Amended  IN  Assembly  May 04, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 3014

Introduced by Assembly Member Muratsuchi

February 21, 2020

An act to add Division 1.6 (commencing with Section 3400) to the Public Utilities Code, relating to electricity. An act to add Division 1.6 (commencing with Section 3400) to the Public Utilities Code, relating to electricity.


LEGISLATIVE COUNSEL'S DIGEST


AB 3014, as amended, Muratsuchi. Electricity: centralized procurement. California Reliability Authority.
Existing law, enacted during the 2000–01 energy crisis, creates the California Consumer Power and Conservation Financing Authority, with prescribed powers and responsibilities, for the purpose of issuing revenue bonds for the purposes of supplementing public and private power supplies and ensuring a sufficient and reliable supply of electricity. The financing authority is also authorized to finance incentives for investment in cost-effective, energy-efficient appliances and energy demand reduction, to achieve an adequate energy capacity reserve level, and to provide financing for the retrofit of inefficient electrical powerplants. Existing law prohibits the financing authority from approving any new program, enterprise, or project on or after January 1, 2007, unless authority to approve such an activity is granted by statute enacted on or before January 1, 2007. Until January 1, 2007, the financing authority was authorized to request proposals from qualified participating parties to purchase, lease, or otherwise acquire sites for the purpose of developing generation facilities that would provide the lowest cost electricity to consumers over the life of the facilities.
This bill would establish the California Reliability Authority, a nonprofit public benefit corporation, and would, beginning January 1, 2022, require the authority, subject to the Public Utilities Commission’s oversight, to procure, through a competitive solicitation process, adequate resource capacity to meet the annual and monthly resource adequacy needs of customer load in the service territories of the electrical corporations, determined as specified. The bill would require the authority, in exercising its procurement authority, to achieve certain objectives. The bill would require the Public Utilities Commission, in coordination with the State Energy Resources Conservation and Development Commission, by June 1, 2021, to adopt selection criteria for use by the authority in selecting resources for procurement to minimize costs and to achieve those objectives. The bill would require the Public Utilities Commission to take certain actions, including the establishment of protocols for the authority’s competitive solicitation process for the procurement of adequate resource capacity and the development of a methodology to allocate costs incurred by the authority in the procurement of that capacity. The bill would specify that costs incurred by the authority are to be recovered through direct billing to electrical corporations, electric service providers, and community choice aggregators, as provided. The bill would provide that the organization and operation of the California Reliability Authority is overseen by an oversight board consisting of 5 members appointed by the Governor who have expertise in electrical reliability. The bill would specify that the members of the oversight board serve a 3-year term and may be reappointed by the Governor.

Existing law provides for the establishment of a Power Exchange as a nonprofit public benefit corporation. Existing law requires the Power Exchange to provide an efficient competitive auction, open on a nondiscriminatory basis to all electricity suppliers, that meets the loads of all exchange customers at efficient prices.

This bill would state the intent of the Legislature to establish a residual resource adequacy centralized procurement structure in California to help ensure the reliability of the state’s electrical system.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Division 1.6 (commencing with Section 3400) is added to the Public Utilities Code, to read:

DIVISION 1.6. California Reliability Authority

CHAPTER  1. General Provisions and Definitions

3400.
 In enacting this division, it is the intent of the Legislature to do all of the following:
(a) Establish the California Reliability Authority to procure adequate resources to meet the collective resource adequacy requirement for the service territories of the electrical corporations.
(b) Direct the California Reliability Authority, in exercising its procurement authority, to achieve all of the following objectives:
(1) Maintain reliability of the electrical system by ensuring sufficient procurement of system, local, and flexible resource adequacy capacity on a three-year forward basis.
(2) Ensure, in coordination with the commission, the Energy Commission, and the Independent System Operator, that new resources needed to meet collective resource adequacy requirements are identified and their development is supported.
(3) Promote economically efficient mitigation or elimination of local capacity area constraints through the development of effective clean energy supply, demand response, energy storage solutions, or through new or expanded transmission.
(4) Allocate equitably the costs of meeting local, system, and flexible resource adequacy requirements to load-serving entities based on principles of cost causation.
(c) Maximize the opportunity for all load-serving entities to procure resource adequacy capacity on behalf of their customers on a voluntary basis in advance of the California Reliability Authority’s procurement of resource adequacy to satisfy residual requirements.
(d) Provide jurisdiction to the commission to develop criteria that will be applied by the California Reliability Authority to select resources for residual procurement, to review the portfolio of resources to be procured by the authority in advance of contract execution, and to develop and oversee cost recovery by the authority from load-serving entities.
(e) Facilitate the economically efficient development of electrical supply, demand response, storage, transmission, and other feasible, viable, and effective resources to meet and maintain system and local electrical reliability needs.
(f) Facilitate transparency in the determination, review, and modification of reliability criteria related to resource adequacy, and in the processes for resource planning, procurement, and development to meet those criteria.

3405.
 For purposes of this division, the following definitions apply:
(a) “Authority” means the California Reliability Authority established pursuant to Section 3410.
(b) “Collective resource adequacy requirement” means, on a forecast or actual basis, the total local, system, and flexible resource adequacy capacity, as applicable, needed to meet the reliability requirements for customers served by all load-serving entities in the service territories of electrical corporations.
(c) “Load-serving entity” has the same meaning as set forth in Section 380.
(d) “Residual resource adequacy requirement” means the collective resource adequacy requirement reduced by the total shown resource adequacy of all load-serving entities.
(e) “Resource adequacy showing” means a showing described in subdivision (e) of Section 3420.
(f) “Shown resource adequacy” means the sum of both of the following:
(1) The resource adequacy capacity procured or controlled by a load-serving entity on behalf of its customers and shown to the authority for purposes of determining the residual resource adequacy requirement.
(2) The resource adequacy capacity allocated to a load-serving entity by the commission or the Independent System Operator.

CHAPTER  2. Establishment of the California Reliability Authority

3410.
 (a) The Governor shall appoint a five-member oversight board to oversee the formation and operation of the California Reliability Authority as a nonprofit public benefit corporation organized pursuant to Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code to support the reliability goals of the state and carry out the responsibilities specified in this division.
(b) (1) Members of the oversight board shall be appointed by the Governor and shall serve three-year terms.
(2) The Governor may reappoint a member of the oversight board upon the expiration of that member’s term.
(3) Members of the oversight board shall have expertise in electrical reliability.

CHAPTER  3. Powers and Responsibilities of the California Reliability Authority

3420.
 Commencing January 1, 2022, the authority shall have the following powers and responsibilities:
(a) The authority shall procure the residual resource adequacy requirement on a three-year forward basis to meet the annual and monthly resource adequacy needs of customer load in the service territories of the electrical corporations. The authority shall make a showing to the commission not less than two months before the commencement of each reliability compliance year to demonstrate that it has met this procurement obligation.
(b) The authority shall procure the residual resource adequacy requirement subject to the following limitations:
(1) The authority shall, subject to the commission’s oversight, procure any residual resource adequacy requirement through an annual competitive solicitation that shall be initiated within 15 days following the annual showing by load-serving entities of resource adequacy they have procured or control on behalf of their customers.
(2) (A) In selecting resources in its annual competitive solicitation, the authority shall apply selection criteria that minimize cost and achieve the objectives set forth in Section 3400.
(B) By June 1, 2021, the commission, in coordination with the Energy Commission, shall adopt the selection criteria through a public process.
(3) The authority shall not enter into contracts for resources with a term of more than three years.
(4) The authority shall not procure energy, renewable portfolio standard attributes, or other products or attributes separately, or in combination with, the procurement of the residual resource adequacy requirement, and shall not require terms directing energy bidding, scheduling, or dispatch of a resource except for terms requiring the seller to comply with the Independent System Operator’s must-offer obligations under the Independent System Operator’s tariff and practices.
(5) The authority shall coordinate with the Independent System Operator and the commission to ensure that information is provided to the market regarding the need and the optimal locations for the development of new resources to facilitate the continued procurement of resource adequacy by load-serving entities in an efficient and timely fashion.
(c) Without limiting the ability or discretion of the load-serving entities to determine the amounts of resource adequacy capacity they will procure, the authority shall procure the residual resource adequacy requirement and ensure that the requirement, in combination with the shown resource adequacy, meets but does not substantially exceed, over the three-year forward procurement period, the following amounts:
(1) For the first year of the three-year forward period, 100 percent of the collective resource adequacy requirement for system, local, and flexible capacity.
(2) For the second year of the three-year forward period, 100 percent of the collective resource adequacy requirement for local capacity and 75 percent of the collective resource adequacy requirement for system and flexible capacity.
(3) For the third year of the three-year forward period, 75 percent of the collective resource adequacy requirement for local capacity and 50 percent for the collective resource adequacy requirement for system and flexible capacity.
(d) The authority shall optimize and reasonably manage its resource adequacy capacity portfolio and may take prudent actions incidental to its procurement responsibility to minimize costs to load-serving entities and their customers.
(e) The authority shall establish an annual resource adequacy showing process for load-serving entities to show resource adequacy resources they own or control to be counted towards the load-serving entity’s share of the collective resource adequacy requirement. The authority shall use those showings in determining the residual resource adequacy requirement.
(f) No later than November 30 of each year, the authority shall provide to each load-serving entity an estimate of the authority’s forecast procurement and administrative costs for the subsequent three years.
(g) The authority shall annually provide a public report containing the following information:
(1) Quantities procured and weighted average prices paid for resource adequacy capacity, by product type and by area and subarea as defined in the local capacity studies of the Independent System Operator.
(2) Procurement selection criteria related to the effectiveness of electrical system locations of existing and potential resources at relieving local area and subarea capacity constraints.

CHAPTER  4. Responsibilities of the Public Utilities Commission

3430.
 In the implementation of this division, the commission shall have the following responsibilities:
(a) By March 31, 2021, the commission, in coordination with the Energy Commission, the Independent System Operator, and load-serving entities, shall establish a process and milestones to enable timely implementation of this division and effective implementation of the authority’s procurement process.
(b) By June 1, 2021, the commission shall, through a public process, establish protocols for the authority’s competitive solicitation process that include all of the following:
(1) A timeline for the solicitation that provides adequate time for load-serving entities to procure resource adequacy capacity on behalf of their customers.
(2) Criteria that the authority shall use in selecting resources from a competitive solicitation.
(3) The mechanics of a cost methodology to implement authority activities pursuant to Section 3420.
(4) All other procurement and cost allocation protocols required for the authority to fulfill its responsibilities pursuant to this division.
(c) The commission, in coordination with the Energy Commission and the Independent System Operator, shall provide to each load-serving entity a reasonably accurate forecast of the load-serving entity’s load share of the collective resource adequacy requirement not less than two months before the date of the load-serving entities’ annual showing specified in subdivision (d).
(d) The commission shall facilitate an annual showing by load-serving entities of resource adequacy capacity that each has procured or controls on behalf of its customers to enable the determination by the authority of the forecast residual resource adequacy requirement. A load-serving entity shall not be subject to a resource adequacy capacity procurement obligation to the authority or to the commission pursuant to this division and may self-procure, develop, or acquire resource adequacy capacity on a voluntary basis.
(e) The commission, through its staff, an independent procurement review group consisting of representatives from each classification of load-serving entities, and an independent evaluator, shall review the authority’s proposed selection of resources from its competitive solicitation and make recommendations not later than September 30 of each year.
(f) The commission shall hear and adjudicate complaints by load-serving entities or their customers against the authority for its failure to comply with this division or any implementing protocols or rules adopted pursuant to this division.

CHAPTER  5. Cost Recovery

3440.
 (a) By October 31, 2021, the commission shall adopt a methodology for the authority to recover its costs from load-serving entities. Those costs shall be allocated as follows:
(1) Procurement costs for each of system, local, and flexible capacity shall be allocated to each load-serving entity by proceeding as follows:
(A) Calculate the load-serving entity’s load capacity share of the actual collective resource adequacy requirement reduced by the load-serving entity’s shown resource adequacy, broken out into system, local, and flexible capacity.
(B) Determine the authority’s weighted average purchase prices for each of system, local, and flexible capacity, each by product type and by area and subarea as defined in the local capacity studies of the Independent System Operator.
(C) Multiply each of the amounts determined pursuant to subparagraph (A) by the respective weighted average purchase prices determined pursuant to subparagraph (B).
(D) Calculate the sum of the amounts determined pursuant to subparagraph (C).
(2) (A) Except as provided in subparagraph (B), ongoing administrative costs shall be allocated to load-serving entities based on the proportion of procurement undertaken by the authority to fulfill each load-serving entity’s share of the residual resource adequacy requirement.
(B) Up to 20 percent of the annual administrative costs may be allocated to all load-serving entities based on their shares of the collective resource adequacy requirement.
(b) The authority shall track all of its cost obligations, including its administrative, overhead, transaction, and procurement costs. All contracts containing procurement costs for which the authority seeks recovery shall be made publicly available within one year of contract execution.
(c) Costs shall be recovered by the authority through direct billing to load-serving entities.
(d) All load-serving entities that rely on the billing process of an electrical corporation to recover the costs of their services shall recover the costs of shown resource adequacy and resource adequacy capacity procured on their behalf by the authority through the generation component of their customers’ bills using a self-determined, reasonable allocation methodology.

CHAPTER  6. Program Review

3450.
 (a) Notwithstanding Section 10231.5 of the Government Code, within three months of the end of each reliability year, the commission, in coordination with the authority, the Independent System Operator, and the Energy Commission, shall submit to the Legislature pursuant to Section 9795 of the Government Code a report on the effectiveness of the authority’s procurement activities in addressing reliability concerns and the cost-effectiveness of those activities.
(b) (1) By January 1, 2028, the commission, in coordination with the authority, the Independent System Operator, and the Energy Commission, shall submit a report to the Legislature pursuant to Section 9795 of the Government Code a report evaluating the continued need for the authority.
(2) Pursuant to Section 10231.5 of the Government Code, this subdivision shall become inoperative on January 1, 2032.

SECTION 1.Division 1.6 (commencing with Section 3400) is added to the Public Utilities Code, to read:
1.6.Residual Resource Adequacy Centralized Procurement
3400.

It is the intent of the Legislaure to establish a residual resource adequacy centralized procurement structure in California to help ensure the reliability of the state’s electrical system.