BILL ANALYSIS
AB 1920
PageA
Date of Hearing: April 7, 2008
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Lloyd E. Levine, Chair
AB 1920 (Huffman) - As Amended: March 13, 2008
SUBJECT : Solar and wind generating resources: net metering.
SUMMARY : Expands the current net-metering programs for wind
and solar, to allow the net-metered customers to sell any excess
electricity they produce over the course of a year to their
electric utility.
EXISTING LAW :
1)Creates the California Solar Initiative (CSI), a $3.3 billion
declining rebate program to offset the cost of installing
solar panels on homes, businesses, and public buildings. The
program requires that in order to be eligible for CSI rebates,
among other requirements, the solar energy must be intended to
primarily offset part or all of the consumer's own electricity
demand. (the panels cannot produce more electricity than the
customer's historic peak demand).
2)Requires electric corporations to offer customers with solar
or wind generation that is no larger than 1 megawatt in size,
a net-metered tariff where the customer can sell back
electricity produced from the solar or wind facility that
exceeds that customer's demand at that moment in time as a
bill credit against electricity that the customer receives
from the utility when their renewable facility produces less
than the customer is consuming. Caps the total amount of solar
and wind generation that can be subject to meter at 2.5
percent of each electric utility's aggregate peak demand.
3)Provides that an electric utility must purchase all
electricity from a eligible renewable resources that is no
larger than 1 megawatt at a rate determined by the California
Public Utilities Commission (PUC). The rate is the Market
Price Referent (MPR), which represents the average cost of
natural gas fired electric generation plus the added costs of
carbon emissions associated with natural gas fired generation.
4)Requires all electric corporations to meet a Renewable
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Portfolio Standard (RPS) where at least 20% of the utility'
electricity procurement comes from renewable resources by
2010. Authorizes the PUC to allow an electric corporation to
use renewable energy credits (RECs) associated with
electricity that is delivered to the California to count
toward the utility's RPS obligations, even if the utility does
not purchase the associated electricity.
THIS BILL :
1)Deletes the requirement that in order to be eligible to
receive CSI rebates the solar energy system must be intended
to primarily offset part or all of the consumer's own
electricity demand, but provides that only the capacity needed
to offset part or all of the consumer's electricity demand
shall be eligible for rebates.
2)Defines a "net surplus customer-generator" as a
customer-generator that generates more electricity in a
12-month period than is supplied by the electric utility to
the customer generator in that same period.
3)Defines "Net surplus electricity" as all electricity generated
by a customer generator over a 12-month period that exceeds
the amount of electricity consumed by that customer generator.
4)Provides that the "net surplus electricity" produced by a
customer generator does not count toward the cap that limits
the amount of allowable net-metered electricity in each IOU's
service territory.
5)Requires all Investor Owned Utilities (IOU) and any Publicly
Owned Utility (POU) that offers net-metering to purchase all
net surplus electricity produced from the customer's wind or
solar generator at a rate set by the PUC or the POU. The rate
shall be set to provide the customer "fair and adequate
compensation" for the surplus energy sales and shall include
the value of electricity itself, the value of the renewable
attributes, the value of the carbon or other environmental
attributes, the time-of-use value, and distributed generation
value of the electricity.
6)Provides that the utility shall own all of the renewable
attributes or renewable energy credits (RECs) associated with
any net surplus electricity it must purchase. The customer
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will retain the REC of any renewable energy credit associated
with any electricity generated by the customer that is
utilized by the customer.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to allow electric utility customers who install solar or wind
generators on their property to be paid by their electric
utility for all the "surplus" electricity they produce. The
author believes this will encourage homeowners and businesses to
conserve more electricity (and thus have more surplus power they
can sell to the utility) and will allow property owners to
install the maximum number of solar panels on their home.
1) California's numerous renewable and customer-generator
programs:
Under net-metering , the electric utility is required to "buy
back" any electricity generated by a customer-owned generator as
measured by an electric meter that can measure the flow of
electricity in both directions. When the customer generates
electricity, he/she uses most of it for his or her own facility.
Any excess electricity passes through the meter and is
distributed to the electricity grid. At the end of the year,
the electric corporation calculates the amount of electricity
distributed to the grid by the customer and reduces the
customer's annual bill by the amount of electricity generated by
the customer. This results in the utility "buying" the excess
power and paying for it in the form of a bill credit.
For biogas and fuel cells, the credit is set at the value of the
utility's average generation costs -- meaning you are selling
the electricity back to the utility at the same price the
utility pays for the generation you are replacing. These
programs do not act as subsidy programs since the utility is
paying the same amount it would pay for any other generation.
For solar and wind, the credit is at the customer's retail cost
(a cost that is much higher than the generation costs since it
includes transmission, distribution, public good charges, and
the utility's rate of return). If the generator is being paid
the retail price, the add-on costs are shifted to the utilities'
other ratepayers. The bill is settled at the end of the year
instead of on a monthly basis. This allows the customer to
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balance high production months against low production months.
Since it is a bill credit, if for some reason the customer is a
net energy producer (meaning over the course of a year you
produce more than you consume) the year-end bill will be zero,
but no check will be written to the customer.
Under PUC rules, the net-metered customer owns all of the RECs
associated with the electricity generated from his or her units,
even if the power is "sold" back to the utility as a bill
credit.
The current net-metering may not be an effective incentive to
build renewable generation in situations where the customer
wants to install generation that exceeds the customer's own
demand at the location of the actual electric meter in question.
For example, if a city wanted to install solar panels over a
parking lot at the local baseball field where the only
electricity usage is from a concession stand, the city may never
recover the full costs of the solar installation since the
production from the panels will significantly exceed the
electricity demand from the concession stand.
Feed-in tariffs require the utility to buy all the electricity
produced from a eligible renewable generator at a pre-set price.
Under a feed-in tariff it does not matter if the utility wants
that power or not, all the customer has to do is ask to have his
or her eligible renewable generator connected to the grid, and
the utility will have to purchase all the electricity the
customer produces and does not use for his or her own demand.
Currently, there are two programs in California that use a
feed-in tariff. The first program was put into place by AB 1969
(Yee), Chapter 731, Statutes of 2006. The AB 1969 program
requires the electric utilities to purchase all the electricity
a customer offers to the utility from an eligible renewable
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generator at a price that is determined by the PUC.<1> In PG&E's
and Southern California Edison's (SCE) service territories any
customer of the utility can install a renewable generator up to
1.5 megawatts in size and participate in the program. In the
service territories of the rest of the remaining electric
corporations, the program is limited to water and waste water
treatment agencies. Under PUC rules, if a customer wants to sell
electricity to the utility under the AB 1969 program, the
customer is not eligible to receive monetary incentives from
other renewable energy programs such as the California Solar
Initiative (CSI) or the Self Generation Incentive Program
(SGIP).
Under the AB 1969 program, the customer owns RECs associated
with electricity that is consumed by the customer. The utility
however, owns the RECs associated with any power it must
purchase from the customer.
The other feed-in tariff program is a holdover from the Public
Utility Regulatory Policies Act of 1978 (PURPA). PURPA requires
electric utilities to purchase power from Qualifying Facilities
(QFs) (QFs include renewable generation facilities of any size
and cogeneration facilities). The utility is required to pay
the generator what it would have cost the utility to produce or
otherwise procure electric power if it did not purchase the
power from the QFs. Under a statutory provision, no actual RECs
are created by renewable generation from a QF, but the electric
utilities can count the power they purchase from a QF toward
their RPS obligations.
Some potential renewable generators believe that the current
feed-in tariff programs are not effective tools to promote all
types of renewable technologies. Some companies or local
governments would prefer to use the electricity they produce to
offset their own electricity demand instead of sell the power to
the utility. Others feel that the current prices offered under
the feed-in tariffs are simply too low.
---------------------------
<1> The rate is the Market Price Referent (MPR), which is a
benchmark price used to calculate any above market costs of
renewable power purchased as part of a utility's Renewable
Portfolio Standard (RPS) The MPR itself is set at the costs to
own and operate a combined cycle gas turbine (CCGT) over a 10-20
year period plus the cost of carbon emissions from that plant.
The MPR also gives additional value to electricity that is
produced at times of high demand.
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Under the RPS renewable generators can participate in the
utility's annual competitive solicitation for renewable
electricity. Each year the electric utilities issue requests for
proposals (RFPs) for the new renewable generation they will need
to meet their RPS obligation. Generators can submit offers to
the utility. The offers are then reviewed by the utility and a
procurement review group to determine which proposals are the
least cost and best fit to the utility's needs and these are the
contracts the utility ultimately signs.
This process is designed to help ensure the utilities are
contracting for renewable power at the lowest possible costs by
creating a competitive bidding process. However, the time and
complexity involved in the bidding process makes it difficult
for smaller generators to participate.
2) None of the above? : The goal of the author to encourage
customers to install solar energy systems on their property that
exceed the owner's own demand cannot be addressed by any of the
existing programs. The current net metering program is
specifically limited to projects that are sized only to meet the
customer's own demand.
The AB 1969 feed-in tariff would allow a customer to use all of
the generation from solar energy system needed to meet on-site
load and then sell all excess power back to the utility, in a
similar fashion that this bill does. However, under PUC rules,
any party that is participating in the AB 1969 program is
ineligible for the rebates provided under the CSI. Given the
fact that for most customers the CSI rebates are necessary to
make the solar energy system affordable, it may not make
economic sense to install a larger solar energy system and forgo
the rebates.
3) So what does this bill do : This bill provides that a customer
of almost every electricity utility in California can install
solar or wind generators on their own property that produce more
electricity than the customer's own demand (up to 1 megawatt in
size). They can receive the CSI rebates for the solar energy
system, but only for the portion of the system that will meet
the customer's own demand. The customers will then be under a
net-metered tariff that gives them a bill credit valued at the
retail rate of electricity for any excess the customer produces
during the year. Then if at the end of the year the credits
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exceed the total electricity the customer consumed from the
utility the customer will be a net surplus producer and the
utility would then owe the customer money for the net surplus
electricity. The net surplus power electricity would be valued
at a rate set by the PUC which will likely be lower than the
value associated with retail rate for the electricity credited
against their bill.
Additionally, for all electricity that is "sold back" to the
grid as a bill credit, the customer would own all of the RECs
associated with that electricity. However, for the electricity
that is sold to the utility as net surplus electricity, the
utility would own the RECs.
4) New subsidy or fair rate : Supporters of this bill feel that
allowing customers to sell their surplus power back to the
utility will help incentivize customers to maximize the full
solar potential of their roof tops and not undersize their
systems. If the program does not result in cost shifts where
non-solar customers are subsidizing one more program to benefit
solar customers, this program could benefit all utility
customers. Some customers would pay to install their own solar
system that provides clean excess power to the grid at times of
day when the utility needs electricity the most and the utility
would then only paying a fair rate for the power.
However, the difference between most of the support and most of
opposition to the bill hinges on whether the program creates a
new subsidy or not. The bill provides that the rate paid for the
surplus power "shall be set to provide the customer 'fair and
adequate compensation' for the surplus energy sales and shall
include the value of electricity itself, the value of the
renewable attributes, the value of the carbon or other
environmental attributes, the time-of-use value, and distributed
generation value of the electricity."
The provision seems to require the PUC to set the surplus
electricity tariff at a level that requires each utility to pay
the customer a rate that mirrors the real value that the
renewable electricity has to the utility. If this is the case,
there is no subsidy. However, this language is very specific in
what must and what cannot be considered in determining if the
rate is reasonable. Consequently, it may force the PUC to give
more value to some factors than is justified and may prevent the
PUC from considering other issues that result in a reduced value
AB 1920
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of the electricity. To avoid the possibility that this program
could create an additionally solar subsidy, the committee may
wish to consider amending the bill to provide that the rate
shall be set to provide the customer just and reasonable
compensation and ensure that there is no cost shifting to
non-solar customers.
5) The sun is the limit : The local distribution grids were
designed to deliver electricity to homes and business, not to
collect power from the customers. While all of the buy-back
programs that have been created in California are small enough
in scale that distribution systems can adequately handle the
unscheduled power, if the programs grow larger and larger there
will be risk of local grid failures. To protect against these
risks every other buy-back program has a cap on the total amount
of power that the utility must take. The current net-metering
program caps the number of kilowatts that can be net-metered at
2.5% of each utility's peak demand. According to testimony
provided to this committee in a March 10, 2008, hearing, the
California Independent System Operator (CAISO) and the major
electric utilities stated that transmission and distribution
grids can currently accommodate approximately 5% of total load
from non-dispatchable resources without compromising the
integrity of the grid. The committee may wish considering
amending the bill to cap the total amount of power that the
utility is required to purchase as surplus powe r.
6) Not quite good enough for everyone : Current statutory
provisions exempt the Los Angeles Department of Water and Power
(LADWP) from the requirements on every other IOU and POU to
provide net metering. LADWP currently has a net-metering
program that does offer a bill credit at the retail rate. Their
program is actually already more generous than the IOU's
programs since LADWP also provides that if the customer is a
net-surplus customer the customer can carry the credits into the
next year. LADWP is also considering changing the program to
give customers the option of either carrying the credits forward
or selling the surplus power back to the utility at a generation
rate. The requirements in this bill apply to every electric
utility in the state other than LADWP.
7) Why so many programs : Under existing law, there are numerous
programs in place that allow for or require electric utilities
to buy back excess power produced by customer generators. In the
2007-2008 Legislative session, there are at least 10 different
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bills that create additional buy back programs. While most of
these programs will help the state achieve its goals of
increasing renewable resources, the committee may wish to
consider if ratepayers are best serviced by the complicated
network of buy-back programs that are in place and are proposed,
or if the state goals would be more successfully achieved and
the administrative costs of the programs could be reduced if
most of the customer generator programs were consolidated into a
single program.
8) Related Legislation :
AB 140 (Garcia) Chapter 29, Statutes of 2007, authorizes the
Desert Water Agency to expand the types of resources it can use
to generate electricity, and to develop electricity for the
construction, treatment, and disposal of sewage.
AB 946 (Krekorian), Chapter 29, Statutes of 2007, expands the
public water and wastewater agency program by including, as
eligible projects, those on "property owned or under the
control" of the agency instead of only those located "on or
adjacent to" a water or wastewater facility.
AB 1428 (Galgiani) expands the existing biogas digester
net-metering pilot program to include customer-generators who
produce electricity generated from poultry and other livestock
waste, and municipal waste. This bill is pending hearing in
Senate Committee on Environmental Quality.
AB 1223 (Arambula) permits an agricultural customer who uses
solar or wind generation to aggregate multiple meters on
properties under the same ownership and adjacent to the
generator, for purposes of net-metering the customer's energy
consumption. This bill is pending hearing in the Senate
Committee on Energy, Utilities, and Communications Committee.
AB 1920 (Huffman) Expands the current net-metering programs for
wind and solar, to allow the net-metered customers to sell any
excess electricity they produce over the course of a year to
their electric utility. This bill is set for hearing in the
Utilities and Commerce Committee on April 7, 2008.
AB 2466 (Laird) Authorizes a local governmental entity to
receive a bill credit against electricity it has consumed from
an electric corporation for electricity it supplied to the
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electric grid from a renewable generating facility. This bill
is set for hearing in the Utilities and Commerce Committee on
April 7, 2008.
AB 2820 (Huffman) Requires an IOU to use its transmission and
distributions facilities to deliver renewable electricity
generated by a local public agency to any local public agency.
This bill is set for hearing in the Utilities and Commerce
Committee on April 7, 2008.
.
SB 451 (Kehoe) Creates a program that allows small scale
renewable generators to sell renewable power to the
investor-owned utilities (IOUs) at rate set by the California
Public Utilities Commission (PUC). This bill was vetoed by the
governor in 2007. The bill was approved by this committee on 12
- 0 vote
SB 463 (Negrete McLeod) permits an eligible biogas digester
customer-generator to sell excess electricity to the IOUs if it
enters into a purchase agreement, and caps the price at the MPR.
This bill is pending hearing in this committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Environment California (Sponsor)
Sempra Energy (Support if amended)
Sierra Club California
The Solar Alliance (Support if amended)
Opposition
Coalition of California Utility Employees (CUE)
Pacific Gas and Electric Company (PG&E) (Oppose unless amended)
Southern California Edison (SCE)
The Utility Reform Network (TURN) (Oppose unless amended)
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083