Order Instituting Rulemaking on the Commission’s own motion to determine the impact on public benefits associated with the expiration of ratepayer charges pursuant to Public Utilities Code Section 399.8.
Attachment B - Various Service Lists for Commission Proceedings
ORDER INSTITUTING RULEMAKING
Funding authorized in Public Utilities Code § 399.8, which currently governs the system benefits charge (also known as the public goods charge), expires as of January 1, 2012. Public benefits provided by the expiring funding are in the areas of energy efficiency, renewables, and research development, and demonstration (RD&D).
This rulemaking will address funding and program issues related to the renewables and RD&D portions of the expiring system benefits or public goods charge funding. Issues related to the expiration of the energy efficiency funding will be handled in the Commission’s ongoing proceedings related to energy efficiency, currently Rulemaking 09-11-014.
System Benefits (Public Goods) Charge
Purpose and History
Beginning with the deregulation of the electricity industry in California in 1996 under Assembly Bill 1890 (Brulte), the concept of a “system benefits” or “public goods” charge was introduced in statute. Conceptually, the Legislative purpose was to guarantee funding for activities that may not otherwise be supported during a move toward competitive wholesale and retail markets for electricity. Under the theory that retail providers were likely to compete for customers based on lowest-cost service, policymakers reasoned that certain activities and funds needed to be protected as in the public interest, in case individual electricity providers might not find it in their individual economic interests to continue such activities.
Originally, covered activities included energy efficiency, low-income energy efficiency, low-income rate discounts, renewables investments, and research, development, and demonstration (RD&D) investments.
Intervening statutory changes have resulted in removal of low-income energy efficiency and rate discount programs from system benefits charge funding (low-income programs and discounts are now funded and covered under separate statutory requirements); the renewables and RD&D provisions have also been modified several times since 1996. The most significant change was the termination of the Supplemental Energy Payments program for renewables in 2007, transferring responsibility from the Energy Commission to the Commission for administration of “above market funds” for renewables projects.
The current system benefits charge requirements are embodied in Public Utilities (Pub. Util.) Code § 399.8, covering only energy efficiency, renewables, and RD&D activities.
Since the inception of the charges, funds have been collected on a volumetric basis from all customers, with a flat fee per kilowatt-hour (kWh) of electricity usage paid by each customer, with the surcharge level determined by customer class.
The funds specified in Pub. Util. Code § 399.8 are collected from customers of the three largest electricity investor-owned utilities (IOUs) regulated by this Commission: Pacific Gas and Electric (PG&E) Company, San Diego Gas & Electric (SDG&E) Company, and Southern California Edison (SCE) Company. Local publicly owned electric utilities also have similar but separate requirements under Pub. Util. Code § 385, which are not the subject of this rulemaking.
In general, for the IOUs covered by the system benefits charge, the energy efficiency funds have been collected and held by the utilities, and then spent on programs for their customers under the oversight authority of the Commission. The renewables and RD&D funds have been remitted to the Energy Commission to oversee and administer on behalf of the IOUs and their customers.
The funding provisions of Pub. Util. Code § 399.8 sunset as of January 1, 2012. Several proposals were considered by the Legislature in 2011 to extend funding collections and make various modifications to the program oversight structure. However, as of the end of the Legislative session on September 9, 2011, no new law had been passed to renew the system benefits charges for energy efficiency, renewables, or RD&D. Thus, without further action, the funding provisions will expire automatically on January 1, 2012.
On September 23, 2011, Governor Brown sent a letter to Commission President Peevey requesting that we “take action under the Commission’s authority to ensure that programs like those supported by the Public Goods Charge are instituted – and hopefully at their current levels. As the Commission goes forward, please take into account the constructive ideas for program reform that were identified during the legislative process as well as ways to create jobs swiftly through investment in energy savings retrofits. We cannot afford to let any of these job-creating programs lapse.”
The majority share of the public goods charge funding (approximately $250 million per year) goes to support IOU energy efficiency programs. Those funds are combined with IOU “procurement” funds to support cost-effective energy efficiency investments overseen by the Commission.1 The current rulemaking for energy efficiency policies is Rulemaking (R.) 09-11-014. The Commission has previously authorized a three-year (2010-2012) portfolio of energy efficiency programs that included the assumption that system benefits funding would continue. In R.09-11-014 the Commission is already grappling with decisions associated with the loss of natural gas public purpose program funding in the 2011-2012 state budget process. Thus, that rulemaking is also the logical venue in which we should consider whether and how to replace the expiration of the electric system benefits charge for energy efficiency on January 1, 2012.
On our own motion, we are opening this new rulemaking to determine whether and how the Commission should act to preserve funding for the public benefits associated with renewables and RD&D activities previously provided by the electric system benefits charges that will expire on January 1, 2012.
There has also been some initial policy discussion about the possibility of funding certain public benefits if and when revenues become available from allowance auction under a cap-and-trade program.2