Today's Law As Amended


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SB-527 Neighborhood Decarbonization Program.(2023-2024)



As Amends the Law Today


SECTION 1.
 (a) The Legislature finds and declares all of the following:
(1) In California, buildings are responsible for 25 percent of all emissions and 13 percent of all direct emissions of greenhouse gases, which contribute to indoor and outdoor pollution.
(2) Building decarbonization should prioritize high road jobs for workers and prioritize benefits to disadvantaged and low-income communities.
(3) There are a range of technologies that can achieve deep emission reductions in buildings, including advanced energy efficiency technologies, clean heating technologies, and demand and load management strategies.
(4) Research has shown that targeted decarbonization can provide a potential decarbonization strategy that both reduces emissions and can provide greater gas rate stability for utility customers.
(5) Despite the favorable economics of targeted decarbonization, regulatory and financial challenges have impeded California from exploring and scaling targeted decarbonization efforts.
(6) It is essential to enable cost-effective decarbonization strategies, such as targeted decarbonization, to achieve California’s greenhouse gas emissions reduction target.
(7) Closed-loop energy networks consist of pipe loops between multiple buildings and energy sources carrying water at ambient temperature. Building owners can connect to the ambient temperature loops with water source heat pumps installed within the building, which can be used for heating and cooling and hot water services.
(8) Advanced heat-pump technologies can maximize greenhouse gas emissions reduction in cooling and heating systems for buildings that deploy closed-looped or other onsite or district energy networks and provide jobs for a skilled workforce.
(9) Network geothermal, thermal energy network, and closed-loop energy systems have the potential to decarbonize buildings at the community and utility-scale level and would assist in achieving California’s 2045 carbon neutrality goal.
(b) It is the intent of the Legislature that the Public Utilities Commission allow gas corporations to deploy no more than 15 limited and targeted pilot projects to decommission portions of the natural gas corporation distribution system.
(c) It is further the intent of the Legislature that pilot projects authorized by the Public Utilities Commission will provide lessons, including by identifying, documenting, and reporting on key challenges and successes, hurdles to customer participation, cost and affordability implications, customer satisfaction, and other outcomes concerning natural gas distribution system decommissioning and electrification.

SEC. 2.

 Section 451.6 is added to the Public Utilities Code, to read:

451.6.
 (a) Notwithstanding any other law, a gas corporation may cease providing service in an area within its service territory where a pilot project authorized under the Neighborhood Decarbonization Program (Chapter 8.8 (commencing with Section 1650)) has been implemented, if the commission determines that adequate substitute energy service is reasonably available to support the energy end use of affected gas corporation customers.
(b) (1) In determining what constitutes adequate substitute energy service and when the substitute energy service is reasonably available, the commission shall adopt guidelines necessary to ensure the rates for substitution of energy service for low-income customers and renters are just and reasonable.
(2) The commission shall authorize gas corporations to recover the undepreciated costs of any gas plant or asset, including the cost to retire the gas plant or asset that will no longer be used and useful. The commission shall determine the just and reasonable recovery of those costs, including the period over which the undepreciated costs are recovered so as to minimize impacts to remaining gas distribution system customers.

SEC. 3.

 Chapter 8.8 (commencing with Section 1650) is added to Part 1 of Division 1 of the Public Utilities Code, to read:

CHAPTER  8.8. Neighborhood Decarbonization Program
1650.
 For purposes of this chapter, the following definitions apply:
(a) “Disadvantaged community” means a community identified as a disadvantaged community pursuant to Section 39711 of the Health and Safety Code.
(b) “Neighborhood Decarbonization Program” or “program” means the program developed pursuant to Section 1651.
(c) “Low-income community” means a geographic area in which at least 50 percent of households have an income less than 80 percent of the area median gross income.
(d) “Targeted decarbonization” means geographically targeted decommissioning of a portion of the gas system with an intent to decarbonize buildings and to reduce gas corporation capital costs, operational costs, or both of those costs, done in coordination with the decarbonization of affected buildings.
1651.
 (a) The commission, in consultation with each of the state’s three largest gas corporations, shall develop and supervise the administration of the Neighborhood Decarbonization Program to facilitate the cost-effective decarbonization of targeted natural gas zones, not to exceed 15 pilot projects across the state and affecting no more than 1 percent of each gas corporation’s customers, with the intent to provide benefits that include, but are not limited to, reduced emissions of greenhouse gases and air pollution, the maintenance of reliable, safe, and resilient energy service, and the maintenance of rate affordability for California gas customers, and with the intent to decommission gas assets in zones with the highest community burdens and those that would result in the highest projected ratepayer cost savings.
(b) In implementing the program, the commission shall coordinate with electrical corporations, publicly owned electric utilities, load-serving entities, local governments, and core transport agents.
(c) The commission, in a new or existing proceeding, shall develop the roles, responsibilities, timelines, and processes for determining whether gas service may be discontinued to one or more gas customers as a part of the Neighborhood Decarbonization Program to promote decarbonization because adequate substitute energy service, as determined pursuant to Section 451.6, is reasonably available to support the energy end use of affected gas corporation customers.
1652.
 The commission, in collaboration with each of the state’s three largest gas corporations, shall adopt guidelines and regulations for the program that include all of the following:
(a) A process for gas corporations to determine and submit eligible targeted decarbonization zones and the requirements and standards for determining cost-effectiveness of decarbonization projects as compared to the replacement, repair, or continued operation of the affected gas system.
(b) A requirement that no less than 67 percent of the affected gas distribution customers within the Neighborhood Decarbonization Program targeted project area provide consent to participate in the program. The commission shall establish the manner in which consent shall be received and notifications about the project shall be provided to affected customers.
(c) Requirements for addressing master-metered properties to ensure tenants receive adequate notification and engagement.
(d) The process and metrics used for evaluating success of the program.
(e) (1) Eligible program-related costs, including, but not limited to, outreach, design, planning, demonstration, implementation, and technical assistance.
(2) The commission shall prohibit a gas corporation from recovering behind-the-meter costs associated with the pilot projects as capital costs that are afforded a rate of return.
(f) A requirement that eligible projects are those where the cost of decarbonization is less than avoided gas asset replacement, repair, or operational costs, such that decarbonization represents a cost-effective alternative to continued gas asset use.
(g) Preference for projects that serve a large percentage of low-income individuals or households, defined as those customers who are eligible to receive a CARE discount pursuant to Section 739.1.
(h) Preference for projects that provide prevailing wage and use high road job programs.
(i) Priority for a minimum of one networked geothermal, thermal energy network, or closed-loop energy network system project in each of the state’s three largest gas corporations’ service territories.
(j) Preference for projects that partner with other state and federal funding programs, including, but not limited to, the California Schools Healthy Air, Plumbing, and Efficiency Program, federal programs administered by the United States Department of Energy, and programs funded by the federal Inflation Reduction Act of 2022 (Public Law 117-169).
(k) Authorization for cost recovery for only those costs related to the 15 pilot projects of the program that are deemed just and reasonable.
1653.
 (a) The commission shall coordinate with the Strategic Growth Council, the Governor’s Office of Business and Economic Development, the Energy Commission, gas corporations, and relevant federal agencies to identify third-party funding, such as state and federal funds, that may be used to establish and implement the program, including the use of external funding to execute projects that would be cost effective with supplemental nonratepayer funding.
(b) The commission shall seek to reduce the initial costs of the program by maximizing the use of appropriate third-party funding, such as state and federal incentive and financing funding.
1654.
 (a) (1) Beginning January 1, 2029, the commission, in a new proceeding, shall review the efficacy of the program in providing benefits to gas customers and in assisting the state in meeting the state’s climate change goals.
(2) On or before March 1, 2030, the commission shall submit to the relevant policy committees of the Legislature a report on the review performed pursuant to paragraph (1).
(b) Beginning March 1, 2025, and by March 1 of each year thereafter, the commission shall submit a progress report to the relevant policy committees of the Legislature summarizing the findings of the program, including the locations of the projects, the number of customers affected, the costs of the program, the funding used to pay for the program, any assistance provided to customers, and any outcomes, challenges, and recommendations.
1655.
 (a) Except for subdivision (a) of Section 1654, this chapter shall become inoperative on January 1, 2030.
(b) This chapter is repealed on January 1, 2031.
SEC. 4.
 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.