January 2011

Greetings! 

Happy New Year!  This newsletter provides an update on issues before State energy and environmental regulators - the California Public Utilities Commission (CPUC), the California Energy Commission (CEC), and the California Air Resources Board - that the Board of the Local Government Sustainable Energy Coalition (LGSEC) has determined are of key interest to the group.


In This Issue
November Meeting Highlights Local Opportunities
CPUC Tweaks Energy Efficiency Process, Approves New Renewable Contract Process
CEC Highlights ARRA, Gets Ready to Implement AB 758
Air Board Adopts Cap and Trade
Upcoming Events
Quarterly Energy Managers Meeting: February (exact date to be determined)
Sacramento, California
LGSEC on the Move

Quarterly Meeting Highlights Opportunities for Local Government

 

The November 19, 2010, quarterly meeting of the LGSEC featured presentations by our host, StopWaste, the City of San Jose, and the Association of Bay Area Governments on their energy and sustainability programs.  Denise Tyrrel, Director of the CPUC's Southern California office, joined us as she has for over a year now to learn more about the work local governments are doing. 

 

Attorney David Huard, from Manatt, Phelps, Phillips, provided an overview of the opportunities for local governments coming out of the November election.  Huard's advice to the LGSEC is to develop a case statement for the value that local governments uniquely provide to the State as it works to achieve energy and sustainability goals, and to sell that case to regulators and legislators. He also encouraged us to get more involved in utility general rate cases, as that is where the utilities' operating budgets are determined.

 

LGSEC Web Site Is A Resource For You

 

Remember to send your friends and colleagues to the LGSEC web site:  www.lgsec.org.  On the site you can find all our advocacy work.  The Members Only section includes memos on various topics from our Regulatory Consultant, as well as back copies of the newsletter.  We also will be posting soon presentations from quarterly meetings, and other resources.

California Public Utilities Commission
ENERGY EFFICIENCY
 

2010-2012 Cycle Extended Through 2013

 

On December 23, 2010, Commissioner Grueneich in a final action before her term expired issued a Ruling extending the 2010-2012 energy efficiency program cycle through 2013 (Rulemaking R.09-11-014).  In November, the CPUC had asked for comments on whether to extend the current cycle by one year, and also whether to permanently extend subsequent energy efficiency cycles to four years.  The CPUC's Energy Division was supposed to have by this time begun work to update the energy efficiency savings goals, before the utilities filed their proposed portfolios for what would have been the 2013-2015 program cycle.  However, that work had not commenced, and the Energy Division needed permission to extend the work to 2012.

 

The LGSEC advocated that the Commission withhold a decision on both issues until June 2011, during which time it could gather more information on the many issues the proposed extensions create, including determining funding for an additional year in the current cycle, integrating timelines of related demand side and other programs, how to modify the current program offerings.  LGSEC was not alone in our perspective on the various questions posed by the CPUC.  Many other parties, including the utilities, agreed that if the current cycle is extended through 2013, the bridge funding process must be better and different than occurred for 2009.  Several other parties also agreed with us that there must be opportunities to add new programs and halt programs that are not performing as needed in mid-cycle.  We also had support in our advocacy for a more inclusive planning process, although no one else was as vocal in recommending a specific process and higher level of participation for governments in portfolio development.

  

 The Ruling directs the CPUC Energy Division to develop a record that will allow the CPUC to determine whether program cycles should be permanently extended to four years.  It also extends the timeframe for a decision on goals for the next cycle until the second quarter of 2012, at the earliest.  The LGSEC will continue to monitor the work on goals and portfolio cycle, and will participate as appropriate.

 

Utilities Receive Additional $68.1 million in Incentives, on 3-2 Vote

 

            On December 16, 2010, the CPUC in a split vote authorized an additional $68 million in shareholder incentives for the investor-owned utilities for the 2006-2008 portfolio cycle (Decision 10-12-049 in Rulemaking 09-01-019).  A decision on this matter was delayed by several months as various proposals were put forward, first by the Assigned Administrative Law Judge (ALJ), then CPUC President Peevey, followed by Commissioner Grueneich.  The ALJ recommended no further incentives payments because the final evaluation, measurement, and verification (EM&V) report found that the utilities had not hit the targets established for the 2006-2008 program cycle.  The report incorporated updated market conditions and more accurate energy savings expectations.  The utilities argued that these updates were unfair, because they had not been in place when the 2006-2008 portfolio was proposed and adopted.  Peevey's Alternate supported the utility position.  Grueneich's would have given them some of the contested amount, but not all.

 

            In the final vote, Commissioners Peevey, Bohn, and Simon supported Peevey's alternate decision.  Commissioners Grueneich and Ryan both published written dissents in which they observed that the utilities had been on notice that the final incentives would be subject to updated factors.  Prior to this decision, the utilities had received $143 million in incentives.  Ryan noted that the utilities had been advised they should modify their programs as additional information became available, but they did not.  Grueneich's written dissent covers the same points, in greater detail and with references to the paper trail that gave the utilities warning. 

 

            D.10-12-049 directs the utilities to submit by June 30, 2011 applications for their shareholder incentives for 2009, which was a bridge year between program cycles.  The decision makes some modifications to the current manner in which the incentives are determined, and directs that these be included in the requests for 2009 incentives.  It also anticipates further work on the methodology for calculating the incentive.

 

CPUC Orders New Approach to Evaluation, Measurement, and Verification  

 

            In late October, the CPUC directed its Policy and Planning Division to develop a different approach for evaluation, measurement, and verification of energy efficiency programs ("EM&V," Decision 10-10-033 in Rulemaking 09-11-014).  D.10-10-033 establishes objectives for energy efficiency programs that will start after the current cycle.  It recognizes the need to perform accurate measurement in a timely manner (currently, EM&V reports are not completed until a year or more after the program's conclusion).  The CPUC envisions using different metrics - "macro consumption" - that will allow it to better assess progress in reducing greenhouse gas emissions and achieving goals in the Energy Efficiency Strategic Plan.   The CPUC's Policy and Planning Division is directed to hold a series of workshops, and produce a report with its recommendations.             

This is a victory for the LGSEC and others who have long argued that a widget-based approach to energy efficiency evaluation does not allow us to do our best work.  Please let Jody know if you anticipate going to the workshops, as that will allow LGSEC to leverage our limited resources on this important issue.

 

Palm Desert Partnership Approved Through End of 2012

 

For several the Palm Desert Energy Efficiency Partnership has been in dispute, drawing particular attention from the CPUC's Division of Ratepayer Advocates and the Utility Reform Network ("TURN").  Those groups have criticized the Palm Desert Partnership, noting that the program is funded at a significantly higher level than other local government partnerships but it has not produced significantly greater energy saving results.  Southern California Edison and Southern California Gas were not given permission to automatically carry forward the partnership for 2010-2012; rather they were directed to submit an application for the program.  On December 16, the CPUC approved the program through 2012, at $6.9 million.  Only the SCE portion of the partnership can move forward. The SoCalGas part of the program is denied due to minimal benefits to date, high administrative costs, and low likelihood of improvement.  (Decision 10-12-027 in Application 10-07-004).  SoCalGas had requested $2.1 million. 

 

The evaluation report for the program in 2006-2008 did not show tremendous results, but the CPUC is allowing the program to continue because it has shown reasonable benefits to date and there appears to be room for improvement. The evaluation report noted that per capita funding for the Palm Desert partnership was $320, compared to an average per capita funding of $14 for 38 other partnerships across the state.  The decision notes that SCE is directed to fund the program by shifting funds from other sources:

         $5,744,000 from the Residential Energy Efficiency Program;

         $638,000 from the Commercial Energy Efficiency Program;

         $176,600 from the Residential and Commercial Heating, Ventilation and Air Conditioning Program; and

         $422,000 from the Energy Leader Partnership Program.

 

The evaluation for SoCalGas showed no energy savings results because SoCalGas considered it a non-resource program and did not set savings goals. Hence, the CPUC says it has no evidence on which to allow the program to continue, and all SoCalGas costs associated with the program were considered operating and administrative.

 


RENEWABLE ENERGY
 

Renewable Auction Mechanism Adopted for Projects Under 20 MW

 

            On December 16, the CPUC adopted a Renewable Auction Mechanism for projects under 20 MW (Decision 10-12-048 in Rulemaking 08-08-009).  In 2009, the CPUC solicited input from parties on how best to enhance a feed-in tariff that at the time was available to projects under 1.5 MW.  After much debate within the agency, the CPUC has adopted this new solicitation program.  This means that projects under 20 MW will no longer be required to submit proposals in the utilities' long-term procurement solicitations for renewable power.  (Senate Bill 32, signed into law in October 2009, directs the CPUC to expand the feed-in tariff program to projects under 3 MW, and revise the current pricing.  To date, the CPUC has not done anything to implement SB 32, although the Decision says that will happen in a separate process.)   

 

D.10-12-048 states that the Renewable Auction Mechanism (RAM) is not a feed-in tariff.  Rather, under the RAM someone who wants to sell energy from a project under 20 MW to the investor-owned utility submits a bid. The utilities accept projects starting with the lowest cost projects, up to a total RAM cap of 1000 MW.  PG&E, SCE, and SDG&E are ordered to simultaneously hold two auctions per year, with 25% of each utility's capacity available in each auction.  Standard contract language will govern each project that is selected through the RAM. The RAM solicitations must ask for three types of electricity: baseload, peaking as-available, and non-peaking as-available.

 

Energy that the utilities purchase under the RAM will help them meet their Renewable Portfolio Standard ("RPS") obligations.  The RPS currently has a statutory goal of 20% by 2020.  Governor Schwarzenegger issued an Executive Order directing the goal to be 33%. It is widely expected that Governor Brown will work with the Legislature to pass legislation to this effect; a bill that would have raised the RPS to 33% just missed being voted on in the last session.

 

Under the RAM, a customer can use energy from the project for on-site needs, then sell any excess to the utility.  The utilities advocated that customers must sell all energy from a project to them at wholesale, then purchase what the customers need at retail.  The CPUC expects that the standard contract and simplified bid process will reduce solicitation costs for utilities and entities that wish to sell power to them.  The Decision recognizes that many parties are raising concerns about challenges in interconnecting distributed generation projects, and generally discusses options that parties can pursue, but it does not offer specific instructions to the utilities in terms of making interconnection quicker and less costly. 

 

Other Renewable Issues on Hold

 

The CPUC has held until its January 13 meeting a decision on re-instating tradable renewable energy credits (R.06-02-012) and a decision on the method for calculating the value of energy sold from a net metered solar system (A.10-03-001). 

 

Non-Residential Solar Incentives Nearly Fully Subscribed

 

Most of you are probably aware that the incentives for solar installations on non-residential buildings under the California Solar Initiative ("CSI") are nearly fully subscribed.  The entities that administer the CSI around the state (PG&E, SCE, and the California Center for Sustainable Energy) have been submitting updates as the incentive amount in each stage is drawn down.  It is not clear what, if anything, will happen when the incentive pool is gone.  If recent history is any example, there will be a call for more funds to be allocated for non-residential projects, particularly because there may be government entities that are still hoping to use ARRA funds or other bond opportunities to install solar.  Over the summer, the CPUC's attempt to freeze the incentives for this group was met with staunch resistance and subsequently abandoned.

 

FURTHER CPUC NEWS
 

Change of Leadership at CPUC

 

December 31 marks the end of the six-year terms for Commissioners Dian Grueneich and John Bohn. Grueneich has been the CPUC's lead on energy efficiency.  Speculation is rampant as to who incoming Governor Jerry Brown will appoint to fill these vacancies, which require Senate confirmation.  Brown also has the option of appointing a different President for the CPUC.  Commissioner Michael Peevey has served as President for several years. 

 

CPUC-watchers also are waiting to see if the Senate will hold a confirmation hearing for Commissioner Nancy Ryan, who was appointed in January 2010, when former Commissioner Rachelle Chong was denied a confirmation hearing.  The LGSEC in August indicated its support for Commissioner Ryan to Senate Pro Tem Darryl Steinberg.  Word on the street is that if Governor Brown supports Ryan, the confirmation hearing will proceed.

 

Other Issues

 

The City and County of San Francisco had asked the CPUC to suspend PG&E's Smart Grid program in San Francisco. That request was denied.  (Decision 10-12-031 in Application 07-12-009.)

 

The CPUC opened a new rulemaking to establish a Small Business Advisory Council (R.10-12-009).  According to the Rulemaking, "The purpose of the Small Business Advisory Council is to provide a forum for the Commission, the utilities and members of the small business community to discuss Commission policy and issues that affect small businesses. The Small Business Advisory Council shall serve as a liaison between small business ratepayers and their representatives and the Commission."  The CPUC envisions this Council to be a standing entity, with nine members appointed by various groups.  In the Rulemaking, the CPUC will consider whether the members of the Small Business Advisory Council should be eligible for staff, travel, and administrative costs, and whether the Council can be relied upon as a proxy for small business interests.  The Rulemaking looks to the Low Income Oversight Board as a possible model for this new group.  It appears that the Rulemaking is a final initiative by Commisioner Bohn, who is cited as an advocate for small business during his tenure on the CPUC. Opening comments are due January 20, 2011.

California Energy Commission

CEC to Adopt Integrated Energy Policy Report in January

 

The CEC will vote January 12, 2011 on the 2010 Update to the Integrated Energy Policy Report (IEPR) it is required to submit to the Legislature.  The 2010 Update focuses on how funds from the American Recovery and Reinvestment Act are being used.  It talks in particular about the three sources of funds: formula funds, competitive grants, and tax credits and loan guarantees.  You can find the draft Update at 2010 IEPR Update.

 

CEC Gearing Up for AB 758 Implementation

 

            The LGSEC for several years has been working to get better access to data about energy usage in buildings within local government jurisdictions.  For the current CPUC energy efficiency cycle, we successfully obtained funding for the City of Irvine to work out operating protocols with SCE and SoCalGas on a pilot basis.  More recently, we have approached the CPUC about expediting access to this data for all local governments.  We also have been monitoring proceedings at the CEC for similar opportunities. 

 

            Assembly Bill 758 (Skinner, 2009) requires the CEC by March 2010 to "develop and implement a program to achieve greater energy savings in California's existing residential and non-residential building stock."  The CEC did not meet the March deadline.  The CEC is directed to do this in consultation with a number of entities, including local government.  In our discussions with the CEC, they have indicated that the AB 758 proceeding should provide an opportunity to work on data exchange protocols.  The CEC advertised in December to fill ten positions to implement AB 758. The LGSEC will invite CEC Commissioners and key staff to our quarterly meeting in February, in Sacramento, to further discuss this and related issues. We also will invite AB 758's author, Assemblymember Nancy Skinner.

 

Appliance Rebates Completed

 

            In early December, the CEC announced that the appliance rebate program funded through the American Reinvestment and Recovery Act ("ARRA") has been fully subscribed.  With only $2.1 million remaining in a total program in California of $35 million, the CEC was giving customers until December 31 to submit paperwork to claim their rebates.

 

Resolution on State Energy Program Funds

 

            Earlier this year the CEC was forced to re-tool the State Energy Program it was implementing under ARRA, when the Federal Housing Finance Authority ("FHFA") issued an opinion that made it nearly impossible to assess liens against private property under Property Assessed Clean Energy ("PACE") programs.  The CEC had been in the process of awarding $33 million to local governments that were developing PACE programs.  Subsequent to the initial announcement of the award, the CEC was sued by the Western Riverside Council of Governments over alleged discrimination against that entity in the bid evaluation process.  The CEC was simultaneously fighting the legal challenge and determining how to revamp the State Energy Program in light of the FHFA ruling.  The story has a happy ending (more or less) with the CEC redirecting the funds to the Energy Upgrade California program, a statewide energy efficiency and renewable energy building improvement program. 

 

Vacancy at CEC

 

Commissioner Jeffrey Byron's five-year term expires at the end of December.  As with the CPUC vacancies, speculation is rampant as to who will replace Byron.  Commissioners Robert Weisenmiller and Anthony Eggert also are awaiting confirmation.  LGSEC has indicated its support for these appointments, as well.

California Air Resources Board



            On December 16, 2010, the California Air Resources Board ("CARB") adopted a cap and trade program for California, as directed by Assembly Bill 32.  Cap and trade will apply to entities that emit more than 25,000 MT CO2e per year.  The program will be phased in starting 2012, and will apply initially to electricity generation and industrial sources.  In 2015, the program will include fuel distributors.  Entities can opt in if they would be included but their emissions are too low.  Others can also opt in (i.e., general public, investment banks, citizen groups).

 

The initial 2012 or 2015 allowances will be based on the best estimate of actual emissions for that year.  The cap will decline each year for each emissions source category.  The 2020 cap will be set to achieve the goal of bringing emissions to 1990 levels.  Some allowances will be free, others will be sold at auction, and the expected price in 2020 is $15-$30/allowance.

 

The LGSEC advocated for CARB to establish a set-aside for local government programs that contribute to greenhouse gas emissions reductions.  We suggested the revenue from selling allowances could fund ongoing local government initiatives, and could complement other programs, such as PACE.  Some might also choose to retire their allowances.  A key reason for a set-aside would be to direct revenues from the auction to local governments so we can continue our work advancing energy and climate change goals. 

 

            The Resolution that accompanied the draft cap and trade regulation directs the CARB Executive Officer to develop an allowance allocation system.  The Resolution provides direction in several areas that are supportive of LGSEC's advocacy to date:

 

  1. Establish a set-aside for voluntary renewable electricity, and a process for quantifying greenhouse gas reductions that result from voluntary renewable projects, along with rules for retiring allowances from the set-aside;
  2. Deposit a minimum of 10 percent of annual revenues from an auction of allowances for appropriation by the Legislature. These funds should be used for programs and projects that reduce greenhouse gas emissions or mitigate direct health impacts of climate change, and promote green collar employment opportunities in the most impacted and disadvantaged communities.
  3. Work with the CPUC and the governing boards of public utilities to direct a portion of any auction allowance value that goes to utilities for the benefit of residential, commercial, and industrial customers;
  4. Work with local governments and non-governmental organizations to direct a portion of allowance value into investments in local communities, especially the most disadvantaged.  There should be an opportunity for small businesses, schools, affordable housing associations, and other community institutions to participate in and benefit from the State's efforts to reduce greenhouse gas emissions.  

We hope you have enjoyed this e-newsletter. It is one of the benefits of your membership in the LGSEC.  Please send us feedback, and contact us with any questions or comments! And we hope to see you next month in Sacramento...stay tuned for details.

Jody London
Regulatory Consultant to the LGSEC
510/459-0667

Howard Choy
LGSEC Board Chair and Director, County of Los Angeles Office of Sustainabilty
[email protected]