BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1990 (Fong) - Renewable energy resources: disadvantaged
communities.
Amended: August 6, 2012 Policy Vote: EU&C 7-3
Urgency: No Mandate: Yes
Hearing Date: August 16, 2012
Consultant: Brendan McCarthy
SUSPENSE FILE.
Bill Summary: AB 1990 would expand an existing program, which
requires utilities to purchase renewable energy using a
feed-in-tariff. The bill would expand the program from 750
megawatts of total capacity to 940 megawatts and require
electricity purchased under the expansion to be generated in
disadvantaged communities.
Fiscal Impact:
Ongoing costs of about $270,000 per year (Public Utilities
Commission Utilities Reimbursement Account) for regulatory
oversight by the Public Utilities Commission.
By requiring utilities to purchase more renewable energy
(typically at higher cost than natural gas or large scale
renewable energy projects), the bill will increase costs to
ratepayers. Because projects authorized under this bill
would be relatively small (less than 500 kW) the costs to
these projects are likely to be higher than other renewable
energy projects. State agencies are responsible for about
1.4 percent of total electricity use in the state. Based on
projections by the Public Utilities Commission that rates
under the program could go over $200 per MWh, the cost to
state agencies could be in the hundreds of thousands of
dollars per year (various funds).
Background: Under current law, there are a variety of programs
mandating that utilities purchase renewable energy or provide
subsidies for renewable energy technologies.
Under one such program, utilities are required to purchase
renewable energy under a standard contract (known as a
AB 1990 (Fong)
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feed-in-tariff). Under this program, operators of renewable
energy projects with capacity up to three megawatts can sell
electricity to a utility under a standardized contract, at a
price determined through an auction process overseen by the
Public Utilities Commission. This feed-in-tariff program is
capped at 750 megawatts.
Proposed Law: AB 1990 would require the Public Utilities
Commission to expand the existing feed-in-tariff program by 190
megawatts (125 megawatts in the investor owned utility
territories and 65 megawatts in publicly owned utility
territories.) Both investor owned utilities and publicly owned
utilities would be required to participate. (Although under
current law, there is no penalty if publicly owned utilities do
not comply with this kind of mandate by the state.)
The bill limits the maximum size of a renewable energy project
at 500 kilowatts. In addition, the bill specifies that eligible
projects must be located in the "most impacted and disadvantaged
communities" and requires the utilities to use a specified
methodology to determine which communities qualify.
The bill exempts publically owned utilities that serve less than
75,000 customers.
Staff Comments: This bill is patterned on the existing
feed-in-tariff program. By requiring utilities to purchase
renewable energy , that program increases ratepayer costs. This
program is likely to further increase ratepayer costs by
requiring additional purchasing of small-scale renewable energy
(under 500 kilowatts as opposed to 3 megawatts under the current
program) Thus, the rates paid by utilities under the bill are
likely to be even higher than in the current program, because of
reduced economies of scale.
Under the bill, only projects in disadvantaged communities are
eligible. Rooftop solar photovoltaic projects are likely to be
the primary sources of renewable energy under the bill. The bill
may generate some short-term economic activity in such
communities during construction of projects. It is not clear
whether renewable energy developers would rely on local firms
and workers to complete those projects. Thus the long-term
economic benefit to disadvantaged communities under the bill is
uncertain.
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The bill imposes a mandate on publicly owned utilities. However,
because publicly owned utilities have the authority to set rates
to recover their costs, the mandate is not reimbursable by the
state under the California Constitution.