BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 7 - Wiggins Hearing Date:
April 27, 2009 S
As Amended: April 13, 2009 FISCAL B
7
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 state's
investor-owned-utilities (IOUs) and publicly owned utilities
(POUs).
Current law requires that PV systems be sized to offset part or
all of the customer's electrical demand to be eligible for the
CSI installation subsidy.
This bill permits a customer to size a PV system larger than the
customer's load, at the customer's expense, and still qualify
for the CSI subsidy up to the customer's electrical load.
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, a procedure known as "net metering."
Current law requires the California Public Utilities Commission
(CPUC) to determine a benchmark price for electricity commonly
referred to as the market price referent (MPR). The contract
price for renewable generation is measured against the MPR as a
test of reasonableness.
Current law requires the CPUC to submit a report to the Governor
and the Legislature no later than January 1, 2010 on the costs
and benefits of net energy metering, wind energy co-metering,
and co-energy metering to participating customers and
nonparticipating customers and with options to replace the
economic costs and benefits of net energy metering, wind energy
co-metering, and co-energy metering with a mechanism that more
equitably balances the interests of participating and
nonparticipating customers.
This bill requires utilities to compensate customers that use
net metering for any generation in excess of their load or, for
customers on time of use rates any net dollar value, on an
annual basis, or to roll that excess generation over, on a
kilowatt hour basis, to the next 12-month cycle. The
compensation rate would be set by the CPUC at a rate not less
than the MPR.
BACKGROUND
California Solar Initiative (CSI) - The CSI calls for the
installation of 3,000 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, is $3.3 billion over 10 years, distributed
between three distinct program components: The CSI ($2.167
million/1940 MW); the New Solar Homes Partnership ($400
million/360 MW); and the Publicly Owned Utility Programs ($700
million/700 MW).
Homeowners, businesses, and government agencies in California's
IOU territories installed 158 MW of distributed solar
photovoltaics (PV) in 2008, doubling the 78 MW installed in IOU
territories in 2007. California now has a cumulative total of
441 MW of distributed solar PV systems, the highest level of
solar installations in the country.
Net Metering - The primary benefit of the CSI program is derived
from the solar customer's eligibility for "net metering" 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 "net metering" 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.
The full retail price includes the utility's cost of generating,
distributing and transmitting the power as well as other charges
including the energy crisis bond costs and public-purpose
program charges. By compensating the solar customer at the full
retail rate, the utility is using ratepayer funds to pay the
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. By compensating the solar or wind
customer at the full retail price, they do not pay any
transmission or distribution costs even though they are still
connected to the system and use it for all their generation
needs when the sun isn't shining and the wind isn't blowing.
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 net metering.
COMMENTS
1. Author's Amendments - This bill would permit a CSI
customer to size a solar system beyond a customer's load
and require a utility to compensate a net metered customer
for TOU credits. The author intends to strike these
provisions and restrict the bill to allowing a net metered
solar customer to roll over excess kilowatt hour credits
beyond the 12-month true-up cycle for an additional two
12-month cycles. She also intends to direct the CPUC to
evaluate the impact of the generation of excess kilowatt
hours and excess credits based on TOU rates on net metered
customers and other ratepayers as part of its currently
mandated study of net metering. The amendment would also
extend the study from a due date of January 1, 2010 to June
30, 2010. This approach is reasonable until the net
metering program and its impact on all ratepayers is more
fully understood.
2. Author's Intent - Although net metering has been
permitted since the mid 1990s the growth of the CSI program
has brought hundreds of more customers under the net
metering umbrella. Because experience with net metering
was limited until the past few years, many customers jumped
into the program without understanding its purpose or
impact. As a consequence some net metered customers are
coming to the fore with concerns about its structure and
seeking revisions.
The author is concerned about perceived inequities in the
current net metering program for CSI customers. She is
aware of constituents who have installed solar but are
generating more electricity in a 12-month net metering
cycle than they can use. Consequently, the customer sees
excess generation for which they receive no compensation
and feel that they should be paid for that excess. She is
also concerned that net metered customers are not receiving
compensation based on the value of the excess electricity
at the time it is generated. CSI customers can be on a
flat rate or time-of-use rate (TOU). Either way, at least
in the PG&E territory, net metered customers receive a
billing that shows both calculations but at the end of
12-months, regardless of a credit of kWh or TOU, the meter
is rolled back and both calculations are zeroed out. The
results on paper can show a credit balance in dollars for
TOU but a deficit on an hourly basis or even a deficit on
the generation side, and an excess on an hourly basis but a
deficit on TOU. At the end of the customer's 12 month net
metering cycle when usage is "trued-up" the customer can
think they are owed money when in fact they are not under
the laws of the program and its intended structure.
3. Net Metering Experience - The utilities and CPUC have
reported that there is excess generation occurring for some
customers. According to the CPUC, "there are a number of
customers whose systems for a wide range of reasons --
ranging from not understanding net metering?to changing
utility rates, installation of energy savings measures
and/or climatic variation in a given year -- have produced
more electricity than the customer has consumed?Better
public outreach by the utilities about optimal system
sizing, and how net metering actually works is also
necessary to educate customers."
The perception that the utility is receiving something of
value without compensating the customer ignores several
factors. First, that the utility cannot plan on a customer
delivering excess generation to the grid because the
customer is under no obligation to do so as a generator
would be. Consequently the utility must plan on making
adequate electricity available (and thus procure that
generation) as if the excess generation will not occur.
Second, the distribution grid is technically limited in the
ability to track net metered customers on a real-time
basis. Finally, through net metering the customer not only
receives credit for electricity generation but is
completely relieved of paying for the costs of
transmission, distribution, and public goods charges which
can add up to as much as 2/3 of the full retail rate for
electricity delivery. Because the net metered customer
does not pay for their portion of the transmission and
distribution costs those costs are shifted to ratepayers
that do not have net metering or solar PV.
4. Ratepayer Impact - Small scale solar PV remains the most
expensive means of generating electricity. The Legislature
recognized this factor when it adopted the CSI and net
metering but intended to subsidize solar installations
through a limited program in an effort to stimulate the
solar market and bring down prices. In the meantime the
program is heavily subsidized through ratepayer subsidies
for installations (CSI), taxpayer subsidies (30% federal
tax credit and exemption from property tax assessment) and
net metering. As proposed to be amended, this bill may
exacerbate the subsidy of net metering by allowing net
metered customers to continue to roll over excess
generation without ever paying the costs of the
transmission, distribution, public goods charges.
POSITIONS
Sponsor:
Recolte Energy
Sustainable Napa County
Support:
Dolce Winery
Family Winemakers of California
Far Niente Winery
National Development Council
Nickel & Nickel Winery
Oakland City Council
Peter A. & Vernice H. Gasser Foundation
Planning and Conservation League
Redwood Empire Chapter of the US Green Building Council
Wine Institute
3 individuals
Oppose:
Pacific Gas & Electric (unless amended)
The Utility Reform Network (unless amended)
Kellie Smith
SB 7 Analysis
Hearing Date: April 27, 2009