BILL NUMBER: SB 1	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JULY 5, 2005
	AMENDED IN ASSEMBLY  JUNE 23, 2005
	AMENDED IN SENATE  MAY 31, 2005
	AMENDED IN SENATE  MAY 16, 2005
	AMENDED IN SENATE  APRIL 25, 2005
	AMENDED IN SENATE  FEBRUARY 28, 2005

INTRODUCED BY   Senators Murray and Campbell
    (   Principal coauthor:   Assembly Member
 Levine   ) 
   (Coauthors: Senators Alquist, Chesbro, Ducheny, and Kehoe)
   (Coauthors: Assembly Members Bermudez, Chan, Cohn, Huff, Koretz,
Laird, Leno, Lieber, Maze, Nation, Pavley, Saldana, and Wolk)

                        DECEMBER 6, 2004

   An act to amend Section 25744 of, to add Sections 25405.5 and
25405.6 to, and to add Chapter 8.8 (commencing with Section 25780) to
Division 15 of, the Public Resources Code, and to amend Section
379.6 of, and to add Sections 379.8 and 387.5 to, the Public
Utilities Code, relating to solar energy.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1, as amended, Murray.  Energy: renewable energy resources:
Million Solar Roofs Initiative.
   (1) Existing law requires the State Energy Resources Conservation
and Development Commission (Energy Commission) to expand and
accelerate development of alternative sources of energy, including
solar resources. Existing law requires the Energy Commission, until
January 1, 2006, and to the extent that funds are appropriated for
that purpose in the annual Budget Act, to implement a grant program
to accomplish specified goals, including making solar energy systems
cost competitive with alternate forms of energy.
   Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations. The existing Public Utilities Act requires the PUC to
require Pacific Gas and Electric Company, San Diego Gas and Electric,
and Southern California Edison to identify a separate electrical
rate component to fund programs that enhance system reliability and
provide in-state benefits. This rate component is a nonbypassable
element of local distribution and collected on the basis of usage.
The funds are collected to support cost-effective energy efficiency
and conservation activities, public interest research and development
not adequately provided by competitive and regulated markets, and
renewable energy resources. Existing law requires that 17.5% of the
money collected under the renewable energy public goods charge be
used for a multiyear, consumer-based program to foster the
development of emerging renewable technologies in distributed
generation applications. Existing law requires that the funds be
expended in accordance with a specified report of the Energy
Commission to the Legislature, subject to certain requirements.
   Existing law requires the PUC, on or before March 7, 2001, and in
consultation with the Independent System Operator, to take certain
actions, including, in consultation with the Energy Commission,
adopting energy conservation demand-side management and other
initiatives in order to reduce demand for electricity and reduce load
during peak demand periods, including differential incentives for
renewable or superclean distributed generation resources.  Pursuant
to this requirement, the PUC has developed a self-generation
incentive program to encourage customers of electrical corporations
to install distributed generation that operates on renewable fuel or
contributes to system reliability. Existing law requires the PUC, in
consultation with the Energy Commission, to administer, until January
1, 2008, a self-generation incentive program for distributed
generation resources in the same form that exists on January 1, 2004,
subject to certain air emissions and efficiency standards.
   This bill would establish the Million Solar Roofs Initiative,
administered by the Energy Commission, with the goals of placing
1,000,000 solar energy systems, as defined  or designated by the
Energy Commission  , on new and existing residential and
commercial customer sites, or its generation capacity equivalent of
3,000 megawatts, establishing a self-sufficient solar industry in 10
years, and placing solar energy systems on 50% of new home
developments in 13 years. The bill would establish the Million Solar
Roofs Initiative Trust Fund and would provide that, upon
appropriation by the Legislature, moneys deposited into the fund may
be expended by the Energy Commission for purposes of carrying out the
Million Solar Roofs Initiative. The bill would provide that up to 2%
of the money in the fund may be expended for the state's costs of
administration. The program would require the Energy Commission to
award incentives, pursuant to a declining schedule to be adopted by
the Energy Commission, and would authorize certain other incentive
programs, to support the installation of eligible solar energy
systems.  The bill would require the Energy Commission to adopt
by January 1, 2010, a performance-based incentive program, for at
least 50% of the moneys expended, that is based on the actual
electrical output of the solar energy system and that promotes the
installation of solar energy systems that maximize electrical output
to coincide with peak loads.  The bill would require the Energy
Commission to establish and revise eligibility criteria for solar
energy systems and to establish conditions for incentives. The bill
would require that electrical work to install the solar energy system
be preformed under contract by a contractor meeting certain
licensure requirements. The bill would require the Energy Commission
to adopt guidelines governing the program at a publicly noticed
meeting. The bill would provide that the Million Solar Roofs
Initiative program supplants that portion of the program to foster
the development of emerging renewable technologies that encourages
installation of residential and commercial photovoltaic solar energy
systems. The bill would require that, upon disbursement of funds from
the Million Solar Roofs Initiative Trust Fund consistent with the
Million Solar Roofs Initiative, the photovoltaic portion of the
emerging renewable technologies program be discontinued and the
remaining funds from that program be deposited into the Million Solar
Roofs Initiative Trust Fund, and would prohibit the Energy
Commission from establishing any other program in addition to the
Million Solar Roofs Initiative program, to encourage the increased
installation of residential and commercial photovoltaic solar energy
systems. The bill would require the Energy Commission to conduct
random audits of solar energy systems to evaluate their operational
performance. The bill would require the Energy Commission, on or
before January 1, 2009, and every 3rd year thereafter, to submit an
assessment of the success of the Million Solar Roofs Initiative
program to the Legislature.
   This bill would require that the PUC, on or before February 1,
2006, and in consultation with the Energy Commission, issue an order
opening a proceeding, or expanding the scope of an existing
proceeding, to finance a comprehensive solar energy program to
adequately fund the Million Solar Roofs Initiative. The bill would
require funding of the Million Solar Roofs Initiative to be an
element of the program adopted by the PUC  , with the charge
imposed not to exceed an unspecified amount per kilowatthour for each
customer class, with the total amount collected not to exceed a
specified aggregate dollar limit   within the service
territories of participating electrical corporations  . The bill
would require that the reasonable cost of the program be included in
the distribution revenue requirements of electrical corporations.
The bill would require that the program adopted by the PUC be a
cost-effective investment by ratepayers in peak electricity
generation capacity that enables ratepayers to recoup the cost of
their investment through lower rates as a result of avoiding
purchases of electricity at peak rates generated by traditional
generation resources. The bill would require the PUC to adopt the
program no later than January 1, 2007. The bill would provide that
the Million Solar Roofs Initiative program supplants that portion of
the self-generation incentive program that encourages installation of
residential and commercial photovoltaic solar energy systems and
would require that, upon disbursement by the Energy Commission of
funds from the Million Solar Roofs Initiative Trust Fund consistent
with the Million Solar Roofs Initiative program, the photovoltaic
portion of the self-generation incentive program be discontinued and
the PUC order the remaining funds from that program be deposited into
the Million Solar Roofs Initiative Trust Fund. The bill would
prohibit the PUC from establishing any other program to encourage the
increased installation of residential and commercial solar energy
systems.
   This bill would require all local publicly owned electric
utilities, as defined, that sell electricity at retail, on or before
January 1, 2007, to adopt, implement, and finance a solar roofs
initiative program, funded by a surcharge, as prescribed, for the
purpose of investing in, and encouraging the increased installation
of, residential and commercial solar energy systems. The bill would
require a local publicly owned electric utility to make certain
program information available to its customers and to the Energy
Commission on an annual basis beginning June 1, 2007. By imposing
additional duties upon local publicly owned electric utilities, the
bill would thereby impose a state-mandated local program.
   (2) Existing law requires all electric service providers, as
defined, to develop a standard contract or tariff providing for net
energy metering, and to make this contract available to eligible
customer generators, upon request.  Existing law requires all
electric service providers, upon request, to make available to
eligible customer generators contracts for net energy metering on a
first-come-first-served basis until the time that the total rated
generating capacity used by eligible customer generators exceeds 0.5%
of the electric service provider's aggregate customer peak demand.
   This bill would, notwithstanding these requirements, require the
PUC to order electric service providers to expand the availability of
net energy metering so that it is offered on a
first-come-first-served basis until the time that the total rated
generating capacity used by all eligible customer-generators exceeds
5% of the electric service provider's aggregate  custom
  customer  peak demand.
   (3) Existing law requires the Energy Commission to expand and
accelerate development of alternative sources of energy, including
solar resources.
   This bill would require that beginning January 1, 2010, a seller
of production homes, as defined, offer the option of a solar energy
system, as defined, to all customers negotiating to purchase a new
production home constructed on land meeting certain criteria and to
disclose certain information. The bill would require the Energy
Commission to develop an offset program that allows a developer or
seller of production homes to forego the offer requirement on one
project, by installing solar energy systems generating specified
amounts of electricity on other projects. The bill would require that
not later than July 1, 2006, the Energy Commission initiate a public
proceeding and make findings if and under what conditions solar
energy systems are to be required on new residential and
nonresidential buildings. The bill would prohibit the Energy
Commission from requiring that a solar energy system be installed on
a residential building unless the Energy Commission determines, based
upon consideration of all costs associated with the system,
including the availability of certain financial incentives, that the
system is cost effective when amortized over the economic life of the
structure.
   (4) Under existing law, a violation of the Public Utilities Act or
an order or direction of the PUC is a crime.
    Various provisions of this bill are within the act and require
action by the PUC to implement the bill's requirements. Because a
violation of those provisions or of PUC actions to implement those
provisions would be a crime, this bill would impose a state-mandated
local program by creating new crimes.
   (5) 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 specified reasons.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 25405.5 is added to the Public Resources Code,
to read:
   25405.5.
   (a) As used in this section, the following terms have the
following meanings:
   (1) "kW" means kilowatts or 1,000 watts, as measured from the
alternating current side of the solar energy system inverter
consistent with Section 223 of Title 15 of the United States Code.
   (2) "Production home" means a single family residence constructed
as part of a development of at least 50 homes per project that is
intended or offered for sale.
   (3) "Solar energy system" means a photovoltaic solar collector or
other photovoltaic solar energy device that has a primary purpose of
providing for the collection and distribution of solar energy for the
generation of electricity, and that produces at least 1 kW, but not
more than 1 megawatt, alternating current rated peak electricity.
 The commission may designate a solar energy device that is not a
photovoltaic solar collector or other photovoltaic solar energy
device to be a "solar energy syste   m" if the solar energy
device has the primary purpose of providing for the collection and
distribution of solar energy for the generation of electricity, and
it meets or exceeds the eligibility criteria established pursuant to
subdivision (c) of Section 25782. 
   (b) A seller of production homes shall offer a solar energy system
option to all customers that enter into negotiations to purchase a
new production home constructed on land for which an application for
a tentative subdivision map has been deemed complete on or after
January 1, 2010, and disclose the following:
   (1) The total installed cost of the solar energy system option.
   (2) The estimated cost savings associated with the solar energy
system option, as determined by the commission pursuant to Chapter
8.8 (commencing with Section 25780) of Division 15.
   (c) The State Energy Resources Conservation and Development
Commission shall develop an offset program that allows a developer or
seller of production homes to forego the offer requirement of this
section on one project, by installing solar energy systems generating
specified amounts of electricity on other projects. The amount of
electricity required to be generated from solar energy systems used
as an offset pursuant to this subdivision, shall be equal to the
amount of electricity generated by solar energy systems installed on
a similarly sized project within that climate zone, assuming 20
percent of the prospective buyers would have installed solar energy
systems.
  SEC. 2.  Section 25405.6 is added to the Public Resources Code, to
read:
   25405.6.
   Not later than July 1, 2006, the commission shall initiate a
public proceeding and make findings if, and under what conditions,
solar energy systems shall be required on new residential and new
nonresidential buildings, including the establishment of numerical
targets. A solar energy system shall not be required for a
residential building unless the commission determines, based upon
consideration of all costs associated with the system, that the
system is cost effective when amortized over the economic life of the
structure. When determining the cost effectiveness of the solar
energy system, the commission shall consider the availability of
governmental rebates, tax deductions, net-metering, and other
quantifiable factors, provided that the commission can determine the
availability of these financial incentives if a solar energy system
is made mandatory and not elective. The commission shall periodically
update the standards and adopt any revision that the commission
determines is necessary, including revisions that reflect changes in
the financial incentives originally considered by the commission when
determining cost effectiveness of the solar energy system. For
purposes of this section, "solar energy system" means a photovoltaic
solar collector or other photovoltaic solar energy device that has a
primary purpose of providing for the collection and distribution of
solar energy for the generation of electricity.
  SEC. 3.  Section 25744 of the Public Resources Code is amended to
read:
   25744.
   (a) Seventeen and one-half percent of the money collected pursuant
to the renewable energy public goods charge shall be used for a
multiyear, consumer-based program to foster the development of
emerging renewable technologies in distributed generation
applications.
   (b) Any funds used for emerging technologies pursuant to this
section shall be expended, except as provided in subdivisions (c) and
(d), in accordance with the report, subject to all of the following
requirements:
   (1) Funding for emerging technologies shall be provided through a
competitive, market-based process that shall be in place for a period
of not less than five years, and shall be structured so as to allow
eligible emerging technology manufacturers and suppliers to
anticipate and plan for increased sale and installation volumes over
the life of the program.
   (2) The program shall provide monetary rebates, buydowns, or
equivalent incentives, subject to subparagraph (C), to purchasers,
lessees, lessors, or sellers of eligible electricity generating
systems. Incentives shall benefit the end-use consumer of renewable
generation by directly and exclusively reducing the purchase or lease
cost of the eligible system, or the cost of electricity produced by
the eligible system. Incentives shall be issued on the basis of the
rated electrical generating capacity of the system measured in watts,
or the amount of electricity production of the system, measured in
kilowatthours. Incentives shall be limited to a maximum percentage of
the system price, as determined by the commission.
   (3) Eligible distributed emerging technologies are photovoltaic,
solar thermal electric, fuel cell technologies that utilize renewable
fuels, and wind turbines of not more than 50 kilowatts rated
electrical generating capacity per customer site, and other
distributed renewable emerging technologies that meet the emerging
technology eligibility criteria established by the commission.
Eligible electricity generating systems are intended primarily to
offset part or all of the consumer's own electricity demand, and
shall not be owned by local publicly owned electric utilities, nor be
located at a customer site that is not receiving distribution
service from an electrical corporation that is subject to the
renewable energy public goods charge and contributing funds to
support programs under this chapter. All eligible electricity
generating system components shall be new and unused, shall not have
been previously placed in service in any other location or for any
other application, and shall have a warranty of not less than five
years to protect against defects and undue degradation of electrical
generation output. Systems and their fuel resources shall be located
on the same premises of the end-use consumer where the consumer's own
electricity demand is located, and all eligible electricity
generating systems shall be connected to the utility grid in
California. The commission may require eligible electricity
generating systems to have meters in place to monitor and measure a
system's performance and generation. Only systems that will be
operated in compliance with applicable law and the rules of the
Public Utilities Commission shall be eligible for funding.
   (4) The commission may limit the distribution of funds available
pursuant to the program based upon the receipt of funding or
financial incentives from other federal or local government or public
utility programs to promote solar energy.
   (5) In awarding funding, the commission may provide preference to
systems that provide tangible demonstrable benefits to communities
with a plurality of minority or low-income populations.
   (6) In awarding funding, the commission shall develop and
implement eligibility criteria and a system that provides preference
to systems based upon system performance, taking into account
factors, including, but not limited to, shading, insulation levels,
and installation orientation.
   (7) The commission shall, on a quarterly basis, publish and make
available to the public the balance of funds available for emerging
renewable energy resources for rebates, buydowns, and other
incentives for the purchase of these resources.
   (c) Notwithstanding Section 399.6 of the Public Utilities Code,
the commission may expend, until December 31, 2008, up to sixty
million dollars ($60,000,000) of the funding allocated to the
Renewable Resources Trust Fund for the program established in this
section, subject to the repayment requirements of subdivision (f) of
Section 25751.
   (d) Notwithstanding Section 399.6 of the Public Utilities Code and
subdivision (b), the Million Solar Roofs Initiative program shall
supplant that portion of the program to foster the development of
emerging renewable technologies that encourage the installation of
residential and commercial photovoltaic solar energy systems. Upon
disbursement of funds from the Million Solar Roofs Initiative Trust
Fund consistent with the Million Solar Roofs Initiative program
established pursuant to Chapter 8.8 (commencing with Section 25780),
the photovoltaic portion of the emerging renewable technologies
program shall be discontinued and the remaining funds from that
program shall be deposited into the Million Solar Roofs Initiative
Trust Fund. The commission shall not establish any other program to
encourage the increased installation of residential and commercial
photovoltaic solar energy systems.
  SEC. 4.  Chapter 8.8 (commencing with Section 25780) is added to
Division 15 of the Public Resources Code, to read:
      CHAPTER 8.8.  Million Solar Roofs Initiative

   25780.
   The Legislature finds and declares all of the following:
   (a) California has a pressing need to procure a steady supply of
affordable and reliable peak electricity.
   (b) Solar generated electricity is uniquely suited to California's
needs because it produces electricity when California needs it most,
during the peak demand hours in summer afternoons when the sun is
brightest and air conditioners are running at capacity.
   (c) Procuring solar electric generation capacity to meet peak
electricity demand increases system reliability and decreases
California's dependence on unstable fossil fuel supplies.
   (d) Solar generated electricity diversifies California's energy
portfolio. California currently relies on natural gas for the bulk of
its electricity generation needs. Increasing energy demands place
increasing pressure on limited natural gas supplies and threaten to
raise costs.
   (e) More than 150,000 homes will be built annually in California
in the coming years, challenging energy reliability and
affordability.
   (f) Investing in residential and commercial solar electricity
generation installations today will lower the cost of solar generated
electricity for all Californians in the future. In 10 years, solar
peak electric generation can be procured without the need for
rebates.
   (g) Increasing California's solar electricity generation market
will also bring additional manufacturing, installation, and sales
jobs to the state at a higher rate than most conventional energy
production sources.
   (h) Funding a Million Solar Roofs Initiative is a cost-effective
investment by ratepayers in peak electricity generation capacity and
ratepayers will recoup the cost of their investment through lower
rates as a result of avoiding purchases of electricity at peak rates,
with additional system reliability and pollution reduction benefits.

   (i) Solar energy systems provide substantial energy reliability
and pollution reduction benefits. Solar energy systems also diversify
our energy supply and thereby reduce our dependence on imported
fossil fuels.
   25781.
   As used in this chapter, the following terms have the following
meanings:
   (a) "kW" means kilowatts or 1,000 watts, as measured from the
alternating current side of the solar energy system inverter
consistent with Section 223 of Title 15 of the United States Code.
   (b) "kWh" means kilowatthours, as measured by the number of
kilowatts generated in an hour.
   (c) "MW" means megawatts or 1,000,000 watts.
   (d) "Solar energy system" means a photovoltaic solar collector or
other photovoltaic solar energy device that has a primary purpose of
providing for the collection and distribution of solar electrical
energy for the generation of electricity, and that produces at least
1 kW alternating current rated peak electricity.  The commission
may designate a solar energy device that is not a photovoltaic solar
collector or other photovoltaic solar energy device to be a "solar
energy system" if the solar energy device has the primary purpose of
providing for the collection and distribution of solar energy for the
generation of electricity, and it meets or exceeds the eligibility
criteria established pursuant to subdivision (c) of Section 25782.

   (e) "Million Solar Roofs Initiative" means the program established
by this chapter.
   25782.
   (a) (1) The commission shall develop and implement a multiyear
Million Solar Roofs Initiative to provide funding and support to
foster the installation of solar energy systems on new and existing
residential and commercial customer sites in California. The goals of
this program are the placement of solar energy systems on 1,000,000
residential and commercial sites, or its generation capacity
equivalent of 3,000 MW, the establishment of a self-sufficient solar
industry in which solar energy systems are a viable mainstream option
for both homes and businesses in 10 years, and the placement of
solar energy systems on 50 percent of new homes in 13 years.
   (2) The Million Solar Roofs Initiative program shall supplant that
portion of the program to foster the development of emerging
renewable technologies funded pursuant to Section 25744, that
encourages installation of residential and commercial photovoltaic
solar energy systems. Upon disbursement of funds from the Million
Solar Roofs Initiative Trust Fund consistent with the Million Solar
Roofs Initiative program, the photovoltaic portion of the emerging
renewable technologies program shall be discontinued and the
remaining funds from that program shall be deposited into the Million
Solar Roofs Initiative Trust Fund.
   (3) The commission shall not establish any other program in
addition to the program established pursuant to this chapter, to
encourage the increased installation of residential and commercial
photovoltaic solar energy systems.
   (b) All funds used for the Million Solar Roofs Initiative shall be
expended in accordance with the following:
   (1) The commission shall award monetary incentives for eligible
solar energy systems not to exceed the existing level of incentive in
effect on January 1, 2006. The incentive level shall decline each
year thereafter at a rate of no less than 7 percent per year and
shall be zero as of December 31, 2016. The commission shall adopt and
publish a schedule of declining incentive levels no less than 60
days in advance of the first decline in incentive levels. The
commission may develop incentives based upon the output of
electricity from the system, provided those incentives are consistent
with the declining incentive levels of this paragraph.  
   (2) By January 1, 2010, the commission shall adopt a
performance-based incentive program in which at least 50 percent of
the moneys expended pursuant to the Million Solar Roofs Initiative is
expended to provide incentives that are based on the actual
electrical output of the solar energy system and that promote the
installation of solar energy systems that maximize electrical output
to coincide with peak loads. In developing the performance-based
incentive program, the commission may:  
   (A) Apply performance-based incentives only to customer classes
designated by the commission.  
   (B) Design the performance-based incentives so that customers may
receive a higher level of incentives than under incentives based on
installed electrical capacity.  
   (C) Develop financing options that help offset the installation
costs of the solar energy system, provided that this financing is
ultimately repaid in full by the consumer or through the application
of the performance-based rebates.   
   (2) 
    (3)    On or before January 1, 2007, the
commission shall adopt revisions to the eligibility criteria for
solar energy systems, including design, installation, and electricity
output standards or incentives.  
   (3) 
    (4)    Notwithstanding paragraph (1), the
commission may increase the incentive level by not more than 50
percent above the maximum incentive level established pursuant to
paragraph (1) for solar energy systems that are installed on "zero
energy homes" or "zero energy commercial structures." Prior to an
increase in the incentive level, the commission shall adopt
definitions for "zero energy homes" and "zero energy commercial
structures" through a public process, including at least one public
hearing with not less than 30 days' notice.  
   (4) 
    (5)    Notwithstanding paragraph (1), the
commission may increase the incentive level by not more than 25
percent above the maximum incentive level established pursuant to
paragraph (1) for solar energy systems that are installed on homes or
commercial structures that exceed the commission's established
building standards by a specified percentage as determined by the
commission.  
   (5) 
    (6)    Awards shall be made for the
installation of eligible solar energy systems on new or existing
residential and commercial customer sites that are or will be
receiving electrical distribution service from an electrical
corporation that is contributing funds to support the Million Solar
Roofs Initiative pursuant to Section 379.8 of the Public Utilities
Code.  
   (6) 
    (7)    Awards shall not be made for eligible
solar energy systems installed on the premises of individuals or
entities that are not contributing funds to support the Million Solar
Roofs Initiative  , except for the following:   (A)
Customers that participate in the California Alternate Rates for
Energy or CARE program are eligible to receive awards. 
    (B)     An electrical corporation, where
the commission determines the solar energy system is appropriately
sized to load and is installed, operated, or part of a program to
facilitate   achieving the goals of the Million Solar Roofs
Initiative. An electrical corporation that receives an award for
participation in the Million Solar Roofs Initiative shall not recover
the value of that award from ratepayers in rates  .
   (c) The commission shall establish eligibility criteria for solar
energy systems, including the following:
   (1) The solar energy system is intended primarily to offset part
or all of the consumer's own electricity demand.
   (2) All components in the solar energy system are new and unused,
and have not previously been placed in service in any other location
or for any other application.
   (3) The solar energy system has a warranty of not less than 10
years to protect against defects and undue degradation of electrical
generation output.
   (4) The solar energy system is located on the same premises of the
end-use consumer where the consumer's own electricity demand is
located.
   (5) The solar energy system is connected to the electrical
corporation's electrical distribution system within the state.
   (6) The solar energy system has meters or other devices in place
to monitor and measure the system's performance and the quantity of
electricity generated by the system.
   (7) The electrical work to install the solar energy system is
performed under contract by a California contractor with an active
C-10 license, in accordance with rules and regulations adopted by the
Contractors' State License Board.
   (8) The solar energy system is installed in conformance with the
manufacturer's specifications and in compliance with all applicable
electrical and building code standards.
   (d) The commission shall establish conditions on incentives that
require  or encourage  all of the following:
   (1) Appropriate siting and high quality installation of the solar
energy system by developing installation guidelines that maximize the
performance of the system and prevent qualified systems from being
inefficiently or inappropriately installed. The conditions
established by the commission shall not impact housing designs or
densities presently authorized by a city, county, or city and county.
The goal of this paragraph is to achieve efficient installation of
solar energy systems to promote the greatest energy production per
ratepayer dollar.
   (2) Optimal solar energy system performance during periods of peak
electricity demand, including the use of advanced metering systems,
onsite performance meters, dispatchable battery backup systems, and
performance based incentives.
   (3) Appropriate energy efficiency improvements in the new or
existing home or commercial structure where the solar energy system
is installed.
   (4) Rate equipment, components, and systems to assure reasonable
performance and to develop standards that provide for compliance with
the minimum ratings.
   (e) The commission may limit the distribution of funds available
to the program based upon the receipt of funding or financial
incentives from other federal or local government or public utility
programs to promote solar energy.
   (f) Notwithstanding subdivision (e), the commission shall provide
proportional program support, not to exceed 10 percent of the overall
funds for the Million Solar Roofs Initiative, for installation of
solar energy systems on affordable housing projects undertaken
pursuant to Section 50052.5, 50053, or 50199.14 of the Health and
Safety Code.  If deemed appropriate in consultation with the
California Tax Credit Allocation Committee, the commission may
establish a revolving loan or loan guarantee program for affordable
housing projects consistent with the requirements of Chapter 5.3
(commencing with Section 25425).
   (g) Pursuant to this chapter, the commission may provide
incentives in the form of a monetary incentive or its equivalent to
purchasers, lessees, lessors, or sellers of an eligible solar energy
system. The incentive shall benefit the end-use consumer by directly
and exclusively reducing the purchase or lease cost of the eligible
solar energy system, or the cost of electricity produced by the
eligible solar energy system. Incentives shall be issued on the basis
of the rated electrical capacity of the system measured in watts, or
in the electricity production of the system, measured in kWh, as
determined by the commission.
   25783.
   In administering the Million Solar Roofs Initiative, the
commission shall do all the following:
   (a) Examine and implement, to the extent appropriate, financing
options that could lower solar energy system financing costs to
residential and commercial customers. The commission shall examine
wholesale and retail mortgage markets, and other issues that it deems
appropriate.
   (b) Acquire, if the commission determines it necessary,
appropriate technical and administrative services or expertise to
support the Million Solar Roofs Initiative. The commission may award
contracts to develop or administer all or a portion of the Million
Solar Roofs Initiative.
   (c) Publish educational materials designed to demonstrate how
builders may incorporate solar energy systems during construction as
well as energy efficiency measures that best complement solar energy
systems.
   (d) Develop and publish the estimated annual electrical generation
and savings for solar energy systems. The estimates shall vary by
climate zone, type of system, size, lifecycle costs, electricity
prices, and other factors the commission determines to be relevant to
a consumer when making a purchasing decision.
   (e) Provide assistance to builders and contractors in support of
the Million Solar Roofs Initiative. The assistance may include
technical workshops, training, educational materials, and related
research.
   (f) Publish, and make available to the public, at least once
quarterly, the balance of funds available in the Million Solar Roofs
Initiative Trust Fund, the cost of the program, the photovoltaic
generating capacity installed, and the percentage of new and existing
residential and commercial customer sites that are equipped with
solar energy systems funded by the Million Solar Roofs Initiative.
This information shall be including in the report to the Legislature
made pursuant to subdivision (i).
   (g) The commission shall annually conduct random audits of solar
energy systems to evaluate their operational performance.
   (h) The commission, in consultation with the Public Utilities
Commission, shall evaluate the costs and benefits of having an
increased number of operational solar energy systems as a part of the
electrical system with respect to their impact upon the
distribution, transmission, and supply of electricty, using the best
available load profiling and distribution operations data from the
Public Utilities Commission, local publicly owned electric utilities,
and electrical corporations, and performance audits of installed
solar energy systems.
   (i) On or before January 1, 2009, and every third year thereafter,
the commission shall submit to the Legislature an assessment of the
success of the Million Solar Roofs Initiative program. That
assessment shall include the number of residential and commercial
sites that have installed solar energy systems, the electrical
generating capacity of the installed solar energy systems, the cost
of the program, total electrical system benefits, including the
effect on electrical service rates, environmental benefits, how the
program affects the operation and reliability of the electrical grid,
how the program has affected peak demand for electricity, the
progress made toward reaching the goals of the program, whether the
program is on schedule to meet the program goals, and recommendations
for improving the program to meet its goals.
                                               25784.
   (a) The commission shall adopt guidelines governing the Million
Solar Roofs Initiative authorized under this chapter, at a publicly
noticed meeting offering all interested parties an opportunity to
comment. Not less than 30 days' public notice shall be given of the
meeting required by this section, before the commission initially
adopts guidelines. Substantive changes to the guidelines shall not be
adopted without at least 10 days' written notice to the public.
Notwithstanding any other provision of law, any guidelines adopted
pursuant to this chapter shall be exempt from the requirements of
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code.
   (b) Funds to further the purposes of this chapter may be committed
for multiple years.
   25785.
   (a) The Million Solar Roofs Initiative Trust Fund is hereby
created in the State Treasury.
   (b) The money in the fund may be expended to implement and support
the Million Solar Roofs Initiative pursuant to this chapter upon
appropriation by the Legislature in the annual Budget Act. Up to 2
percent of the money in the fund may be expended for the costs of the
state's administration of this chapter, upon appropriation by the
Legislature.
   (c) Revenues collected by electrical corporations pursuant to
Section 379.8 of the Public Utilities Code shall be transmitted to
the commission at least quarterly for deposit in the Million Solar
Roofs Initiative Trust Fund. The Treasurer shall immediately deposit
money received pursuant to this section into the Million Solar Roofs
Initiative Trust Fund for the current calendar year.
   (d) Upon appropriation by the Legislature and notification by the
commission, the Controller shall pay all awards of the money in the
fund for purposes enumerated in this chapter. The eligibility of an
award shall be determined solely by the commission based on the
procedures it adopts under this chapter. Based on the eligibility of
an award, the commission shall also establish the need for a
multiyear commitment to any particular award and so advise the
Department of Finance. An eligible award submitted by the commission
to the Controller shall be accompanied by a summary description of
how payment of the award furthers the purposes enumerated in this
chapter, and an accounting of future costs associated with any award
or group of awards known to the commission to represent a portion of
a multiyear funding commitment.
  SEC. 5.  Section 379.6 of the Public Utilities Code is amended to
read:
   379.6.
   (a) The commission, in consultation with the State Energy
Resources Conservation and Development Commission, shall administer,
until January 1, 2008, the self-generation incentive program for
distributed generation resources originally established pursuant to
Chapter 329 of the Statutes of 2000. Except as provided in
subdivisions (b) and (c), the program shall be administered in the
same form as it existed on January 1, 2004.
   (b) Eligibility for the self-generation incentive program's level
3 incentive category shall be subject to the following conditions:
   (1) Commencing January 1, 2005, all combustion-operated
distributed generation projects using fossil fuel shall meet an
oxides of nitrogen (NOx) emissions rate standard of 0.14 pounds per
megawatthour.
   (2) Commencing January 1, 2007, all combustion-operated
distributed generation projects using fossil fuel shall meet a NOx
emissions rate standard of 0.07 pounds per megawatthour and a minimum
efficiency of 60 percent. A minimum efficiency of 60 percent shall
be measured as useful energy output divided by fuel input. The
efficiency determination shall be based on 100 percent load.
   (3) Combined heat and power units that meet the 60 percent
efficiency standard may take a credit to meet the applicable NOx
emissions standard of 0.14 pounds per megawatthour or 0.07 pounds per
megawatthour. Credit shall be at the rate of one megawatthour for
each 3.4 million British thermal units (Btus) of heat recovered.
   (4) Notwithstanding paragraphs (1) and (2), a project that does
not meet the applicable NOx emission standard is eligible if it meets
both of the following requirements:
   (A) The project operates solely on waste gas. The commission shall
require a customer that applies for an incentive pursuant to this
paragraph to provide an affidavit or other form of proof, that
specifies that the project shall be operated solely on waste gas.
Incentives awarded pursuant to this paragraph shall be subject to
refund and shall be refunded by the recipient to the extent the
project does not operate on waste gas. As used in this paragraph,
"waste gas" means natural gas that is generated as a byproduct of
petroleum production operations and is not eligible for delivery to
the utility pipeline system.
   (B) The air quality management district or air pollution control
district, in issuing a permit to operate the project, determines that
operation of the project will produce an onsite net air emissions
benefit, compared to permitted onsite emissions if the project does
not operate. The commission shall require the customer to secure the
permit prior to receiving incentives.
   (c) In administering the self-generation incentive program, the
commission may adjust the amount of rebates, include other ultraclean
and low-emission distributed generation technologies, as defined in
Section 353.2, and evaluate other public policy interests, including,
but not limited to, ratepayers, and energy efficiency and
environmental interests. The Million Solar Roofs Initiative program
shall supplant that portion of the self-generation incentive program
that encourages installation of residential and commercial
photovoltaic solar energy systems. Upon disbursement by the State
Energy Resources Conservation and Development Commission of funds
from the Million Solar Roofs Initiative Trust Fund consistent with
the Million Solar Roofs Initiative program established pursuant to
Chapter 8.8 (commencing with Section 25780) of Division 15 of the
Public Resources Code, the photovoltaic portion of the
self-generation incentive program shall be discontinued and the
commission shall order the remaining funds from that program to be
deposited into the Million Solar Roofs Initiative Trust Fund. The
commission shall not establish any other program to encourage the
increased installation of residential and commercial solar energy
systems.
  SEC. 6.  Section 379.8 is added to the Public Utilities Code, to
read:
   379.8.
   (a) As used in this section, the following terms have the
following meanings:
   (1) "kW" means kilowatts or 1,000 watts, as measured from the
alternating current side of the solar energy system inverter
consistent with Section 223 of Title 15 of the United States Code.
   (2) "kWh" means kilowatthours, as measured by the number of
kilowatts generated in an hour.
   (3) "MW" means megawatts or 1,000,000 watts.
   (4) "Solar energy system" means a photovoltaic solar collector or
other photovoltaic solar energy device that has a primary purpose of
providing for the collection and distribution of solar electrical
energy for the generation of electricity, and that produces at least
1 kW alternating current rated peak electricity.  The State
Energy Resources Conservation and Development Commission may
designate a solar energy device that is not a photovoltaic solar
collector or other photovoltaic solar energy device to be a "solar
energy system" if the solar energy device has the primary purpose of
providing for the collection and distribution of solar energy for the
generation of electricity, and it meets or exceeds the eligibility
criteria established pursuant to subdivision (c) of Section 25782 of
the Public Resources Code. 
   (b) Notwithstanding any other law, on or before February 1, 2006,
the commission, in consultation with the State Energy Resources
Conservation and Development Commission, shall initiate a new
proceeding or expand the scope of an existing proceeding to finance a
comprehensive solar energy program pursuant to Chapter 8.8
(commencing with Section 25780) of Division 15 of the Public
Resources Code, to adequately fund the Million Solar Roofs
Initiative.
   (c) The commission's proceeding shall do all of the following:
   (1) Order that funding for the photovoltaic portion of the
self-generation incentive program for distributed generation be
deposited into the Million Solar Roofs Initiative Trust Fund, at the
same level as was collected in the 2004-05 fiscal year.
   (2) Determine the level of additional funding needed to adequately
support the goal of placing solar energy systems on one million
residential and commercial customer sites or its equivalent of 3,000
MW solar generating capacity in the state by December 31, 2018. 
Any additional funding shall not exceed $ ___ per kilowatthour for
any class of customers and shall not result in the collection of more
than one billion eight hundred thousand dollars ($1,800,000,000)
from customers within the service territories of the participating
electrical corporations.  
   (3) In making the determination pursuant to paragraph (2), the
commission shall consider the impact all existing solar incentive
programs will have on achieving the goals of the program, including
cash and noncash incentives, state and federal tax benefits, credits
from net energy metering that exceed the actual avoided costs of the
replaced generation, and benefits from waivers of other electrical
corporation costs and charges. For purposes of this paragraph, "other
electrical corporation costs and charges" include the nonbypassable
rate component of local distribution service imposed pursuant to
Article 7 (commencing with Section 381) or Article 15 (commencing
with Section 399), standby charges, cost responsibility surcharges,
and installation costs.  
   (3) 
    (4)    Encourage participation by a broad and
diverse range of interests from all areas of the state, and
interested state entities.
   (d) The commission shall include the reasonable cost of the
program in the distribution revenue requirements of electrical
corporations.
   (e) Notwithstanding any other provision of law, any charge imposed
to fund the program adopted and implemented pursuant to this section
shall be imposed upon all customers not participating in the
California Alternate Rates for Energy or CARE program as provided in
paragraph (2), including those residential customers subject to the
rate cap required by Section 80110 of the Water Code for existing
baseline quantities or usage up to 130 percent of existing baseline
quantities of electricity.
   The costs of the program adopted and implemented pursuant to this
section may not be recovered from customers participating in the
California Alternate Rates for Energy or CARE program established
pursuant to Section 739.1, except to the extent that program costs
are recovered out of the nonbypassable system benefits charge
authorized pursuant to Section 399.8.
   (f) The commission shall adopt the program no later than January
1, 2007.
   (g) The program adopted by the commission pursuant to this
section, shall do all of the following:
   (1) Be a cost-effective investment by ratepayers in peak
electricity generation capacity that enables ratepayers to recoup the
cost of their investment through lower rates as a result of avoiding
purchases of electricity at peak rates generated by traditional
powerplants and peaker generation units, with additional system
reliability and pollution reduction benefits.
   (2) Utilize the most cost-effective administrative mechanism to
adequately accomplish the goals of the program.
   (3) Provide a predictable long-term funding mechanism sufficient
to encourage adequate investment by the solar industry.  
   (4) Make time-variant pricing available for all ratepayers with a
solar energy system, upon adoption of time-variant pricing tariffs
pursuant to Section 760. The commission shall structure any
time-variant pricing so 
    (4)     Require time-variant pricing for
all ratepayers with a solar energy system. The commission shall
develop a time-variant tariff that creates the maximum incentive for
ratepayers to install solar energy systems so that the system's peak
electricity production coincides with California's peak electricity
demands and that assures  that ratepayers receive due value for
their contribution to the purchase of solar energy systems and
customers with solar energy systems continue to have an incentive to
use electricity efficiently.
   (5) Require San Diego Gas and Electric Company, Southern
California Edison Company, and Pacific Gas and Electric Company to
each designate at least one employee to be accountable for solar
energy system installations and operations.
   (6) Require San Diego Gas and Electric Company, Southern
California Edison Company, and Pacific Gas and Electric Company to
each monitor and report key solar program performance and progress
data to the commission in a clearly identified place on the utility's
Internet Web site.
   (7) Consider energy efficiency and demand side management options,
in addition to solar energy system procurement, for new residential
and commercial construction.
   (8) Notwithstanding Section 2827, require an electric service
provider to expand the availability of net energy metering so that it
is offered on a first-come-first-served basis until the time that
the total rated generating capacity used by all eligible
customer-generators exceeds 5 percent of the electric service
provider's aggregate customer peak demand. However, the net metering
cap shall not exceed 2 percent until the commission has established
an appropriate net metering time-variant rate design that considers
the costs to all net metering participants and ratepayers as a whole
and that considers the recovery of the fixed costs of providing
distribution service to customers. The commission shall monitor the
level of net energy metering for each electrical corporation to
ensure that the cap is increased in a timely manner as needed to
further the objectives of this section.
   (h) The program adopted by the commission pursuant to this section
shall also include elements for the purpose of funding a Million
Solar Roofs Initiative by the State Energy Resources Conservation and
Development Commission pursuant to Chapter 8.8 (commencing with
Section 25780) of Division 15 of the Public Resources Code. These
program elements shall exclude customers participating in the State
Energy Resources Conservation and Development Commission's Million
Solar Roofs Initiative from the rate cap for residential customers
for existing baseline quantities or usage by those customers of up to
130 percent of existing baseline quantities, as required by Section
80110 of the Water Code.  
   (i) Any rate structure for an electrical corporation in effect as
of January 1, 2006, that provides for a separate per kW energy charge
and a separate facilities charge for nonresidential customers with a
maximum demand of more than 20 kW shall remain in effect for those
nonresidential customers with a maximum demand of more than 20 kW who
participate in the Million Solar Roofs Initiative pursuant to
Chapter 8.8 (commencing with Section 25780) of Division 15 of the
Public Resources Code.  
   (i) 
    (j)    Upon disbursement by the State Energy
Resources Conservation and Development Commission of funds from the
Million Solar Roofs Trust Fund consistent with the Million Solar
Roofs Initiative program established pursuant to Chapter 8.8
(commencing with Section 25780) of Division 15 of the Public
Resources Code, the photovoltaic portion of the self-generation
incentive program shall be discontinued and the commission shall
order the remaining funds from that program to be deposited into the
Million Solar Roofs Initiative Trust Fund. The commission shall not
establish any other program to encourage the increased installation
of residential and commercial photovoltaic solar energy systems.
  SEC. 7.  Section 387.5 is added to the Public Utilities Code, to
read:
   387.5.
   (a) The governing body of a local publicly owned electric utility,
as defined in subdivision (d) of Section 9604, that sells
electricity at retail, shall adopt, implement, and finance a solar
roofs initiative program, funded by a surcharge in accordance with
subdivision (b), for the purpose of investing in, and encouraging the
increased installation of, residential and commercial solar energy
systems. This program shall be consistent with the intent and goals
of the Legislature to encourage the installation of 3,000 megawatts
of photovoltaic solar energy in California in accordance with the
Million Solar Roofs Initiative program (Chapter 8.8 (commencing with
Section 25780) of Division 15 of the Public Resources Code).
   (b) On or before January 1, 2007, a local publicly owned electric
utility shall establish a new surcharge sufficient to offer monetary
incentives for the installation of solar energy systems of at least
two dollars and forty cents ($2.40) per installed watt of
photovoltaic solar energy. The incentive level shall decline each
year thereafter at a rate of no less than 7 percent per year.
   (c) A local publicly owned electric utility shall establish the
program on or before January 1, 2007. Before establishing the
program, the governing body of the local publicly owned utility shall
give notice of, and hold, a public hearing to seek comment on the
program from the community.
   (d) A local publicly owned electric utility shall, on an annual
basis beginning June 1, 2007, make available to its customers and to
the State Energy Resources Conservation and Development Commission,
information relating to the utility's solar roofs initiative program
established pursuant to this section, including, but not limited to,
the number of photovoltaic solar watts installed, the total number of
photovoltaic systems installed, the total number of applicants, the
amount of incentives awarded, and the contribution toward the program
goals.
  SEC. 8.
   No reimbursement is required by this act pursuant to Section 6 of
Article XIII B of the California Constitution because the only costs
that may be incurred by a local agency or school district will be
incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIII B of the California Constitution.
  SEC. 9.
   No reimbursement is required by this act pursuant to Section 6 of
Article XIII B of the California Constitution for certain other costs
that may be incurred by a local agency or school district because a
local agency or school district has the authority to levy service
charges, fees, or assessments sufficient to pay for the program or
level of service mandated by this act, within the meaning of Section
17556 of the Government Code.