricity mix to meet their unique needs

Senate Bill 237 allows commercial and industrial customers to choose alternative electricity service, called Direct Access, and sign contracts separate from the local utility company. The bill will encourage competition, which reduces prices. This, in turn, will give California businesses the necessary tools to make comprehensive cost-effective energy decisions and make California more business friendly, while providing new flexible options for meeting the state’s renewable energy and greenhouse gas reduction goals.”

ARGUMENTS IN OPPOSITION: Several of those opposed to the bill are concerned about the potential for backsliding on the state’s environmental policies, the implications for disadvantaged communities, and the potential for cost shifts to CCA customers. In opposition to this bill, TURN expresses numerous concerns, including: (1) an increased risk of another market crisis, (2) ESPs preference to cherry-pick customers, (3) potential for increased prices through the market actions of ESPs, (4) short-term purchases of ESPs undermine the state’s ambitious clean energy goals, and (5) the opaque nature of ESP transactions compared to those executed through the CPUC.

ASSEMBLY FLOOR: 48-17, 8/30/18

AYES: Travis Allen, Arambula, Brough, Burke, Caballero, Carrillo, Cervantes, Chau, Chávez, Chen, Choi, Cooley, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Fong, Frazier, Gallagher, Eduardo Garcia, Gipson, Gonzalez Fletcher, Gray, Grayson, Harper, Jones-Sawyer, Kamlager-Dove, Maienschein, Mathis, Mayes, Medina, Melendez, Obernolte, O'Donnell, Patterson, Quirk-Silva, Rivas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Thurmond, Voepel, Waldron, Rendon

NOES: Acosta, Baker, Berman, Bloom, Chu, Friedman, Cristina Garcia, Irwin, Kalra, Lackey, Levine, Low, Mullin, Muratsuchi, Quirk, Mark Stone, Wood

NO VOTE RECORDED: Aguiar-Curry, Bigelow, Bonta, Calderon, Chiu, Gabriel, Gloria, Holden, Kiley, Limón, McCarty, Nazarian, Reyes, Ting, Weber

Prepared by:

8/31/18 14:06:02

**** END ****

SENATE THIRD READING

STR Bill Id:SB 237

Author:(Hertzberg)

As Amended Ver:August 24, 2018

Majority vote

SENATE VOTE: 37-0

SUMMARY: This bill directs the California Public Utilities Commission (CPUC) to take specified actions regarding the Direct Access Program (DA). Specifically, this bill:

1. Requires the CPUC to expand the permissible capacity of the DA program by 4,000 gigawatt hours apportioned across the service territories of electrical corporations.
2. Requires that all DA customers enrolled in the program on January 1, 2019 remain eligible to participate in the program.
3. Requires the CPUC to report to the Legislature by June 1, 2020 on further expansion of the program and specifically include phase-in periods for all remaining nonresidential customer accounts.
4. Requires that the CPUC recommendations be conditioned on specified findings:
   1. Be consistent with the state's greenhouse gas emission goals;
   2. Not increase criteria air pollutants and toxic air contaminants;
   3. Ensure electric system reliability; and
   4. Not cause undue cost shifting.

CURRENT LAW:

1. Suspends the ability of retail end-use customers of the investor-owned utilities (IOU) to receive electrical service from an entity other than an IOU unless authorized by the Legislature. This arrangement commonly is referred to as direct access (DA). (Public Utilities Code Section 365.1(a))
2. Allows a limited enrollment into DA for new nonresidential customers based on historical enrollment volumes. (Public Utilities Code Section 365.1(b])
3. Requires DA providers to meet the same requirements as the IOUs for resource adequacy, the RPS, and the requirements for the electricity sector adopted by the California Air Resources Board (CARB) pursuant to the California Global Warming Solutions Act of 2006. (Public Utilities Code Section 365.1 (c))
4. States the intent of the Legislature to prevent any shifting of recoverable costs between IOU customers. (Public Utilities Code Section 366.1[d][1])
5. Defines "direct transaction" as a contract between any one or more electric generators, marketers, or brokers of electric power and one or more retail customers providing for the purchase and sale of electric power or any ancillary services. (Public Utilities Code Section 331)
6. Defines an electric service provider (ESP) as a non-utility entity that offers electric service to customers within the service territory of an electric utility and requires each ESP to register with the CPUC. (Public Utilities Code Section 394(a))

FISCAL EFFECT: According to the Assembly Appropriations Committee, one-time costs to the CPUC, in the mid-hundreds of thousands of dollars over several years, to consider appropriate changes to the cap on Direct Access and to make recommendations to the Legislature.

COMMENT:

Deregulation & Direct Access. California's experiment with deregulation was launched in 1996 when the Legislature passed AB 1890 (Brulte), Chapter 854, Statutes of 1996 to restructure the electric industry. One of the key features of electrical restructuring was the authorization of retail competition within IOU service areas. AB 1890 ended the service monopoly of utilities and authorized retail customers to purchase energy directly from suppliers. These transactions are known as "direct access."

Before the energy crisis in 2001, non-IOU providers (direct access or energy service providers) had enrolled customers but then failed to provide the power ordered. The customers returned to the IOUs for service but the utilities did not have the electric generation resources to serve those customers because they had left IOU service. In response the Legislature mandated that the IOUs maintain resource adequacy for current customers and those customers that could return to IOU service. The ability to choose DA service was officially suspended on September 20, 2001. However, CPUC rules allowed certain "eligible" customers to begin DA service after the suspension date and switch between bundled service and DA service.

At the time of the energy crisis, enrollment was statutorily capped in the DA program. In 2010 the cap was revisited by the Legislature and expanded to its current level which is approximately 13% of retail electric load with 41,975 enrolled customers comprising 0.3% of customer accounts in the state according the CPUC. The majority of DA customer accounts are commercial customer accounts (about 17,223) with load between 20 and 500 kilowatts (kW) per month. However, industrial customers with load over 500 kW per month are the largest DA customers in terms of kilowatt hours provided (about 35.5% of total load served by electric service providers.

Since the cap on DA was expanded and re-opened in 2011, demand for DA service has remained high with requests for DA service outpacing availability. Any openings are filled in a matter of seconds. The vast majority of customers using DA are commercial businesses, including hospitals, grocery stores, schools, universities, and retailers.

DA Program Expansion. This bill would require the CPUC to increase the program cap on the DA program by 16% or 4,000 gigawatt hours.

Community Choice Aggregation. Community aggregation is a form of DA where, for example, a city may act as a purchasing agent on behalf of its residents. CCAs are governmental entities formed by cities and/or counties to serve the electricity requirements of their local residents and businesses. The state Legislature has expressed the state's policy to permit and promote CCAs by enacting AB 117 (Migden), Chapter 838, Statutes of 2002, which authorized the creation of CCAs at the time that DA was capped. The bill described essential CCA program elements, required the state's IOUs to provide certain services, and established methods to protect existing utility customers from liabilities that they might otherwise incur when a portion of the IOU's customers transfer their energy services to a CCA. The CCA program was revisited in the Legislature in 2011 at which time the definition of CCA was expanded, the CPUC was required to initiate a code of conduct rulemaking for IOUs, and CCAs were permitted to apply for public purpose funds to administer energy efficiency programs.

Extensive growth in CCAs in recent years which, when coupled with rooftop solar, community and existing DAs were estimated to make up about 25% of retail in 2017; a number that is estimated to reach up to 85% by the mid-2020s.

IOU Responsibility Does Not End – A critical driver of CCA and DA policies is that any CCA or DA customer can terminate service on a moment's notice and return to IOU service. Should they do so, or should the DA or CCA provider fail to provide sufficient power, the IOU is always and ultimately responsible to provide that power.

The California Customer Choice Project. The CPUC has issued "The Choice Paper" which addresses the changing electric market in California as a result of the growth of CCAs, presence of DA, growth of generation on the customer's side of the meter, and resulting new challenges that are confronting the state's energy future and reliability. The purpose of the Choice Paper is to raise awareness of the challenges and opportunities in California's rapidly changing electricity market, engage stakeholders, and advance a public dialogue to ensure continued reliable, clean, and affordable electricity for customers and equitable treatment for all market participants.

As next steps, the CPUC will perform a gap analysis that will examine the fundamental questions raised in the Choice Paper to identify critical issues requiring solutions. Additionally, a public workshop will be held mid-October 2018, to discuss the CPUC's findings in the gap analysis and a draft action plan as the framework for addressing these gaps.

The recommendations on expansion of DA required by this bill are consistent with the CPUC's work on customer choice. The expansion of the DA program called for in this bill may be premature given the CPUC's warning that they observe similar circumstances in the electricity market as they observed before the energy crisis of 2001.

Analysis Prepared by: Kellie Smith / U. & E. / (916) 319-2083 FN: 0004908

SENATE THIRD READING

STR Bill Id:SB 237

Author:(Hertzberg)

As Amended Ver:August 21, 2018

Majority vote

SENATE VOTE: Not relevant

SUMMARY: This bill requires the California Public Utilities Commission (CPUC) to provide recommendations, to the Legislature by June 1, 2020, on expanding the Direct Access Program (DA) based on specific findings. :

CURRENT LAW:

1. Suspends the ability of retail end-use customers of the investor-owned utilities (IOU) to receive electrical service from an entity other than an IOU unless authorized by the Legislature. This arrangement commonly is referred to as direct access (DA). (Public Utilities Code Section 365.1(a))
2. Allows a limited enrollment into DA for new nonresidential customers based on historical enrollment volumes. (Public Utilities Code Section 365.1(b])
3. Requires DA providers to meet the same requirements as the IOUs for resource adequacy, the RPS, and the requirements for the electricity sector adopted by the California Air Resources Board (CARB) pursuant to the California Global Warming Solutions Act of 2006. (Public Utilities Code Section 365.1 (c))
4. States the intent of the Legislature to prevent any shifting of recoverable costs between IOU customers. (Public Utilities Code Section 366.1[d][1])
5. Defines "direct transaction" as a contract between any one or more electric generators, marketers, or brokers of electric power and one or more retail customers providing for the purchase and sale of electric power or any ancillary services. (Public Utilities Code Section 331)
6. Defines an electric service provider (ESP) as a non-utility entity that offers electric service to customers within the service territory of an electric utility and requires each ESP to register with the CPUC. (Public Utilities Code Section 394(a))

FISCAL EFFECT:

According to the Assembly Appropriations Committee, one-time costs to the CPUC, in the mid-hundreds of thousands of dollars over several years, to consider appropriate changes to the cap on Direct Access and to make recommendations to the Legislature.

COMMENT:

Deregulation. California's experiment with deregulation was launched in 1996 when the Legislature passed AB 1890 (Brulte), Chapter 854, Statutes of 1996) to restructure the electric industry. One of the key features of electrical restructuring was the authorization of retail competition within IOU service areas. AB 1890 ended the service monopoly of utilities and authorized retail customers to purchase energy directly from suppliers. These transactions are known as "direct access."

Before the energy crisis in 2001, non-IOU providers (direct access or energy service providers) had enrolled customers but then failed to provide the power ordered. The customers returned to the IOUs for service but the utilities did not have the electric generation resources to serve those customers because they had left IOU service. In response the Legislature mandated that the IOUs maintain resource adequacy for current customers and those customers that could return to IOU service. The ability to choose DA service was officially suspended on September 20, 2001. However, CPUC rules allowed certain "eligible" customers to begin DA service after the suspension date and switch between bundled service and DA service.

At the time of the energy crisis, enrollment was statutorily capped in the DA program. In 2010 the cap was revisited by the Legislature and expanded to its current level which is approximately 13% of retail electric load with 41,975 enrolled customers comprising 0.3% of customer accounts in the state according the CPUC. The majority of DA customer accounts are commercial customer accounts (about 17,223) with load between 20 and 500 kilowatts (kW) per month. However, industrial customers with load over 500 kW per month are the largest DA customers in terms of kilowatt hours provided (about 35.5% of total load served by electric service providers.

Since the cap on DA was expanded and re-opened in 2011, demand for DA service has remained high with requests for DA service outpacing availability. Any openings are filled in a matter of seconds. The vast majority of customers using DA are commercial businesses, including hospitals, grocery stores, schools, universities, and retailers.

Community Choice Aggregation. Community aggregation is a form of DA where, for example, a city may act as a purchasing agent on behalf of its residents. CCAs are governmental entities formed by cities and/or counties to serve the electricity requirements of their local residents and businesses. The state Legislature has expressed the state's policy to permit and promote CCAs by enacting AB 117 (Migden), Chapter 838, Statutes of 2002) which authorized the creation of CCAs at the time that DA was capped. The bill described essential CCA program elements, required the state's IOUs to provide certain services, and established methods to protect existing utility customers from liabilities that they might otherwise incur when a portion of the IOU's customers transfer their energy services to a CCA. The CCA program was revisited in the Legislature in 2011 at which time the definition of CCA was expanded, the CPUC was required to initiate a code of conduct rulemaking for IOUs, and CCAs were permitted to apply for public purpose funds to administer energy efficiency programs.

Extensive growth in CCAs in recent years which, when coupled with rooftop solar, community and existing DAs were estimated to make up about 25% of retail in 2017; a number that is estimated to reach up to 85% by the mid-2020s.

IOU Responsibility Does Not End – A critical driver of CCA and DA policies is that any CCA or DA customer can terminate service on a moment's notice and return to IOU service. Should they do so, or should the DA or CCA provider fail to provide sufficient power, the IOU is always and ultimately responsible to provide that power.

The California Customer Choice Project. The CPUC has issued "The Choice Paper" which addresses the changing electric market in California as a result of the growth of CCAs, presence of DA, growth of generation on the customer's side of the meter, and resulting new challenges that are confronting the state's energy future and reliability. The purpose of the Choice Paper is to raise awareness of the challenges and opportunities in California's rapidly changing electricity market, engage stakeholders, and advance a public dialogue to ensure continued reliable, clean, and affordable electricity for customers and equitable treatment for all market participants.

As next steps, the CPUC will perform a gap analysis that will examine the fundamental questions raised in the Choice Paper to identify critical issues requiring solutions. Additionally, a public workshop will be held mid-October 2018, to discuss the CPUC's findings in the gap analysis and a draft action plan as the framework for addressing these gaps.

The recommendations on expansion of DA required by this bill are consistent with the CPUC's work on customer choice.

Analysis Prepared by: Kellie Smith / U. & E. / (916) 319-2083 FN: 0004305

Date of Hearing: August 8, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 237

Author:(Hertzberg) – As Amended Ver:June 13, 2018

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill directs the California Public Utilities Commission (CPUC) to remove the cap on “direct access” (DA) participation so that, by July 1, 2022, all non-residential end-use customers of the state’s investor-owned utilities (IOUs) may acquire electric service from a provider other than the incumbent electric utility.

FISCAL EFFECT:

The CPUC identifies the following new or increased activity resulting from this bill: (1) registering electric service providers (ESPs) and processing annual ESP requirements, (2) reviewing Renewable Portfolio Standard (RPS) compliance, (3) reviewing resource adequacy requirements, and (4) responding to ESP inquiries. For this work, the CPUC estimates it will need five new positions, including an administrative law judge, and outside consulting contracts, at an annual cost of approximately $775,000 and $200,000, respectively.

It is impractical to precisely asses the CPUCs’ costs estimate; however, the estimate seems exaggerated. In any case, it is reasonable to conclude the bill will result in substantial ongoing costs, likely in the hundreds of thousands of dollars annually (special fund) to the CPUC for staffing and contracting.

COMMENTS:

1. Purpose. The author intends this bill to allow commercial and industrial customers to choose alternative electricity service, thereby encouraging competition for electric service and reducing prices. Bill proponents contend the state already has deregulated electricity service, in the name of competition, through the growth of community choice aggregation, yet has restricted true competition by capping DA participation. In proponents’ view, this bill would realize such competition for electric service, at least for nonresidential customers located in the service territories of the state’s investor-owned electric utilities.
2. Direct Access—Open and Shut. DA allows customers of each IOU to elect to receive electric service from a provider other than the IOU. Such providers are know as ESPs. ESP rely on the use of IOU transmission lines to deliver electricity to DA customers. DA was first offered as part of efforts to restructure the electricity markets to provide more competition. These efforts were codified in AB 1890 (Brulte), Chapter 854, Statutes of 1996. In 2000 and 2001, the state experienced extraordinary wholesale electricity prices in what has become known as the California electricity crisis. Pacific Gas and Electric declared bankruptcy; Southern California Edison nearly did so. Unsure of the exact causes of the crisis, state government took a number of actions to stabilize the electricity market. Among those actions was suspension of DA. No new customers would be allowed to sign DA contracts; existing DA contracts, however, would continue in effect.

In 2009, the Legislature passed SB 695 (Kehoe) Chapter 337, Statutes of 2009, which reopened DA by directing the CPUC to allow nonresidential end-use customers to acquire electric service from ESPs in each IOUs service territory, up to a specified limit. The CPUC noted that the newly eligible DA allowance resulting from SB 695 represented a relatively small portion of each IOU’s portfolio: collectively, less than 6% of the entire load of all the IOUs, and amount “much less than the annual variation in electricity consumption across the state due to weather and the economy.” The overall SB 695 DA limit represents approximately 13% of the IOUs total load.

Nonresidential customers quickly enrolled in all available DA service made newly available by SB 695. The CPUC reports that, today 21 ESPs procure electricity for about 42,000 customers, representing about 13.13% of total IOU load. Individual load of customers in the DA program ranges between 20 kilowatts per month to over 500 kilowatts per month. While commercial customers represent the greatest number of customers, by type, participating in DA, the relatively small number of industrial customers represents a disproportionate percentage of the electric load served by DA.

1. A Swiftly Titling Market. The electricity market has undergone significant changes since the energy crisis. Many of those changes continue. Notable among those changes is a significant, and increasing, reliance on renewable energy resources, many of which produce power intermittently, and a growth in the deployment and use of distributed energy resources, such as on-site solar. In addition, the state’s local governments have shown such an interest in community choice aggregation that the CPUC predicts, soon, a majority of customers within the service territory of an IOU will receive electric service from an entity other than the incumbent IOU.

The CPUC has noted the potential for benefits to result from these changes and from a more competitive electric service market. It has also expressed concerns, as such as those described the in the commission’s recently published “green book:”

In the last deregulation, we had a plan, however flawed. Now, we are deregulating electric markets through dozens of different decisions and legislative actions, but we do not have a plan…Without a coherent and comprehensive plan, the current policies in place may drift California to an unintended outcome and breakdown in services like the Energy Crisis.

Given the context, this bill—unlimited DA service to nonresidential customers—represents a radical proposal, though, perhaps, no more radical than mass migration to community choice aggregation. Nonetheless, the author may wish to consider a more limited expansion.

1. Opposition. This bill was gutted-and-amended in the Assembly on June 13^th of this year to newly address DA expansion. Opposition to the bill has only recently developed. Opponents included some proponents of community choice aggregators, who object to this bill mainly on the grounds that it would threaten the viability of CCAs, who these parties assert procure more renewable energy and provide more local jobs benefits than do ESPs. Other opponents, such as The Utility Reform Network (TURN), acknowledge that statute requires ESPS to meet the same requirements regarding renewables procurement, greenhouse gas reduction and long-term contracting. TURN asserts, nonetheless, that the ESP business model conflicts with long-term contracting, which TURN sees as essential to renewable resources development. (TURN’s description matches data provided the committee by the CPUC, which shows most ESPs, to date, have yet to meet requirements for both the RPS and for long-term contracting.)

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: June 27, 2018

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

SBPCA Bill Id:SB 237

Author:(Hertzberg) – As Amended Ver:June 13, 2018

SENATE VOTE: 37-0

SUBJECT: Electricity: direct transactions

SUMMARY: Requires the California Public Utilities Commission (CPUC) to eliminate the cap over three years, commencing on July 1, 2019, on the "direct access" (DA) program for nonresidential, end-use customers allowing those customers to acquire electric service from other providers in each IOU’s distribution service territory.

EXISTING LAW:

1. Suspends the ability of retail end-use customers of the investor-owned utilities (IOU) to receive electrical service from an entity other than an IOU unless authorized by the Legislature. This arrangement commonly is referred to as DA. (Public Utilities Code § 365.1[a])
   
2. Allows a limited enrollment into DA for new nonresidential customers based on historical enrollment volumes. (Public Utilities Code § 365.1[b])
   
3. Requires DA providers to meet the same requirements as the IOUs for resource adequacy, the RPS, and the requirements for the electricity sector adopted by the California Air Resources Board (CARB) pursuant to the California Global Warming Solutions Act of 2006. (Public Utilities Code § 365.1 [c])
   
4. States the intent of the Legislature to prevent any shifting of recoverable costs between IOU customers. (Public Utilities Code § 366.1[d][1])
   
5. Defines “direct transaction” as a contract between any one or more electric generators, marketers, or brokers of electric power and one or more retail customers providing for the purchase and sale of electric power or any ancillary services. (Public Utilities Code § 331)
   
6. Defines an electric service provider (ESP) as a non-utility entity that offers electric service to customers within the service territory of an electric utility and requires each ESP to register with the CPUC. (Public Utilities Code § 394[a])

FISCAL EFFECT: Unknown.

BACKGROUND:

Deregulation – California’s experiment with deregulation was launched in 1996 when the Legislature passed AB 1890 (Brulte, 1996) to restructure the electric industry. One of the key features of electrical restructuring was the authorization of retail competition within IOU service areas. AB 1890 ended the service monopoly of utilities and authorized retail customers to purchase energy directly from suppliers. These transactions are known as "direct access."

Before the energy crisis in 2001, non-IOU providers (direct access or energy service providers) had enrolled customers but then failed to provide the power ordered. The customers returned to the IOUs for service but the utilities did not have the electric generation resources to serve those customers because they had left IOU service. In response the Legislature mandated that the IOUs maintain resource adequacy for current customers and those customers that could return to IOU service. The ability to choose DA service was officially suspended on September 20, 2001. However, CPUC rules allowed certain "eligible" customers to begin DA service after the suspension date and switch between bundled service and DA service.

At the time of the energy crisis, enrollment was statutorily capped in the DA program. In 2010 the cap was revisited by the Legislature and expanded to its current level which is approximately 13% of retail electric load with 41,975 enrolled customers comprising 0.3% of customer accounts in the state according the CPUC. The majority of DA customer accounts are commercial customer accounts (about 17,223) with load between 20 and 500 kilowatts (kW) per month. However, industrial customers with load over 500 kW per month are the largest DA customers in terms of kilowatt hours provided (about 35.5% of total load served by electric service providers.

Since the cap on DA was expanded and re-opened in 2011, demand for DA service has remained high with requests for DA service outpacing availability. Any openings are filled in a matter of seconds. The vast majority of customers using DA are commercial businesses, including hospitals, grocery stores, schools, universities, and retailers.

Community Choice Aggregation – Community aggregation is a form of DA where, for example, a city may act as a purchasing agent on behalf of its residents. CCAs are governmental entities formed by cities and/or counties to serve the electricity requirements of their local residents and businesses. The state Legislature has expressed the state’s policy to permit and promote CCAs by enacting AB 117 (Migden, 2001) which authorized the creation of CCAs at the time that DA was capped. The bill described essential CCA program elements, required the state’s IOUs to provide certain services, and established methods to protect existing utility customers from liabilities that they might otherwise incur when a portion of the IOU’s customers transfer their energy services to a CCA. The CCA program was revisited in the Legislature in 2011 at which time the definition of CCA was expanded, the CPUC was required to initiate a code of conduct rulemaking for IOUs, and CCAs were permitted to apply for public purpose funds to administer energy efficiency programs.

Extensive growth in CCAs in recent years which, when coupled with rooftop solar, community and existing DAs were estimated to make up about 25% of retail in 2017; a number that is estimated to reach up to 85% by the mid-2020s.

IOU Responsibility Does Not End – A critical driver of CCA and DA policies is that any CCA or DA customer can terminate service on a moment’s notice and return to IOU service. Should they do so, or should the DA or CCA provider fail to provide sufficient power, the IOU is always and ultimately responsible to provide that power.

The California Customer Choice Project – A project of the CPUC, a draft paper entitled, California Customer Choice: An Evaluation of Regulatory Framework Options for an Evolving Electricity Market was issued in May. This draft paper is also referred to as the "Green Book." The Green Book is designed to initiate a policy conversation among a wide range of stakeholders and interests about the future of California's electricity market, rather than make specific recommendations. Over the past year, the CPUC has reviewed the history of competition and choice in California, including the California Energy Crisis, evaluated the current regulatory construct, and analyzed selected markets to provide lessons learned for California. This draft paper will inform the next stage of the process to gather input before issuing a final paper. The CPUC has stated that California must consider how to shape this new environment in a way that continues to ensure reliable, clean, and affordable electricity for customers and equitable treatment for all market participants.

COMMENTS:

1. Author’s Statement. As the state’s electrical system continues to evolve, customers are learning to connect with and obtain the power mix they want when and where they need it. From roof-top solar and advanced battery systems to waste-heat generators, California’s businesses make cost-effective and environmental energy decisions every day, but lack the ability to fully customize their electricity mix to meet their unique needs.

Senate Bill 237 allows commercial and industrial customers to choose alternative electricity service, called Direct Access, and sign contracts separate from the local utility company. The bill will encourage competition, which reduces prices. This, in turn, will give California businesses the necessary tools to make comprehensive cost-effective energy decisions and make California more business friendly, while providing new flexible options for meeting the state’s renewable energy and greenhouse gas reduction goals.

1. Resource Adequacy. The RA program has its origins in the energy crisis of 2001 and has two goals. First, it provides sufficient resources to the CAISO to ensure the safe and reliable operation of the grid in real time. Second, it is designed to provide appropriate incentives for the siting and construction of new resources needed for reliability in the future.

The CPUC adopted a RA policy framework in 2004 in order to ensure the reliability of electric service in California and the obligations are applicable to all LSEs within the CPUC’s jurisdiction. The RA program guides resource procurement and promotes infrastructure investment by requiring that LSEs procure capacity so that capacity is available to the CAISO when and where needed.

Over the last ten years, California has maintained adequate reserves under the CPUC’s RA program to ensure reliable grid operation. However, California’s electric system is undergoing significant structural changes that include integrating greater numbers of intermittent renewable resources, repowering or retiring over 16 gigawatts of gas-fired power plants that rely on once-thorough cooling (OTC) technology, and an increasing number of resources that will surpass their design life in the coming years. In addition to these changes, the California electric system is also witnessing rapid expansion of CCAs.

Within the past year in particular, several new challenges have arisen within the RA program. They include: (1) an apparent decrease in forward procurement; (2) LSE requests for local requirement waivers; (3) growth in CAISO back-stop procurement, including three RMR contracts and two CPM designations; (4) acceleration in load migration from the IOUs to new and existing CCAs; and (5) divergent trends in local procurement activity, notwithstanding.

Given the shaky status of RA, is this the right time to contribute to the destabilization of the market by removing the cap on DA?

1. ISO Sounds Alarm. Under Federal Energy Regulatory Commission (FERC) rules, the CAISO, like all other balancing authorities, must ensure system reliability or face penalties by FERC. If California RA policies fail to provide sufficient resources, the CAISO may be forced to utilize centralized backstop procurement mechanisms whereby the CAISO enters into contract to address the shortfall in order to maintain electric system reliability. CAISO backstop procurement had been on the decline but in the fall of 2017, CAISO contracted for more than 1,500 megawatts of natural gas fired generation from five different plants. This is notice that RA is not working. The CPUC has initiated a thorough review of RA which is reflected in a staff white paper and an ongoing rulemaking (R.14-10-010).
   
2. CPUC President’s Warning. The CPUC reports that it is seeing some of the same trends in the electricity marketplace that preceded the last energy crisis in California. Specifically, in a forward to what is called “The Green Book,”^[1] released in May, CPUC President Michael Picker made the following statement. In light of this concern that procurement is already unstable in the state, should the Legislature compound the instability by removing the cap on DA at this time?

In the late 1990s, California deregulated the electric industry, allowing customers to choose their power supplier. But in 2000 and 2001, the new electric system collapsed, saddling customers with high costs and rolling outages. The California Legislature reset the large regulated utilities as the dominant providers of electric service, although the utilities no longer owned most power generators.

Customers are once again departing from the utilities as providers of their electricity. They are getting power from rooftop solar panels, from local agencies called Community Choice Aggregators or from private electric re-sellers called Direct Access providers. Large industrial customers are buying power directly from renewable generators, sometimes serving several locations from a distant wind farm or solar plant. Fewer and fewer customers are getting power from the traditional large regional utilities and the central decision making that we use for keeping the grid reliable, safe and affordable is splintering, becoming the task of dozens of decision-makers.

In the last deregulation, we had a plan, however flawed. Now, we are deregulating electric markets through dozens of different decisions and legislative actions, but we do not have a plan. If we are not careful, we can drift into another crisis.

This paper is produced by the California Public Utilities Commission’s Policy and Planning Division. While much of our work here is focused on current activities and implementing various laws, the Policy and Planning Division looks forward and conducts policy research on new and emerging trends. It researched the experience of other states and governments to see what has worked to give customers more control over how they get their electricity, and to evaluate what might be best for California.

The paper asks us to consider such question as:

• How do we protect safe delivery of electricity to meet customer demand in an increasingly fragmented market?
• How will we ensure that increasing fragmentation of suppliers and buyers will add up to meet our ambitious clean energy goals?
• How will we make sure that different players are meeting their responsibilities to provide all the energy resources we need to make the grid work?
• How will we protect customers from the unfair behavior like “slamming” and “cramming” that we saw during deregulation of telecommunications?
• What preparations should we make for customers who might become stranded without service if their electric provider fails, as many did in the previous California deregulation?
• What is the best way for a fair, affordable and durable transition?

Some of these decisions will require leadership from the Legislature, although others must be solved by the California Public Utilities Commission, with the help of our partners at the California Energy Commission and the California Independent System Operator. We plan to follow the publication of this white paper with a public workshop to hear comments and responses from the players who are driving this transformation of our electricity supply. And then we will dig deeper into solving the questions that the issues raised in this white paper demand that we answer.^[2]

1. Support for Eliminating the DA Cap. A leading advocate of the expansion of DA is the “Direct Access Customer Coalition” which was one of several parties which filed comments in response to the Green Book earlier this month. In response to the question “How does the increased customer choice occurring in the electric sector impact California’s ability to achieve its policy objectives of affordability, decarbonization, and reliability?” DACC opined:^[3]
   

DACC believes increased customer choice should not frustrate California’s achievement of the state’s policy objectives of Affordability, Decarbonization and Reliability, due to actions already undertaken by the Legislature that are being implemented by this Commission, as well as actions taken on the Commission’s own initiative along with those of other state agencies. If, however, the order of these policy objectives is meant to imply prioritization, DACC would suggest that in order of importance, the appropriate listing should read Reliability, Affordability and Decarbonization. While all three are of course important, reliability must be paramount, followed closely by affordability. Decarbonization is a worthwhile goal, but not at the expense of either of the other two policy objectives. DACC next looks at each of these objectives in turn:

Reliability – Both ESPs and CCAs are subject to the same resource adequacy (“RA”) standards as the IOUs and are also subject to the integrated resource planning (“IRP”) requirements imposed by the Commission’s recent issuance of D.18-02-018 in Rulemaking (“R”) 16-02-007.5 As noted in the February 19, 2016, Rulemaking:

The general issues to be addressed for the 2016 procurement planning cycle are as follows:

(1) Assess the impact of SB 350 on future procurement needs and develop the process and requirements for the IRPs to be filed by load-serving entities (LSEs). This includes bringing together or taking to the next level a number of efforts that have been underway in previous LTPP proceedings or other related resource proceedings, including developing and refining modeling assumptions to assess the need for additional flexible resources to integrate variable renewable energy resources.

(2) Develop or refine procurement rules for non-investor-owned utility (IOU) LSEs now required to develop IRPs who did not previously submit LTPPs and consider cost allocation and competitiveness issues between IOUs and other LSEs.

(3) To the extent necessary, identify CPUC-jurisdictional needs for new resources to meet local, flexible, or system resource adequacy (RA) requirements and to consider authorization of procurement to meet that need.

In summary, by ensuring that all LSEs are subject to these requirements, concrete steps have already been taken by the Commission to ensure that expanded customer choice does not impede achievement of these policy goals.

Affordability – Customers elect direct access service for many reasons, including the opportunity for cost savings offered by ESPs when compared to utility bundled service rates. DACC also believes that many CCAs also undercut utility bundled rates. Affordability, then, does not appear to be an issue that the Commission need to be concerned about when addressing the implications

of customer choice.

Decarbonization – Both ESPs and CCAs are subject to the same greenhouse gas (“GHG”) and renewable portfolio standards applicable to the more heavily regulated IOUs. DA customers are also frequently subject to California Air Resources Board (“CARB”) standards such as cap-and trade. Furthermore, in the IRP proceeding, activity is being conducted pursuant to Public Utilities Code Section 454.51 that directs the Commission to:

Identify a diverse and balanced portfolio of resources needed to ensure a reliable electricity supply that provides optimal integration of renewable energy in a cost-effective manner. The portfolio shall rely upon zero carbon-emitting resources to the maximum extent reasonable and be designed to achieve any statewide greenhouse gas emissions limit established pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code) or any successor legislation.

The same decision also cites Public Utilities Code Section 454.52 that requires each LSE to file an integrated resource plan to ensure that they do the following:

1. Meet the greenhouse gas emissions reduction targets established by the State Air Resources Board, in coordination with the commission and the Energy Commission, for the electricity sector and each load-serving entity that reflect the electricity sector’s percentage in achieving the economy-wide greenhouse gas emissions reductions of 40 percent from 1990 levels by 2030.
2. Prior Legislation.

SB 695 (Kehoe) Among the provisions, allowed the expansion of direct-access service to individual retail non-residential end-use customers up to the total annual kilowatt-hours supplied by electric service providers for any year after April 1, 1998 approximately doubling enrollment in the DA program. (Chapter 337, Statutes of 2009)

AB 1X (Keely) Suspended direct access until the Department of Water Resources no longer provides power. (Chapter 4, Statutes of 2001)

SB 286 (Hertzberg) Required the CPUC to allow individual retail nonresidential end-use customers to contract directly for their electricity supplies, also known as DA. Status:

Held in Assembly Appropriations Committee, 2015.

REGISTERED SUPPORT / OPPOSITION:

Support

Alliance For Retail Energy Markets
Bell Foundry Company
California Grocers Association
California League Of Food Producers
California Manufacturers & Technology Association
California Retailers Association
Clean Energy
Constellation Newenergy, Inc.
Crothall Laundry Services, Inc.
Damar Plastics
Darling Ingredients Inc.
Delano Growers Grape Products
Direct Access Customer Coalition
Direct Energy
Enernoc, Inc.
Engenuus Energy LLC
Ever-bloom, Inc.
Fontana Paper Mills, Inc.
Heck Cellars
Huhtamaki
Just Energy
Retail Energy Supply Association
School Project For Utility Rate Reduction (SPURR)
Shell Energy North America
Silicon Valley Leadership Group
Swisstex California
Tes
Zanker Road Recycling

Opposition

Carbon Free Mountain View
Carbon Free Silicon Valley
Climate Action Campaign
Eco-sustainability Professionals
Organizing For Action East Bay Central Chapter
The Utility Reform Network

5 Individuals

Analysis Prepared by: Kellie Smith / U. & E. /

1. The Green Book is available at: http://www.cpuc.ca.gov/uploadedFiles/CPUC_Public_Website/Content/Utilities_and_Industries/Energy_-_Electricity_and_Natural_Gas/Cal%20Customer%20Choice%20Report%20%20v5-17-18.pdf

   ↑

2. ↑

3. Available at the CPUC at: http://www.cpuc.ca.gov/uploadedFiles/CPUC_Public_Website/Content/Utilities_and_Industries/Energy_-_Electricity_and_Natural_Gas/Direct%20Access%20Customer%20Coalition%20(DACC)_DraftGreenBookComments.pdf ↑

SENATE THIRD READING

STR Bill Id:

Author:(Hertzberg)

As Amended Ver:

Majority vote

SENATE VOTE: 37-0

SUMMARY: Authorizes a peace officer to release an arrested person from custody without taking him or her before a judge if the person is delivered, after arrest, to a hospital or urgent care facility for the purpose of mental health evaluation and treatment, and no further criminal proceedings are desirable. Specifies that such an arrest shall not be deemed an arrest, but a detention only.

EXISTING LAW:

1. States that when an arrest is made without a warrant by a peace officer or private person, the person arrested, if not otherwise released, shall, without unnecessary delay, be taken before the nearest or most accessible magistrate in the county in which the offense is triable, and a complaint stating the charge against the arrested person shall be laid before the magistrate.
2. Allows a peace officer to release from custody, instead of taking the person before a magistrate, a person arrested without a warrant in the following circumstances:
   1. The officer is satisfied that there are insufficient grounds for making a criminal complaint against the person arrested;
   2. The person arrested was arrested for intoxication only, and no further proceedings are desirable;
   3. The person was arrested only for being under the influence of a controlled substance or drug and the person is delivered to a facility or hospital for treatment and no further proceedings are desirable; or
   4. The person was arrested for driving under the influence of alcohol or drugs and the person is delivered to a hospital for medical treatment that prohibits immediate delivery before a magistrate.
3. Provides that when the person was only arrested for being under the influence of a drug and the person is delivered to a facility for treatment and no further proceedings are desirable, there shall be a record of release. Thereafter, the arrest shall not be deemed an arrest, but a detention only.
4. Makes the same provisions for record of release and detention only, when an officer is satisfied that there are insufficient grounds for making a criminal complaint against the person.
5. Specifies that when a person is arrested for misdemeanor, and does not demand to be taken before a magistrate, that person shall be released with a citation, as specified.
6. States the following are reasons not to a release a person with a citation on a misdemeanor arrest:
   1. The person arrested was so intoxicated that he or she could have been a danger to himself or herself or to others;
   2. The person arrested required medical examination or medical care or was otherwise unable to care for his or her own safety;
   3. The person was arrested under one or more of the circumstances as specified in the Vehicle Code;
   4. There were one or more outstanding arrest warrants for the person;
   5. The person could not provide satisfactory evidence of personal identification;
   6. The prosecution of the offense or offenses for which the person was arrested, or the prosecution of any other offense or offenses, would be jeopardized by immediate release of the person arrested;
   7. There was a reasonable likelihood that the offense or offenses would continue or resume, or that the safety of persons or property would be imminently endangered by release of the person arrested;
   8. The person arrested demanded to be taken before a magistrate or refused to sign the notice to appear;
   9. There is reason to believe that the person would not appear at the time and place specified in the notice; or
   10. The person was arrested for specified offenses.
7. Authorizes a person to be involuntarily detained for a period of up to 72 hours for assessment, evaluation, and crisis intervention, when, as a result of a mental disorder, the person is a danger to him or herself or to others, or is gravely disabled.

FISCAL EFFECT: According to the Assembly Appropriations Committee, potential savings to counties by reducing the number of incarcerations at the county jail, offset to a degree by reductions in fine-revenue.

COMMENTS: According to the author, "SB 237 would create more options for compassionate treatment for individuals with mental illness by allowing law enforcement to transport low level offenders suffering from an acute mental health crisis to Urgent Care Centers (UCCs) rather than to jail.

"UCCs are not inpatient facilities but are safe and secure acute care medical facilities that specialize in treating persons with mental illnesses. UCCs provide a location, other than emergency rooms or county jails, where persons suffering from mental health crises can be evaluated, psychiatrically stabilized and have a plan for further action formulated to assist them, whether by returning home, proceeding to a residential treatment location, a hospital, supportive housing, substance use disorder treatment facility.

"Law enforcement may lack the legal authority to transport an individual suffering from an acute mental health crisis to a mental health UCC in lieu of arrest, absent the individual's consent for treatment. UCCs can serve as an alternative to county jail where persons suffering from mental health crisis can receive the help they need."

Analysis Prepared by: David Billingsley / PUB. S. / (916) 319-3744 FN: 0001094

Date of Hearing: June 28, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 237

Author:(Hertzberg) – As Amended Ver:June 15, 2017

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes a peace officer to release an arrested person from custody without taking him or her before a judge if the person is delivered, after arrest, to a hospital or urgent care facility for the purpose of mental health evaluation and treatment, and no further criminal proceedings are desirable. Such an arrest will be deemed a detention only, and not an arrest.

FISCAL EFFECT:

Potential savings to counties by reducing the number of incarcerations at the county jail, offset to a degree by reductions in fine-revenue.

COMMENTS:

1. Background. Law enforcement officers are often the first responders to mental health crisis calls; they respond to 911 calls ranging from suicide attempts to individuals potentially endangering themselves or others. Studies confirm that the volume of calls to law enforcement involving crisis mental health concerns have been increasing in the past decade. Mental health crisis calls also take more officer time to resolve. Beyond crisis calls, officers routinely respond to calls where they are required to determine whether a person meets the criteria for involuntary detention for psychiatric assessment and treatment (otherwise known as 5150).

SB 843 (Committee on Budget and Fiscal Review), Chapter 33, Statutes of 2016, established the Law Enforcement Assisted Diversion Program (LEAD). The LEAD program, in the Board of State and Community Corrections, awards grants in up to three jurisdictions. In the LEAD program, police officers exercise discretionary authority at point of contact to divert individuals to a community-based, harm-reduction intervention. When officers encounter individuals who have violated the law due to unmet behavioral health needs, the officers refer the individuals to a trauma-informed intensive case management program. In lieu of the normal criminal justice system cycle – booking, detention, prosecution, conviction and incarceration – the case management program provides a wide range of support services for the individual, often including transitional and permanent housing and/or drug treatment.

1. Purpose. Currently, law enforcement may lack the legal authority to transport an individual suffering from an acute mental health crisis to a mental health Urgent Care Center (UCC) in lieu of arrest, absent the individual’s consent for treatment. UCCs can serve as an alternative to county jail where persons suffering from mental health crisis can receive the help they need.

This bill creates more options for compassionate treatment for individuals with mental illness by allowing law enforcement to transport low level offenders suffering from an acute mental health crisis that might otherwise have been arrested for criminal conduct and taken to county jail.

1. Support. According to The Los Angeles County District Attorney, “SB 237 is meant to encourage mental health diversion of persons suffering from mental illnesses who commit low-level criminal offenses by transporting them to unlocked mental health facilities instead of jail.”

“When law enforcement personnel are not comfortable seeking consent from a person with mental illnesses who has committed a minor crime, they will instead follow the traditional path of arrest and jail. When such persons could have appropriately been treated in the community, while still preserving public safety, such incarceration may not be in the interests of justice.”

1. Related Legislation. AB 473 (Waldron) would have required the University of California Criminal Justice and Health Consortium to administer a four year pilot project in six counties for the purpose of creating programming and treatment for mentally ill adults in county jails who have co-occurring substance use disorders. AB 473 was held in this Committee.
2. Prior Legislation. SB 843 (Committee on Budget and Fiscal Review), Chapter 33, Statutes of 2016, established the Law Enforcement Assisted Diversion Program.

SB 11 (Beall), Chapter 469, Statutes of 2015, requires California Peace Officers Standards and Training (POST) to require field training officers who are instructors for the field training program to have at least 8 hours of crisis intervention behavioral health training.

SB 29 (Beall), Chapter 468, Statutes of 2015, requires 15 hours of POST training to better prepare law enforcement officers to recognize, deescalate, and appropriately respond to persons with mental illness, intellectual disability, or substance use disorders.

Analysis Prepared by: Pedro Reyes / APPR. / (916) 319-2081

Date of Hearing: June 13, 2017

Counsel: David Billingsley

ASSEMBLY COMMITTEE ON PUBLIC SAFETY

Reginald Byron Jones-Sawyer, Sr., Chair

SBPCA Bill Id:SB 237

Author:(Hertzberg) – As Introduced Ver:February 6, 2017

As Proposed to be Amended in Committee

SUMMARY:

Authorizes a peace officer to release an arrested person from custody without taking him or her before a judge if the person is delivered, after arrest, to a hospital or urgent care facility for the purpose of mental health evaluation and treatment, and no further criminal proceedings are desirable. Specifies that such an arrest shall not be deemed an arrest, but a detention only.

EXISTING LAW:

1. States that when an arrest is made without a warrant by a peace officer or private person, the person arrested, if not otherwise released, shall, without unnecessary delay, be taken before the nearest or most accessible magistrate in the county in which the offense is triable, and a complaint stating the charge against the arrested person shall be laid before the magistrate. (Pen. Code, § 849, subd. (a).)
   
2. Allows a peace officer to release from custody, instead of taking the person before a magistrate, a person arrested without a warrant in the following circumstances:
   
   1. The officer is satisfied that there are insufficient grounds for making a criminal complaint against the person arrested;
      
   2. The person arrested was arrested for intoxication only, and no further proceedings are desirable;
      
   3. The person was arrested only for being under the influence of a controlled substance or drug and the person is delivered to a facility or hospital for treatment and no further proceedings are desirable; or
      
   4. The person was arrested for driving under the influence of alcohol or drugs and the person is delivered to a hospital for medical treatment that prohibits immediate delivery before a magistrate. (Pen. Code, § 849, subd. (b).)
      
3. Provides that when the person was only arrested for being under the influence of a drug and the person is delivered to a facility for treatment and no further proceedings are desirable, there shall be a record of release. Thereafter, the arrest shall not be deemed an arrest, but a detention only. (Pen. Code, § 849, subd. (c).)
   
4. Makes the same provisions for record of release and detention only, when an officer is satisfied that there are insufficient grounds for making a criminal complaint against the person. (Pen. Code, § 849, subd. (c).)
   
5. Specifies that when a person is arrested for misdemeanor, and does not demand to be taken before a magistrate, that person shall be released with a citation, as specified. (Pen. Code 853.6, subd. (a)(1).)
   
6. States the following are reasons not to a release a person with a citation on a misdemeanor arrest:
   
   1. The person arrested was so intoxicated that he or she could have been a danger to himself or herself or to others;
      
   2. The person arrested required medical examination or medical care or was otherwise unable to care for his or her own safety;
      
   3. The person was arrested under one or more of the circumstances as specified in the Vehicle Code;
      
   4. There were one or more outstanding arrest warrants for the person;
      
   5. The person could not provide satisfactory evidence of personal identification;
      
   6. The prosecution of the offense or offenses for which the person was arrested, or the prosecution of any other offense or offenses, would be jeopardized by immediate release of the person arrested;
      
   7. There was a reasonable likelihood that the offense or offenses would continue or resume, or that the safety of persons or property would be imminently endangered by release of the person arrested;
      
   8. The person arrested demanded to be taken before a magistrate or refused to sign the notice to appear;
      
   9. There is reason to believe that the person would not appear at the time and place specified in the notice; or
      
   10. The person was arrested for specified offenses. (Pen. Code, § 853.6, subd. (i).)
       
7. Authorizes a person to be involuntarily detained for a period of up to 72 hours for assessment, evaluation, and crisis intervention, when, as a result of a mental disorder, the person is a danger to him or herself or to others, or is gravely disabled. (Welfare and Inst. Code, § 5150.)
   

FISCAL EFFECT:

Unknown

COMMENTS:

1. Author's Statement: According to the author, "SB 237 would create more options for compassionate treatment for individuals with mental illness by allowing law enforcement to transport low level offenders suffering from an acute mental health crisis to Urgent Care Centers (UCCs) rather than to jail.
   

“UCCs are not inpatient facilities but are safe and secure acute care medical facilities that specialize in treating persons with mental illnesses. UCCs provide a location, other than emergency rooms or county jails, where persons suffering from mental health crises can be evaluated, psychiatrically stabilized and have a plan for further action formulated to assist them, whether by returning home, proceeding to a residential treatment location, a hospital, supportive housing, substance use disorder treatment facility.

“Law enforcement may lack the legal authority to transport an individual suffering from an acute mental health crisis to a mental health UCC in lieu of arrest, absent the individual’s consent for treatment. UCCs can serve as an alternative to county jail where persons suffering from mental health crisis can receive the help they need.”

1. Frequency of Law Enforcement Contacts Involving Mental Health Issues: Law enforcement officers are often the first responders to mental health crisis calls; they respond to 911 calls ranging from suicide attempts to individuals potentially endangering themselves or others. Studies confirm that the volume of calls to law enforcement involving crisis mental health concerns have been increasing in the past decade. Mental health crisis calls also take more officer time to resolve. More than eighty percent of the agencies that Disability Rights California surveyed report that officers spend more time on these calls. Nearly 4 out of 10 agencies estimated that officers spend two hours or more on mental health calls. This means that on a typical day, officers can spend 1/3 of their time in interactions which would necessitate skills in crisis intervention and de-escalation. Beyond crisis calls, officers routinely respond to calls where they are required to determine whether a person meets the criteria for involuntary detention for psychiatric assessment and treatment (otherwise known as 5150). Even standard crime scene calls require officers to use skills to de-escalate potentially volatile situations when interacting with members of the public. (An Ounce of Prevention: Law Enforcement Training Mental Health Crisis Intervention, (2014) Disability Rights California, p. 37.)
   
2. Urgent Care Centers (UCCs): These facilities provide up to 23 hours of immediate care and focus on recovery and linkage to ongoing community services and supports that are designed to impact unnecessary and lengthy involuntary inpatient treatment. http://dmh.lacounty.gov. Police in Los Angeles have utilized UCCs in conjunction with some of their encounters with individuals suffering from mental health problems.
   
   A Los Angeles Times story from January 19, 2016, discussed the use of UCCs in Los Angeles.
   
   “County mental health officials and police are increasingly looking to urgent care centers such as the facility in Boyle Heights as an alternative to jail beds or overcrowded psychiatric emergency rooms for people in the throes of a mental health crisis. There are now five such centers around the county, the newest of which opened last month, and the county plans to open four more over the next couple of years.”

“Until recently, Los Angeles police were reluctant to take patients directly to the urgent care centers because, unlike hospital emergency rooms, the centers don't take people with serious medical issues or who are extremely drunk or aggressive. But after meeting with Exodus staff over the summer to clarify the guidelines, police have begun taking more patients to the centers rather than emergency rooms. In December 2014, law enforcement officers took 209 patients to L.A. County-USC Medical Center and 107 to the Exodus center across the street. In August, officers took 196 patients to the hospital and 268 to the urgent care center. LAPD officers who had been frustrated at the time they spent waiting to hand off patients to medical staff at the overcrowded county emergency rooms said the turnaround time is much quicker at the urgent care centers.” http://www.latimes.com/local/california/la-me-crisis-center-20160119-story.html

1. Law Enforcement Assisted Diversion: SB 843 (Committee on Budget and Fiscal Review), Chapter 33, Statutes of 2016, established the Law Enforcement Assisted Diversion Program. The LEAD program is administered by the Board of State and Community Corrections (BSCC). BSCC awards grants in up to three jurisdictions. Participation in LEAD services are voluntary throughout the duration of the program and shall not require abstinence from drug or alcohol use as a condition of continued participation. In the LEAD program, police officers exercise discretionary authority at point of contact to divert individuals to a community-based, harm-reduction intervention. When officers encounter individuals who have violated the law due to unmet behavioral health needs, the officers refer the individuals to a trauma-informed intensive case management program. In lieu of the normal criminal justice system cycle – booking, detention, prosecution, conviction and incarceration – the case management program provides a wide range of support services for the individual, often including transitional and permanent housing and/or drug treatment.
   
   As an alternative to arrest, a law enforcement officer may take or refer a person for whom the officer has probable cause for arrest on specified offenses, to a case manager to be screened for immediate crisis services and to schedule a complete assessment intake interview. Participation in LEAD diversion shall be voluntary, and the person may decline to participate in the program at any time. Criminal charges based on the conduct for which a person is diverted to LEAD shall not be filed, provided that the person finishes the complete assessment intake interview within a period set by the local jurisdictional partners, but not to exceed 30 days after the referral.
   
   This bill provides another alternative for law enforcement when encountering individuals with mental health issues that might otherwise have been arrested for criminal conduct and taken to county jail.
   
2. Proposed Amendments to be Adopted in Committee: The proposed amendments clarify that when an individual is arrested and delivered to a hospital or other urgent care facility for treatment, the arrest shall not be deemed an arrest, but a detention only. The proposed amendments also conform to existing law.
   
3. Argument in Support: According to The Los Angeles County District Attorney, “SB 237 is meant to encourage mental health diversion of persons suffering from mental illnesses who commit low-level criminal offenses by transporting them to unlocked mental health facilities instead of jail.
   

“UCCs are acute care medical facilities where persons with mental illnesses can be evaluated by clinicians, and can remain for a period of time not to exceed 23 hours and 59 minutes. UCCs are not inpatient facilities, and are not locked, but are safe and secure locations where persons suffering from acute mental health crises can be evaluated, psychiatrically stabilized and have a plan for further action formulated to assist them, whether by returning home, proceeding to a residential treatment location, a hospital, supportive housing, substance use disorder treatment facility, etc. UCCs were originally created to specialize in mental health issues and provide a location other than emergency rooms where persons suffering from mental health crises could receive specialized, immediate treatment. More recently, UCCs have also provided a location other than the county jail where persons suffering from mental health crises could receive help.

“However, law enforcement personnel have expressed reservations about using the UCCs for mental health diversion due to uncertainty regarding their legal authority to transport individuals for treatment rather than incarceration. SB 237 seeks to solve that problem.

Law enforcement personnel and their legal counsel have indicated that they lack the legal authority to transport a persons with mental illnesses to a UCC in lieu of arrest, absent the person’s consent. Law enforcement personnel are often reluctant to seek written consent from persons who suffer from mental illnesses, and indeed may lack expertise in knowing when such a person is capable of consent.

“When law enforcement personnel are not comfortable seeking consent from a person with mental illnesses who has committed a minor crime, they will instead follow the traditional path of arrest and jail. When such persons could have appropriately been treated in the community, while still preserving public safety, such incarceration may not be in the interests of justice.

“SB 237 would greatly encourage appropriate mental health diversion efforts if the law clearly permitted law enforcement officers to transport persons to a treatment facility, without needing to engage with a person with acute mental illnesses in the field to seek consent. Law enforcement personnel also require legal discretion to transport either before or after the booking process, should they need to identify a person with certainty through the fingerprinting process before making a decision about diversion.”

1. Related Legislation: AB 473 (Waldron), would have required the University of California Criminal Justice and Health Consortium to administer a four year pilot project in six counties for the purpose of creating programming and treatment for mentally ill adults in county jails who have co-occurring substance use disorders. AB 473 was held in the Assembly Appropriations Committee.
   
2. Prior Legislation:
   
   1. SB 843 (Committee on Budget and Fiscal Review), Chapter 33, Statutes of 2016, established the Law Enforcement Assisted Diversion Program.
      
   2. SB 11 (Beall), Chapter 469, Statutes of 2015, requires California Peace Officers Standards and Training (POST) to require field training officers who are instructors for the field training program to have at least 8 hours of crisis intervention behavioral health training.
      
   3. SB 29 (Beall), Chapter 468, Statutes of 2015, requires 15 hours of POST training to better prepare law enforcement officers to recognize, deescalate, and appropriately respond to persons with mental illness, intellectual disability, or substance use disorders.

REGISTERED SUPPORT / OPPOSITION:

Support

Los Angeles County District Attorney’s Office (Sponsor)
American Civil Liberties Union
Association for Los Angeles Deputy Sheriffs
Association of Deputy District Attorneys
California Access Coalition
California Association of Code Enforcement Officers
California Attorneys for Criminal Justice
California College and University Police Chiefs Association
California Council of Community Behavioral Health Agencies
California District Attorneys Association
California Narcotic Officers Association
California Probation, Parole and Correctional Association
California Public Defender’s Association
California Public Defender’s Association
Californians for Safety and Justice
Chief Probation Officers of California
Disability Rights California
Drug Policy Alliance
Los Angeles County Board of Supervisors
Los Angeles County Professional Peace Officers Association
Los Angeles Police Protective League
NAMI, California
National Association of Social Workers, California Chapter
Peace Officers Research Association of California
Riverside Sheriffs Association

Opposition

None

Analysis Prepared by: David Billingsley / PUB. S. / (916) 319-3744

 CONSENT  

Bill No: SB 237

Author:

:

Vote:

SENATE PUBLIC SAFETY COMMITTEE: 7-0, 3/21/17

AYES: Skinner, Anderson, Bradford, Jackson, Mitchell, Stone, Wiener

SUBJECT:

SOURCE: Los Angeles District Attorney’s Office

DIGEST: This bill permits law enforcement to transport a person suffering from a mental illness to a therapeutic healthcare facility, including a mental health urgent care center, emergency room, or other location providing acute substance use disorder detoxification for persons who suffer from co-occurring mental health disorders.

ANALYSIS:

Existing law:

1. Requires that when an arrest is made without a warrant by a peace officer or private person, the person arrested, if not otherwise released, must, without unnecessary delay, be taken before the nearest or most accessible magistrate in the county in which the offense is triable, and a complaint stating the charge against the arrested person shall be laid before the magistrate. (Penal Code § 849(a).)
2. Provides, in Penal Code Section 849(b), that a peace officer may release from custody, instead of taking the person before a magistrate, a person arrested without a warrant in the following circumstances:
   1. The officer is satisfied that there are insufficient grounds for making a criminal complaint against the person arrested.
   2. The person arrested was arrested for intoxication only, and no further proceedings are desirable.
   3. The person was arrested only for being under the influence of a controlled substance or drug and the person is delivered to a facility or hospital for treatment and no further proceedings are desirable.
   4. The person was arrested for driving under the influence of alcohol or drugs and the person is delivered to a hospital for medical treatment that prohibits immediate delivery before a magistrate.
3. States that the record of arrest of a person released. Thereafter, the arrest shall not be deemed an arrest, but a detention only. (Penal Code § 849(c).)

This bill allows a peace officer to release a person from custody, instead of taking the person before the magistrate, if the person was arrested and subsequently delivered to a hospital or other urgent care facility, including, but not limited to, a facility for the treatment of co-occurring substance use disorders, for mental health evaluation and treatment, and no further proceedings are desirable.

Comments

According to the author:

SB 237 would create more options for compassionate treatment for individuals with mental illness by allowing law enforcement to transport low level offenders suffering from an acute mental health crisis to Urgent Care Centers (UCCs) rather than to jail.

UCCs are not inpatient facilities but are safe and secure acute care medical facilities that specialize in treating persons with mental illnesses. UCCs provide a location, other than emergency rooms or county jails, where persons suffering from mental health crises can be evaluated, psychiatrically stabilized and have a plan for further action formulated to assist them, whether by returning home, proceeding to a residential treatment location, a hospital, supportive housing, substance use disorder treatment facility.

Law enforcement may lack the legal authority to transport an individual suffering from an acute mental health crisis to a mental health UCC in lieu of arrest, absent the individual’s consent for treatment. UCCs can serve as an alternative to county jail where persons suffering from mental health crisis can receive the help they need.

This bill makes it clear that law enforcement is permitted to transport a person suffering from a mental illness to a therapeutic healthcare facility, including a UCC, emergency room, or other location providing acute substance use disorder detoxification for persons who suffer from co-occurring mental health disorders. This bill allows such transportation either before or after the booking process, without requiring officers to seek the consent of the individual, thereby providing a less restrictive alternative than a full custodial arrest.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 3/21/17)

Los Angeles District Attorney’s Office (source)

Association for Los Angeles Deputy Sheriffs

Association of Deputy District Attorneys

California Association of Code Enforcements

California Attorneys for Criminal Justice

California College and University Police

California District Attorneys Association

California Narcotic Officers Association

California Public Defender’s Association

Disability Rights California

Drug Policy Alliance

Los Angeles County Professional Peace Officers Association

Los Angeles Police Protective League

National Association of Social Workers, California Chapter

Riverside Sheriffs Association

OPPOSITION: (Verified 3/21/17)

None received

Prepared by:

3/24/17 14:41:57

**** END ****

SENATE COMMITTEE ON PUBLIC SAFETY

Senator Nancy Skinner, Chair

2017 - 2018 Regular

Bill No: SB 237 Hearing Date: March 21, 2017

Subject: Criminal Procedure: Arrest

HISTORY

Source: Los Angeles District Attorney’s Office

Prior Legislation: None known

Support: Association for Los Angeles Deputy Sheriffs; Association of Deputy District Attorneys; California Association of Code Enforcements; California Attorneys for Criminal Justice; California College and University Police; California District Attorneys Association; California Narcotic Officers Association; California Public Defender’s Association; Disability Rights California; Drug Policy Alliance; Los Angeles County Professional Peace Officers Association; Los Angeles Police Protective League; National Association of Social Workers, California Chapter; Riverside Sheriffs Association

Opposition: None known

PURPOSE

The purpose of this legislation is to permit law enforcement to transport a person suffering from a mental illness to a therapeutic healthcare facility, including a mental health urgent care center, emergency room, or other location providing acute substance use disorder detoxification for persons who suffer from co-occurring mental health disorders, as specified.

Existing law requires that when an arrest is made without a warrant by a peace officer or private person, the person arrested, if not otherwise released, must, without unnecessary delay, be taken before the nearest or most accessible magistrate in the county in which the offense is triable, and a complaint stating the charge against the arrested person shall be laid before the magistrate. (Penal Code § 849(a).)

Existing law provides that a peace officer may release from custody, instead of taking the person before a magistrate, a person arrested without a warrant in the following circumstances:

• The officer is satisfied that there are insufficient grounds for making a criminal complaint against the person arrested.
• The person arrested was arrested for intoxication only, and no further proceedings are desirable.
• The person was arrested only for being under the influence of a controlled substance or drug and the person is delivered to a facility or hospital for treatment and no further proceedings are desirable.
• The person was arrested for driving under the influence of alcohol or drugs and the person is delivered to a hospital for medical treatment that prohibits immediate delivery before a magistrate.

(Penal Code § 849(b)

Existing law states that the record of arrest of a person released. Thereafter, the arrest shall not be deemed an arrest, but a detention only. (Penal Code § 849(c).)

This legislation allows a peace officer to release a person from custody, instead of taking the person before the magistrate, if the person was arrested and subsequently delivered to a hospital or other urgent care facility, including, but not limited to, a facility for the treatment of co-occurring substance use disorders, for mental health evaluation and treatment, and no further proceedings are desirable.

COMMENTS

1. Need for This Legislation

According to the author:

SB 237 would create more options for compassionate treatment for individuals with mental illness by allowing law enforcement to transport low level offenders suffering from an acute mental health crisis to Urgent Care Centers (UCCs) rather than to jail.

UCCs are not inpatient facilities but are safe and secure acute care medical facilities that specialize in treating persons with mental illnesses. UCCs provide a location, other than emergency rooms or county jails, where persons suffering from mental health crises can be evaluated, psychiatrically stabilized and have a plan for further action formulated to assist them, whether by returning home, proceeding to a residential treatment location, a hospital, supportive housing, substance use disorder treatment facility.

Law enforcement may lack the legal authority to transport an individual suffering from an acute mental health crisis to a mental health UCC in lieu of arrest, absent the individual’s consent for treatment. UCCs can serve as an alternative to county jail where persons suffering from mental health crisis can receive the help they need.

1. San Antonio: Model of Mental Health Diversion

A mental health diversion model has been successfully utilized by law enforcement personnel in Bexar County, Texas. Specifically, in San Antonio, the law permits law enforcement officers to take individuals into custody and transport them to unlocked multi-disciplinary “Restoration Center,” which provide mental health treatment, substance use disorder treatment, and acute detoxification for drugs and alcohol.

A recent article describes diversion in San Antonio:

The plan was simple: instead of arresting the mentally ill for crimes, treat them for their illness.

Keep them out of the jails and emergency rooms and instead provide them with a one-stop shop where they can be treated with psychiatric care, counseling and rehabilitation. The plan in this Texas city was to help them heal.

This happened in 2008 when the Roberto L. Jimenez M.D. Restoration Center opened. Since that time, close to 50,000 people have been treated, saving the law enforcement more than 100,000 manpower hours that can now be spent on the streets, and saving taxpayers more than $50 million.

The center opened because of humane issues and not necessarily any financial ones that were plaguing the jails and hospitals. It came after Leon Evans was hired as president and CEO of the Center for Health Care Services in San Antonio. Previously he served as the director of community services for the Texas Department of Mental Health and Mental Retardation, and had become "aware of so many of these people becoming criminalized.

"There was a disconnect between the mentally ill and the community."

And it is a connection leaders in Montgomery are working toward building in the Capital City.

"I can prove treatment works," said Evans, the mastermind behind the center. "I do it through the criminal justice system. We focus our dollars on intervention points, catching these people before they end up in prisons and emergency rooms. We decided a person shouldn't be criminalized if they have a mental illness."

​The Restoration Center, housed in a former job corps building, is an integrated clinic where people can receive psychiatric care, substance abuse services, general health care and transitional housing. There is a Sobering Unit, an Extended Observation Unit and a Detox Room. And there are programs including the "Mommies Program," which treats pregnant women addicted to heroin, and more programs including a Crisis Care Center, an Injured Prisoners and Minor Medical Clinic, an Opioid Addiction Treatment Services and Outpatient Transitional Services.

It costs $100 million to operate annually.

"Leon is an icon in mental health," said Jimenez, a psychiatrist and mental health care advocate. "He proposed this idea ... where we had everything under one roof. It is truly a remarkable story.

"We're the third largest county in the state of Texas, and the poorest county in the state of Texas. And yet, we're able to do something that New York, Dallas, Chicago ... it didn't even dawn on them to do. It depended on relationships with city leaders, private businesses, military leaders, schools."

The relationships were built with law enforcement, first responders and emergency rooms.

A case based on numbers

When Evans worked for the state, he became "painfully aware of the people going through the criminal justice system with severe mental illness, and that they were really there because they were untreated."

Studies have shown, he said, that behavioral mental health is on the top of lists when looking at which diseases costs society the most in early death: bipolar, schizophrenia, major depression, post-traumatic stress, personality disorders, alcoholism and drug use.

People in the U.S. with severe mental illnesses, he added, die at least 25 years sooner than the general population as they go untreated and undiagnosed.

“These people are dying early, but not from their mental illness,” Evans said. “Most go undiagnosed, and they start self-medicating with alcohol and drugs. Their illness is so debilitating so they don't work, don't have insurance, don't receive care, don't eat properly. All of these things compound their early death. So you're dying of congestive heart failure, liver disease, diabetes ...”

The problem, Evans said, is that the country used to think that 16 percent of people going to jail had mental illnesses, but “that's because we never tested them. It's more like 40 percent or maybe even higher. Most people are arrested for alcohol or drug-related offenses, and most of them have a mental health issue.” (Restoration Center: San Antonio's answer to mental health, Kym Klass , Montgomery Advertiser, January 27, 2017, http://www.montgomeryadvertiser.com/story/news /2017/01/27/ restoration-center-san-antonios-answer-mental-health/96457170/.)

1. ​Mental Health UCCs in California

A UCC provides intensive crisis services to individuals who otherwise would be brought to emergency rooms. These facilities provide up to 23 hours of immediate care and focus on recovery and linkage to ongoing community services and supports that are designed to impact unnecessary and lengthy involuntary inpatient treatment. (http://dmh.lacounty.gov) Local law enforcement is currently utilizing UCCs in Los Angeles:

County mental health officials and police are increasingly looking to urgent care centers such as the facility in Boyle Heights as an alternative to jail beds or overcrowded psychiatric emergency rooms for people in the throes of a mental health crisis. There are now five such centers around the county, the newest of which opened last month, and the county plans to open four more over the next couple of years.

They provide short-term care for walk-in patients such as Rhaburn’s son and for people transferred from emergency rooms or brought in by police after being deemed a danger to themselves or others. The centers handled more than 27,000 visits last fiscal year.

At the opening ceremony last month for the newest urgent care facility, county Supervisor Mark Ridley-Thomas said the centers can help prevent crises from escalating and “avoid needless violence in our communities.”

“Not only is it more humane, it is more cost effective, makes us better stewards of public resources, to build more urgent care centers than to build more jails,” he said.

It costs the county about $28 million a year to operate five centers, with much of that coming from state mental health funding and Medi-Cal. The cost per patient ranges from $200 to $900, depending on the level of care required.

Support for the facilities wasn't always there. When the first county-contracted crisis center opened in 2006, it had to be placed inside a Culver City hospital because there were so many problems finding a neighborhood willing to take a stand-alone center, said Luana Murphy, head of Exodus Recovery, the contractor that runs three of the centers.

That first center shut down in 2014 after the hospital underwent changes but reopened last month at a new location on West Washington Boulevard. Four more have been established in Long Beach, Sylmar, Willowbrook and Boyle Heights.

Until recently, Los Angeles police were reluctant to take patients directly to the urgent care centers because, unlike hospital emergency rooms, the centers don't take people with serious medical issues or who are extremely drunk or aggressive.

But after meeting with Exodus staff over the summer to clarify the guidelines, police have begun taking more patients to the centers rather than emergency rooms. In December 2014, law enforcement officers took 209 patients to L.A. County-USC Medical Center and 107 to the Exodus center across the street. In August, officers took 196 patients to the hospital and 268 to the urgent care center. LAPD officers who had been frustrated at the time they spent waiting to hand off patients to medical staff at the overcrowded county emergency rooms said the turnaround time is much quicker at the urgent care centers.

“The times I've been there, it's been 15 minutes as opposed to two hours at the ER,” said Lt. Brian Bixler of the Los Angeles Police Department's specialized mental health team.

The turn to urgent care centers has also helped to alleviate overcrowding at the county hospitals' psychiatric emergency departments and in the regular emergency rooms. The average morning patient count for the three county psychiatric emergency rooms was about 40 in November, down from 60 a year earlier.

Mark Ghaly, director of community programs for the county’s Department of Health Services, which runs the hospitals, said a “significant amount” of the reduction in crowding can be attributed to the increased use of urgent care centers.

But the centers are limited in what they can provide. Unlike hospitals, which can hold patients found to be in a severe crisis for three days before releasing them or seeking a longer court-ordered stay, the centers can keep people for only 23 hours.

By that time, the vast majority of the patients have stabilized enough to be sent home or to a sober living facility or homeless shelter, Murphy said. (County turns to urgent care centers, rather than jails or ERs, to treat the mentally ill in crisis, Abby Sewall, the Los Angeles Times, January 19, 2016, http://www.latimes.com/local/california/la-me-crisis-center-20160119-story.html)

4. Effect of this Legislation

Under existing law, law enforcement personnel may lack the legal authority to transport a person suffering from mental illnesses to a UCC in lieu of arrest, absent the person’s consent. According to the sponsor, law enforcement personnel are often reluctant to seek written consent from persons who suffer from mental illnesses, and indeed may lack expertise in knowing when such a person is capable of consent. This legislation makes it clear that law enforcement is permitted to transport a person suffering from a mental illness to a therapeutic healthcare facility, including a UCC, emergency room, or other location providing acute substance use disorder detoxification for persons who suffer from co-occurring mental health disorders. This legislation would allow such transportation either before or after the booking process, without requiring officers to seek the consent of the individual, thereby providing a less restrictive alternative than a full custodial arrest.

-- END –