BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 445-6614 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1 Author: Murray (D) Amended: 5/31/05 Vote: 21 SENATE ENERGY, UTILITIES & COMMUN. COMM. : 10-0, 4/26/05 AYES: Escutia, Morrow, Alarcon, Battin, Campbell, Cox, Dunn, Kehoe, Murray, Simitian NO VOTE RECORDED: Bowen SENATE APPROPRIATIONS COMMITTEE : 8-4, 5/26/05 AYES: Migden, Alarcon, Alquist, Escutia, Florez, Murray, Ortiz, Romero NOES: Aanestad, Ashburn, Battin, Poochigian NO VOTE RECORDED: Dutton SUBJECT : Energy: Million Solar Roofs Initiatives SOURCE : Author DIGEST : This bill establishes the Million Solar Roofs Initiative, the goal of which is to place one million solar energy systems, or 3,000 megawatts, on new or existing residential and commercial buildings by 2018. ANALYSIS : Current law, (SBX2 82 [Murray] Chapter 10, Statues of 2001), requires the Department of General Services, in consultation with the California Energy Commission (CEC) to ensure that solar energy equipment is installed, no later than January 1, 2007, on all state CONTINUED SB 1 Page 2 buildings and state parking facilities where feasible and cost-effective, as specified. Apparently, very few systems have been installed as a result of this statute. Existing law also establishes numerous subsidy programs for solar photovoltaic (PV) systems. For example, the Self-Generation Incentive Program (SGIP), within the Public Utilities Commission (PUC), provides incentives to customers for the installation of qualifying (greater than 30 kW) solar, wind turbines, etc. The current incentive is $3.50/watt. The SGIP is funded by a charge imposed on utility bills, which generates about $125 million annually, of which the PV portion is about $70 million. The PUC has imposed an administrative sunset of December 31, 2007. A cost-effectiveness report of the SGIP is due in July 2005. Current law also establishes the Emerging Renewables Program (ERP), administered by the CEC, for systems less than 30 kW, which provides a rebate of $2.80 per watt for installation of PV systems. In addition, there are a number of other solar subsidies available, such as: 1.7.5 percent personal income and corporate tax credit for taxpayers who purchase solar or wind systems. Approximately 4,000 taxpayers claimed the solar credit in 2003. 2.Property tax exemption for solar energy systems installed between January 1, 1999 and January 1, 2006. 3.Net metering program for PV systems, which credits the customer for electricity produced by spinning the meter backwards. 4.Federal tax credits. Since 1976, the state has provided more than $1 billion in tax credits for solar energy systems. In addition, the PV portions of the CEC and PUC programs mentioned above generate about $100-110 million annually. This bill proposes to increase the number of PV systems in the state from about 12,000 to one million, or increase solar capacity from about 93 megawatts to 3,000 megawatts SB 1 Page 3 (about the equivalent of six small power plants) by increasing electricity rates and offering solar subsidies. Specifically, the bill: 1. Requires the CEC to develop, implement and fund the Million Solar Roofs Initiative (MSRI), and establish solar subsidies, not to exceed the subsidy level in existence on January 1, 2006 (probably $2.80-3.00/watt, or about $7,250 for a 2.5kW residential system), which decrease annually to zero by the end of 2016. 2. Requires the CEC, in implementing the MSRI, to evaluate the costs and benefits of having an increased number of solar systems as part of the electrical system, as specified. 3. Requires the PUC to adopt a program by January 1, 2007 to implement and finance the MSRI, and to include the reasonable cost of the program in the distribution revenue requirements of electrical corporations. 4. Requires the PUC program to be a cost-effective investment by ratepayers in peak electricity generation capacity, as specified. 5. Requires municipal utilities to adopt similar programs funded by a surcharge. 6. Requires production home builders to offer solar as an option. 7. Requires the CEC to conduct random audits of solar energy systems to evaluate their operational performance. 8. Provides that upon implementation of the MSRI, the PV portions of the ERP the SGIP shall be discontinued and their respective funding (about $100-110 million) deposited into the MSRI Trust Fund at the 2004-05 levels. 9. Exempts low-income customers participating in the California Alternate Rates for Energy (CARE) program SB 1 Page 4 from any rate increases necessary to fund the program. 10. Makes related changes. Note: For an extensive discussion of the issues involved, please refer to the Senate Energy, Utilities and Communications Committee analysis. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According the to Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2005-06 2006-07 2007-08 Fund PUC $140 $279 $279 Special* Costs should be recovered from fee revenues. CEC $705 $1,385 $1,485 Unspecified Costs should be recovered from revenues. State agencies' energy costs See comments below Various *Public Utilities' Reimbursement Account (PURA) California's electricity rates are among the highest in the nation. The electricity cost savings associated with 3,000 MW are indeterminable, but significant. On the other hand, rate increases will help fund the subsidy program. Senate Appropriations staff notes that energy costs of state agencies are in excess of $500 million annually. For illustrative purposes, a one percent increase in the state's energy costs could result in increased costs of $5 million annually. Note: For a detailed breakdown of all costs, please refer to the Senate SB 1 Page 5 Appropriations Committee analysis. SUPPORT : (Verified 5/31/05) Schwarzenegger Administration Attorney General Bill Lockyer Akeena Solar Alliance for Nuclear Responsibility American Colar Energy Society American Federation of State, County and Municipal Employees American Lung Association Bluewater Network Borrego Solar California Alliance For Consumer Protection California Building Officials California Interfaith Power and Light California League of Conservation Voters California Public Interest Research Group California Public Utilities Commission Carville Sierra, Inc. City of Aliso Valley City of Berkeley City of Irvine City of Santa Cruz City of Sebastopol Clarum Homes Clean Power Campaign Coalition for Clean Air Community Environmental Council Cooperative Community Energy East Bay Municipal Utility District Energy Independence Now Environment California Global Green USA Gray Panthers Green Lease, Inc. Greenpeace USA Henry T. Perea, Councilmember 7th District Industrial Environmental Association KYOCERA International, Inc. Marin County Board of Supervisors Merced/Mariposa County Asthma Coalition National Wildlife Federation SB 1 Page 6 New Vision Technologies NorCal Solar Northern California Solar Energy Association Oakland City Mayor Jerry Brown Our Children's Earth Pacific Environment Pacific Gas and Electric Company (if amended) Physicians for Social Responsibility Planning and Conservation League Powerlight Solar Electric Systems Public Citizen PV Manufacturers Alliance Rainforest Action Network Real Goods Relational Culture Institute Sacramento City Mayor Heather Fargo San Diego City Council Member Donna Frye San Francisco County Board of Supervisors San Francisco Mayor Gavin Newsome San Jose City Mayor Ron Gonzalez Sempra Energy (if amended) Sharp Solar Sierra Club California Solar Integrated Technologies SolarWorks South Coast Air Quality Management District Stopwaste.org Sun Power & Geothermal Energy The Better World Group Union of Concerned Scientists Vote Solar Working Assets World Council for Renewable Energy Yolo County Board of Supervisors OPPOSITION : (Verified 5/31/05) California Manufacturers and Technology Association California Chamber of Commerce Associated Builders and Contractors (oppose unless amended) California Building Industry Association (oppose unless amended) Southern California Edison (oppose unless amended) The Utility Reform Network (oppose unless amended) SB 1 Page 7 NC:nl 5/31/05 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****