DRAFT ATTACHMENT C
6056930 1
Proposed Policy on the Use of Electric and Gas Public Benefits Funds I. Electric Public Benefits Charge
Public Utilities Code Section 385, enacted in 1996, requires all publicly owned utilities (POUs) with distribution facilities to collect a nonbypassable usage-based charge to fund investments in four areas:
(1) Cost-effective demand-side management services to promote energy efficiency and energy conservation.
(2) New investment in renewable energy resources and technologies consistent with existing statutes and regulations which promote those resources and technologies. (3) Research, development and demonstration programs for the public interest to advance science or technology which is not adequately provided by competitive and regulated markets. (4) Services provided for low-income electricity customers, including, but not limited to, energy efficiency services, education, weatherization, and rate discounts.
While Public Utilities Code Section 385 prescribes a specific revenue collection formula,1 the statute provides POUs flexibility to implement a program as long as expenditures fall within the four categories specified in the statute. This structure has remained unchanged for nearly 20 years.2 Legislative history supports an interpretation of broad POU authority over their Public Benefits programs. The last bill to amend Section 385 was SB 1939 in 2000. Both the final Senate Floor Analysis and final Assembly Floor Analysis included the following description of the Public Benefits program:
AB 1890 (Brulte), Chapter 854, Statutes of 1996, the landmark electric restructuring law, requires IOUs and publicly-owned utilities to impose a surcharge on each electricity customer to fund, among other programs, needs- based public purpose programs for low-income electricity customers, including but not limited to, targeted energy efficiency and rate discounts. The publicly- owned utilities, unlike the IOUs, are not required to spend specified amounts on public purpose programs and have total discretion as to how these monies are spent.3
1 The statute does not establish a specific collection rate from customers, but it does establish a formula. Most POUs have interpreted this formula to result in a local distribution service charge of 2.85%. POUs may present the charge as a separate bill component or fold it into the overall rate.
2 In contrast, the statutes governing similar programs for investor-owned utilities have regularly been restructured, modified, and limited over that time period. The lack of legislative action related to POU public benefits programs suggests that the Legislature views POU programs as consistent with legislative intent. (Bd. of Trustees of California State Univ. v. Pub.
Employment Relations Bd., 155 Cal. App. 4th 866, 877–78 (2007)). 3 Senate Floor Analysis of SB 1939, August 30, 2000 (emphasis added).
DRAFT ATTACHMENT C
6056930 2
II. Gas Public Benefits Charge
Public Utilities Code Section 890, enacted by AB 1002 in 2000, imposes a surcharge on all natural gas consumed in California to fund:
1) low-income rate assistance programs,
2) low-income energy efficiency programs,
3) cost-effective energy efficiency and conservation activities, and 4) public interest research and development not adequately provided by the competitive and regulated markets.
Municipalities that offer home weatherization services, low-income customer rate assistance or programs similar to those set forth above are not required to collect the surcharge. Since Palo Alto’s Gas Utility offers the services and programs described, CPAU does not collect the surcharge as a separate line item on customer bills. Rather, the Gas Utility uses between 0.75% and 1.25% of gas utility revenues to fund Gas Public Benefit Programs in whatever amount is needed to fulfill demand for the above programs.
Legislative history described the gas Public Benefit programs as “of a similar character” as the non- bypassable surcharge which funds electric public purpose programs and “specific to the service territory of each gas public utility”.4
III. Use of Gas and Electric Public Benefits Funds
In light of the statutory text and legislative history interpreting the Electric and Gas Public Benefits statutes, the Council wishes to set forth a policy on prioritization of the use of Public Benefits funds collected by the City’s Electric and Gas Utilities. All uses of these funds will be reviewed for compliance with applicable State law before implementing new programs. 1)Electric Utility Public Benefits revenues may be used for any of the purposes identified in Public Utilities Code section 385 in the following order of preference:
a) Demand Side Management Programs to support Distributed Energy Resource Integration b)Cost effective energy efficiency and conservation measures to ensure compliance with SB 1037 (2005) requiring the development of all cost-effective energy efficiency and SB 350 (2015) which increased energy efficiency targets statewide.
i) Energy efficiency and conservation include building electrification measures that reduce energy use on a btu basis compared to a gas equivalent piece of equipment. ii) Cost-effectiveness can be determined by studies using the direct supply cost savings to the community associated with the efficiency or electrification measures. iii) Incentives for the purchase of e-bikes or other small EVs or provision of leasing services are included as an energy efficiency measure for electric transportation. c) Services to low-income customers, including:
i) Low-income rate discounts
4 California Bill Analysis of AB 1002, June 27, 2000.
DRAFT ATTACHMENT C
6056930 3
ii) Energy efficiency and building electrification services, provided that electrification measures reduce customer utility bills compared to a gas equivalent piece of equipment. iii) Vehicle electrification, including EV charging.
iv) Incentives for the purchase of e-bikes or other small EVs or provision of leasing services as an energy efficiency measure for electric transportation. d) Purchasing or providing incentives for renewable energy (with or without the inclusion of battery storage), either locally or outside Palo Alto
e) Research and development funding for small pilots of emerging energy or electrification technologies or program delivery mechanisms.
2)Gas Public Benefits Revenues may be used for any of the purposes identified in Public Utilities Code section 890, in the following order of preference:
a)Low-income rate assistance and weatherization
b)Cost effective energy efficiency and conservation measures c)Public interest research and development