BILL ANALYSIS                                                                                                                                                                                                    


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                              UNFINISHED BUSINESS

          Bill No:  SB 1
          Author:   Murray (D), et al
          Amended:  6/29/06
          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

           SENATE FLOOR  :  30-5, 6/1/05
          AYES:  Alarcon, Alquist, Campbell, Cedillo, Chesbro, Cox,  
            Denham, Ducheny, Dunn, Dutton, Escutia, Figueroa, Florez,  
            Kehoe, Kuehl, Lowenthal, Maldonado, Migden, Morrow,  
            Murray, Ortiz, Perata, Poochigian, Romero, Scott,  
            Simitian, Soto, Speier, Torlakson, Vincent
          NOES:  Aanestad, Ackerman, Battin, Hollingsworth,  
          NO VOTE RECORDED:  Ashburn, Bowen, Machado, Margett, Runner

           ASSEMBLY FLOOR  :  49-19, 6/29/06 - See last page for vote

           SENATE ENERGY, UTILITIES & COMMUN. COMM.  :  9-0, 8/8/06
          AYES:  Escutia, Alarcon, Battin, Bowen, Cox, Dunn, Dutton,  
            Kehoe, Murray
          NO VOTE RECORDED:  Simitian


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           SUBJECT  :    Electricity:  solar energy:  net metering

           SOURCE  :     Author

           DIGEST  :    This bill makes changes to the California Solar  
          Initiative, which is implemented by the California Public  
          Utilities Commission.

           Assembly Amendments  delete most of the prior provisions.   
          As it left the Senate, the bill established the Million  
          Solar Roofs Initiative.  That program was subsequently  
          implemented as the California Solar Initiative (CSI).  This  
          bill now contains the specific statutory changes required  
          for the CSI and the language necessary to, among other  
          things, (1) include municipal utilities, (2) raise the net  
          metering cap, (3) establish a cost cap of $3.4 billion, and  
          (4) impose some constraints on the program.

           ANALYSIS  :    Current law and regulations establish subsidy  
          programs for the installation of solar photovoltaic (PV)  
          systems administered by California Energy Commission (CEC)  
          and the California Public Utilities Commission (CPUC).   
          These programs, known collectively as the California Solar  
          Initiative (CSI), provide $3.2 billion in subsidies through  
          rebates for the installation of photovoltaic projects.

          Current law requires investor-owned utilities (IOUs) to  
          increase their existing level of renewable resources by one  
          percent of sales per year until a portfolio of 20 percent  
          renewable resources is achieved by no later than 2017.   
          Municipal electric utilities are not subject to these  
          standards, but are required to implement and enforce their  
          own renewable resource procurement programs.

          This bill establishes goals of installing 3000 MW of solar  
          generation capacity, establishing a self-sufficient solar  
          industry, and placing PV systems on 50 percent of new homes  
          in 13 years.

          This bill requires the CPUC, in implementing the CSI, to:



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          1.Adopt a subsidy that declines not less than an average of  
            seven percent per year, and shall be zero as of December  
            31, 2016.

          2.Adopt performance-based subsidies (e.g. subsidies that  
            pay based on the amount of electricity produced) by  
            January 1, 2008 for all large PV systems and for half of  
            all medium-sized systems.  Peformance-based subsidies are  
            encouraged, but not required, for smaller systems.   
            Performance-based incentives shall also decline at an  
            average of not less than seven percent per year.

          This bill authorizes the CPUC to award $101 million in  
          subsidies for solar thermal systems.

          This bill authorizes the CPUC to award $50 million for  
          solar research and development.

          This bill requires municipal utilities to establish solar  
          energy programs in support of the 3000 MW goal.  Such  
          programs shall be established by January 1, 2008 and shall  
          cost $784 million.

          This bill establishes an aggregate cost cap for these solar  
          programs of $3.4 billion.

          This bill prohibits the CPUC from imposing the cost of the  
          CSI on low income customers and bars the CPUC from imposing  
          a surcharge on natural gas to pay for the CSI.

          This bill requires the CEC to commence a proceeding by July  
          1, 2006, and conclude that proceeding within three years,  
          to consider if and when solar energy systems should be  
          required on new buildings.  
          This bill requires sellers of production homes, as defined,  
          to offer PV systems on new homes for which tentative  
          subdivision maps are completed on or after January 1, 2011.

          This bill raises the net metering cap from 0.5 percent to  
          2.5 percent.  

          This bill requires the CEC to establish eligibility  
          criteria, installation guidelines, and equipment rating  



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          standards for solar energy systems receiving ratepayer  
          subsidies.  The CEC is also required to perform random  
          performance audits on PV systems.

          This bill requires the Contractors' State Licensing Board  
          to review and, if needed, revise its licensing  
          classifications to ensure that PV contractors have the  
          proper qualifications.

          As passed by the Senate in 2005, this bill established the  
          Governor's Million Solar Rooftops proposal.  Because this  
          bill did not pass the Assembly in 2005, the CPUC instead  
          created a solar program by regulation, known as the  
          California Solar Initiative.  That program is similar to  
          the one envisioned in this bill, though there are important  
          differences noted below.  Rather than create a solar  
          program, the current version of this bill now creates  
          limits on the CPUC's solar program and includes municipal  
          utilities, over which the CPUC has no jurisdiction.

           California Solar Initiative
          After the 2005 session adjourned without passing this bill,  
          the CPUC established the CSI by regulation.  The CSI shares  
          the goals and basic mechanism of this bill, which is to  
          provide a long-term subsidy for photovoltaic systems with  
          incentives that are reduced annually.  But the CSI differs  
          from this bill in important ways, some of which are due to  
          the jurisdictional limitations of the CPUC and others which  
          are differences in policy.

          The major difference is that the cost of the program  
          increased substantially.  The last 2005 version of this  
          bill had a cost cap of $2.5 billion.  This amount reflects  
          what the solar industry said it would take to accomplish  
          the goals of the program.  But the CPUC's CSI raised the  
          cost cap to $3.2 billion.  The CPUC has never justified the  
          cost-effectiveness of the higher price tag.  And the  
          increased program cost will not lead to more installed  
          solar capacity.  Part of the cost increase will cover $160  
          million in new R&D expenditures.  Funding is also made  
          available for a solar water heating subsidy program.  And  



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          the CPUC allows $250 million to be spent on utility  
          administration.  The cost of the CSI is recovered  
          exclusively from CPUC-regulated utility customers, both gas  
          and electric.

          Importantly, the CSI does not raise the net metering cap.   
          Net metering is a major benefit to PV customers because it  
          allows the customer to sell his excess electricity  
          production back to the utility at retail rates.  Because  
          net metering creates an additional, substantial subsidy,  
          the amount of PV capacity that can be net metered has been  
          limited by statute.  PG&E and Southern California Edison  
          are nearing their limit.  Consequently, a bill raising the  
          net metering cap is required for any significant solar  
          capacity to be added.

           Current Subsidies
          Even without the CSI, solar energy is already heavily  
          subsidized.  For commercial customers federal tax credits  
          and accelerated depreciation cover about 50 percent of the  
          cost of the system.  Accelerated depreciation for state tax  
          purposes is worth another six percent. 

          Since 1976 California has provided $1.1 billion in tax  
          credits and another $1 billion in rebates for solar energy  
          systems, resulting in over 160 MW of solar power.  State  
          and federal policy has been generous to the solar industry.  
           And, just as high gasoline prices make alternative  
          transportation fuels more attractive, so too do high (and  
          rising) electric prices make solar more attractive.

           California -- a Green Energy Leader
          By any measure, California has been a leader in the pursuit  
          of alternative energy sources and energy efficiency.  Every  
          year customers of California's IOUs, through a surcharge on  
          CPUC-regulated utility bills, pay at least an extra $228  
          million to fund energy efficiency and conservation, $135  
          million for renewable energy, and $62.5 million for energy  
          research, development and demonstration.  Legislation  
          authorizing the surcharge was enacted in 1996 (AB 1890,  
          Brulte, Chapter 854, Statutes of 1996) and again in 2000  
          (AB 995,Wright, Chapter 1051, Statutes of 2000), both on a  



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          bipartisan basis.  Authorization of a 5-year spending plan  
          for some of these funds is pending again this year in SB  
          1250 (Perata).  California's Renewable Portfolio Standard  
          is a further major commitment to renewable energy.  It  
          requires electric utilities to increase their purchase of  
          renewable energy by 1 percent of total energy needs  
          annually until 20 percent of their energy is from renewable  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

           SUPPORT  :   (Verified  8/8/06)

          Governor's Administration
          Office of the Attorney General
          Oakland City Mayor Jerry Brown 
          Sacramento City Mayor Heather Fargo 
          San Diego City Council Member Donna Frye 
          San Francisco County Board of Supervisors 
          San Francisco Mayor Gavin Newsom
          San Jose City Mayor Ron Gonzalez
          Akeena Solar
          Alliance for Nuclear Responsibility
          American Federation of State, County and Municipal  
          American Lung Association
          American Solar Energy Society
          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
          California Solar Energy Industries Association
          Carville Sierra, Inc. 
          City of Aliso Valley 
          City of Berkeley 
          City of Irvine 
          City of Santa Cruz
          City of Sebastopol 
          Clarum Homes



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          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
          New Vision Technologies
          NorCal Solar
          Northern California Power Agency
          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
          Sempra Energy (if amended)
          Sharp Solar
          Sierra Club California 
          Solar Integrated Technologies 
          South Coast Air Quality Management District
          Sun Power and Geothermal Energy
          The Better World Group
          Union of Concerned Scientists 
          Vote Solar
          Working Assets
          World Council for Renewable Energy



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          Yolo County Board of Supervisors
          Several individuals

           OPPOSITION  :    (Verified  8/8/06)

          The Utility Reform Network

           ASSEMBLY FLOOR  :
          AYES:  Arambula, Baca, Bass, Berg, Bermudez, Blakeslee,  
            Calderon, Canciamilla, Chan, Chu, Cohn, Coto, Daucher, De  
            La Torre, Dymally, Frommer, Garcia, Goldberg, Hancock,  
            Jerome Horton, Shirley Horton, Jones, Karnette, Keene,  
            Klehs, Koretz, Laird, Leno, Levine, Lieber, Lieu, Maze,  
            Montanez, Mullin, Nava, Oropeza, Pavley, Richman,  
            Ridley-Thomas, Ruskin, Saldana, Salinas, Torrico, Tran,  
            Umberg, Vargas, Wolk, Yee, Nunez
          NOES:  Aghazarian, Benoit, Bogh, Cogdill, DeVore, Haynes,  
            Houston, Huff, La Malfa, La Suer, Leslie, Mountjoy,  
            Nakanishi, Niello, Plescia, Spitzer, Strickland, Walters,  
          NO VOTE RECORDED:  Chavez, Emmerson, Evans, Liu, Matthews,  
            McCarthy, Nation, Negrete McLeod, Parra, Sharon Runner,  

          NC:nl  8/9/06   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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