BILL ANALYSIS
SB 7
Page 1
Date of Hearing: July 6, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
SB 7 (Wiggins) - As Amended: June 26, 2009
SENATE VOTE : 34-0.
SUBJECT : Renewable energy sources: net metering
SUMMARY : Allows net-metered customers who use wind and solar to
produce more electricity than they consume in a given year to
carry the credits for the excess production forward and apply
those credits against excess consumption for up to two years.
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
offset part or all of the consumer's own electricity demand
(the panels should not produce more electricity than the
customer's historic peak demand).
2)Requires investor owned utilities (IOUs) to offer customers
with solar or wind generation that is smaller 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 usage at a 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 net metering at 2.5 % of
each utility's aggregate peak demand.
3)Requires all publicly owned utilities (POUs) other than the
Los Angeles Department of Water and Power (LADWP) to offer a
net-metering tariff as provided in (2), or offer a co-metering
tariff where the bill credit is based only on the cost of
generation and not the entire retail rate. Exempts LADWP from
the net-metering and co-metering requirements.
4)Provides that all IOUs must purchase electricity from eligible
SB 7
Page 2
renewable resources that are no larger than 1.5 megawatts 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 and the added costs of carbon emissions associated
with natural gas-fired generation.
5)Requires all IOUs to meet a renewable portfolio standard (RPS)
where at least 20% of the utility's 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
California to count toward the utility's RPS obligations, even
if the utility does not purchase the associated electricity.
THIS BILL :
1)Defines a "net surplus customer-generator" as a
customer-generator that generates more electricity in a
12-month period than the customer purchases from the utility
in that same period.
2)Requires all IOUs and POUs that offer net metering to allow
net surplus customer-generators to apply excess credits for
the generation of solar or wind energy from one year as a bill
credit over one or both of the next two years.
3)Extends from January 1, 2010, to June 30, 2010 the due date of
a report the PUC is required to prepare on the costs and
benefits of net energy metering and requires that the report
include an evaluation of the impacts of the generation of
excess kilowatthours and excess credits based on time-of-use
rates.
FISCAL EFFECT : Unknown.
COMMENTS :
1) Background : 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
SB 7
Page 3
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 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 customer-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 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 the
customer-generator produces more than he or she consumes) the
year-end bill will be zero, but no check will be written to the
customer.
2) California's numerous renewable and customer-generator
programs : Over the past 10 years or so, the Legislature has
created a vast array of special statutes to force electric
utilities to compensate customer-generators for various forms
and sizes of renewable and other preferred small energy projects
according to various payment methodologies. These "must take"
requirements are essentially commercial contracts by statute.
Each new program that is aimed at one technology or application
seems to create disincentives for other parties to install
similar technologies or at least creates the public appearance
the program is unfairly applied. The net-metering program this
bill is amending is an example of this problem.
Because net metering is based on sizing the generation to meet a
customer-generator's own load, a customer has no incentive to
build a larger solar energy system. Net metering also
eliminates the normal financial reward a customer-generator
receives for conserving electricity - a lower electricity bill.
If the customer generator has already installed sufficient
generation to zero out their electricity bill, they would not
receive any additional benefit for reducing their own
electricity usage.
SB 7
Page 4
Other "must take" programs include feed-in tariffs where the
utility is required to buy all the electricity produced from an
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-generator 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 excess electricity the
customer produces. Feed-in tariffs do not require a generator to
size the generation to meet their own load. Instead, the
generation units can be sized up to the maximum capacity allowed
under the program.
The current net-metering program is specifically limited to
projects that are sized only to meet the customer's own demand.
The net-metering program works in tandem with the CSI to provide
grants to a customer installing solar energy systems. Given the
current prices of solar panels, onsite solar energy is not cost
effective for most utility customers unless the customer can
receive both the CSI rebates and net metering.
The feed-in tariff programs that are in place today 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, PUC rules preclude any party that is participating in
the feed-in tariff program from receiving CSI rebates.
3) What this bill does : This bill provides that net-metered
customers that produce more electricity over the course of a
year than they consume, and thus have excess bill credits, will
be allowed to carry those credits forward and apply the credits
toward any excess consumption they have in the next two years.
This rewards customers that have excess production in one year
due to temporary changes in behavior.
The bill will likely have a very limited impact on solar
customer generators. If the solar customers are net surplus
producers due to the fact that they installed a solar energy
system that was larger than their needs or they made energy
efficiency investments, the bill will not provide the customers
any additional benefit. These customers will always be net
surplus producers of electricity and thus there will never be
excess consumption to offset with the bill credit they carry
forward. The only customers that would be able to use these
SB 7
Page 5
credits are customers that had excess production in one year due
to one-time changes in events, such as a long vacation, or
unusual weather patterns and then went back to their usual usage
in future years.
4) Opposition : Several electric utilities oppose this bill
because they believe the bill undermines the requirements of the
CSI and net metering that subsidized solar energy system should
be sized to meet a customer's load and thus should not be
producing excess electricity that they are required to buy at a
high price. They are also concerned that allowing excess energy
production to be carried forward from one year to the next will
result in a cost shift from the customers with solar generation
to non-solar customers. On this point, while the bill may
result in some cost shift due to the very limited number of
solar customers that would ever be able to claim the bill credit
under this bill, the cost shift will likely be negligible.
Additionally, Environment California has expressed concerns that
this bill could increase an incentive they believe exists today
for solar customers with excess energy to waste energy so they
not loose any bill credits. Environment California is concerned
that the provisions in this bill that allow customers to carry
the bill credits forward might perpetuate these potentially
wasteful incentives as customers build up ever bigger reserves
over a two year period and have ever greater desire to "use up"
their reserve.
5) 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. Even so, LADWP has a net-metering program
that is already more generous than the current IOUs' programs.
LADWP also provides that if the customer is a net-surplus
customer the customer can carry the credits into the next year.
The requirements in this bill exempt LADWP from the requirements
to purchase the surplus net-metered electricity.
6) 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 were at least 10 different
bills that create additional must-buy programs. While most of
these programs would help the state achieve its goals of
SB 7
Page 6
increasing renewable resources, the committee may wish to
consider whether ratepayers are best served 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 policy.
7) Another Report : This bill requires the PUC to delay issuing a
report on the cost and benefits of net metering and to include
an evaluation of the impacts of the generation of excess
electricity under net metering. The report is current due on
January 1, 2010. This bill delays the report for 6 months. The
PUC has already begun preparing this report and the report may
be used to inform legislative discussion over the progress of
the CSI next year. The PUC is not confident that they could
include the new material in the report and complete the report
on time. To ensure that the Legislature receives the report on
the cost and benefits of net metering in a timely basis, the
committee may wish to amend the bill to strike the provisions
delaying and amending the net metering report and instead
require that the data requested in this bill be provided in the
2010 annual assessment of the California Solar Initiative that
is required under PU Code Section 2851 (c)(3) .
8) Related Legislation :
AB 1106 (Fuentes), AB 1023 (Ruskin), SB 32 (Negrete McCloud),
all propose expanding the current AB 1969 feed-in-tariff program
by increasing the size of eligible generators and increasing the
rate paid to the generators.
AB 970 (Huffman) allows net-metered customers that produce more
electricity than they consume to be paid by the IOUs for their
excess production.
SB 14 (Simitian), AB 64 (Krekorian/Bass) both increase
California's RPS to 33% by 2020.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Sanitation Agencies
California Association of Sanitation Agencies
SB 7
Page 7
California Farm Bureau Federation
California Public Utilities Commission (as amended)
Calistoga City Council
Chemistry Students from Vintage High School (65 total)
David Arthur Vineyards
di Rosa
Dolce Winery
Environment California (Support if Amended)
Family Winemakers of California (FWC)
Far Niente Winery
Mr. John Anderson
Mrs. Heather Jackson, Teacher, Vintage High School
Napa Valley Vintners
New Media Learning
Nickel & Nickel Winery
Oakland City Council
Planning and Conservation League
Recolte Energy
Redwood Empire Chapter of the US Green Building Council
Scripps Enterprises, Inc.
Sustainable Napa County (SNC)
The Peter A. and Vernice H. Gasser Foundation
Vintner's Collective
Wine Institute
Opposition
Bear Valley Electric Service
Mountain Utilities
Pacific Gas and Electric (PG&E) (unless amended)
Pacific Power
Sacramento Municipal Utility District (SMUD)
Sierra Pacific Power Company
Southern California Edison (SCE)
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083