BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 228 - Huffman Hearing Date: June
29, 2010 A
As Amended: June 17, 2010 FISCAL B
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DESCRIPTION
Current law establishes the California Solar Initiative (CSI), a
$3.3 billion program to subsidize the installation of
photovoltaic (PV) systems for customers of the states
investor-owned utilities (IOUs) and publicly owned utilities
(POUs).
Current law requires IOUs, POUs (except the Los Angeles
Department of Water and Power), or any other entity offering
retail electric service, to credit all electricity generated by
a customer-owned solar or wind system against the customer's
usage of electricity sold by the utility, on a kilowatt hour
basis (kWh), a procedure known as "net energy metering" (NEM).
Participation by all utilities is capped at 5 percent of each
utility's aggregate peak electricity demand and solar and wind
generation is limited to the size of the customer's electrical
load not to exceed 1 MW.
This bill expands the NEM participation cap from 5% to 6% and
allocates the additional 1% to large commercial or industrial
customers but prohibits those customers from offsetting charges
for transmission and distribution services.
This bill expands the size of eligible wind and solar facilities
to 5 MW.
Current law requires the IOUs and POUs to develop a standard
tariff (aka feed-in-tariff or FIT) to compensate a generator of
eligible renewable resources up to a maximum of 3 megawatts
(MW). Statewide participation is capped at 1,500 MW which is
split evenly between the territories of the large IOUs and POUs
and then proportionally between the utilities. For the IOUs,
the tariff price is based on the market price referent plus
renewable and other attributes.
BACKGROUND
California Solar Initiative (CSI) - The CSI calls for the
installation of 3,000 megawatts (MW) of new, solar-produced
electricity by 2016 to be installed on the customer's side of
the meter. Targeted expenditures under the CSI, funded by a
surcharge on all ratepayers, are $3.3 billion over ten years,
distributed among three distinct program components:
Investor-Owned Utilities (IOUs) ($2.167 million/1940 MW); New
Solar Homes Partnership ($400 million/360 MW); and
publicly-owned utility programs ($700 million/700 MW).
California now has over 736 MW of solar PV in the IOU
territories at over 43,000 residential, commercial and
governmental sites. This includes installed generation and
pending applications. The POUs have installed 26 MW of
generation at 7,712 sites and the NHSP reports 7.8 MW of solar
PV at 3,002 sites.
All CSI programs combined, California has approximately
installed 770 MW of solar generation on the customer's side of
the meter - 27% of goal.
Net Energy Metering - The primary benefit of CSI program is
derived from the solar customer's eligibility for NEM which is
authorized under state law separately from the CSI program.
Utility customers that generate power from a wind or solar
system are eligible for NEM under which the electricity
purchases of the customer are netted against the electricity
generated by the customer's own solar or wind electric system.
When the sun is shining or the wind is blowing, the generated
electricity spins the meter backward, making it financially
equivalent to using less electricity for the customer with the
same effect as the electric utility paying the customer the full
retail price for the electricity. When the sun stops shining
and the wind stops blowing, the customer draws electricity from
the grid and their meter spins forward using the credit on the
meter. In theory, depending on weather patterns, system size
and customer behavior, the customer will have a zero energy bill
at the end of a 12-month cycle.
The full retail price of electricity includes the utility's cost
of generating, distributing and transmitting the power, public
goods programs (e.g. energy efficiency), low-income customer
assistance (e.g. CARE), energy crisis costs and other charges
not related to generation. By compensating the solar or wind
customer at the full retail rate, the utility is using ratepayer
funds to pay the solar or wind customer at a rate well above the
value of the generated power, which is about one-third of the
total cost of a typical residential customer's bill. The solar
or wind customer does not pay transmission or distribution costs
even though they are still connected to the electrical grid and
use it for all their generation needs when the sun isn't shining
and the wind isn't blowing (approximately 18 hours a day).
Consequently, those unpaid transmission and distribution costs
and public goods charges are a subsidy, the cost of which is
ultimately shifted to all other ratepayers in the class. All
customer classes are eligible for NEM.
NEM Cost Shift - The fundamental affect of NEM is that the
participating customer avoids the costs of transmission,
distribution and public goods charges which fund programs such
as the CARE and energy efficiency programs. Because those costs
are fixed, if one class of ratepayers is excluded from paying
those costs, then those costs are shifted to the remaining
ratepayers. Transmission and distribution costs typically
comprise one-half to two-thirds of a customer's billing.
The CPUC released a report earlier this year evaluating the
impacts of NEM.<1> Although a small fraction of the annual
electricity revenue (less than one-tenth of one percent) in
California, the CPUC reported that, based on 2008 solar
installations of 386 MW, the costs of NEM to ratepayers was $20
million per year. When the CSI program is fully subscribed in
the IOU territories (2,550 MW by 2017) the annual costs to
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<1> Because the vast majority of NEM generators and NEM
generation is solar, the evaluation did not include wind.
ratepayers would be $137 million per year.
Feed-in Tariff - another option for customer-generators is the
feed-in-tariff. This standardized contract allows small,
renewable generators to sell power to a utility at predefined
terms and conditions, without contract negotiations. The FIT
operates as a "must take" contract in a utility's renewable
portfolio. That is, if the power is generated the utility must
take it. FITs are available for systems sized up to 3 MW for
10, 15, or 20 year contract periods.<2>
COMMENTS
1)Author's Purpose . Many large energy users around California
may not achieve regulatory mandates to reduce greenhouse gas
emissions (GHG) as required by AB 32 without the installation
of onsite renewable energy generation. Implementing energy
efficiency measures at large energy using facilities, such as
industrial manufacturing facilities, cannot always reduce
sufficient emissions alone to meet these policy goals. The
nature of some industrial businesses, such as cement
production, makes it impossible to reduce the carbon emissions
from the manufacturing process. 50% of cement manufacturing
emissions result from the chemical process of heating
limestone and is unavoidable. Therefore, transitioning to
renewable energy is really the one way some large energy users
can make a significant impact on their carbon footprint.
Installing renewable energy can also be one of the most
economical ways for large industrial energy users to achieve
GHG emission reductions.
Many businesses around the state have taken the initiative and
installed renewable energy systems, but the net metering
current system cap of 1 MW limits larger energy-using
facilities from installing systems better sized to meet their
energy demand.
2)NEM Expansion . Just four months ago the Legislature approved
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<2> The Legislature expanded the FIT from 1.5 MW to 3 MW in 2009
as a result of SB 32 (Negrete McLeod). The CPUC has yet to
begin to implement that bill primarily due to limited staff
resources.
an expansion of the NEM cap from 2.5 MW to 5 MW of a utility's
peak load leaving plenty of eligible capacity available to
customers under this program. That expansion takes affect
January 1, 2011. (AB 510, Skinner) Consequently the
necessity of expanding the cap again, in the same year, is not
evident.
Moreover, the author and sponsor have attempted to shoehorn a
special program for large customer generators into an already
complicated NEM statute designed for smaller customers. As an
example, the NEM program doesn't require customers to pay
transmission and distribution charges yet the bill exempts the
large customers from this provision and requires the payment
of those costs. The NEM program is capped at 1 MW of
generation, but the bill allows large customers to meter up to
5 MW of generation. In order to avoid competition for a
perceived limit of available capacity under the NEM, this bill
carves out 1 MW of eligibility for large customers. Those
customers are already significant participants in the current
NEM program. This bill may have the unintended consequence of
moving all current large customers into the 1 MW carve-out and
shut down further participation in the NEM program for large
customers because that class may have already reached the cap.
3)Program Clutter . The CPUC is increasingly challenged in
implementing myriad program mandates that have been designed
by the Legislature to accommodate each stated unique need of
certain classes of customer-generators (e.g. local
governments, wineries, state buildings). Once a new program
is created or modified by the Legislature it typically takes
18 months for a public proceeding to be concluded and the
program made operative.
There is an increasing need for the design and utilization of
one program that will be available to all customers to
generate renewable energy, offset their own load, and sell
excess generation back to the utility under the same rules and
pricing for all customers while promoting easy access for
customer generators and maximizing ratepayer benefits.
4)FIT vs. NEM . The author and sponsor indicate that their
primary intent is to allow the customer to offset their own
load at large facilities but they chose to expand the NEM over
utilization of the FIT because the program design of the NEM
is preferential to large energy users. Among the differences
is that the FIT is limited to 3 MW, not 5 and customers are
eligible for installation subsidies under the NEM but not the
FIT.
To try and reduce program clutter at the CPUC and design one
solid program that will work for all customers, the author and
committee may wish to consider program changes to the current
3 MW, FIT to meet the needs of more customer-generators in an
equitable and streamlined manner that also limits the
cost-shifting that occurs with NEM. The specific program
modifications for customer-generators would include:
An increase of eligible renewable facilities from a
capacity of 3 MW to 5 MW;
Eligibility for installation incentives under
programs such as the CSI and Self Generation Incentive
Program.<3>
Restricting a utility from terminating a FIT because
no power was sold back to the grid within 12 months; and
Require the use of best available inverter system
technology.
1)Ratepayer Impact . As current drafted, this bill would shift
additional costs for NEM to other ratepayers, however the
amendments proposed in comment #4 would minimize those
impacts.
The CPUC reports that this bill, in its current form, "would
put pressure on the California Solar Initiative program to
raise its eligible size cap, setting a bad precedent by
singling out a particular customer class, and imposing
significant costs on non-participating ratepayers."
2)Related Legislation - The following bills in the current
session also modify the NEM program:
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<3>The SGIP is administered by the CPUC and offers rebates to
customer generators for the installation of technologies such as
wind, fuel cells and waste gas. Legislation was adopted in 2009
(SB 412, Kehoe) to authorize an expansion of eligible
technologies top include those that will support the state's
goals for reductions of emission of greenhouse gases.
AB 51 (Blakeslee) - Modifies the NEM program to
permit an agricultural customer who uses solar or wind
generation to offset the customer's own electrical needs,
to aggregate the load of separately metered facilities on
the same or adjacent property and credit that load
against excess generation from the solar or wind
generation. Status: Set for hearing in the Senate
Energy, Utilities, and Communications Committee June
29th.
AB 510 (Skinner) - Increased the NEM cap from 2.5%
to 5% of the each utility's aggregate peak electricity
demand. Status: Chapter 6, Statutes of 2010.
AB 560 (Skinner) - Proposed to lift the NEM cap to
ten percent. Status: held in Senate Business &
Professions Committee.
AB 920 (Huffman) - Requires utilities to allow NEM
customers to roll over excess generation not used in a
12-month billing cycle, on a kWh basis, or to compensate
customers for any generation in excess of their usage
over a 12-month billing cycle at a rate to be determined
by the CPUC. Status: Chapter 376, Statutes of 2009.
SB 7 (Wiggins) - Requires that NEM customers be
permitted to roll over excess NEM generation to two
subsequent 12-month cycles. Status: Assembly Inactive
File.
ASSEMBLY VOTES
Not relevant
POSITIONS
Sponsor:
California Large Energy Consumers Association
Support:
Breathe California
California Business Properties Association
California Large Energy Consumers Association
California League of Conservation Voters
Clean Power Campaign
Environmental Defense Fund
Environment California
Planning and Conservation League
Union of Concerned Scientists
Oppose:
Bear Valley Electric
California Public Utilities Committee (oppose unless amended)
Coalition of California Utility Employees -CUE
Mountain Utilities
Pacific Gas & Electric Company
Pacific Power
Sierra Pacific
Kellie Smith
AB 228 Analyses
Hearing Date: June 29, 2010