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AB-1088 California Procurement Authority.(2021-2022)



Current Version: 02/18/21 - Introduced Compare Versions information image


AB1088:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1088


Introduced by Assembly Member Mayes

February 18, 2021


An act to amend Section 387 of, to add Section 913.13 to, and to add Article 4.5 (commencing with Section 357) to Chapter 2.3 of Part 1 of Division 1 of, the Public Utilities Code, relating to electricity.


LEGISLATIVE COUNSEL'S DIGEST


AB 1088, as introduced, Mayes. California Procurement Authority.
Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations. The California Constitution authorizes the commission to fix the rates and establish rules for all public utilities, subject to control by the Legislature. The California Constitution provides that the Legislature has plenary authority, unlimited by the other provisions of the constitution, to confer additional authority upon the commission that is cognate and germane to the regulation of public utilities.
Existing law requires the commission, in consultation with the Independent System Operator, to establish resource adequacy requirements for all load-serving entities, defined to include electrical corporations, community choice aggregators, and electric service providers. That law requires each load-serving entity to maintain physical generating capacity and electrical demand response adequate to meet its electrical demand requirements. In establishing resource adequacy requirements, the commission is required to ensure the reliability of electrical service while advancing, to the extent possible, the state’s goals for clean energy, reducing air pollution, and reducing emissions of greenhouse gases. Existing law requires that the resource adequacy program achieve specified objectives.
Existing law requires the commission to adopt a process for each load-serving entity to file an integrated resource plan and a schedule for periodic updates to the plan to ensure that load-serving entities accomplish specified objectives. Existing law requires each load-serving entity to prepare and file an integrated resource plan consistent with those objectives on a time schedule directed by the commission and subject to commission review.
Existing law provides that an electrical corporation is the provider of last resort, as defined, in its service territory unless provided otherwise in a service territory boundary agreement approved by the commission or unless the commission designates a load-serving entity other than the electrical corporation to serve as the provider of last resort for all or a portion of that service territory pursuant to a joint application of the electrical corporation and the load-serving entity. Existing law establishes requirements for a load-serving entity other than the electrical corporation to serve as the provider of last resort. Existing law requires the commission to supervise and regulate each provider of last resort, as necessary, as a public utility for the services it provides as a provider of last resort to ensure the provision of electrical service to customers without disruption, and provides that each provider of last resort is a public utility subject to the jurisdiction, control, and regulation of the commission, as specified.
This bill would establish the California Procurement Authority as a central procurement entity to ensure that load-serving entities collectively have adequate electrical resources, both in the short run and long run, as are necessary to ensure resource adequacy and to achieve the purposes of the integrated resource planning process. The bill would require the commission, in consultation with the Independent System Operator and the Office of the Ratepayer Advocate, to develop an implementing framework for the authority through a public process by January 1, 2023, and would require the commission to ensure that the authority is operational by January 1, 2024. The bill would require the authority to procure electrical resources to meet the collective procurement needs identified by the commission pursuant to the resource adequacy and integrated resource planning statutes that are not fulfilled by self-procurement by load-serving entities whether because a load-serving entity elected to not procure their proportionate share of those resource requirements identified by the commission or because they are unable to procure sufficient resources to meet their proportionate share of those requirements. If an electrical corporation voluntarily elects to cease procuring electricity to serve the bundled service customers in its service territory, or otherwise is unable to serve its bundled service customers, the bill would require the authority to serve those customers. The bill would require the authority to serve as the provider of last resort for all customers in an electrical corporation’s distribution service territory, except where the electrical corporation serves as the provider of last resort or where a load-serving entity has been approved by the commission to serve as the provider of last resort. If an electrical corporation voluntarily elects to cease providing electricity to retail customers in its service territory, for any customer not served by a community choice aggregator or an electric service provider, the bill would require that the authority serve as the provider of last resort, except where another load-serving entity is designated by the commission to serve as the provider of last resort.
This bill would require the commission to ensure that the authority complies with its responsibilities as the provider of last resort. The bill would require that an electrical corporation be exclusively responsible for planning, making necessary investments in, and operating the electrical distribution grid in its distribution service territory and, if a distributed energy resource provides distribution grid operations or services on the utility side of the meter, the bill would provide that the distributed energy resource is a part of the electrical distribution grid for these purposes.
This bill would, beginning one year from the establishment of the authority, require the commission, in consultation with the authority, the Independent System Operator, and the State Energy Resources Conservation and Development Commission, to annually submit to the Legislature a report on the effectiveness of the authority’s procurement activities and the cost-effectiveness of those activities.
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   Local Program: YES  

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


SECTION 1.

 The Legislature finds and declares all of the following:
(a) The landscape of retail sellers of electricity, and the volume of electrical load served by each type of retail seller, is changing dramatically and will continue to change rapidly in the next decade.
(b) Electrical corporations historically supplied the majority of the electricity used by retail consumers in California. However, by the mid-2020s, over 85 percent of the electricity used within the service territories of the electrical corporations could be supplied by sources other than electrical corporations, including community choice aggregators, direct access providers, and customer self-generation.
(c) As the providers of last resort in their respective service territories, electrical corporations are currently required to provide as-needed electricity to customers not served with electricity by other providers or by self-generation.
(d) The planning and cost responsibilities attendant to the role of provider of last resort have not been well defined in the context of projected load departure, but are important to clarify in order to maintain safety and ensure cost allocation that preserves customer indifference.
(e) Since 2001, the Public Utilities Commission has relied mainly on its jurisdiction over electrical corporation procurement of electricity to achieve the state’s ambitious environmental goals without sacrificing electrical grid reliability.
(f) Continued state oversight and control of electricity procurement is critical to ensure that the state achieves its goals of (1) procuring 60 percent of retail sales of electricity from eligible renewable energy resources by December 31, 2030, (2) reducing statewide emissions of greenhouse gases by at least 40 percent below the 1990 level by no later than December 31, 2030, and (3) supplying 100 percent of all retail sales of electricity to California end-use customers from eligible renewable energy resources and resources that emit no greenhouse gases when generating electricity by December 31, 2045.
(g) Given increasing fragmentation of the energy market in California, future state oversight and control of electricity procurement will need to encompass a wider set of providers and take into consideration the significantly reduced role of electrical corporations in electricity procurement.
(h) It is the intent of the Legislature to establish a state-level central procurement entity and to provide a mechanism for an electrical corporation to voluntarily elect to transition electricity procurement for its remaining bundled service customers to that entity.
(i) It is the additional intent of the Legislature that the central procurement entity assume responsibility for procurement that the commission has ordered be undertaken by an electrical corporation because the procurement activities of other load-serving entities serving customers within the service territory of that electrical corporation are determined by the commission to be falling short of procurement goals necessary to ensure resource adequacy pursuant to Section 380 of the Public Utilities Code and to achieve the purposes of the integrated resource planning process pursuant to Sections 454.51, 454.52, and 454.54 of the Public Utilities Code.
(j) It is the further intent of the Legislature that the central procurement entity will also serve as the provider of last resort to all customers in an electrical corporation’s distribution service territory if the electrical corporation voluntarily elects to not be the provider of last resort or if the electrical corporation contracts, pursuant to Article 8.5 (commencing with Section 387) of Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code, with a load-serving entity to serve as the provider of last resort in the electrical corporation’s distribution service territory.

SEC. 2.

 Article 4.5 (commencing with Section 357) is added to Chapter 2.3 of Part 1 of Division 1 of the Public Utilities Code, to read:
Article  4.5. California Procurement Authority

357.
 (a) For purposes of this article, the following terms have the following meanings:
(1) “Authority” means the California Procurement Authority.
(2) “Load-serving entity” has the same meaning as defined in Section 380.
(3) “Provider of last resort” has the same meaning as defined in Section 387.
(b) (1) The California Procurement Authority is hereby created as a central procurement entity to ensure that load-serving entities collectively have adequate electrical resources, both in the short run and long run, as are necessary to ensure resource adequacy pursuant to Section 380 and to achieve the purposes of the integrated resource planning process pursuant to Sections 454.51, 454.52, and 454.54.
(2) By January 1, 2023, the commission, in consultation with the Independent System Operator and the Office of the Ratepayer Advocate, shall develop an implementing framework for the authority pursuant to this article through a public process.
(3) The commission shall ensure that the authority is operational by January 1, 2024.
(c) The authority shall procure electrical resources to meet the collective procurement needs identified by the commission pursuant to Sections 380, 454.51, 454.52, and 454.54 that are not fulfilled by self-procurement by load-serving entities whether because a load-serving entity elected to not procure their proportionate share of those resource requirements identified by the commission or because they are unable to procure sufficient resources to meet their proportionate share of those requirements.
(d) The authority shall serve as the provider of last resort for all customers in an electrical corporation’s distribution service territory, except where the electrical corporation serves as the provider of last resort or where a load-serving entity has been approved by the commission to serve as the provider of last resort pursuant to Article 8.5 (commencing with Section 387). As the provider of last resort, the authority shall do all of the following:
(1) Comply with all legal and regulatory requirements as a load-serving entity, subject to the commission’s jurisdiction and authority, including meeting the renewables portfolio standard pursuant to Article 16 (commencing with Section 399.11), meeting the resource adequacy requirements established by the commission pursuant to Section 380, and meeting the integrated resources planning requirements established by the commission pursuant to Sections 454.51, 454.52, and 454.54.
(2) Allow community choice aggregation and allow customers to elect to receive electric service from a community choice aggregator.
(3) Allow noncore customers to enter into direct transactions for electric service when authorized to do so pursuant to Section 365.1.
(e) The authority shall create a separate internal division to serve as the primary load-serving entity for any customers within an electrical corporation’s distribution service territory that are not served by a community choice aggregator or an electric service provider. If an electrical corporation voluntarily elects to cease procuring electricity to serve the bundled service customers in its service territory, or otherwise be unable to serve its bundled service customers, the authority shall serve those customers.
(f) Upon assuming responsibility for electric service procurement, the authority shall be subject to the requirements imposed on the load-serving entity by the commission.
(g) An electrical corporation shall be exclusively responsible for planning, making necessary investments in, and operating the electrical distribution grid in its distribution service territory, including owning, controlling, managing, maintaining, engineering, designing, and constructing the electrical distribution grid on the utility side of customer meters, or, at the electrical corporation’s option, to contract for these grid services from a third party. A distributed energy resource that provides distribution grid operations or services on the utility side of the meter is a part of the electrical distribution grid for these purposes.

357.2.
 (a) The commission shall direct the authority, in exercising its procurement authority, to achieve all of the following objectives:
(1) Maintain reliability of the electrical grid system by ensuring sufficient procurement or development of system, local, and flexible resource adequacy resources.
(2) Procure electrical resources to meet the collective procurement needs identified by the commission pursuant to Sections 380, 454.51, 454.52, and 454.54 that are not fulfilled by self-procurement by load-serving entities.
(3) Ensure, in coordination with the commission, the Energy Commission, and the Independent System Operator, that new resources needed to meet collective short- and long-term reliability needs are identified and their development supported.
(4) Promote economically efficient mitigation or elimination of system and local capacity area constraints through the development of effective clean energy supply, demand response, energy storage solutions, or through new or expanded transmission.
(5) Allocate equitably the costs of meeting collective short- and long-term reliability needs to load-serving entities or customers based on principles of cost causation.
(b) If an electrical corporation voluntarily elects to cease providing electricity to retail customers in its service territory, for any customer not served by a community choice aggregator or an electric service provider, the authority shall serve as the provider of last resort, except where another load-serving entity is designated by the commission to serve as the provider of last resort pursuant to Article 8.5 (commencing with Section 387). The commission shall ensure that the authority complies with its responsibilities as the provider of last resort.
(c) The commission shall ensure that the authority, in procuring resources, complies with the requirements of a retail seller pursuant to the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11)) and the requirements of a load-serving entity pursuant to the resource adequacy requirements of Section 380 and the integrated resource planning requirements established by the commission pursuant to Sections 454.51, 454.52, and 454.54.

357.4.
 (a) The authority shall separately track and recover directly from its retail customers administrative, overhead, transaction, and procurement costs related to its provision of electric service as a load-serving entity.
(b) Costs for serving as the provider of last resort shall be recovered by the authority through direct billing to the customers receiving provider of last resort services.
(c) The authority’s retail customer rates shall not be subject to cost shifts due to customer load migration consistent with Section 365.2.

SEC. 3.

 Section 387 of the Public Utilities Code is amended to read:

387.
 (a) For purposes of this article, the following terms have the following meanings:
(1) “Carbon-free electrical resource” means a source of electrical generation that emits no greenhouse gases when generating electricity that is deliverable to retail end-use customers in California.
(2) “Load-serving entity” has the same meaning as defined in Section 380.
(3) “Provider of last resort” means a load-serving entity that the commission determines meets the minimum requirements of this article and designates to provide electrical service to any retail customer whose service is transferred to the designated load-serving entity because the customer’s load-serving entity failed to provide, or denied, service to the customer customer, opted out of procuring electrical resources for customers pursuant to Article 4.5 (commencing with Section 357), or otherwise failed to meet its obligations. The California Procurement Authority established pursuant to Article 4.5 (commencing with Section 357) may also serve as provider of last resort.
(b) The provider of last resort shall be the electrical corporation in its service territory unless provided otherwise in a service territory boundary agreement entered into pursuant to Article 1 (commencing with Section 8101) of Chapter 6 of Division 4, or unless another load-serving entity is designated by the commission pursuant to subdivision (c) or (d). (d), or the California Procurement Authority established pursuant to Article 4.5 (commencing with Section 357) assumes the provider of last resort role.
(c) The commission may designate a load-serving entity other than the electrical corporation to serve as a provider of last resort in the electrical corporation’s service territory by approving a joint application by the electrical corporation and the load-serving entity that proposes to become the new provider of last resort in the electrical corporation’s service territory. The application may request a transfer of the responsibilities of the provider of last resort for the entire service territory of the electrical corporation or for a portion of that service territory. The application shall include all of the following:
(1) A demonstrated ability by the load-serving entity seeking to become the new provider of last resort to post a bond sufficient to meet the minimum threshold established pursuant to subdivision (e).
(2) A demonstrated history of contracting for electricity and access to carbon-free electrical resources by the load-serving entity seeking to become provider of last resort.
(3) A viable plan for meeting the resource adequacy requirements established pursuant to Section 380, the requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11)), and all other load-serving entity procurement requirements.
(4) A history of the load-serving entity seeking to become the provider of last resort participating in, and complying with the requirements of, the integrated resource planning process pursuant to Sections 454.51, 454.52, and 454.54, and all other load-serving entity procurement requirements.
(5) The full disclosure by the load-serving entity seeking to become the provider of last resort of any fines or penalties imposed by, or violations of law found by, any regulatory body of any state or territory, or the federal government.
(6) A detailed history of the safety record of the load-serving entity seeking to become the provider of last resort.
(7) An implementation plan to provide for universal access, equitable treatment of all classes of customers, and other customer protections including electric service disconnection procedures consistent with Sections 718 and 779.3.
(d) The commission shall develop a process to facilitate a joint application from load-serving entities that are not electrical corporations to request to transfer the responsibilities of the provider of last resort. This process shall apply when one load-serving entity that is not an electrical corporation has already been designated as a provider of last resort, as described in subdivision (c). The commission may approve a joint application by the designated provider of last resort and the load-serving entity that proposes to become the new provider of last resort in the service territory. The application may request a transfer of responsibilities of the provider of last resort for the entire service territory or for a portion of that service territory. The application shall include all of the elements described in subdivision (c). All of the requirements of this article are applicable to the load-serving entity that proposes to become the new provider of last resort in the applicable service territory.
(e) While a load-serving entity is serving as the new provider of last resort pursuant to subdivision (c) or (d), the commission shall not enforce the provider of last resort requirements on the former provider or providers of last resort.
(f) The commission shall develop additional threshold attributes for a load-serving entity other than an electrical corporation to serve as a provider of last resort to retail end-use customers in California that include all of the following:
(1) Minimum insurance requirements.
(2) Minimum financial requirements necessary to provide electricity to retail end-use customers in each service territory.
(3) Compliance with resource adequacy requirements pursuant to Section 380, requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11)), integrated resource planning requirements pursuant to Sections 454.51, 454.52, and 454.54, and all other state-mandated procurement requirements.
(4) Electric service disconnection rules pursuant to Sections 718 and 779.3.
(5) Any additional minimum requirements that the commission determines are needed to ensure that the provider of last resort will perform its obligation to serve.
(g) The commission shall ensure that the provider of last resort for each service territory receives reasonable cost recovery for being designated and serving as a provider of last resort.
(h) To ensure continued achievement of California’s greenhouse gas emission reduction and air quality goals, and continued accounting of emissions of greenhouse gases for California pursuant to Part 2 (commencing with Section 38530) of Division 25.5 of the Health and Safety Code and other emissions reporting programs, in preparation for an unplanned customer migration to a provider of last resort, the commission, in consultation with the Energy Commission, may do both of the following:
(1) Establish rules for all load-serving entities in preparation of any potentially large and unplanned customer migration.
(2) Recommend to agencies modifications to relevant regulations.
(i) Notwithstanding any other law, electrical corporations shall continue to provide all metering, billing, and collection to retail customers served by the provider of last resort. Bills sent by an electrical corporation to retail customers shall identify the designated provider of last resort. The commission shall determine the terms and conditions under which the electrical corporation provides these services to the provider of last resort.
(j) The commission shall supervise and regulate each provider of last resort, as necessary, as a public utility for the services provided by the provider of last resort pursuant to this article to ensure the provision of electrical service to customers without disruption if a load-serving entity fails to provide, or denies, service to any retail end-use customer in California for any reason. The commission may do all things that are necessary and convenient in the exercise of this power.
(k) This section does not limit the authority of the commission to regulate the terms of service or establish requirements for provider of last resort service by an electrical corporation or any new provider of last resort.

SEC. 4.

 Section 913.13 is added to the Public Utilities Code, to read:

913.13.
 Notwithstanding Section 10231.5 of the Government Code, on an annual basis beginning one year from the establishment of the California Procurement Authority pursuant to Article 4.5 (commencing with Section 357) of Chapter 2.3, the commission, in consultation with the California Procurement Authority, the Independent System Operator, and the Energy Commission, shall submit to the Legislature a report on the effectiveness of the authority’s procurement activities and the cost-effectiveness of those activities.

SEC. 5.

 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.