CITY OF SIMI VALLEY
MEMORANDUM
A
pril 3, 2023
TO
: City Council
F
ROM: Office of the City Manager
S
UBJECT: DISCUSSION OF AB 1538 (MURATSUCHI) AND REQUEST FOR
DIRECTION
STAFF RECOMMENDATION
It is recommended that the City Council discuss AB 1538 and provide direction to staff.
BACKGROUND AND OVERVIEW
During the March 20, 2023, City Council meeting, Council Member Rhodes requested the City Council discuss AB 1538 (Muratsuchi) (Attachment A, page 3), a bill sponsored by the Clean Power Alliance (CPA). Council Member Rhodes is the City’s represent ative to the CPA, and Mayor Thomas serves as the alternate. AB 1538 would create a financial incentive program for energy providers, including community choice aggregators, such as CPA, to secure additional energy for “the grid” with a goal of increasing reliability and affordability. The CPA is requesting letters of support from its member agencies for the Assembly Utilities and E nergy Committee Hearing scheduled for April 12, 2023, by April 4, 2023, to be considered in the Committee’s analysis.
FINDINGS AND ALTERNATIVES
Currently, if energy providers are unable to, or do not, obtain the forecasted energy needed, they can be fined by the California Public Utilities Commission. AB 1538 would financially incentivize load serving entities to procure additional clean energy resources for “the grid”, beyond what they are already required to secure for anticipated energy needs. AB 1538 does not define how the financial inc entive would be funded; however in conversations with CPA staff, City staff has been assured it would not be through rate increases.
The intent of the bill, to ensure that there is more than sufficient clean energy for customers in the event of high demand, is p ositive; however it needs to be noted that a community choice aggregator, such as CPA, does not control the electricity distribution lines. Without control of the distribution lines, the additional clean energy procured may not be able to be delivered to CPA’s customers if the controlling entity, Southern California Edison, deactivates the lines for weather, fire, or heat risk.
The City’s Legislative Platform, Section V.5. Energy, language does not provide latitude for staff to take a position on AB 1538 and the actions it proposes, therefore staff requests direction on the City’s position on this bill.
AGENDA ITEM NO.
9B
2 The following alternatives are available to the City Council:
1. D
irect staff to draft a letter of support for AB 1538 (Maratsuchi) and provide to the Clean Power Alliance by April 4, 2023, to include in the Assembly Utilities and Energy Committee analysis for its Hearing on April 12, 2023;
2. D
irect staff to draft a letter of opposition for AB 1538 (Maratsuchi) and provide directly to the author’s office and the Assembly Utilities and Energy Committee by April 4, 2023, for inclusion in its analysis for its Hearing on April 12, 2023;
3. P
rovide staff with further direction.
S
taff does not have a recommendation.
SUGGESTED CITY COUNCIL MOTION
I mov
e to:
1. D
irect staff to draft a letter of support for AB 1538 (Maratsuchi) and provide to the Clean Power Alliance by April 4, 2023, to include in the Assembly Utilities and Energy Committee analysis for its Hearing on April 12, 2023; or
2. D
irect staff to dr aft a letter of opposition for AB 1538 (Maratsuchi) and provide directly to the author’s office and the Assembly Utilities and Energy Committee by April 4, 2023, for inclusion in its analysis for its Hearing on April 12, 2023; or
3. P
rovide staff with further direction.
SUMMARY
D
uring the March 20, 2023, City Council meeting, Council Member Rhodes requested the City Council discuss AB 1538 (Muratsuchi), a bill sponsored by the Clean Power Alliance (CPA). Council Member Rhodes is the City’s representative to the CPA, and Mayor Thomas serves as the alternate. AB 1538 would create a financial incentive program for energy providers, including community choice aggregators, such as CPA, to secure additional energy for “the grid” with a goal of increasing reliability and affordability. The CPA is requesting letters of support from its member agencies for the Assembly Utilities and Energy Committee Hearing scheduled for April 12, 2023, by April 4, 2023, to be considered in the Committee’s analysis. Therefore, it is recommended that the City Council discuss AB 1538 and provide direction to staff. ___
_________________________________
_ Samantha Argabrite
Assistant City Manager
P
repared by: Samantha Argabrite, Assistant City Manager INDEX Page
Attachment A – AB 1538 Text ......................................................... 3 Attachment B – AB 1538 Fact Sheet ............................................... 7 AMENDED IN ASSEMBLY MARCH 30, 2023
california legislature—2023–24 regular session
ASSEMBLY BILL No. 1538
Introduced by Assembly Member Muratsuchi
February 17, 2023
An act to add Section 380.7 to the Public Utilities Code, relating to energy.
legislative counsel’s digest
AB 1538, as amended, Muratsuchi. Clean Energy Reliability Program.
Existing law vests the Public Utilities Commission with regulatory authority over load-serving entities, which include electrical corporations, electric service providers, and community choice aggregators. Existing law requires the commission, in consultation with the Independent System Operator, to establish resource adequacy requirements for all load-serving entities. Existing law requires the commission, in establishing those resource adequacy requirements, to ensure the reliability of electrical service in California while advancing, to the extent possible, the state’s goals for clean energy, reducing air pollution, and reducing emissions of greenhouse gases.
This bill would establish the Clean Energy Reliability Program, to be administered by the commission, upon appropriation, to provide incentive payments to qualifying load-serving entities that use eligible resources, as defined, to exceed their clean energy capacity requirements or targets, within or at the end of a given compliance period, as those requirements and compliance periods are determined through a specified commission rulemaking or its successor.
98 ATTACHMENT A
3 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 its provisions would be part of the act and a violation of a commission action implementing its requirements would therefore be a crime, the bill would impose a state-mandated local program.
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.
V ote: majority.
Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
The people of the State of California do enact as follows:
line 1 SECTION 1. This act shall be known, and may be cited, as the line 2 Clean Energy Reliability Program.
line 3 SEC. 2. Section 380.7 is added to the Public Utilities Code, to line 4 read:
line 5 380.7. (a) For purposes of this section, the following line 6 definitions apply:
line 7 (1) (A) “Eligible resources” means zero-emission resources line 8 that include, b ut are not limited to, include all of the following:
line 9 (A)
line 10 (i) Eligible renewable energy resources, as defined in Section line 11 399.12.
line 12 (B)
line 13 (ii) Energy storage resources.
line 14 (C) Combustion or fuel cell technologies that use biogas. line 15 (D)
line 16 (iii) Green hydrogen.
line 17 (E) Hybrid
line 18 (iv) Zero-emission hybrid battery storage technologies. line 19 (F) Demand-side
line 20 (v) Zero-emission demand-side resources.
line 21 (B) “Eligible resources” do not include fossil fuel resources, line 22 even if emissions of greenhouse gases arising from the use of the line 23 resource are offset by carbon capture or storage technologies. 98 — 2 — AB 1538
4 line 1 (2) “Load-serving entity” has the same meaning as defined in line 2 Section 380.
line 3 (3) “Program” means the Clean Energy Reliability Program. line 4 (b) The Clean Energy Reliability Program is hereby established, line 5 to be administered by the commission, upon appropriation by the line 6 Legislature, to provide incentive payments to qualifying line 7 load-serving entities that use eligible resources to exceed their line 8 clean energy capacity requirements or targets, within or at the end line 9 of a given compliance period, as those requirements and line 10 compliance periods are determined through Rulemaking 20-05-003 line 11 or its successor.
line 12 (c) For purposes of the program, the commission shall do all line 13 both of the following:
line 14 (1) Count eligible resources using applicable commission line 15 counting rules.
line 16 (2) Calculate incentive payments using the resource adequacy line 17 market price benchmark for the year of the payment for each line 18 megawatt of electricity generated from an eligible resource. line 19 resource in excess of the load-serving entity’s clean energy line 20 capacity requirements or targets.
line 21 (d) In order to receive an incentive payment pursuant to the line 22 program, a load-serving entity’s eligible resources shall be online line 23 and participating in the Independent System Operator’s market. line 24 (e) (1) In order to receive an incentive payment pursuant to line 25 the program, a load-serving entity shall include a project labor line 26 agreement if both of the following conditions are satisfied:
line 27 (A) The load-serving entity enters into a contract for the eligible line 28 resource on or after January 1, 2024, and the eligible resource line 29 comes online on or after January 1, 2024.
line 30 (B) The eligible resource has a capacity of 5 megawatts or more. line 31 (2) In order to receive an incentive payment pursuant to the line 32 program, a load-serving entity shall include a prevailing wage line 33 requirement if both of the following conditions are satisfied:
line 34 (A) The load-serving entity enters into a contract for the eligible line 35 resource on or after January 1, 2024, and the eligible resource line 36 comes online on or after January 1, 2024.
line 37 (B) The eligible resource has a capacity of less than 5 line 38 megawatts.
line 39 (e)
98 AB 1538 — 3 —
5 line 1 (f) If a load-serving entity receives an incentive payment during line 2 a multiyear compliance period, but does not exceed its clean energy line 3 capacity requirements or targets in a subsequent year of the line 4 compliance period, the commission shall not provide incentive line 5 payments to the load-serving entity for any year that it failed to line 6 exceed its clean energy capacity requirements or targets. line 7 SEC. 3. No reimbursement is required by this act pursuant to line 8 Section 6 of Article XIIIB of the California Constitution because line 9 the only costs that may be incurred by a local agency or school line 10 district will be incurred because this act creates a new crime or line 11 infraction, eliminates a crime or infraction, or changes the penalty line 12 for a crime or infraction, within the meaning of Section 17556 of line 13 the Government Code, or changes the definition of a crime within line 14 the meaning of Section 6 of Article XIII B of the California line 15 Constitution.
98 — 4 — AB 1538
6 Last Updated: 3/13/2023
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AB 1538 (Muratsuchi) – Clean Energy Reliability Program SUMMARY______________________________
In the midst of a record -breaking heat wave in
September 2022 , the Governor’s Office of
Emergency Services sent text messages to millions
of Californians asking them to turn off their A/C and
large appliances or risk rolling blackouts across the
state. Luckily, residents did their part to prevent
forced shutoffs, but a s climate change worsens, t his
could become the new normal unless we take action.
The state needs more clean energy if it wants to meet
its ambitious climate change goals and address
increasing electricity demand. AB 1538 is needed to
get more clean energy onto the grid at a faster pace.
BACKGROUND__________________________
In 2004, The California Public Utilities Commission
(CPUC) adopted the resource adequacy (RA)
program to ensure reliability of statewide electricity service. The RA program requires load serving
entities (LSEs) – which include investor-owned
utilities, energy service providers, and community
choice aggregators – to have enough electricity on-
hand to meet demand when and where the state grid
operators need it.
Many gas-fired power plants have recently gone
offline at a time when demand has increased due to
climate change. As a stopgap measure, the CPUC has
ordered short-term “emergency” procurement orders
that force LSEs to buy capacity at any cost. LSEs that
fall short of these targets must pay penalties.
Conversely, LSEs t hat can exceed these
requirements are not given an incentive to do so ,
even though it would help relieve the statewide
capacity shortage. While the state has invested in
programs to maintain grid reliability, they have not
applied the same approach to investing in LSEs that
may have the ability to increase grid reliability.
ISSUE___________________________________
The CPUC is in the process of setting new capacity
requirements for LSEs that will remove the need for
last-minute emergency orders. However, these new
requirements would still only encourage LSEs to
procure their minimum, at a time when we need more
clean capacity as quickly as possible.
SOLUTION_______________________________
Working with CPUC’s existing and upcoming clean
capacity requirements, AB 1538 creates an incentive
structure for LSEs who provide clean electric grid
capacity ahead of schedule. LSEs would receive
incentive payments for each eligible megawatt of
electricity built in advance of its requirement.
Eligible projects inclu de battery storage, green
hydrogen, and other zero-carbon resources.
AB 1538 would not c hange penalties incurred by
LSEs who don’t meet CPUC’s guidelines but would
add an incentive to the state’s enforcem ent toolkit.
This added incentive would help the state bring clean
energy sources online faster and meet its climate
goals on schedule.
Finally, the anticipated increase in electricity supply as a result of this bill would lower electricity costs by more than the cost of the incentive. This would give
ratepayers clean reliable electricity without
exorbitant prices during high-demand weather.
STAFF CONTACT_________________________
Aaron Forburger, [email protected]
SUPPORT________________________________
Clean Power Alliance (Sponsor)
ATTACHMENT B
7