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Other Budget Issues

Last Updated: 4/27/2011
Budget Issue: Advanced energy storage (See April Finance Letter for update on issue)
Program: Public Utilities Commission
Finding or Recommendation: Deny, without prejudice, Governor's January budget proposal for two positions and $229,000 to develop policies and incentives regarding advanced energy storage (AES), until such time as the administration provides a workload analysis that provides sufficient justification for the proposal and adequately accounts for legislative policy direction provided in 2010 legislation.
Further Detail

Governor’s January Budget Proposal. The Governor’s 2011-12 January budget has requested authority for an increase of two positions and $229,000 from the Public Utilities Commission Utilities Reimbursement Account for the commission to develop and implement AES policies.

What Is AES? Energy storage refers to technological devices and systems which have the capacity to hold some form of energy which can be put to use at a later time. A primary example of energy storage currently in use is pumped hydroelectric storage which stores energy in the form of water, pumped from a lower elevation reservoir to a higher elevation. In contrast, new emerging forms of energy storage such as compressed air energy storage, batteries, and flywheels are referred to as “advanced energy storage.”

The U.S. Department of Energy (DOE) has stated that developing technology to store electricity that can be available to meet demand whenever needed would represent a major breakthrough in electricity distribution. The DOE reports that fundamental research gaps exist and technological breakthroughs are necessary in order to make AES a commercially viable option in the future.

2010-11 Budget. Last year, the Governor requested three positions for workload associated with AES. The Legislature instead approved one two-year limited term position. 

AES Legislation Was Enacted in 2010. Subsequent to the Legislature's evaluation of the CPUC's 2010-11 budget request related to AES, Chapter 469, Statutes of 2010 (AB 2514, Skinner), was enacted to provide Legislature's policy direction in the area of AES. Commonly referred to as AB 2514, the legislation authorized the CPUC to determine by October 2013 what (if any) are the appropriate energy storage capacity targets for Investor Owned Utilities (IOUs). IOUs are then required to meet those targets by 2015 and 2020.

Budget Request Fails to Account for Legislative Policy Direction. The budget proposal submitted for legislative review does not include a workload analysis associated with the implementation of AB 2514 and, in fact, is totally silent regarding AB 2514. Instead, the Governor’s budget proposal cites 2007 federal energy legislation as the driving force behind its request to increase staffing capacity for AES-related work, but does not explain how, if at all, this legislation creates additional staffing requirements at CPUC. In fact, CPUC staff have indicated that the state is currently in compliance with the 2007 federal mandate. Having failed to evaluate how recent policy direction has impacted their current workload, the CPUC will still need to provide adequate analysis and justification to merit approval of this request.

LAO Recommendation. Until such time as the administration provides adequate analysis of its AES workload in a manner that clearly lays out work done to date as well as justification of needs going forward, accounting for legislative policy direction in AB 2514, we recommend that the Legislature deny the CPUC’s budget request.

April Finance Letter and Updated LAO Recommendation. During January budget hearings, the Legislature denied without prejudice the Governor's January proposal and asked the Administration to provide greater justification for the request based on current workload analysis. See our analysis of the AES April Finance Letter and our updated recommendation on this issue.