BILL NUMBER: AB 1553INTRODUCED BILL TEXT INTRODUCED BY Committee on Utilities and Commerce (Fuentes (Chair), Duvall (Vice Chair), Blakeslee, Buchanan, Carter, Fong, Furutani, Huffman, Krekorian, Smyth, and Torrico) MARCH 10, 2009 An act to amend Section 44273 of the Health and Safety Code, to amend Sections 25620.1, 25620.2, 25620.6, 25620.7, and 25620.15 of the Public Resources Code, and to amend Sections 381, 384, 399, 890, and 895 of the Public Utilities Code, relating to energy. LEGISLATIVE COUNSEL'S DIGEST AB 1553, as introduced, Committee on Utilities and Commerce. Public interest energy research. Existing law requires the State Energy Resources Conservation and Development Commission to develop, implement, and administer a program, titled the Public Interest Energy Research, Development, and Demonstration Program, to include a full range of research, development, and demonstration activities that are not adequately provided for by competitive and regulated energy markets. Certain statutes, however, refer to the program as the Public Interest Research, Development, and Demonstration Program and the fund established for implementation and administration of the program is the Public Interest Research, Development, and Demonstration Fund. This bill would change statutory references to the program to refer to it as the Public Interest Energy Research, Development, and Demonstration Program and would change the name of the fund established for implementation and administration of the program to the Public Interest Energy Research, Development, and Demonstration Fund. Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 44273 of the Health and Safety Code is amended to read: 44273. (a) The Alternative and Renewable Fuel and Vehicle Technology Fund is hereby created in the State Treasury, to be administered by the commission. The moneys in the fund, upon appropriation by the Legislature, shall be expended by the commission to implement the Alternative and Renewable Fuel and Vehicle Technology Program in accordance with this chapter. (b) Notwithstanding any other provision of law, the sum of ten million dollars ($10,000,000) shall be transferred annually from the Public Interest Energy Research, Development, and Demonstration Fund created by Section 384 of the Public Utilities Code to the Alternative and Renewable Fuel and Vehicle Technology Fund. Prior to the award of any funds from this source, the commission shall make a determination that the proposed project will provide benefits to electric or natural gas ratepayers based upon the commission's adopted criteria. (c) Beginning with the integrated energy policy report adopted in 2011, and in the subsequent reports adopted thereafter, pursuant to Section 25302 of the Public Resources Code, the commission shall include an evaluation of research, development, and deployment efforts funded by this chapter. The evaluation shall include all of the following: (1) A list of projects funded by the Alternative and Renewable Fuel and Vehicle Technology Fund. (2) The expected benefits of the projects in terms of air quality, petroleum use reduction, greenhouse gas emissions reduction, technology advancement, and progress towards achieving these benefits. (3) The overall contribution of the funded projects toward promoting a transition to a diverse portfolio of clean, alternative transportation fuels and reduced petroleum dependency in California. (4) Key obstacles and challenges to meeting these goals identified through funded projects. (5) Recommendations for future actions. SEC. 2. Section 25620.1 of the Public Resources Code is amended to read: 25620.1. (a) The commission shall develop, implement, and administer the Public Interest Energy Research, Development, and Demonstration Program that is hereby created. The program shall include a full range of research, development, and demonstration activities that, as determined by the commission, are not adequately provided for by competitive and regulated markets. The commission shall administer the program consistent with the policies of this chapter. (b) The general goal of the program is to develop, and help bring to market, energy technologies that provide increased environmental benefits, greater system reliability, and lower system costs, and that provide tangible benefits to electric utility customers through the following investments: (1) Advanced transportation technologies that reduce air pollution and greenhouse gas emissions beyond applicable standards, and that benefit electricity and natural gas ratepayers. (2) Increased energy efficiency in buildings, appliances, lighting, and other applications beyond applicable standards, and that benefit electric utility customers. (3) Advanced electricity generation technologies that exceed applicable standards to increase reductions in greenhouse gas emissions from electricity generation, and that benefit electric utility customers. (4) Advanced electricity technologies that reduce or eliminate consumption of water or other finite resources, increase use of renewable energy resources, or improve transmission or distribution of electricity generated from renewable energy resources. (c) To achieve the goals established in subdivision (b), the commission shall adopt a portfolio approach for the program that does all of the following: (1) Effectively balances the risks, benefits, and time horizons for various activities and investments that will provide tangible energy or environmental benefits for California electricity customers. (2) Emphasizes innovative energy supply and end use technologies, focusing on their reliability, affordability, and environmental attributes. (3) Includes projects that have the potential to enhance transmission and distribution capabilities. (4) Includes projects that have the potential to enhance the reliability, peaking power, and storage capabilities of renewable energy. (5) Demonstrates a balance of benefits to all sectors that contribute to the funding under Section 399.8 of the Public Utilities Code. (6) Addresses key technical and scientific barriers. (7) Demonstrates a balance between short-term, mid-term, and long-term potential. (8) Ensures that prior, current, and future research not be unnecessarily duplicated. (9) Provides for the future market utilization of projects funded through the program. (10) Ensures an open project selection process and encourages the awarding of research funding for a diverse type of research as well as a diverse award recipient base and equally considers research proposals from the public and private sectors. (11) Coordinates with other related research programs. (d) The term "award," as used in this chapter, may include, but is not limited to, contracts, grants, interagency agreements, loans, and other financial agreements designed to fund public interest energy research, demonstration, and development projects or programs. SEC. 3. Section 25620.2 of the Public Resources Code is amended to read: 25620.2. (a) To ensure the efficient implementation and administration of the Public Interest Energy Research, Development, and Demonstration Program, the commission shall do both of the following: (1) Develop procedures for the solicitation of award applications for project or program funding, and to ensure efficient program management. (2) Evaluate and select programs and projects, based on merit, that will be funded under the program. (b) The commission shall adopt regulations to implement the program, in accordance with the following procedures: (1) Prepare a preliminary text of the proposed regulation and provide a copy of the preliminary text to any person requesting a copy. (2) Provide public notice of the proposed regulation to any person who has requested notice of the regulations prepared by the commission. The notice shall contain all of the following: (A) A clear overview explaining the proposed regulation. (B) Instructions on how to obtain a copy of the proposed regulations. (C) A statement that if a public hearing is not scheduled for the purpose of reviewing a proposed regulation, any person may request, not later than 15 days prior to the close of the written comment period, a public hearing conducted in accordance with commission procedures. (3) Accept written public comments for 30 calendar days after providing the notice required in paragraph (2). (4) Certify that all written comments were read and considered by the commission. (5) Place all written comments in a record that includes copies of any written factual support used in developing the proposed regulation, including written reports and copies of any transcripts or minutes in connection with any public hearings on the adoption of the regulation. The record shall be open to public inspection and available to the courts. (6) Provide public notice of any substantial revision of the proposed regulation at least 15 days prior to the expiration of the deadline for public comments and comment period using the procedures provided in paragraph (2). (7) Conduct public hearings, if a hearing is requested by an interested party, that shall be conducted in accordance with commission procedures. (8) Adopt any proposed regulation at a regularly scheduled and noticed meeting of the commission. The regulation shall become effective immediately unless otherwise provided by the commission. (9) Publish any adopted regulation in a manner that makes copies of the regulation easily available to the public. Any adopted regulation shall also be made available on the Internet. The commission shall transmit a copy of an adopted regulation to the Office of Administrative Law for publication, or, if the commission determines that printing the regulation is impractical, an appropriate reference as to where a copy of the regulation may be obtained. (10) Notwithstanding any other provision of law, this subdivision provides an interim exception from the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code for regulations required to implement Sections 25620.1 and 25620.2 that are adopted under the procedures specified in this subdivision. (11) This subdivision shall become inoperative on January 1, 2012, unless a later enacted statute deletes or extends that date. However, after January 1, 2012, the commission is not required to repeat any procedural step in adopting a regulation that has been completed before January 1, 2012, using the procedures specified in this subdivision. SEC. 4. Section 25620.6 of the Public Resources Code is amended to read: 25620.6. The commission, in consultation with the Department of General Services, may purchase insurance coverage necessary to implement an award. Funding for the purchase of insurance may be made from money in the Public Interest Ene rgy Research, Development, and Demonstration Fund created pursuant to Section 384 of the Public Utilities Code. SEC. 5. Section 25620.7 of the Public Resources Code is amended to read: 25620.7. (a) The commission may contract for, or through interagency agreement obtain, technical, scientific, or administrative services or expertise from one or more entities, to support the program. Funding for this purpose shall be made from money in the Public Interest Energy Research, Development, and Demonstration Fund. (b) The commission may select the services or expertise described in subdivision (a), pursuant to Section 25620.5. In the event that contracts or interagency agreements have been made to multiple entities and their subcontractors for similar purposes, the commission may select from among those entities the particular expertise needed for a specified type of work. Selection of the particular expertise may be based solely on a review of qualifications, including the specific expertise required, availability of the expertise, or access to a resource of special relevance to the work, including, but not limited to, a database, model, technical facility, or a collaborative or institutional affiliation that will expedite the quality and performance of the work. SEC. 6. Section 25620.15 of the Public Resources Code is amended to read: 25620.15. (a) In order to ensure that prudent investments in research, development, and demonstration of energy efficient technologies continue to produce substantial economic, environmental, public health, and reliability benefits, it is the policy of the state and the intent of the Legislature that funds made available, upon appropriation, for energy related public interest energy research, development, and demonstration programs shall be used to advance science or technology that is not adequately provided by competitive and regulated markets. (b) Notwithstanding any other provision of law, money collected for public interest energy research, development, and demonstration pursuant to Section 399.8 of the Public Utilities Code shall be transferred to the Public Interest Energy Research, Development, and Demonstration Fund. Money collected between January 1, 2007, and January 1, 2012, shall be used for the purposes specified in this chapter. (c) In lieu of the Public Utilities Commission retaining funds authorized pursuant to Section 381 of the Public Utilities Code for investments made by electrical corporations in public interest energy research, development, and demonstration projects for transmission and distribution functions, up to 10 percent of the funds transferred to the commission pursuant to subdivision (b) shall be awarded to electrical corporations for public interest energy research, development, and demonstration projects for transmission and distribution functions consistent with the policies and subject to the requirements of this chapter. SEC. 7. Section 381 of the Public Utilities Code is amended to read: 381. (a) To ensure that the funding for the programs described in subdivision (b) and Section 382 are not commingled with other revenues, the commission shall require each electrical corporation to identify a separate rate component to collect the revenues used to fund these programs. The rate component shall be a nonbypassable element of the local distribution service and collected on the basis of usage. (b) The commission shall allocate funds collected pursuant to subdivision (a), and any interest earned on collected funds, to programs that enhance system reliability and provide in-state benefits as follows: (1) Cost-effective energy efficiency and conservation activities. (2) Public interest energy research and development not adequately provided by competitive and regulated markets. (3) In-state operation and development of existing and new and emerging eligible renewable energy resources, as defined in Section 399.12. (c) The Public Utilities Commission shall order the respective electrical corporations to collect and spend these funds at the levels and for the purposes required in Section 399.8. (d) Each electrical corporation shall allow customers to make voluntary contributions through their utility bill payments as either a fixed amount or a variable amount to support programs established pursuant to paragraph (3) of subdivision (b). Funds collected by electrical corporations for these purposes shall be forwarded in a timely manner to the appropriate fund as specified by the commission. SEC. 8. Section 384 of the Public Utilities Code is amended to read: 384. (a) Funds transferred to the State Energy Resources Conservation and Development Commission pursuant to this article for purposes of public interest energy research, development, and demonstration shall be transferred to the Public Interest Energy Research, Development, and Demonstration Fund, which is hereby created in the State Treasury. The fund is a trust fund and shall contain money from all interest, repayments, disencumbrances, royalties, and any other proceeds appropriated, transferred, or otherwise received for purposes pertaining to public interest research, development, and demonstration. Any appropriations that are made from the fund shall have an encumbrance period of not longer than two years, and a liquidation period of not longer than four years. (b) Funds deposited in the Public Interest Energy Research, Development, and Demonstration Fund may be expended for projects that serve the energy needs of both stationary and transportation purposes if the research provides an electricity ratepayer benefit. (c) The State Energy Resources Conservation and Development Commission shall report annually to the appropriate budget committees of the Legislature on any encumbrances or liquidations that are outstanding at the time the commission's budget is submitted to the Legislature for review. SEC. 9. Section 399 of the Public Utilities Code is amended to read: 399. (a) This article shall be known, and may be cited, as the Reliable Electric Service Investments Act. (b) The Legislature finds and declares that safe, reliable electric service is of utmost importance to the citizens of this state, and its economy. (c) The Legislature further finds and declares that in order to ensure that the citizens of this state continue to receive safe, reliable, affordable, and environmentally sustainable electric service, it is essential that prudent investments continue to be made in all of the following areas: (1) To protect the integrity of the electric distribution grid. (2) To ensure an adequately sized and trained utility workforce. (3) To ensure cost-effective energy efficiency improvements. (4) To achieve a sustainable supply of renewable energy. (5) To advance public interest energy research, development and demonstration programs not adequately provided by competitive and regulated markets. (d) It is the intent of the Legislature to reaffirm, without requiring revision, California's doctrine, as reflected in regulatory and judicial decisions, regarding electrical corporations' reasonable opportunity to recover costs and investments associated with their electric distribution grid and the reasonable opportunity to attract capital for investment on reasonable terms. (e) The Legislature further finds and declares all of the following: (1) Acting under applicable constitutional and statutory authorities, the Public Utilities Commission and the boards of local publicly owned electric utilities have included in regulated electricity prices, investments that are essential to maintaining system reliability, reducing California electricity users' bills, and mitigating environmental costs of California users' electricity consumption. (2) Among the most important of these "system benefits" investments categories are energy efficiency, renewable energy, and public interest energy research, development and demonstration (RD&D). (3) Energy efficiency investments funded from California's usage-based charges on electricity distribution help improve systemwide reliability by reducing demand in times and areas of system congestion, and at the same time reduce all California electricity users' costs. These investments also significantly reduce environmental costs associated with California's electricity consumption, including, but not limited to, degradation of the state' s air, water, and land resources. (4) California's in-state renewable energy resources help alleviate supply deficits that could threaten electric system reliability, reduce environmental costs associated with California's electricity consumption, and increase the diversity of the electricity system's fuel mix, reducing electricity users' exposure to fossil-fuel price volatility. (5) California's public interest RD&D investments enhance private and regulated sector investment in electricity system technologies, and are designed specifically to help ensure sustained improvement in the economic and environmental performance of the distribution, transmission, and generation and end-use systems that serve California electricity users. (6) California has established a long tradition of recovering system benefits investments through usage-based electricity charges, which is reflected in at least two decades of electricity price regulation by the commission, the boards of local publicly owned electric utilities, and the mandate of the Legislature in Chapter 854 of the Statutes of 1996 (Assembly Bill 1890 of the 1995-96 Regular Session of the Legislature) and Chapter 905 of the Statutes of 1997 (Senate Bill 90 of the 1997-98 Regular Session of the Legislature). (7) Unless the Legislature acts to extend the mandate of this article for minimum levels of usage based system benefits charges, California electricity users are at substantial risk of higher economic and environmental costs and degraded reliability. SEC. 10. Section 890 of the Public Utilities Code is amended to read: 890. (a) On and after January 1, 2001, there shall be imposed a surcharge on all natural gas consumed in this state. The commission shall establish a surcharge to fund low-income assistance programs required by Sections 739.1, 739.2, and 2790 and cost-effective energy efficiency and conservation activities and public interest energy research and development authorized by Section 740 and not adequately provided by the competitive and regulated markets. Upon implementation of this article, funding for those programs shall be removed from the rates of gas utilities. (b) (1) Except as specified in Section 898, a public utility gas corporation, as defined in subdivision (b) of Section 891, shall collect the surcharge imposed pursuant to subdivision (a) from any person consuming natural gas in this state who receives gas service from the public utility gas corporation. (2) A public utility gas corporation is relieved from liability to collect the surcharge insofar as the base upon which the surcharge is imposed is represented by accounts which have been found to be worthless and charged off in accordance with generally accepted accounting principles. If the public utility gas corporation has previously paid the amount of the surcharge it may, under regulations prescribed by the State Board of Equalization, take as a deduction on its return the amount found to be worthless and charged off. If any accounts are thereafter collected in whole or in part, the surcharge so collected shall be paid with the first return filed after that collection. The commission may by regulation promulgate other rules with respect to uncollected or worthless accounts as it determines to be necessary to the fair and efficient administration of this part. (c) Except as specified in Section 898, all persons consuming natural gas in this state that has been transported by an interstate pipeline, as defined in subdivision (c) of Section 891, shall be liable for the surcharge imposed pursuant to subdivision (a). (d) The commission shall annually determine the amount of money required for the following year to administer this chapter and fund the natural gas related programs described in subdivision (a) for the service territory of each public utility gas corporation. (e) The commission shall annually establish a surcharge rate for each class of customer for the service territory of each public utility gas corporation. A customer of an interstate gas pipeline, as defined in Section 891, shall pay the same surcharge rate as the customer would pay if the customer received service from the public utility gas corporation in whose service territory the customer is located. The commission shall determine the total volume of retail natural gas transported within the service territory of a utility gas provider, that is not subject to exemption pursuant to Section 896, for the purpose of establishing the surcharge rate. (f) The commission shall allocate the surcharge for gas used by all customers, including those customers who were not subject to the surcharge prior to January 1, 2001. (g) The commission shall notify the State Board of Equalization of the surcharge rate for each class of customer served by an interstate pipeline in the service territory of a public utility gas corporation. (h) The State Board of Equalization shall notify each person who consumes natural gas delivered by an interstate pipeline of the surcharge rate for each class of customer within the service territory of a public utility gas corporation. (i) The surcharge imposed pursuant to subdivision (a) shall be in addition to any other charges for natural gas sold or transported for consumption in this state. Effective on July 1, 2001, the surcharge imposed pursuant to this article shall be identified as a separate line item on the bill of a customer of a public utility gas corporation. (j) Notwithstanding subdivision (a), public utility gas corporations shall continue to collect in rates those costs of programs described in subdivision (a) of Section 890 that are uncollected prior to the operative date of this article. SEC. 11. Section 895 of the Public Utilities Code is amended to read: 895. Notwithstanding Section 13340 of the Government Code, moneys in the Gas Consumption Surcharge Fund are continuously appropriated, without regard to fiscal years, as follows: (a) To the commission or an entity designated by the commission to fund programs described in subdivision (a) of Section 890. If the commission designates the State Energy Resources Conservation and Development Commission to receive funds for public interest energy research and development, both of the following shall apply: (1) The Controller shall transfer funds to a separate subaccount within the Public Interest Energy Research, Development, and Demonstration Fund to pay the State Energy Resources Conservation and Development Commission for its costs in carrying out its duties and responsibilities under this article. (2) The State Energy Resources Conservation and Development Commission may administer the program pursuant to Chapter 7.1 (commencing with Section 25620) of Division 15 of the Public Resources Code. (b) To pay the commission for its costs in carrying out its duties and responsibilities under this article. (c) To pay the State Board of Equalization for its costs in administering this article.