Bill Text

Bill Information

PDF |Add To My Favorites |Track Bill | print page

SB-350 Electricity: resource adequacy: multiyear centralized resource adequacy mechanism.(2019-2020)

SHARE THIS:share this bill in Facebookshare this bill in Twitter
Date Published: 02/19/2019 09:00 PM
SB350:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 350


Introduced by Senator Hertzberg

February 19, 2019


An act to amend Sections 365.1 and 380 of the Public Utilities Code, relating to electricity.


LEGISLATIVE COUNSEL'S DIGEST


SB 350, as introduced, Hertzberg. Electricity: resource adequacy: multiyear centralized resource adequacy mechanism.
Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations. Existing law requires the commission, in consultation with the Independent System Operator, to establish resource adequacy requirements for all load-serving entities, including electrical corporations, electric service providers, and community choice aggregators, in accordance with specified objectives. Existing law further requires each load-serving entity to maintain physical generating capacity adequate to meet its load requirements, including peak demand and planning and operating reserves, deliverable to locations and at times as may be necessary to provide reliable electric service. Existing law authorizes the commission to consider a centralized resource adequacy mechanism, among other options, to most efficiently and equitably meet specified resource adequacy objectives.
This bill would authorize the commission to consider a multiyear centralized resource adequacy mechanism, among other options, to most efficiently and equitably meet specified resource adequacy objectives.
Existing law requires the 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.
If the commission authorizes or orders an electrical corporation to obtain generation resources that the commission determines are needed to meet system or local area reliability needs for the benefit of all customers in the electrical corporation’s distribution service territory, existing law requires the commission to ensure that the net capacity costs of those generation resources are allocated on a fully nonbypassable basis consistent with specified departing load provisions and to ensure that those resources meet a system or local reliability need in a manner that benefits all customers of the electrical corporation. Existing law suspends this latter requirement if the commission approves a centralized resource adequacy mechanism.
This bill would suspend this requirement if the commission approves a multiyear resource adequacy mechanism, and only if the mechanism, does not include a central procurement entity.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 365.1 of the Public Utilities Code is amended to read:

365.1.
 (a) Except as expressly authorized by this section, and subject to the limitations in subdivisions (b) and (c), the right of retail end-use customers pursuant to this chapter to acquire service from other providers is suspended until the Legislature, by statute, lifts the suspension or otherwise authorizes direct transactions. For purposes of this section, “other provider” means any person, corporation, or other entity that is authorized to provide electric service within the service territory of an electrical corporation pursuant to this chapter, and includes an aggregator, broker, or marketer, as defined in Section 331, and an electric service provider, as defined in Section 218.3. “Other provider” does not include a community choice aggregator, as defined in Section 331.1, and the limitations in this section do not apply to the sale of electricity by “other providers” to a community choice aggregator for resale to community choice aggregation electricity consumers pursuant to Section 366.2.
(b) The commission shall allow individual retail nonresidential end-use customers to acquire electric service from other providers in each electrical corporation’s distribution service territory, up to a maximum allowable total kilowatthours annual limit. The maximum allowable annual limit shall be established by the commission for each electrical corporation at the maximum total kilowatthours supplied by all other providers to distribution customers of that electrical corporation during any sequential 12-month period between April 1, 1998, and the effective date of this section. Within six months of the effective date of this section, or by July 1, 2010, whichever is sooner, the commission shall adopt and implement a reopening schedule that commences immediately and will phase in the allowable amount of increased kilowatthours over a period of not less than three years, and not more than five years, raising the allowable limit of kilowatthours supplied by other providers in each electrical corporation’s distribution service territory from the number of kilowatthours provided by other providers as of the effective date of this section, to the maximum allowable annual limit for that electrical corporation’s distribution service territory. The commission shall review and, if appropriate, modify its currently effective rules governing direct transactions, but that review shall not delay the start of the phase-in schedule.
(c) Once the commission has authorized additional direct transactions pursuant to subdivision (b), it shall do both of the following:
(1) Ensure that other providers are subject to the same requirements that are applicable to the state’s three largest electrical corporations under any programs or rules adopted by the commission to implement the resource adequacy provisions of Section 380, the renewables portfolio standard provisions of Article 16 (commencing with Section 399.11), and the requirements for the electricity sector adopted by the State Air Resources Board pursuant to the California Global Warming Solutions Act of 2006 (Division 25.5 (commencing with Section 38500) of the Health and Safety Code). This requirement applies notwithstanding any prior decision of the commission to the contrary.
(2) (A) Ensure that, in the event that the commission authorizes, in the situation of a contract with a third party, or orders, in the situation of utility-owned generation, an electrical corporation to obtain generation resources that the commission determines are needed to meet system or local area reliability needs for the benefit of all customers in the electrical corporation’s distribution service territory, the net capacity costs of those generation resources are allocated on a fully nonbypassable basis consistent with departing load provisions as determined by the commission, to all of the following:
(i) Bundled service customers of the electrical corporation.
(ii) Customers that purchase electricity through a direct transaction with other providers.
(iii) Customers of community choice aggregators.
(B) If the commission authorizes or orders an electrical corporation to obtain generation resources pursuant to subparagraph (A), the commission shall ensure that those resources meet a system or local reliability need in a manner that benefits all customers of the electrical corporation. The commission shall allocate the costs of those generation resources to ratepayers in a manner that is fair and equitable to all customers, whether they receive electric service from the electrical corporation, a community choice aggregator, or an electric service provider.
(C) The resource adequacy benefits of generation resources acquired by an electrical corporation pursuant to subparagraph (A) shall be allocated to all customers who pay their net capacity costs. Net capacity costs shall be determined by subtracting the energy and ancillary services value of the resource from the total costs paid by the electrical corporation pursuant to a contract with a third party or the annual revenue requirement for the resource if the electrical corporation directly owns the resource. An energy auction shall not be required as a condition for applying this allocation, but may be allowed as a means to establish the energy and ancillary services value of the resource for purposes of determining the net costs of capacity to be recovered from customers pursuant to this paragraph, and the allocation of the net capacity costs of contracts with third parties shall be allowed for the terms of those contracts.
(D) It is the intent of the Legislature, in enacting this paragraph, to provide additional guidance to the commission with respect to the implementation of subdivision (g) of Section 380, as well as to ensure that the customers to whom the net costs and benefits of capacity are allocated are not required to pay for the cost of electricity they do not consume.
(d) (1) If the commission approves a multiyear centralized resource adequacy mechanism pursuant to subdivisions (h) and (i) of Section 380, upon the implementation of the multiyear centralized resource adequacy mechanism the requirements of paragraph (2) of subdivision (c) shall be suspended. suspended if the mechanism does not include a central procurement entity. If the commission later orders that electrical corporations load-serving entities cease procuring capacity through a centralized resource adequacy mechanism, the requirements of paragraph (2) of subdivision (c) shall again apply.
(2) If the use of a multiyear centralized resource adequacy mechanism is authorized by the commission and has been implemented as set forth in paragraph (1), the net capacity costs of generation resources that the commission determines are required to meet urgent system or urgent local grid reliability needs, and that the commission authorizes to be procured outside of the Section 380 or Section 454.5 processes, shall be recovered according to the provisions of paragraph (2) of subdivision (c).
(3) Nothing in this subdivision supplants the resource adequacy requirements of Section 380 or the resource procurement procedures established in Section 454.5.
(e) On or before June 1, 2019, the commission shall issue an order regarding direct transactions that provides as follows:
(1) Increase the maximum allowable total kilowatthours annual limit by 4,000 gigawatthours and apportion that increase among the service territories of the electrical corporations.
(2) All residential and nonresidential customer accounts that are on direct access as of January 1, 2019, remain authorized to participate in direct transactions.

(e)

(f) (1) On or before June 1, 2020, the commission shall provide recommendations to the Legislature on implementing a further direct transactions reopening schedule, including, but not limited to, the phase-in period over which the further direct transactions shall occur for all remaining nonresidential customer accounts in each electrical corporation’s service territory.
(2) In developing the recommendations pursuant to subdivision (f), paragraph (1), the commission shall find all of the following:
(A) The recommendations are consistent with the state’s greenhouse gas emission reduction goals.
(B) The recommendations do not increase criteria air pollutants and toxic air contaminants.
(C) The recommendations ensure electric system reliability.
(D) The recommendations do not cause undue shifting of costs to bundled service customers of an electrical corporation or to direct transaction customers.
(3) (A) The recommendations shall be provided in compliance with Section 9795 of the Government Code.
(B) Pursuant to Section 10231.5 of the Government Code, this subdivision is inoperative on June 1, 2024.

SEC. 2.

 Section 380 of the Public Utilities Code is amended to read:

380.
 (a) The commission, in consultation with the Independent System Operator, shall establish resource adequacy requirements for all load-serving entities.
(b) In establishing resource adequacy requirements, the commission shall ensure the reliability of electrical service in California while advancing, to the extent possible, the state’s goals for clean energy, reducing air pollution, and reducing emissions of greenhouse gases. The resource adequacy program shall achieve all of the following objectives:
(1) Facilitate development of new generating, nongenerating, and hybrid capacity and retention of existing generating, nongenerating, and hybrid capacity that is economic and needed.
(2) Establish new or maintain existing demand response products and tariffs that facilitate the economic dispatch and use of demand response that can either meet or reduce an electrical corporation’s resource adequacy requirements, as determined by the commission.
(3) Equitably allocate the cost of generating capacity and demand response in a manner that prevents the shifting of costs between customer classes.
(4) Minimize enforcement requirements and costs.
(5) Maximize the ability of community choice aggregators to determine the generation resources used to serve their customers.
(c) Each load-serving entity shall maintain physical generating capacity and electrical demand response adequate to meet its load requirements, including, but not limited to, peak demand and planning and operating reserves. The generating capacity or electrical demand response shall be deliverable to locations and at times as may be necessary to maintain electrical service system reliability, local area reliability, and flexibility.
(d) Each load-serving entity shall, at a minimum, meet the most recent minimum planning reserve and reliability criteria approved by the Board of Directors of the Western Systems Coordinating Council or the Western Electricity Coordinating Council.
(e) The commission shall implement and enforce the resource adequacy requirements established in accordance with this section in a nondiscriminatory manner. Each load-serving entity shall be subject to the same requirements for resource adequacy and the renewables portfolio standard program that are applicable to electrical corporations pursuant to this section, or otherwise required by law, or by order or decision of the commission. The commission shall exercise its enforcement powers to ensure compliance by all load-serving entities.
(f) The commission shall require sufficient information, including, but not limited to, anticipated load, actual load, and measures undertaken by a load-serving entity to ensure resource adequacy, to be reported to enable the commission to determine compliance with the resource adequacy requirements established by the commission.
(g) An electrical corporation’s costs of meeting or reducing resource adequacy requirements, including, but not limited to, the costs associated with system reliability, local area reliability, and flexibility, that are determined to be reasonable by the commission, or are otherwise recoverable under a procurement plan approved by the commission pursuant to Section 454.5, shall be fully recoverable from those customers on whose behalf the costs are incurred, as determined by the commission, at the time the commitment to incur the cost is made, on a fully nonbypassable basis, as determined by the commission. The commission shall exclude any amounts authorized to be recovered pursuant to Section 366.2 when authorizing the amount of costs to be recovered from customers of a community choice aggregator or from customers that purchase electricity through a direct transaction pursuant to this subdivision.
(h) The commission shall determine and authorize the most efficient and equitable means for achieving all of the following:
(1) Meeting the objectives of this section.
(2) Ensuring that investment is made in new generating capacity.
(3) Ensuring that existing generating capacity that is economic is retained.
(4) Ensuring that the cost of generating capacity and demand response is allocated equitably.
(5) Ensuring that community choice aggregators can determine the generation resources used to serve their customers.
(6) Ensuring that investments are made in new and existing demand response resources that are cost effective and help to achieve electrical grid reliability and the state’s goals for reducing emissions of greenhouse gases.
(7) Minimizing the need for backstop procurement by the Independent System Operator.
(i) In making the determination pursuant to subdivision (h), the commission may consider a multiyear centralized resource adequacy mechanism among other options.
(j) The commission shall ensure appropriate valuation of both supply and load modifying demand response resources. The commission, in an existing or new proceeding, shall establish a mechanism to value load modifying demand response resources, including, but not limited to, the ability of demand response resources to help meet distribution needs and transmission system needs and to help reduce a load-serving entity’s resource adequacy obligation pursuant to this section. In determining this value, the commission shall consider how these resources further the state’s electrical grid reliability and the state’s goals for reducing emissions of greenhouse gases. The commission, Energy Commission, and Independent System Operator shall jointly ensure that changes in demand caused by load modifying demand response are expeditiously and comprehensively reflected in the Energy Commission’s Integrated Energy Policy Report forecast, as well as in planning proceedings and associated analyses, and shall encourage reflection of these changes in demand in the operation of the grid.
(k) For purposes of this section, “load-serving entity” means an electrical corporation, electric service provider, or community choice aggregator. “Load-serving entity” does not include any of the following:
(1) A local publicly owned electric utility.
(2) The State Water Resources Development System commonly known as the State Water Project.
(3) Customer generation located on the customer’s site or providing electric service through arrangements authorized by Section 218, if the customer generation, or the load it serves, meets one of the following criteria:
(A) It takes standby service from the electrical corporation on a commission-approved rate schedule that provides for adequate backup planning and operating reserves for the standby customer class.
(B) It is not physically interconnected to the electrical transmission or distribution grid, so that, if the customer generation fails, backup electricity is not supplied from the electrical grid.
(C) There is physical assurance that the load served by the customer generation will be curtailed concurrently and commensurately with an outage of the customer generation.