BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 581 - Leno Hearing Date: May 5, 2009 S
As Amended: April 28, 2009 Non-FISCAL
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DESCRIPTION
Existing law requires Pacific Gas and Electric (PG&E) to credit
the City and County of San Francisco (City) for any excess
electricity exported to the PG&E grid from up to 15 megawatts of
solar generation facilities owned by the City that would serve
its municipal facilities. The required credit is equivalent to
the generation component of the appropriate time-of-use rate for
the electricity. Facilities must be located within 20 miles of
the Hetch Hetchy Water and Power electric generation facility or
in, or within 20 miles of, the City which operates as the San
Francisco Public Utilities Commission (SFPUC).
This bill would require PG&E to take electricity from any
renewable resource owned, leased or under contract with the
SFPUC without geographic restriction.
Existing law requires the SFPUC to pay the reasonable costs of
any improvements required to facilitate interconnection between
the solar facility and PG&E.
This bill deletes the SFPUC's cost responsibility for
interconnection and defaults any cost requirements to any
applicable rules and interconnection procedures.
BACKGROUND
For nearly 100 years federal law (The Raker Act of 1913) has
granted the City water and power resource rights-of-way in
Yosemite National Park and Stanislaus National Forest and
permitted the City to generate hydroelectric power through the
Hetch Hetchy system. The City is also required to sell excess
Hetch Hetchy power at cost, when available above the City's own
municipal needs, to Modesto and Turlock Irrigation Districts for
agricultural pumping and municipal needs. The SFPUC sells Hetch
Hetchy power, in excess of its Raker Act obligation to Modesto
and Turlock Irrigation Districts and its own municipal needs, to
public agencies and/or private commercial users.
The power system delivers an average of 1.7 billion kilowatt
hours of electricity annually to the City and County of San
Francisco, the Modesto and Turlock Irrigation Districts and
tenants at the San Francisco International Airport.
As a result of legislation in 2004 and 2006 the SFPUC has been
authorized under state law to build solar generation at remote
sites, deliver the power to PG&E, and net that generation out
against its municipal load at a generation rate. The result is
a surrogate net metering program designed only for San
Francisco's municipal load in which the generation from City
owned solar facilities is credited for excess electricity
production under a limited form of net-metering, in which PG&E
pays for excess electricity at the time-of-use generation rate,
rather than the full retail rate.
COMMENTS
1. Revisiting the Deal - As a result of legislation in 2006
(AB 2573, Leno) the SFPUC and PG&E were finally able to
resolve years of heated negotiations concerning the
interconnection of solar facilities and related costs and
obligations. The 184 page agreement was finalized in
October 2007 and remains in effect until July 1, 2015.
According to the parties, this bill does not directly
affect any provision of that agreement. It could however
result in pressures to reopen the negotiations.
2. Cost Shift - The 2006 legislation was originally opposed
by PG&E. Based on amendments which clearly placed
responsibility for all costs of transmission, distribution
and interconnection on the SFPUC, PG&E went neutral.
This bill revises the 2006 cost agreement for
interconnection and eliminates a clear mandate of cost
responsibility on the SFPUC. In its place the bill
proposes that any existing rules of interconnection apply.
This provision would not protect PG&E ratepayers from
potential cost shifting. Interconnection rules are
generally designed for a competitive wholesale electric
market are not under state jurisdiction but the
jurisdiction of the Federal Energy Regulatory Commission
(FERC).
The unique relationship established under law for the SFPUC
has required legislative attention to the costs of that
relationship to ensure that they are not shifted to other
ratepayers. Removal of a clear cost responsibility under
this bill would not necessarily be addressed by the FERC or
any other body which governs interconnection as their rules
and regulations are not designed for the unique arrangement
that SFPUC has been granted under state law. Because the
SFPUC would be authorized to build any renewable generation
without any requirement that the generation be near the
load it is designed to serve, the mitigation of the impacts
of that generation on the grid have even greater
significance. The author and committee may wish to
consider reinstating the interconnection cost requirement.
3. No Geographic Restriction - The 2006 legislation also
required that solar facilities owned by the SFPUC be
located within 20 miles of Hetch Hetchy or the City.
Because the generation is intended to address the load of
the municipal facilities, there was some logic to placing a
geographic restriction on the solar generation facility.
At the time the sponsor represented that the solar
facilities would likely be located on concrete-topped
reservoirs to serve nearby load.
Since transmission and distribution costs incurred by PG&E
as a result of the solar facilities are required to be paid
by the SFPUC, elimination of the 20 mile restriction on the
placement of a solar facility isn't necessarily
problematic. Once the City was allowed to start building
its own generation the horse was out of the barn and
whether it runs 20 miles or 100 miles doesn't necessarily
have any adverse implications on other ratepayers.
However, this bill now has no geographic restriction. The
facilities could conceivably be located anywhere inside or
outside of California which would create myriad challenges
in the scheduling and delivery of the electricity and could
conflict with current law governing the delivery of
electricity under the Renewable Portfolio Standard. The
author and committee may wish to consider limiting the
location of the facility to the territory of PG&E.
4. Definition of Renewable - The SFPUC is currently
authorized to generate electricity from its hydroelectric
facilities at Hetch Hetchy and solar facilities. This bill
expands eligible facilities to include specified renewable
resources. To ensure consistent policy throughout the
state regardless of the utility or municipality that
generates the power, the author and committee may wish to
consider striking the enumeration of renewable facilities
and cross-reference eligible renewable facilities for the
state's renewable Portfolio Standard at Public Resources
Code Section 25741(b).
5. Prior Legislation - AB 594 (Leno), Chapter 790, Statutes
of 2004) required PG&E to credit the City for any excess
electricity from a solar facility exported to the PG&E
grid. Facilities could be sized up to one megawatt; total
solar capacity was limited to five megawatts.
AB 2573 (Leno, 2006) permitted solar facilities to be sited
within 20 miles of the City or Hetch Hetchy; solar capacity
was increased to 15 megawatts; and SFPUC was required to
assume responsibility for all interconnection,
distribution, and transmission costs associated with the
solar facilities.
POSITIONS
Sponsor:
San Francisco Public Utilities Commission
Support:
American Federation of State, County and Municipal Employees,
AFL-CIO
Association of California Water Agencies
The Solar Alliance
Vote Solar Initiative
Oppose:
Pacific Gas & Electric
Kellie Smith
SB 581 Analysis
Hearing Date: May 5, 2009