California Energy Commission 1 IEP Annual Meeting Energy Policy Perspectives from a customer turned regulator Jeffrey D. Byron California Energy Commission

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California Energy Commission

IEP Annual Meeting

Energy Policy Perspectives from a customer turned regulator

Jeffrey D. ByronCalifornia Energy Commission

October 9, 2006

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Overview

• California Energy Policy– Governor’s Goals– Energy Action Plan II– 2005 Integrated Energy Policy Report– New legislation

• Implementation issues

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CA Policy Development

• Governor’s Executive Orders• Governor’s Response to ’04 IEPR Update

and ’03 IEPR• Energy Action Plan II• 2005 Energy Report

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Governor’s Energy Goals

• Adequate and reliable energy supplies when and where needed

• Affordable energy to households and business

• Advanced technologies improve economic and environmental conditions

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Governor’s Energy Policies

• Supports the Loading Order• Strengthen infrastructure• Reduce transport fuel use, GHG effects• Improve energy permitting, planning• Employ risk, cost benefit analysis

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“Loading Order” of Energy Actions

• Improve Efficiency First• Diversify Resources

– Renewables– Clean fuels, new alternatives– Conventional resources– Distributed generation

• Improve Infrastructure

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Governor’s Climate Change Goals

• By 2010, reduce greenhouse gas emissions to 2000 levels.

• By 2020, reduce greenhouse gas emissions to 1990 levels.

• By 2050, reduce greenhouse gas emissions to 80% below 1990 levels.

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Energy Action Plan II

Joint Agency Adoption: Implementation of the Governor’s Goals

•CEC & CPUC lead •Input from CA ISO, Cal EPA, stakeholders•CEC adopted September 21, 2005•CPUC adopted October 6, 2005

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EAP II Electricity Actions• Increase efficiency

– Efficiency standards, programs– Green Buildings Action Plan (-20% by 2015)– Demand response, dynamic pricing programs

• Diversify generation– 20% renewables by 2010, possibly 33% by 2020– Increase distributed generation, CH&P– Develop ‘clean coal policy’ in ’05 IEPR

• Improve Infrastructure– Implement long-term procurement, 15-17% reserves– Streamline transmission siting process– Plan for, reserve transmission corridors– Better market rules, including new capacity mkt.

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2005 Integrated Energy Policy Report (IEPR)

• Collaboration with federal, state and local agencies

• 60 Committee/Commission hearings and workshops

• 25,000+ pages of docketed materials• More than 50 staff and consultant papers and

reports • Adopted November 21, 2005

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2005 IEPR Recommendations

Efficiency and Demand Response• The CPUC and Energy Commission should monitor IOUs

energy efficiency programs to ensure peak savings are captured in their efficiency portfolios.

• The CPUC, DWR, Energy Commission, local water agencies and other stakeholders should assess efficiency improvements in hot/cold water use in homes/businesses, and include these improvements in the 2006-08 programs.

• The Energy Commission should establish (consistent with SB 1027) reporting requirements for POUs to ensure efficiency goals are comparable to those of the IOUs.

• The CPUC and Energy Commission must vigorously pursue actions to ensure the state’s demand response goals are met.

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Renewable resources• The Energy Commission should ensure that POUs meet the

same RPS targets for eligibility and compliance as the IOUs• By the end of 2006, the CPUC and Energy Commission should

establish a joint proceeding to develop a simpler/more transparent RPS process.

• The CPUC and Energy Commission should closely monitor the 2005 renewable procurement cycle to determine the potential value of greater contract standardization.

• To prevent under-procurement, the CPUC should require IOUs to procure a prudent contract-risk margin, starting at 30%.

• The CPUC should quickly develop new standardized wind re-powering contracts to more efficiently harness wind resources and reduce bird deaths.

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Procurement Recommendations• CPUC should require IOUs to procure enough energy/capacity

to meet net short positions and provide for retirement of aging plants by 2012.

• By the end of 2006, the CPUC should develop coming/going rules for departing load.

• The Energy Commission and CPUC should establish transparent resource planning and procurement processes for all-source and renewable resources, and eliminate confidential procurement review groups.

• The Energy Commission and CPUC should develop transparent and standardized methods for addressing least-cost best-fit criteria and consistently apply a renewable “rebuttable-presumption” to all procurement.

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Combined Heat & Power (CHP)• The Energy Commission and the CPUC should establish annual

utility procurement targets by the end of 2006.• The CPUC should require IOUs to purchase electricity from

these facilities at prevailing wholesale prices.• The CPUC should explore regulatory incentives that reward

utilities for promoting customer and utility-owned CHP projects.• The CPUC should require IOUs to provide CA ISO scheduling

services for these facilities and be compensated.

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Transmission infrastructure• The Legislature should expeditiously transfer transmission

permitting to the Energy Commission using the Warren-Alquist Act’s power facility and siting certification process as a framework.

• The Energy Commission, CPUC, and the CA ISO should collaborate to investigate changes to the CA ISO tariff to encourage construction of transmission for renewable generation interconnections.

• The Legislature should assign the Energy Commission the statutory authority to establish a statewide corridor planning process and designate future corridors.

• The Energy Commission should actively participate in the corridor planning processes under the Federal Energy Act of 2005.

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EAP II Natural Gas Actions

• Increase efficiency– Efficiency standards– Efficiency programs– Demand response programs

• Diversify sources– Consider importation of LNG– Encourage landfill, biomass & other renewables

• Improve Infrastructure– Increase pipeline capacity– Increase storage capacity

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Natural gas• The state must make certain that existing

infrastructure is maintained and retained.• The state needs to continue to evaluate the

need for additional pipeline capacity to meet customer demand during winter’s coldest days or when there are interstate pipeline disruptions.

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EAP II Transportation Actions

• Increase efficiency– Reduce petrol fuels use

• CEC to develop reduction goals, plan, timetable 3/31/06• Improve federal CAFE standards, tire efficiency

• Diversify fuel sources– Develop alternatives including hydrogen

• Improve Infrastructure– Expand refinery capacity– Expand import infrastructure capability– Develop guiding principles for new facility approval

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In transportation, the state should:• Simultaneously reduce petroleum fuel use, increase fuel diversity/security, and reduce air

emissions/greenhouse gases.• Implement a public goods charge to establish a funding source for a transportation program

that includes infrastructure, technology/fuels research, analytical support, and incentive programs.

• Continue to work with other states to pressure the federal government to double vehicle fuel efficiency standards and enact fleet procurement requirements that include super-efficient gasoline/diesel vehicles.

• Establish non-petroleum diesel fuel standard so that all diesel fuel sold in California contains a minimum of 5% non-petroleum content that would include biodiesel, ethanol, and gas-to-liquid.

• Establish a state renewable gasoline fuel standard so that all gasoline sold in California contains a minimum of 10% renewable content.

• Investigate how IOUs can help to develop equipment/infrastructure to fuel electric and natural gas vehicles.

• For its fleet of vehicles, establish a minimum fuel economy standard and a procurement requirement for alternative fuels/vehicles, and examine the use of re-refined and synthetic oils.

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Climate ChangeAlthough more specific recommendations must await Governor Schwarzenegger’s Climate Action Team Report due in January 2006, the Energy Commission recommends:

• Setting a greenhouse gas performance standard for utility procurement no higher than emission levels from new combined cycle natural gas turbines.

• Additional consideration is needed before determining what if any role greenhouse gas emission offsets should play in complying with such a standard.

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EAP II R&D Actions

• R&D should respond to policy goals• Emerging technologies that improve:

– Efficiency– Effectiveness– Environment– Infrastructure– Transportation

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Implementation

• The policy framework is largely in place

• It is now time for action….

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Recent legislation

Key energy bills enacted in 2005/2006 provide part of the implementation framework

A few of these bills include:• AB 32 and SB 1368• SB 1 and SB 107• SB 1059• AB 2021 and 2005’s AB 380

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Greenhouse gas regulation

• AB 32 (Nunez, Chapter 488, Statutes of 2006) requires the Air Resources Board to establish greenhouse gas reporting requirements by 2008 and emission limits and reduction measures by 2011

• SB 1368 (Perata, Chapter 598, Statutes of 2006) requires the PUC to create a greenhouse gas performance standard for the IOUs by February 28, 2007, and the Energy Commission to create a standard consistent with the PUC’s for publicly owned utilities by June 30, 2007

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Renewable energy

• SB 1 (Murray, Chapter 132, Statutes of 2006) establishes requirements and procedures to implement the California Solar Initiative (CSI) to be administered by the California Public Utilities Commission (CPUC) and the California Energy Commission (Energy Commission).

• SB 107 (Simitian, Chapter 464, Statutes of 2006)revises California’s Renewable Portfolio Standard (RPS) by accelerating the 20 percent renewable energy target from 2017 to 2010

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Transmission

• SB 1059 (Escutia, Chapter 638, Statutes of 2006) authorizes the Energy Commission to designate transmission corridors for future use, under certain conditions, that are consistent with the strategic plan for the State’s transmission grid

• Governor Schwarzenegger vetoed AB 974, noting the need for one-stop transmission permitting integrated with energy planning

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Publicly owned utilities

• AB 2021 (Levine, Chapter 734, Statutes of 2006) requires local publicly owned utilities (POUs) to report on achievable cost-effective electricity measures and targets for statewide efficiency, and to report on their investments in energy efficiency and demand programs

• AB 380 (Nunez, Chapter 367, Statutes of 2005)requires local publicly owned utilities (POUs) to undertake and accomplish resource adequacy, and designates the CEC to oversee these activities and to periodically report to the legislature

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Next steps

• This new legislation provides useful direction to the Energy Commission, PUC, the state’s utilities and others on how to accomplish the state’s energy policy goals

• Implementation is now the key.

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Implementation needs

Resource adequacy• Implementation of the first phase of resource

adequacy was important this summer– The contracts the IOUs had in place for out of

state capacity was a factor in getting adequate imports during the July heat storm

• … but more work lies ahead.

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Long-term procurement• The IOUs have begun to sign long-term

contracts • … but the real need to sign adequate

contracts to incent new generation remains critical (and overall progress has been slow).

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Renewable resources• The initial steps in implementing the

renewable portfolio standard have been slow and painful; we're starting to see progress on the contract front

• … but reaching the goal of 20% of electricity generation in 2010 coming from renewables (now law) will be extremely difficult.

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Transmission• Fixing the state's transmission problems

remains a big problem• … and more needs to be done.

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Interesting times

• I have the privilege to be named to the Energy Commission in interesting times as the state turns to the hard work of implementing ambitious policies

• I have great confidence in the ability of the Energy Commission and the state to rise to the challenge and to keep these interesting times from turning into a curse

Documents

California Energy Commission 1 IEP Annual Meeting Energy Policy Perspectives from a customer turned regulator Jeffrey D. Byron California Energy Commission