HomeMy WebLinkAboutAgenda Report - June 5, 2019 C-14{
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AGENDA TITLE:
MEETING DATE:
PREPARED BY:
Receive Report Regarding Communication Pertaining to Senate B,il|772 (Bradford)
Long Duration Bulk Energy Storage: Procurement
June 5,2019
City Clerk
RECOMMENDED ACTION Receive report regarding communication pertaining to Senate
B.il|772 (Bradford) Long Duration Bulk Energy Storage:
Procurement.
BACKGROUND INFORMATION: The City received a request for communication from the Northern
California Power Agency (NCPA) regarding Senate Bill (SB) 772
(Bradford) Long Duration Bulk Energy Storage: Procurement. There
was a need to send a letter of concern immediately in light of a
pending hearing.
SB 772 would require the California lndependent System Operator (CAISO) to procure at least 2,000
megawatts (MW) and up to 4,400 MW of long-duration bulk energy storage, generally understood to
mean pumped-hydroelectric energy storage. SB 772 would rely upon deliberations of the Federal Energy
Regulatory Commission (FERC) to assess how the billions of dollars in procurement costs imposed by
the bill would be passed on to electric utilities - and ultimately their customers - that participate in the
CAISO, of which Lodi Electric is a participant. FERC's determination to socialize costs could result in our
utility customers paying for a resource that does not provide any energy delivery, reliability, or economic
benefits to our customers.
The attached letter, electronically signed by the Mayor, was sent on May 22, 2019. A copy of the initial
request, along with the text of the bill is also attached. This report is provided for informational purposes
only, pursuant to policy.
FISCAL IMPACT:Not applicable
FUNDING AVAILABLE: Not applicable.
t
nifer M iolo
City Clerk
APPROVED
ity Manager
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CITY COUNCIL
MARK CHANDLER , Mayor
DOUG KUEHNE,
Mayor Pro Tempore
BOB JOHNSON
JOANNE MOUNCE
ALAN NAKANISHI
CITY OF LODI
2015 “Wine Region of the Year”
CITY HALL, 221 WEST PINE STR EET
P.O. BOX 3006
LODI, CALIFORNIA 95241 -1910
(209) 333 -6702 / FAX (209) 333 -6807
www.lodi.gov cityclerk@lodi.gov
STEPHEN SCHWABAUER
City Manager
JENNIFER M. FERRAIOLO
C ity Clerk
JANICE D. MAGDICH
City Attorney
May 23, 2019
The Honorable Steven Bradford
State Senator, 35th District
State Capitol, Room 2059
Sacramento, CA 95814
RE: SB 772 (Bradford) Long Duration Bulk Energy Storage: Procurement – CONCERN
On behalf of the City of Lodi Electric Utility, I write to express concerns with your bill, SB 772, which
would require the California Independent System Operator (CAISO) to procure at least 2,000
megawatts (MW) and up to 4,400 MW of long-duration bulk energy storage, generally understood
to mean pumped-hydroelectric energy storage. SB 772 would rely upon deliberations of the Federal
Energy Regulatory Commission (FERC) to assess how the billions of dollars in procurement costs
imposed by the bill would be passed on to electric utilities – and ultimately their customers – that
participate in the CAISO, of which Lodi Electric is a participant. FERC’s determination to socialize
costs could result in our utility customers paying for a resource that does not provide any energy
delivery, reliability, or economic benefits to our customers.
The City of Lodi Electric Utility is a not-for-profit, publicly owned electric utility overseen by a locally
elected governing board that serves over 26,000 residents and businesses. Lodi Electric provides
reliable and affordable electric service while meeting the state’s clean energy goals and procures a
balanced portfolio, informed by the needs and input of our community. While we share your interest
in finding solutions to support renewable energy integration, unfortunately, the path proposed in SB
772 raises significant concerns.
As a community-owned utility, we hear from our customers at regular public meetings of our
governing board. They emphasize the importance of maintaining affordable electricity rates and
share their concerns about rising costs. Our procurement planning balances these concerns while
factoring in how the City of Lodi Electric Utility can most cost-effectively meet California’s energy
and climate goals.
Beyond our utility’s individual planning efforts, there are already mechanisms to assess long-term
resource needs on a broad, statewide scale. For example, under SB 100 (de Leon, 2018), the
state’s energy planning agencies are mandated to conduct an assessment of achieving a 100%
zero-carbon retail electric supply. Both state- and utility-level planning processes provide necessary
analysis for determining the most feasible (from both cost and environmental perspectives)
pathway for a carbon-free economy. However, procurement mandates, such as those prescribed
by SB 772, would predetermine costly outcomes without robust consideration of the underlying
need.
We appreciate your consideration of our concerns. Please do not hesitate to contact my office at
(209) 333-6702 should you have any questions.
Sincerely,
Mark Chandler
Mayor
cc: The Honorable Cathleen Galgiani
***FLOOR ALERT ***
OPPOSE SB 772 (BRADFORD)
Northern California Power Agency | 651 Commerce Drive | Roseville, CA 95678 | (916) 781-3636
www.ncpa.com | www.twitter.com/NCPA_Alert
NCPA must STRONGLY OPPOSE SB 772, as amended on May 17th, because the bill:
Invites federal government intervention in state policymaking. The bill relies upon a
process subject to approval by the federal government. Though recent amendments to
the bill attempt to limit costs to the entities who need storage, California policies will
not have a direct impact on the actions of the Federal Energy Regulatory Commission’s
(FERC) deliberations. In fact, FERC could require all utilities in California to pay for these
projects regardless of whether the utilities need the storage to maintain reliable
electric service.
Increases the cost of electricity service for Californians. The projects mandated by this
bill will have a multibillion-dollar pricetag that Californians will have to pay through
increased electric utility costs. Utility transmission rates make-up a significant portion
of electric utility customer rates; California utilities already have some of the highest
transmission rates in the nation and have seen exponential transmission rate increases
over the past 10 years. SB 772 would exacerbate this problem by increasing
transmission rates that result in direct increases to utility customer rates that are
already seeing upward pressures as utilities work toward the state’s decarbonization
policies.
Violates the intent of having an independent system operator. The California
Independent System Operator (CAISO) was established with the intent of serving as an
independent entity to support the operation of the state’s transmission system. By
requiring the CAISO to contract with long-term bulk energy storage resources, SB 772
would inappropriately create an incentive for the CAISO to call-on power from this
resource before others.
Violates local decision-making processes. SB 772 would implement a statewide,
resource procurement mandate that directly impedes on the imperative of the
governing boards of local, publicly owned electric utilities to make electricity
procurement decisions with input from their constituents.
We strongly urge your NO vote on SB 772.
AMENDED IN SENATE MAY 17, 2019
AMENDED IN SENATE APRIL 11, 2019
SENATE BILL No. 772
Introduced by Senator Bradford
(Coauthor: Senator Coauthors: Senators Bates and Stone)
(Coauthors: Assembly Members Cervantes, Cooper, Eduardo Garcia,
Mayes, O’Donnell, Rodriguez, Blanca Rubio, Salas, and Santiago)
February 22, 2019
An act to add Section 351 to the Public Utilities Code, relating to
energy.
legislative counsel’s digest
SB 772, as amended, Bradford. Long duration bulk energy storage:
procurement.
Existing law provides for the establishment of an Independent System
Operator (ISO), under the jurisdiction of the Federal Energy Regulatory
Commission (FERC), to secure generating and transmission resources
necessary to guarantee achievement of specified minimum planning
and operating reserve criteria for much of the state’s electrical
transmission system.
This bill would require the ISO, on or before June 30, 2022, to
complete a competitive solicitation process for the procurement of one
or more long duration energy storage projects that in aggregate have at
least 2,000 megawatts capacity, but not more than 4,000 2,400
megawatts, except as provided. The bill would require the ISO, after
December 31, 2030, and only if found to be necessary, to complete an
additional competitive solicitation process for additional long duration
bulk energy storage projects that in aggregate have up to 2,000
megawatts capacity and have targeted commercial operation dates of
97
no later than January 1, 2045. The bill would require that the
competitive solicitation process processes provide for cost recovery
from load-serving entities within the ISO-controlled electrical grid that
the ISO determines is just and reasonable and that takes into account
the distribution of in a manner that allocates those costs among
load-serving entities based on cost causation and each load-serving
entity’s need for, and benefits from realized from, the long duration
bulk energy storage. If FERC takes any action that materially affects
California’s clean energy and climate laws, programs, or policies, the
bill would relieve the ISO from the duty to comply with the bill’s
requirements, as specified.
Under existing law, a violation of the Public Utilities Act is a crime.
Because the provisions of this bill would be a part of the act, a
violation of which would 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.
Vote: 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. The Legislature finds and declares all of the
line 2 following:
line 3 (a) California is experiencing unprecedented changes in the
line 4 generation, delivery, and consumption of electricity. Along with
line 5 these changes come challenges in operating the state’s electrical
line 6 grid and resources in the most efficient and reliable manner,
line 7 particularly in terms of simultaneously matching electrical
line 8 generation with demand.
line 9 (b) As part of the long-term procurement planning process at
line 10 the Public Utilities Commission, the California Independent System
line 11 Operator (ISO) has identified a need for fast-ramping and flexible
line 12 resources to balance the electrical grid and store low-cost energy
line 13 from eligible renewable energy resources.
line 14 (c) The ISO has identified long duration bulk energy storage
line 15 and, in particular, pumped hydroelectric storage, when constructed
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line 1 in a sufficiently large scale, as supporting the California electrical
line 2 grid’s need for fast-ramping capability and the capacity to store
line 3 generation from eligible renewable energy resources.
line 4 (d) The State Energy Resources Conservation and Development
line 5 Commission has identified bulk energy storage, including pumped
line 6 hydroelectric storage, storage as a key resource to help meet the
line 7 challenges of integrating electricity from eligible renewable energy
line 8 resources into the California electrical grid and of supporting
line 9 economywide goals for reducing emissions of greenhouse gases.
line 10 (e) Pumped hydroelectric storage is a well-established and
line 11 proven technology form of long duration bulk energy storage in
line 12 wide deployment in the world, including in California, and, over
line 13 many decades, has been shown to be reliable over a useful asset
line 14 life exceeding 50 years.
line 15 (f) Pursuant to Chapter 7.7 (commencing with Section 2835)
line 16 of Part 2 of Division 1 of the Public Utilities Code, the Public
line 17 Utilities Commission established a 1,325 megawatts energy storage
line 18 procurement mandate. However, pumped hydroelectric storage
line 19 facilities larger than 50 megawatts were not included as an eligible
line 20 technology under the commission’s implementation of that chapter.
line 21 Battery energy storage projects have been the primary energy
line 22 storage technology procured to meet that mandate.
line 23 (g) Other bulk energy storage technologies, including
line 24 compressed air and those that store energy by chemical, thermal,
line 25 or other means, also provide capabilities and valuable long duration
line 26 bulk storage benefits similar to pumped hydroelectric storage.
line 27 benefits.
line 28 (h) The State Energy Resources Conservation and Development
line 29 Commission has identified a number of barriers to bulk energy
line 30 storage projects, including their significant upfront capital costs,
line 31 long development timelines, and uncertainty surrounding cost
line 32 recovery and allocation caused by the increasing fragmentation of
line 33 customer load served by California’s growing number of
line 34 load-serving entities.
line 35 (i) Many of the barriers to the development of long duration
line 36 bulk energy storage would similarly apply to the development of
line 37 electrical transmission projects if it were not for the transmission
line 38 planning process implemented by the ISO, which identifies, selects,
line 39 bids out, and allocates costs to ratepayers for electrical
line 40 transmission projects. The ISO currently selects developers of
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SB 772 — 3 —
line 1 electrical transmission projects by way of a public competitive
line 2 solicitation process to ensure the cost effectiveness of each project.
line 3 The ISO’s process also ensures electrical transmission project
line 4 quality, timing, and cost containment protections for ratepayers
line 5 and has resulted in the development of projects at significant cost
line 6 savings relative to presolicitation project cost estimates.
line 7 (i)
line 8 (j) It is in the interest of California to diversify energy storage
line 9 technologies.
line 10 (j)
line 11 (k) California needs long duration bulk energy storage given its
line 12 ability both to store excess electricity generated by eligible
line 13 renewable energy resources and, when needed, to quickly inject
line 14 that electricity back into the electrical grid to meet ramping, peak
line 15 demand needs, and other reliability requirements, including those
line 16 related to weather or fire events. Such long duration bulk energy
line 17 storage can serve as part of the new strategy for efficiently
line 18 operating the electrical grid, while maintaining electrical reliability
line 19 and satisfying environmental goals. This public policy directive
line 20 should be implemented by the ISO. ISO through a competitive
line 21 solicitation process that is comparable to the one used in the ISO’s
line 22 transmission planning process and that is open to all eligible long
line 23 duration bulk energy storage technologies.
line 24 (k)
line 25 (l) Because long duration bulk energy storage will contribute
line 26 to systemwide reliability of the electrical transmission grid as
line 27 additional eligible renewable energy resources are added, it is
line 28 appropriate that the cost of long duration bulk energy storage be
line 29 recovered through federal rates charged by the ISO in a manner
line 30 consistent with its broad benefits. The ISO should establish a cost
line 31 recovery framework for such energy storage through a public
line 32 process.
line 33 SEC. 2. Section 351 is added to the Public Utilities Code, to
line 34 read:
line 35 351. (a) For purposes of this section, “long duration bulk
line 36 storage project” means an energy storage resource interconnected
line 37 to the electrical grid in California that has the capability to
line 38 continuously discharge at its capacity for at least eight hours and
line 39 cycle through its discharge and charge cycle on a daily basis, hours,
line 40 has at least 400 megawatts in project capacity, and has been proven
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— 4 — SB 772
line 1 by way of deployment to have deployment, and has a minimum
line 2 useful asset life of at least 40 years.
line 3 (b) (1) On or before June 30, 2022, the Independent System
line 4 Operator shall complete a competitive solicitation process for one
line 5 or more long duration bulk storage projects that have an aggregate
line 6 capacity of at least 2,000 megawatts, but not more than 4,000 2,400
line 7 megawatts. The Independent System Operator shall ensure that
line 8 the selected long duration bulk energy storage is feasible and can
line 9 be constructed on a timeline consistent with the California
line 10 Renewables Portfolio Standard Program (Article 16 (commencing
line 11 with Section 399.11)) and the state’s targets for reducing emissions
line 12 of greenhouse gases, taking into consideration the status of the
line 13 required permits and licenses for each project, with a targeted
line 14 commercial operation date for each project of no later than 2030.
line 15 If the competitive solicitation authorized by this paragraph results
line 16 in the selection of an aggregate project capacity of less than 4,000
line 17 megawatts of long duration bulk energy storage, the Independent
line 18 System Operator, in consultation with the commission and the
line 19 Energy Commission, may complete a public, competitive
line 20 solicitation process for selecting one or more long duration bulk
line 21 energy storage projects to satisfy the remainder of the maximum
line 22 authorized capacity of 4,000 megawatts as a means to facilitate
line 23 achievement of the state’s goals for reducing emissions of
line 24 greenhouse gases.
line 25 (2) After December 31, 2030, and only upon the commission
line 26 and the Energy Commission each making a finding that after the
line 27 solicitation process required pursuant to paragraph (1) there is
line 28 still a need for additional long duration bulk energy storage
line 29 projects, the Independent System Operator shall complete an
line 30 additional competitive solicitation process for one or more long
line 31 duration bulk energy storage projects that have an aggregate
line 32 capacity of up to 2,000 megawatts and have targeted commercial
line 33 operation dates of no later than January 1, 2045.
line 34 (2)
line 35 (3) The Independent System Operator shall identify the
line 36 commercial operation date and technical criteria for each long
line 37 duration bulk energy storage project to ensure each selected
line 38 resource provides the electrical grid with the fast ramping and
line 39 flexible capacity necessary to support eligible renewable energy
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SB 772 — 5 —
line 1 resource integration, enhance grid reliability, and achieve
line 2 California’s goals for reducing emissions of greenhouse gases.
line 3 (3)
line 4 (4) The project or projects selected pursuant to this authority
line 5 shall not be owned or operated by the Independent System
line 6 Operator.
line 7 (c) The Independent System Operator’s competitive solicitation
line 8 processes, authorized in subdivision (b), shall provide for cost
line 9 recovery from load-serving entities within the Independent System
line 10 Operator-controlled electrical grid at rates that the Independent
line 11 System Operator determines are just and reasonable and that take
line 12 into account the distribution of in a manner that allocates those
line 13 costs among load-serving entities based on cost causation and the
line 14 degree to which each load-serving entity contributes to the need
line 15 for, or otherwise realizes the benefits from from, the long duration
line 16 bulk energy storage. The Independent System Operator cost
line 17 recovery mechanism shall collect the revenue requirement of any
line 18 selected long duration bulk energy storage project through a
line 19 cost-of-service, or similar, rate, net of revenues the project receives
line 20 from participation in the Independent System Operator-supervised
line 21 markets.
line 22 (d) (1) To the extent that approval is required by federal law,
line 23 the Independent System Operator shall implement this section
line 24 subject to the approval of the Federal Energy Regulatory
line 25 Commission.
line 26 (2) If the Federal Energy Regulatory Commission takes any
line 27 action that would preempt or otherwise supersede the requirements
line 28 of this section, seeks to impose an alternative market mechanism,
line 29 expands eligibility to generation resources that consume fossil
line 30 fuels, or takes any other action that materially affects California’s
line 31 clean energy and climate laws, programs, or policies, the
line 32 Independent System Operator shall immediately withdraw its filing
line 33 with the Federal Energy Regulatory Commission and is not
line 34 required to comply with this section.
line 35 (e) This section does not alter or affect the authority of the
line 36 Independent System Operator or any state commission to adopt a
line 37 different definition for long-term bulk energy storage for purposes
line 38 of any other authority to procure long-term bulk energy storage.
line 39 (f) The provisions of this section are severable. If any provision
line 40 of this section or its application is held invalid, that invalidity shall
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— 6 — SB 772
line 1 not affect other provisions or applications that can be given effect
line 2 without the invalid provision or application.
line 3 SEC. 3. No reimbursement is required by this act pursuant to
line 4 Section 6 of Article XIII B of the California Constitution because
line 5 the only costs that may be incurred by a local agency or school
line 6 district will be incurred because this act creates a new crime or
line 7 infraction, eliminates a crime or infraction, or changes the penalty
line 8 for a crime or infraction, within the meaning of Section 17556 of
line 9 the Government Code, or changes the definition of a crime within
line 10 the meaning of Section 6 of Article XIII B of the California
line 11 Constitution.
O
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SB 772 — 7 —