Bill Text: CA AB2454 | 2015-2016 | Regular Session | Amended

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

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Bill Title: Energy: procurement plans.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2016-09-29 - Chaptered by Secretary of State - Chapter 826, Statutes of 2016. [AB2454 Detail]

Download: California-2015-AB2454-Amended.html

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BILL NUMBER: AB 2454	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 4, 2016
	AMENDED IN ASSEMBLY  APRIL 26, 2016
	AMENDED IN ASSEMBLY  MARCH 17, 2016

INTRODUCED BY   Assembly Member Williams

                        FEBRUARY 19, 2016

   An act to amend Section 454.5 of, and to add Section 921 to, the
Public Utilities Code, relating to energy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2454, as amended, Williams. Energy: procurement plans.
   Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including electrical corporations.
The Public Utilities Act requires the commission to review and
accept, modify, or reject a procurement plan for each electrical
corporation in accordance with specified elements, incentive
mechanisms, and objectives. The act requires that an electrical
corporation's proposed procurement plan include certain elements,
including a showing that the electrical corporation will first meet
its unmet needs through all available energy efficiency and demand
reduction resources that are cost effective, reliable, and feasible.
   This bill would require the electrical corporation, in determining
the availability of cost-effective, reliable, and feasible demand
reduction resources, to consider the findings of the Demand Response
Potential Study required by a specific order of the commission, as
specified.
   Under existing law, to the extent that additional procurement is
authorized for an electrical corporation, as specified, the
commission is required to ensure that the costs are allocated in a
fair and equitable manner to all customers, that there is no
cost-shifting among customers of load-serving entities, that
community choice aggregators may self-provide renewable integration
resources, and that unmet resource needs are met through available
energy efficiency and demand reduction resources that are cost
effective, reliable, and feasible.
   This bill would also require the commission to demonstrate to the
Legislature, if the commission approves new capacity additions in
excess of 100 megawatts, that the electrical corporation met its
unmet needs through all available energy efficiency and demand
reduction resources that were cost effective, reliable, and feasible.
 The bill would require the commission, prior to approving a
contr   act for any new or repowered gas-fired generation
resources, to require the electrical corporation to demonstrate that
it has undertaken all feasible efforts to meet identified resources
needs through available renewable energy, energy storage, energy
efficiency, and demand reduction resources that are cost effective,
reliable, and feasible. 
   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 creating a new 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.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


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

  SECTION 1.  Section 454.5 of the Public Utilities Code is amended
to read:
   454.5.  (a) The commission shall specify the allocation of
electricity, including quantity, characteristics, and duration of
electricity delivery, that the Department of Water Resources shall
provide under its power purchase agreements to the customers of each
electrical corporation, which shall be reflected in the electrical
corporation's proposed procurement plan. Each electrical corporation
shall file a proposed procurement plan with the commission not later
than 60 days after the commission specifies the allocation of
electricity. The proposed procurement plan shall specify the date
that the electrical corporation intends to resume procurement of
electricity for its retail customers, consistent with its obligation
to serve. After the commission's adoption of a procurement plan, the
commission shall allow not less than 60 days before the electrical
corporation resumes procurement pursuant to this section.
   (b) An electrical corporation's proposed procurement plan shall
include, but not be limited to, all of the following:
   (1) An assessment of the price risk associated with the electrical
corporation's portfolio, including any utility-retained generation,
existing power purchase and exchange contracts, and proposed
contracts or purchases under which an electrical corporation will
procure electricity, electricity demand reductions, and
electricity-related products and the remaining open position to be
served by spot market transactions.
   (2) A definition of each electricity product, electricity-related
product, and procurement related financial product, including support
and justification for the product type and amount to be procured
under the plan.
   (3) The duration of the plan.
   (4) The duration, timing, and range of quantities of each product
to be procured.
   (5) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services,
including the format and criteria of that procurement process.
   (6) An incentive mechanism, if any incentive mechanism is
proposed, including the type of transactions to be covered by that
mechanism, their respective procurement benchmarks, and other
parameters needed to determine the sharing of risks and benefits.
   (7) The upfront standards and criteria by which the acceptability
and eligibility for rate recovery of a proposed procurement
transaction will be known by the electrical corporation prior to
execution of the transaction. This shall include an expedited
approval process for the commission's review of proposed contracts
and subsequent approval or rejection thereof. The electrical
corporation shall propose alternative procurement choices in the
event a contract is rejected.
   (8) Procedures for updating the procurement plan.
   (9) A showing that the procurement plan will achieve the
following:
   (A) The electrical corporation, in order to fulfill its unmet
resource needs, shall procure resources from eligible renewable
energy resources in an amount sufficient to meet its procurement
requirements pursuant to the California Renewables Portfolio Standard
Program (Article 16 (commencing with Section 399.11) of Chapter
2.3).
   (B) The electrical corporation shall create or maintain a
diversified procurement portfolio consisting of both short-term and
long-term electricity and electricity-related and demand reduction
products.
   (C) The electrical corporation shall first meet its unmet resource
needs through all available energy efficiency and demand reduction
resources that are cost effective, reliable, and feasible. In
determining the availability of cost-effective, reliable, and
feasible demand reduction resources, the  electrical
corporation   commission  shall consider the
findings regarding  technical, economic, and  
technically and economically  achievable demand reduction in the
Demand Response Potential Study required pursuant to Commission
Order D.14-12-024, to the extent those findings are not superseded by
 subsequent   other  demand reduction
 potential studies,   studies conducted by
academic institutions or government agencies,  and to the extent
that any demand reduction is consistent with commission policy. 

   (D) (i) The electrical corporation shall undertake all feasible
efforts to meet any identified resource need through available
renewable energy, energy storage, energy efficiency, and demand
reduction resources that are cost effective, reliable, and feasible.
 
   (ii) Prior to approving a contract for any new or repowered
gas-fired generation resource, the commission shall require the
electrical corporation to demonstrate compliance with clause (i).

   (10) The electrical corporation's risk management policy,
strategy, and practices, including specific measures of price
stability.
   (11) A plan to achieve appropriate increases in diversity of
ownership and diversity of fuel supply of nonutility electrical
generation.
   (12) A mechanism for recovery of reasonable administrative costs
related to procurement in the generation component of rates.
   (c) The commission shall review and accept, modify, or reject each
electrical corporation's procurement  plan.  
plan and any amendments or updates to the plan. The commission shall
ensure that the plan contains the elements required pursuant to this
section, including the elements described in subparagraph  
(D) of paragraph (9) of subdivision (b).  The commission's
review shall consider each electrical corporation's individual
procurement situation, and shall give strong consideration to that
situation in determining which one or more of the features set forth
in this subdivision shall apply to that electrical corporation. A
procurement plan approved by the commission shall contain one or more
of the following features, provided that the commission may not
approve a feature or mechanism for an electrical corporation if it
finds that the feature or mechanism would impair the restoration of
an electrical corporation's creditworthiness or would lead to a
deterioration of an electrical corporation's creditworthiness:
   (1) A competitive procurement process under which the electrical
corporation may request bids for procurement-related services. The
commission shall specify the format of that procurement process, as
well as criteria to ensure that the auction process is open and
adequately subscribed. Any purchases made in compliance with the
commission-authorized process shall be recovered in the generation
component of rates.
   (2) An incentive mechanism that establishes a procurement
benchmark or benchmarks and authorizes the electrical corporation to
procure from the market, subject to comparing the electrical
corporation's performance to the commission-authorized benchmark or
benchmarks. The incentive mechanism shall be clear, achievable, and
contain quantifiable objectives and standards. The incentive
mechanism shall contain balanced risk and reward incentives that
limit the risk and reward of an electrical corporation.
   (3) Upfront achievable standards and criteria by which the
acceptability and eligibility for rate recovery of a proposed
procurement transaction will be known by the electrical corporation
prior to the execution of the bilateral contract for the transaction.
The commission shall provide for expedited review and either approve
or reject the individual contracts submitted by the electrical
corporation to ensure compliance with its procurement plan. To the
extent the commission rejects a proposed contract pursuant to this
criteria, the commission shall designate alternative procurement
choices obtained in the procurement plan that will be recoverable for
ratemaking purposes.
   (d) A procurement plan approved by the commission shall accomplish
each of the following objectives:
   (1) Enable the electrical corporation to fulfill its obligation to
serve its customers at just and reasonable rates.
   (2) Eliminate the need for after-the-fact reasonableness reviews
of an electrical corporation's actions in compliance with an approved
procurement plan, including resulting electricity procurement
contracts, practices, and related expenses. However, the commission
may establish a regulatory process to verify and ensure that each
contract was administered in accordance with the terms of the
contract, and contract disputes that may arise are reasonably
resolved.
   (3) Ensure timely recovery of prospective procurement costs
incurred pursuant to an approved procurement plan. The commission
shall establish rates based on forecasts of procurement costs adopted
by the commission, actual procurement costs incurred, or combination
thereof, as determined by the commission. The commission shall
establish power procurement balancing accounts to track the
differences between recorded revenues and costs incurred pursuant to
an approved procurement plan. The commission shall review the power
procurement balancing accounts, not less than semiannually, and shall
adjust rates or order refunds, as necessary, to promptly amortize a
balancing account, according to a schedule determined by the
commission. Until January 1, 2006, the commission shall ensure that
any overcollection or undercollection in the power procurement
balancing account does not exceed 5 percent of the electrical
corporation's actual recorded generation revenues for the prior
calendar year excluding revenues collected for the Department of
Water Resources. The commission shall determine the schedule for
amortizing the overcollection or undercollection in the balancing
account to ensure that the 5 percent threshold is not exceeded. After
January 1, 2006, this adjustment shall occur when deemed appropriate
by the commission consistent with the objectives of this section.
   (4) Moderate the price risk associated with serving its retail
customers, including the price risk embedded in its long-term supply
contracts, by authorizing an electrical corporation to enter into
financial and other electricity-related product contracts.
   (5) Provide for just and reasonable rates, with an appropriate
balancing of price stability and price level in the electrical
corporation's procurement plan.
   (e) The commission shall provide for the periodic review and
prospective modification of an electrical corporation's procurement
plan.
   (f) The commission may engage an independent consultant or
advisory service to evaluate risk management and strategy. The
reasonable costs of any consultant or advisory service is a
reimbursable expense and eligible for funding pursuant to Section
631.
   (g) The commission shall adopt appropriate procedures to ensure
the confidentiality of any market sensitive information submitted in
an electrical corporation's proposed procurement plan or resulting
from or related to its approved procurement plan, including, but not
limited to, proposed or executed power purchase agreements, data
request responses, or consultant reports, or any 
combination,   combination of these,  provided that
the Office of Ratepayer Advocates and other consumer groups that are
nonmarket participants shall be provided access to this information
under confidentiality procedures authorized by the commission.
   (h) Nothing in this section alters, modifies, or amends the
commission's oversight of affiliate transactions under its rules and
decisions or the commission's existing authority to investigate and
penalize an electrical corporation's alleged fraudulent activities,
or to disallow costs incurred as a result of gross incompetence,
fraud, abuse, or similar grounds. Nothing in this section expands,
modifies, or limits the Energy Commission's existing authority and
responsibilities as set forth in Sections 25216, 25216.5, and 25323
of the Public Resources Code.
   (i) An electrical corporation that serves less than 500,000
electric retail customers within the state may file with the
commission a request for exemption from this section, which the
commission shall grant upon a showing of good cause.
   (j) (1) Prior to its approval pursuant to Section 851 of any
divestiture of generation assets owned by an electrical corporation
on or after the date of enactment of the act adding this section, the
commission shall determine the impact of the proposed divestiture on
the electrical corporation's procurement rates and shall approve a
divestiture only to the extent it finds, taking into account the
effect of the divestiture on procurement rates, that the divestiture
is in the public interest and will result in net ratepayer benefits.
   (2) Any electrical corporation's procurement necessitated as a
result of the divestiture of generation assets on or after the
effective date of the act adding this subdivision shall be subject to
the mechanisms and procedures set forth in this section only if its
actual cost is less than the recent historical cost of the divested
generation assets.
   (3) Notwithstanding paragraph (2), the commission may deem
proposed procurement eligible to use the procedures in this section
upon its approval of asset divestiture pursuant to Section 851.
   (k) The commission shall direct electrical corporations to include
in their proposed procurement plans the integration costs described
and determined pursuant to clause (v) of subparagraph (A) of
paragraph (4) of subdivision (a) of Section 399.13.
  SEC. 2.  Section 921 is added to the Public Utilities Code, to
read:
   921.  To the extent that additional procurement is authorized for
the electrical corporation in the integrated resource plan or the
procurement process authorized pursuant to Section 454.5, the
commission shall demonstrate to the Legislature, in a report
submitted pursuant to Section 9795 of the Government Code not more
than 60 days after the commission issues a final decision approving
new capacity additions in excess of 100 megawatts, that the
prioritized procurement of energy efficiency and demand reduction
resources required by subparagraph (C) of paragraph (9) of
subdivision (b) of Section 454.5 is achieved.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.