BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 510| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 510 Author: Skinner (D), et al Amended: 1/26/10 in Senate Vote: 21 SENATE HUMAN SERVICES COMMITTEE : Not relevant (See Note under Digest) ASSEMBLY FLOOR : Not relevant (See Note under Digest) SUBJECT : Net energy metering SOURCE : Solar Alliance DIGEST : This bill requires that the standard contract or tariff for net energy metering be offered on a first-come-first-served basis until the time that the total rated generating capacity used by eligible customer-generators exceeds five percent of the electric utility's aggregate customer peak demand. The bill requires an electrical corporation to include a provision in the net energy metering contract or tariff requiring that any customer with an existing electrical generating facility and meter who enters into a new net energy metering contract to provide an inspection report to the electrical corporation, unless the electrical generating facility and meter have been installed or inspected within the previous three years. Note: This bill is similar to AB 560 (Skinner) which CONTINUED AB 510 Page 2 passed the Assembly with a vote of 47-22, the Senate Energy, Utilities and Commerce Committee with a vote of 9-1 and the Senate Appropriations Committee with a vote of 12-1. AB 560 was sent to Senate Rules Committee on a 29.10 and was referred to the Senate Business and Professions Committee, where it presently resides. ANALYSIS : Current law requires the state's investor owned utilities (IOUs), publicly owned utilities (POUs), except the Los Angeles Department of Water and Power, and 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, a procedure known as "net energy metering" (NEM). Participation by all utilities is capped at 2.5 percent of each utility's aggregate peak electricity demand. Background Net Energy Metering . The primary benefit of the California Solar Initiative (CSI) program is derived from the solar customer's eligibility to NEM which is au theorized under state law separately from the CSI program. Utility customers that generate power from a wind or solar system are eligible 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 generation, distributing and transmitting the power, public goods program (e.g., energy efficiency), AB 510 Page 3 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. California Solar Initiative The Public Utilities Commission (PUC) established the CSI regulation in 2005. The goal of the CSI is to provide a long-term subsidy for solar systems with incentives that are reduced annually. SB 1 (Murray), Chapter 132, Statutes of 2006, statutorily established the CSI policy goal of 3,000 MW of new, solar-produced electricity in 2017. The CSI statewide budget is $3.3 billion over 10 years, distributed between three distinct program components: The CSI ($2.167 million/1,940 MW), the New Solar Homes Partnership ($400 million/360 MW), and Publicly Owned Utility Programs ($700 million/700 MW). SB 1 required the PUC, in consultation with the California Energy Commission, to report to the Governor and the Legislature on the costs and benefits of net metering, wind energy co-metering, and co-energy metering to participating customers with options to replace those costs and benefits with a more equitable mechanism. SB1 further required the Contractor State Licensing Board to review and, if needed, revise its licensing classifications and examinations to ensure that contractors authorized to perform work on solar energy systems subject to the provisions of the Public Resources Code have the requisite qualifications to perform the work. AB 510 Page 4 FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 2/9/10) City of San Jose (co-source) Solar Alliance (co-source) Applied Materials Applied Solar Association of California Water Agencies Building Owners and Managers Association of California California Building Industry Association California Business Properties Association CalSEIA Clean Power Campaign Contractors Association, California Chapter County of Lake Environmental Defense fund EnvironmentCA Global Green USA International Council of Shopping Centers Kyocera KyotoUSA Large Scale Solar Association McCalmont Engineering Mitsubishi Electric and Electronics USA NAIOP of California National Electric National Parks Conservation Association NRDC PetersonDean Roofing and Solar Systems Sharp Solar Silicon Valley Leadership Group SolarCity Solaria SolarTech SOLutions in Solar Energy SPG Solar SunEdison SunRun Inc. Suntech America Tioga Energy U.S. Green Building Council, California Chapter AB 510 Page 5 Union of Concerned Scientists United Solar Ovonic Vote Solar Initiative Yolo County ARGUMENTS IN SUPPORT : Solar Alliance states, "California was one of the first states to enact net energy metering legislation. In 2006, when the California legislature enacted the California Solar Initiative (CSI), it increased the state-wide net energy metering cap to 2.5 percent of a retail electric service provider's "aggregate customer peak demand." The net energy metering cap was increased in recognition of the fact that net energy metering would be necessary in order for the state to meet its CSI goals. "However, California has been recently surpassed by other states in net metering legislation. Of the 44 states that offer net metering, 18 states have completely eliminated the cap on total net energy metering capacity. "Solar customers are homes, businesses, and local, state and federal governments. Today there are over 50,000 net metered solar customers in California. It is crucial to send a message to the solar industry that California has a long-term commitment to solar development. The Solar Alliance strongly believes that increasing the existing cap to five percent is essential in order to ensure the both successful completion of the California Solar Initiative's goal of installing 3,000 MW and a successful market growth after the completion of the program." DLW:cm 2/10/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****