2. System Benefits Charge (or Public Goods Charge) Purpose and History
Beginning with the deregulation of the electricity industry in California in 1996 under Assembly Bill (AB) 1890 (Stats 1996, ch. 854), the concept of a system benefits charge or public goods charge (PGC) was mandated by statute. Conceptually, the Legislative purpose was to guarantee funding for necessary activities that may not otherwise be supported during a move toward competitive wholesale and retail markets for electricity.
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 California Energy Commission (Energy Commission) to this Commission for administration of "above market funds" for renewables projects.
The current system benefits charge requirements are embodied in Public Utilities Code § 399.8,1 covering only energy efficiency, renewables, and RD&D activities. The majority share of the PGC funding (approximately $250 million per year) goes to support investor-owned utilities' (IOUs) energy efficiency programs. Those funds are combined with IOU procurement funds to support cost-effective energy efficiency investments overseen by the Commission.2 The current rulemaking for energy efficiency policies is R.09-11-014. As stated in the Order Instituting Rulemaking (R.11-10-003), R.09-11-014 is the venue in which we will consider whether and how to replace the energy efficiency funding from the expiring electric system benefits charge.
The funds specified in § 399.8 are charged to customers by each electrical corporation pursuant to § 399.8(b)(1) through a nonbypassable rate component (per § 399.8 (c)(1)) and, pursuant to § 399.8(d), collected by the three largest electrical IOUs regulated by this Commission: Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), and Southern California Edison Company (SCE). The charges are collected from customers on a volumetric (equal cents per kilowatt hour (kWh)) basis from individual classes of customers. Local publicly owned electric utilities also have similar but separate requirements under § 385, which are not the subject of this rulemaking.
In general, for the IOUs covered by the § 399.8 PGC, the energy efficiency funds have been collected and held by these utilities, and then spent on programs for their customers under the oversight authority of the Commission. The renewables and RD&D program funds have been remitted to the Energy Commission to oversee and administer on behalf of the IOUs and their customers. For the 2011/2012 fiscal year, the Energy Commission's estimated expenditures for PGC-funded RD&D programs are $70.4 million, and $73 million for renewables.
The funding provisions of § 399.8 sunset as of January 1, 2012.3 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 collection and disbursement of the system benefits charges for energy efficiency, renewables, or RD&D under § 399.8. Thus, without further action, the funding under § 399.8 will end automatically on January 1, 2012.
On September 23, 2011, Governor Jerry Brown sent a letter to Commission President Michael 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."
In this new Rulemaking, we will determine whether and how the Commission should act to preserve funding for the public and ratepayer benefits associated with renewables and RD&D activities to date provided by the electric PGC that will be without continued funding on January 1, 2012.
As determined in the R.11-10-003, this proceeding will be handled in two phases. A Scoping Memo was issued by the assigned Commissioner on November 8, 2011. The Scoping Memo determined that Phase 1 of this proceeding will address the Commission's authority for the continued collection of system benefits charges for the renewables and RD&D purposes, and provide limited guidance as to programmatic objectives and details about how the funds should be used. Phase 1 will also address how those funds, if any, should continue to be collected from IOU ratepayers and for how long.
R.11-10-003 posited a number of questions to parties regarding funding levels, programmatic issues and governance structures for renewables and RD&D programs currently funded by the PGC. As discussed in more detail below, we will explore these questions in more detail in Phase 2 of this proceeding. We also will monitor the legislative process for any further legislation related to the continuation of programs funded by the expiring PGC.
1 All references are to the Public Utilities Code, unless otherwise noted.
2 There are additional natural gas funds utilized to support natural gas energy efficiency programs from the parallel gas public purpose program fund. Together, the three sources of funds have been combined to support portfolios of energy efficiency programs offered by the natural gas and electric IOUs and oversee by the Commission. All funds and expenditures for energy efficiency programs are being considered in Rulemaking (R.) 09-11-014.
3 While authorization in § 399.8 to collect the PGC ends on January 1, 2012, the statute does not sunset, and all of its provisions remain law.
