Date	Status
Feb 3, 2020	Died on file pursuant to Joint Rule 56.
May 30, 2019	Ordered to inactive file on request of Senator Bradford.
May 29, 2019	Read third time. Refused passage. (Ayes 11. Noes 11.)
May 28, 2019	Read second time. Ordered to third reading.
May 24, 2019	Read third time and amended.
May 20, 2019	Read second time. Ordered to third reading.
May 17, 2019	From committee: Do pass as amended. (Ayes 6. Noes 0.) (May 16).
May 10, 2019	Set for hearing May 16.
May 6, 2019	May 6 hearing: Placed on APPR. suspense file.
Apr 30, 2019	Set for hearing May 6.
Apr 24, 2019	From committee: Do pass and re-refer to Com. on APPR. (Ayes 9. Noes 1.) (April 24). Re-referred to Com. on APPR.
Apr 11, 2019	From committee with author's amendments. Read second time and amended. Re-referred to Com. on E., U. & C.
Apr 3, 2019	Set for hearing April 24.
Apr 2, 2019	April 10 set for first hearing canceled at the request of author.
Mar 27, 2019	Set for hearing April 10.
Mar 14, 2019	Referred to Com. on E., U. & C.
Feb 25, 2019	Read first time.
Feb 25, 2019	From printer. May be acted upon on or after March 27.
Feb 22, 2019	Introduced. To Com. on RLS. for assignment. To print.

Date	Description	Location	Votes
May 29, 2019	Senate 3rd Reading SB772 Bradford et al. Reconsider	Senate Floor	38 0 0 Passed
May 29, 2019	Senate 3rd Reading SB772 Bradford et al.	Senate Floor	11 11 16 Passed
May 16, 2019	Do pass as amended	Senate Standing Committee on Appropriations	6 0 0 Passed
May 6, 2019	Placed on suspense file	Senate Standing Committee on Appropriations	5 0 1 Passed
Apr 24, 2019	Do pass, but first be re-referred to the Committee on [Appropriations]	Senate Standing Committee on Energy, Utilities and Communications	9 1 3 Passed

SENATE RULES COMMITTEE

Office of Senate Floor Analyses

(916) 651-1520 Fax: (916) 327-4478

SB 772

THIRD READING

Bill No: SB 772

Author: Bradford (D), et al.

Amended: 5/24/19

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 9-1, 4/24/19

AYES: Hueso, Moorlach, Bradford, Dodd, Rubio, Skinner, Stern, Stone, Wiener

NOES: Hill

NO VOTE RECORDED: Chang, Hertzberg, McGuire

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SENATE FLOOR: 11-11, 5/29/19 (FAIL)

AYES: Atkins, Beall, Bradford, Caballero, Durazo, Hertzberg, Hueso, Pan, Rubio, Stone, Wilk

NOES: Borgeas, Dodd, Grove, Hill, Jackson, Jones, Mitchell, Monning, Moorlach, Umberg, Wiener

NO VOTE RECORDED: Allen, Archuleta, Bates, Chang, Galgiani, Glazer, Hurtado, Leyva, McGuire, Morrell, Nielsen, Portantino, Roth, Skinner, Stern, Wieckowski

SUBJECT: Long duration bulk energy storage: procurement

SOURCE: Author

DIGEST:

This bill requires the California Independent System Operator (CAISO) to solicit for up to 4,400 megawatts (MWs) of long-duration bulk energy storage recovered by electric ratepayers in the CAISO grid through a federally approved rate. Specifically, this bill requires the CAISO to solicit for at least 2,000 MWs capacity but not more than 2,400 MWs on or before June 30, 2022, and require another solicitation for up to 2,000 MWs after December 31, 3030, if found to be necessary, as specified.

Senate Floor Amendments of 5/24/19 recast the useful asset life requirements of the bulk energy storage projects, explicitly include transmission costs considerations for selected projects, and include minor technical amendments.

ANALYSIS: Existing federal law establishes that Federal Energy Regulatory Commission (FERC) has exclusive jurisdiction over the transmission of electric energy in interstate commerce; and establishes the process and procedures for establishing transmission of electric energy in interstate commerce by public utilities, i.e., the rates, terms & conditions of interstate electric transmission by public utilities. (Federal Power Act §§§201, 205, 206 (16 USC 824, 824d, 824e))

Existing state law:

Imposes, via The Public Utilities Act, various duties and responsibilities on the California Public Utilities Commission (CPUC) with respect to the purchase of electricity and requires the CPUC to review and adopt a renewable energy procurement plan for each investor-owned utility (IOU) and all retail sellers pursuant to the California Renewables Portfolio Standard Program (RPS). (Public Utilities Code §399.15)
Requires each publicly owned utility (POU) to adopt and implement a renewable energy resources procurement plan that requires the utility to procure a minimum quantity of eligible renewable energy resources each compliance period to achieve the RPS procurement goals. (Public Utilities Code §399.30)
Requires each load-serving entity (LSE) to prepare and file an integrated resource plan (IRP) that includes procurements enabling utilities to meet greenhouse gas (GHG) emissions reduction targets for the electricity sector. (Public Utilities Code §454.52)
Provides for the establishment of an Independent System Operator (ISO) as a nonprofit public benefit corporation and requires the ISO to make certain filings with the FERC and to seek authority from the FERC as needed to give the ISO the ability to secure generating and transmission resources necessary to guarantee achievement of planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council and the North American Electric Reliability Council. (Public Utilities Code §334 et seq.)

This bill:

Makes several findings and declarations concerning the changing electrical grid, the need to match generation to the demand for electricity, and the beneficial attributes of long-duration bulk energy storage, including pumped hydroelectric storage.
Defines “long duration bulk storage project” to mean an energy storage resource interconnected to the electrical grid in California that has the capability to discharge at its capacity continuously for at least eight hours, has at least 400 MWs in project capacity, has been proven by way of deployment, and has a minimum useful asset life of 40 years.
Requires the CAISO to complete, on or before June 30, 2022, a competitive solicitation process for one or more long duration bulk storage projects that have an aggregate capacity of at least 2,000 MWs, but not more than 2,400 MWs, that can be constructed with a targeted commercial operation date of no later than 2030.
Requires the CAISO to complete, after December 31, 2030, and only upon the CPUC and CEC each making a finding that after the above mentioned solicitation process there is still a need for additional long duration bulk energy storage projects, an additional competitive solicitation process for one or more long duration bulk energy storage projects with an aggregate capacity of up to 2,000 MWs and targeted commercial operation dates of no later than January 1, 2045.
Requires the procurement process to provide for cost recovery to all LSEs within the CAISO-controlled electrical grid in a manner that allocates those costs among LSEs based on cost causation and the degree to which each LSE contributes to the need for, or otherwise realizes the benefits from, long duration bulk energy storage.
Requires the CAISO to immediately withdraw its filing with the FERC, and does not require the CAISO to comply with this bill, if the FERC takes any action that would preempt or otherwise supersede the requirements of this bill, seeks to impose an alternative market mechanism, expands eligibility to generation resources that consume fossil fuels, or takes any other action that materially affects California’s clean energy and climate laws, programs, or policies.

Background

Bulk energy storage. Bulk energy storage, also known as grid-scale energy storage, can include any technology used to store energy on a large scale within the power grid. Pumped hydroelectric energy systems are the primary bulk energy technology deployed in California. However, there are other technologies, including compressed air energy systems and advanced rail energy systems. Additionally, with developments and advancements in technology, its possible battery storage may one day become more commonly used as a grid-scale energy storage. In the case of pumped hydroelectric energy storage, also known as pumped storage or pumped hydro, it is one of the oldest energy resources.

Renewable Portfolio Standard (RPS). California’s ambitious RPS program is jointly implemented and administered by the CPUC and the California Energy Commission (CEC). The RPS program requires the state’s energy LSEs, including IOUs, Community Choice Aggregators (CCAs), Electric Service Providers (ESPs) and POUs to procure 60 percent of their total electricity retail sales from eligible renewable energy resources by 2030, and a mix of RPS-eligible and zero-carbon resources by December 31, 2045, for a total of 100 percent clean energy. The RPS requires milestones on the path to 2030, including interim goals of 25 percent by 2016, 33 percent by 2020, 44 percent by 2024, and 52 percent by 2027. The state is well on its way to achieving its existing RPS targets. Most POUs are on track to meet their 2020 goals and working towards their 2030 goals. The state’s three largest electric utilities generally have met current procurement goals and anticipate exceeding future procurement goals, with each having procured over 40 percent eligible renewable energy resources.

“Duck Curve” integration of renewables is a challenge for the electric grid.

A typical pumped storage facility uses pumps and generators to move water between an upper and lower reservoir. When electricity is cheap during times of low demand, water is pumped from the lower reservoir to the upper reservoir. During periods of high demand, water is released from the upper reservoir through a generator to produce electricity that can be sold at higher prices. This fluctuation and responsiveness to the changing electricity landscape during the day, may help with renewables integration and replace the reliance on natural gas power plants. However, pumped storage requires a significant amount of up front capital, long construction phase, and, like other resources, connection to or construction of costly transmission lines to connect to the power grids.

Integrated Resources Plan (IRP) Reference System Plan. As required in SB 350 (De León, Chapter 547, Statutes of 2015), the IRP process requires the CPUC to identify a portfolio of resources for electricity procurement that provides optimal integration of renewable energy in a cost-effective manner, and minimize impacts on ratepayer’s bills. The identification of this portfolio is intended to guide LSEs’ IRPs, which help ensure that utilities meet GHG reduction targets for the electricity sector. The reference system plan is a guide – not a mandate. As part of the first two-year IRP planning cycle, last year, the CPUC adopted a reference system plan, which identifies the energy procurements needed to help the LSEs meet specific GHG reduction goals. The CPUC adopted a GHG reduction goal of 42 million metric tons (MMT) by 2030. To meet this target, the CPUC identified specific procurements for LSEs, noted in the IRP reference system plan.

Large IOUs long on renewable procurement. As noted above, the large IOUs are currently long on procurement and are anticipated to meet their 2030 RPS requirements by 2020. Initially the IOUs procured more renewables than necessary in part to hedge against potential RPS shortfalls due to the initial higher project failure rates. However, changes in the electricity landscape, in particular the load migration from IOUs to other load-serving entities – CCAs and ESPs – results in the IOUs having less of a need to procure additional resources, including renewable energy resources. Considering LSEs and the CPUC are in the midst of the first IRP cycle and the uncertainty in the electricity landscape due to load migration, an obvious question is whether any additional procurement is needed at this time.

Comments

SB 772. This bill mandates a cumulative procurement solicitation by the CAISO of up to 4,400 MWs, including 2,000 to 2,400 MWs of long duration bulk storage, largely meant to prefer pumped storage hydroelectric projects, by June 30, 2022, and requires another up to 2,000 MWs after December 31, 2030, if found to be necessary. The author notes the existing hurdles for procurement of pumped storage, in particular, long lead times, high up-front costs, and a challenge for any one LSE to procure the resource. Moreover, the author states that this particular resource will be needed in a 60 percent plus RPS world as adopted by SB 100.

Too much? Too soon? Too costly? As noted above, long duration bulk energy – including pumped storage – can provide some beneficial attributes that can complement the integration of renewables on the electric grid. However, the fundamental questions are: how much is needed, where is it needed, and when is it needed? Considering the costs to ratepayers is likely in the billions of dollars, for projects and corresponding transmission lines mandated by this bill, it would seem wise to proceed with caution. As noted above the CPUC and CEC are in the final stages of the first two-year cycle of the IRP, as required by SB 350. In adopting the IRP Reference System Plan, the CPUC noted that with respect to pumped storage, “staff concluded that there is enough lead time before 2030, under the 42 MMT Scenario, that procurement activities do not need to begin in this IRP cycle.” The CPUC did note that they would examine pumped storage again with better information in the next IRP cycle, which has already been initiated. The proponents of this bill argue that the new SB 100 RPS and zero-carbon goals necessitate a deeper GHG reduction goal than what was adopted in the first cycle of the IRP. They argue that a deeper GHG goal would warrant the procurement of long duration bulk storage proposed by this bill. It is accurate that the first IRP cycle did not incorporate the SB 100 goals, since this bill had not been adopted at that time. However, the CPUC has already stated that the SB 100 goals would be incorporated into subsequent IRPs which, as noted, are already being initiated.

CAISO central energy procurement entity? This bill establishes a new precedent and requires the CAISO to procure the mandated energy storage in a similar fashion as transmission assets through a competitive solicitation process. There are many concerns with such an approach, not the least of which is that this Legislature in recent years has been repeatedly asked whether to expand the CAISO from a largely California footprint to a broader, Western States ISO. Under either scenario, the prospect of CAISO procurement is not very appealing, and perhaps, less so, under an expanded and uncertain grid. One of the concerns with CAISO procurement is that historically CAISO has limited procurement to only where there is a demonstrated need to address reliability, including as identified through the resources adequacy program. These procurements tend to be at much higher prices than what might otherwise be purchased through a CPUC review. However, the proponents are correct to note that the purchases required by this bill would not be part of the resource adequacy program, but handled in similar fashion as transmission assets, under a review by the FERC. Nonetheless, the CAISO has noted its own concerns with this approach. Furthermore, the CAISO has stated they had studied the use of energy storage in 2016-17, but they found that the benefits did not outweigh the costs, generally. Additionally, as stakeholders have noted, the notion of the CAISO procuring for resources as it oversees dispatch would provide an opportunity for the CAISO to have bias in the market. If the CAISO is an air traffic controller, were we to require it to contract for airplanes, would it take action to benefit the landing and take-offs of those planes above that of others?

CAISO procurement invites FERC action. Transmission procurement is very clearly under federal jurisdiction by the FERC. To the extent one has concerns about the current FERC, this mandated procurement would likely be handled by the existing federal administration. The CAISO has stated that the approach proposed in this bill would “fundamentally alter California’s direct authority over procurement and would inject federal oversight into the process.” As the CAISO states, the preference for a specific resource type could be viewed as discriminatory under the Federal Power Act, and thereby challenged by other stakeholders under review by the FERC. Additionally, any tariff changes would need to be submitted to FERC for review and adoption. Important to note that transmission cases have generally resulted in increasing rates for ratepayers, in many cases outpacing the increases in distribution. While many stakeholders are active at the CPUC, there are fewer participants involved in transmission cases affecting Californians. In acknowledgement of this challenge, the Legislature, last year, approved budget requests to support increased participation by the CPUC to help better protect California ratepayers in FERC cases. Nonetheless, CPUC participation at the FERC will still be limited and is only a more recent development. Recent amendments to the bill attempt to address concerns about potential unintended FERC action against the state’s policies, requiring the CAISO to abandon the required procurement if the FERC proposed alternative mechanisms or changes to California’s polices. However, it is unclear whether those protections would be sufficient and whether the statute could force the CAISO to take that action, particularly if there is a dispute as to the interpretation of the FERC’s actions. Should the Legislature wish to mandate the procurement of bulk energy resource, the Legislature can accomplish this mandate without inviting FERC action by utilizing the state’s existing procurement authority and directing the CPUC and POUs to procure the energy.

Allocating costs to CAISO LSEs. As proposed by this bill, the costs of the projects procured by the proposed mandated procurement would be shouldered by all LSEs participating in the CAISO-controlled electric grid with consideration for cost causation principles. Such an approach may be beneficial to financing large, expensive capital projects that might be too large and expensive for any one LSE to procure. However, the approach may not fully acknowledge the efforts of each LSE to procure a cost optimized diverse portfolio. Again, the Legislature may wish to consider proceeding with caution before diving in to such an approach. The proponents of this bill may have some merit about the ability of any one LSE to procure one very large contract for bulk energy storage. However, the state is in the midst of debating proposals to establish a central procurement entity or approach to procurement. It is possible that a new entity or approach would be adopted in time to procure for a large mandated resource, such as bulk storage. This bill proposes the central procurement entity to be the CAISO.

Timing. The question for the Legislature is whether a determination that it is exactly this resource on the specific timeline is needed. The proponents note that bulk energy storage facilities require long lead times, potentially 10 years. They state that such a long lead time merits immediate action by the state. One challenge of the proposed effort through legislation may have the unintended effect of increasing costs to all ratepayers, where a more cost-effective approach may be optimized through the IRP process. It may be that some patience is warranted. As the CPUC notes, “any additional statutory clean energy procurement mandates will limit the ability of the CPUC, stakeholders, and sister agency partners to look at a full range of energy resource alternatives to find the optimal mix of clean energy resources needed to achieve California’s pioneering GHG emission reduction plan.”

CAISO concerns. Although not taking a position, the CAISO has raised concerns about the designation of the CAISO as the procurement entity for this resource and the potential to raise federal/state jurisdictional concerns. On these matters, the CAISO specifically notes the need to undergo FERC approval to include cost-allocation mechanism in their tariff.

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

According to the Senate Committee on Appropriations:

CPUC: Ongoing annual costs of $208,000 for 1.0 Attorney III position to represent CPUC clients before CAISO to develop the new procurement rules and ensure that the resulting procurement is needed, cost effective, and that an appropriate owner of the facility is designated and to likely advocate at the FERC due to the novelty and complexity of the procurement process. (Public Utilities Commission Utilities Reimbursement Account)
State as ratepayer: Unknown, likely-major costs, potentially in the high tens of millions to hundreds of millions of dollars, to the state as an energy utility ratepayer. Some, but not all, ratepayer costs potentially could be recovered later as procurement savings, depending on later determinations by CAISO. (Various funds)

SUPPORT: (Verified 5/24/19)

California Partnership

California State Association of Counties

California State Association of Electrical Workers

California State Pipe Trades Council

California Wind Energy Association

City of Coachella

Coachella Valley Economic Partnership

Coachella Valley Water District

Coalition of California Utility Employees

Congress of California Seniors

County of Riverside 4^th District Supervisor, V. Manuel Perez

Culturas Music & Arts

Eagle Crest Energy

East Valley Coalition

General Renewable Energy – Hydro Solutions

Gridflex Energy, LLC
Industrial Environmental Association

Inland Empire Regional Chamber of Commerce

International Brotherhood of Electrical Workers, Local 440

JinkoSolar (U.S.) Inc.

Los Angeles/Orange Counties Building & Construction Trades Council

Magnum CAES, LLC

Mission Springs Water District

NextEra Energy Resources

NEXTracker

Pueblo Unido Community Development Corporation

San Bernardino/Riverside Counties Building & Construction Trades Council, AFL-CIO

San Diego County Building & Construction Trades Council

San Diego County Water Authority

San Francisco Building & Construction Trades Council

State Building & Construction Trades Council, AFL-CIO

OPPOSITION: (Verified 5/24/19)

Agricultural Energy Consumers Association

Alberhill Ranch Homeowners Association

Anaheim Public Utilities

Audubon California

California Cotton Ginners and Growers Association

California Food Producers

California Large Energy Consumers Association

California League of Food Producers

California Municipal Utilities Association

California Native Plant Society

California Poultry Federation

California Wilderness Coalition

Center for Biological Diversity

City of Riverside

Defenders of Wildlife

Foothill Conservancy

Green Tech Action Fund

Hydrostor

Independent Energy Producers Association

Large-scale Solar Association

Milk Producers Council

National Parks Conservation Association

Northern California Power Agency

Sierra Club California

Solar Energy Industries Association

Southern California Public Power Authority

The Nature Conservancy

Western Agricultural Processors Association

ARGUMENTS IN SUPPORT: According to the author:

California has set ambitious goals for our energy sector, but there are holes in the road to 100% zero-carbon power by 2045. One of these is long-duration energy storage. The State already acted in 2010 to spur the growth of short-duration storage with AB 2514. But as we increase our reliance on renewable energy, which is intermittent by nature, we will need more storage of all kinds on the electric grid. This includes long-duration storage, which can store vast amounts of energy and discharge over much longer periods of time.

But the State has not yet acted to spur the growth of this necessary resource, which we will need to meet our energy goals. Because long-duration storage projects take up to 10 years to bring online, the time to act is now. It will be more expensive to ratepayers if we must rush to fill this void in subsequent years rather than acting proactively to ensure California has the necessary resources to meet the energy goals already enacted into law.

ARGUMENTS IN OPPOSITION: The arguments in opposition to this bill generally fall into the following categories of concerns: (1) concern about the costs of the projects and the impact to ratepayers, (2) concerns about the designations of the CAISO as the procurement entity and related federal/state jurisdictional concerns, (3) the lack of need for this procurement requirement, (4) the undermining of the existing procurement process through the IRP, and (5) concern about the effects of Eagle Mountain project on the water, habitat, and environment of sensitive lands in the surrounding site area. Specifically, the California Large Energy Consumers Association and The Utility Reform Network express concerns about the effect on ratepayers from the procurement mandate in this bill. The POUs also take issue with the indiscriminate allocation of costs for a costly resource that is not needed and may not be directly benefiting a utility’s customers. The Independent Energy Producers (IEP) raise concerns with the costs, the lack of need for this bill, as well as, the undermining of the IRP process. The IEP also raises significant concern with the designation of the CAISO as the procurement entity and the involvement of FERC. Several conservation and environmental organizations are concerned that this bill would support a controversial project, Eagle’s Crest/Eagle Mountain, which would threaten the environment in and around Joshua Tree National Park. These organizations are particularly concerned with the groundwater mining by the project and the effect of the loss of the water. They also raise concerns that this project could use fossil fuel to run the facility, thereby potentially negating the “clean energy” the project would create.

Prepared by: Nidia Bautista / E., U., & C. / (916) 651-4107

5/29/19 17:04:46

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