BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1947
                                                                  Page  1

          Date of Hearing:   April 5, 2010

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                     AB 1947 (Fong) - As Amended:  March 25, 2010
           
          SUBJECT  :   Solar energy.

           SUMMARY  :   Permits a publicly owned utility (POU) to implement a  
          solar program that allows customers to offset part or all of  
          their electricity demand, with a solar energy system not located  
          on the premises of the consumer.  

          EXISTING LAW  

          1)Requires each POU to establish a nonbypassable charge to  
            promote energy efficiency and conservation, new investment in  
            renewable energy technology, research, and services for  
            low-income electricity customers.  

          2)Requires each POU to annually report to the California Energy  
            Commission (CEC) the amount of funds collected and expended  
            for renewable energy resource development and the utility's  
            status in implementing the Renewable Portfolio Standard (RPS),  
            which requires all electric utilities to procure at least 20%  
            of their generating capacity from renewable energy generating  
            sources by 2010.

          3)Requires a POU to offer monetary incentives for the  
            installation of solar energy systems.

          4)Establishes the California Solar Initiative (CSI), which sets  
            a goal for investor-owned utilities (IOUs) and POUs to install  
            3,000 megawatts of photovoltaic (PV) solar energy in  
            California within 10 years.

          5)Requires POUs to initiate a public proceeding by January 1,  
            2008, to fund a solar energy program to support the goal  
            established by the CSI.

          6)Establishes criteria for a POU's solar energy program,  
            including that the solar energy system be located on the same  
            premises of the end-use consumer where the consumer's own  
            electricity demand is located, and is intended to offset part  
            or all of that customer's demand.

          7)Establishes a statewide expenditure goal for POUs' solar  
            programs at $784 million.





                                                                  AB 1947
                                                                 Page  2


          8)Requires all investor-owned utilities and POUs that offer  
            net-metering to purchase all electricity produced from the  
            customer's wind or solar generator at a rate set by the  
            California Public Utilities Commission (CPUC) or POU. The rate  
            shall be set to provide the customer-generator "just and  
            reasonable" compensation for the surplus energy sales, leave  
            all other ratepayers indifferent, and shall not result in any  
            cost shifting to non-customer generators.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   The purpose of this bill is to assist a POU with  
          achieving its CSI goals.  In the IOU territories, because of  
          deregulation and the energy crisis, rates are high enough to  
          provide individual customers incentive to invest in solar PV  
          panels to offset their own load.  This takes a substantial  
          investment of about $16,000-$20,000 for an average single-family  
          home and the payback period is usually about 5 years or less.   
          Because the Sacramento Municipal Utility District (SMUD) and  
          other POUs' retail prices can be substantially less, it takes  
          longer for the investment to pay off and customers are less  
          likely to invest in solar PV for financial reasons if they have  
          to install it on their own premises. 

          SMUD has created an alternative program that would enable those  
          customers who choose to contribute toward solar PV generation to  
          participate without having to make the substantial up-front  
          investment with such a lengthy pay-back period.  Current law  
          precludes SMUD from implementing it because the law requires  
          that the solar energy system be located on the same premises of  
          the end-use customer where the customer's own electricity demand  
          is located.
                                      
          1)   Background  :  AB 1890 (Brulte) Chapter 864, Statutes of 1996,  
          required electricity providers to divest from its own generation  
          and provided POUs a 4-year grace period and many did not  
          "deregulate" immediately.  Most POUs didn't divest from their  
          own municipally owned generation and purchase all generation  
          from the now defunct Power Exchange (PX), as AB 1890 required.   
          While private generators and power brokers severely manipulated  
          the PX and increased the IOUs' costs for wholesale generation,  
          some POUs that retained their own generation avoided the  
          manipulated market and the skyrocketing wholesale prices.  As a  
          result, PG&E's highest tiered residential rate is 50
 per kWh  š          and Sacrament Municipal Utility District's highest tiered  
          residential rate is 14.1
 per kWh.   š





                                                                  AB 1947
                                                                  Page  3

          2)   The California Solar Initiative  :  SB 1 (Murray) Chapter 132,  
          Statutes of 2006, created the CSI which required the electric  
          utilities to collect and invest about $3.3 billion over a  
          ten-year period for a declining rebate program with a goal of  
          installing 3,000 MW of solar PV on California roofs.   To be  
          eligible for the CSI rebates the system must still be sized to  
          actual or projected load of the customer-generator at the time  
          the solar energy system is installed.  Customers cannot  
          intentionally oversize a solar energy system and receive a CSI  
          rebate.  

          If the customer's future electricity usage is less than the  
          usage at the time of installation the customer will be under a  
          net-metered tariff that gives the customer a bill credit valued  
          at the retail rate of electricity for any excess the customer  
          produces during the year, but at the end of the year if bill  
          credits exceed the total electricity the customer consumed from  
          the utility the customer will be a net surplus producer and the  
          utility would owe the customer a credit for the net surplus  
          electricity.  For an IOU customer, the net surplus electricity  
          would be valued at a rate set by the CPUC at a "just and  
          reasonable" rate that ensures no cost shifting.  This rate is  
          likely less than the value associated with retail rate for the  
          electricity credited against their bill.

          POUs are not regulated by the CPUC and instead are governed by  
          either an elected board or the municipality.  As such, the CSI  
          requires each local publicly owned electric utility to offer  
          monetary incentives for the installation of solar energy systems  
          of at least $2.80 per installed watt, or for the electricity  
          produced by the solar energy system as determined by the  
          governing board.  In addition, POUs are required to report to  
          the CEC the number of watts installed, number of applicants, the  
          amount of incentives awarded, and the contribution toward the  
          program.  The POUs are prohibited from redirecting funds from  
          low-income ratepayers or energy efficiency programs. As such,  
          they must collect a surcharge or an amount embedded in rates.

          3)   SMUD's program  :  As directed by the CSI, SMUD has been  
          collecting the CSI but because of its lower rates, many  
          ratepayers who are paying the solar surcharge remain unable or  
          unwilling to install solar on their rooftops.  

          To more widely distribute the benefits of the CSI collections,  
          SMUD created a Solar Shares pilot program.  Customers who choose  
          to participate in the Solar Shares program pay a monthly fee in  
          exchange for a portion of their electricity to come from locally  
          sourced solar.  Those customers also receive a monthly credit on  





                                                                  AB 1947
                                                                  Page  4

          their electricity bill based on their proportion of the solar  
          energy system's expected output.  SMUD's customers who choose to  
          participate in the Solar Shares program pay an additional  
          monthly charge of $6 and SMUD will meet 100% of that customer's  
          electricity needs with power from renewable resources.  For $3  
          per month, 50% of that customer's electricity will be met with  
          renewable resources.  Commercial customers can choose to pay an  
          additional monthly charge of $20 and SMUD will meet up to 2,000  
          kWh per month of the business' electricity needs from renewable  
          generation; the amount used by the average small business.

          According to SMUD, by requiring on-site solar panels, many  
          ratepayers who pay for the CSI cannot take advantage of it.    
          SMUD lists a number of situations where rooftop solar PV doesn't  
          work.  Renters or businesses that lease commercial space will  
          not install solar panels on someone else's property.  Some roofs  
          may not generate the optimal output of the solar panels because  
          they are either shaded, steeply pitched, or facing north or  
          east.

          4)  What about the self-sustaining industry  :   SB 1 provided that  
          the CSI was to encourage and facilitate a self-sustaining solar  
          energy market that after 10 years.  SB 1 intended to gradually  
          reduce the subsidies as the market became more robust.  Upon  
          attaining a competitive industry (assumed after 3,000 MW of  
          installed solar PV), no additional subsidies would be needed.   
          One way to encourage a self-sustaining market was to require  
          many roof-top installations.  Numerous small installations were  
          intended to spawn competitive manufacturing and installation  
          industries, thus, using market forces to keep prices as low as  
          they can be.  

          Some are concerned that SMUD's Solar Shares program, by allowing  
          customers to purchase "shares" or a proportion of a solar energy  
          system, the solar energy system will be a few large ones and not  
          the many individual systems initially envisioned by SB 1.  SMUD  
          believes that this bill will not thwart the efforts of SB 1 with  
          regard to spawning a self-sustaining industry.  AB 1947 will  
          limit the amount of the Solar Shares capacity to 20% of the  
          proportionate amount for the POU of the overall 3,000 megawatt  
          state goal.  In addition, SMUD responds that this bill will  
          retain the maximum capacity of the IOUs, which does not allow  
          rebates for systems greater than 5 MW.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           





                                                                  AB 1947
                                                                  Page  5

          California Municipal Utilities Association (CMUA)
          Sierra Club California
          Sacramento Municipal Utility District (SMUD)

           Opposition 
           
           None on file.

          Analysis Prepared by  :    Gina Adams / U. & C. / (916) 319-2083