BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  AB 2249|
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                                 THIRD READING


          Bill No:  AB 2249
          Author:   Buchanan (D), et al.
          Amended:  8/22/12 in Senate
          Vote:     21

           
           SENATE ENERGY, UTIL. & COMMUNIC. COMM.  :  10-0, 7/3/12
          AYES:  Padilla, Fuller, Corbett, De León, DeSaulnier, 
            Kehoe, Pavley, Rubio, Strickland, Wright
          NO VOTE RECORDED:  Berryhill, Emmerson, Simitian
           
          SENATE APPROPRIATIONS COMMITTEE  :  7-0, 8/16/12
          AYES:  Kehoe, Walters, Alquist, Dutton, Lieu, Price, 
            Steinberg
           
          ASSEMBLY FLOOR  :  69-9, 5/30/12 - See last page for vote


           SUBJECT  :    Solar Water Heating and Efficiency Act of 2007

           SOURCE  :     California Solar Energy Industries Association


           DIGEST  :    This bill expands eligibility for incentives 
          under the California Solar Initiative (CSI) thermal program 
          to include multifamily residential, governmental, 
          educational, and nonprofit solar pool heating systems.

           ANALYSIS  :    Existing law establishes the CSI, a $3.6 
          billion program which provides incentives for the 
          installation of solar photovoltaic and solar thermal 
          systems for customers of the state's investor-owned 
          utilities (IOUs) and publicly owned utilities.  The measure 
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          allocated $100.8 million for solar thermal technologies 
          that displace electric use.

          Existing law establishes the Solar Water Heating and 
          Efficiency Act of 2007 to provide incentives for customers 
          of IOUs to displace their natural gas use by installing 
          solar water heating (SWH) systems under the California 
          Solar Initiative-Thermal (CSI-Thermal) program and funded 
          by $250 million in ratepayer surcharges.

          Existing law defines "solar water heating systems" as any 
          solar energy device that has the primary purpose of 
          reducing demand for natural gas through water heating, 
          space heating, or other methods of capturing energy from 
          the sun to reduce natural gas consumption in a home, 
          business, or any building receiving natural gas that is 
          subject to the surcharge and that meets or exceeds the 
          eligibility criteria and specifically excludes solar pool 
          heating systems.

          This bill:

          1. Requires the Public Utilities Commission (PUC) to (a) 
             determine an appropriate division of funds between SWH 
             systems and solar pool heating systems (b) complete a 
             review of whether the rebate levels established by the 
             PUC will be sufficient to spur investment to reach the 
             goals of the program and to report the results to the 
             Legislature by no later than February 1, 2014 and (c) 
             direct gas corporations or third-party administrators to 
             implement the program changes made by this bill no later 
             than July 1, 2013.

          2. Provides that the SWH system incentives should be a 
             cost-effective investment by gas customers.  Gas 
             customers will recoup the cost of their investment 
             through lower prices as a result of avoiding purchases 
             of natural gas. 

          3. Provides that this Act will encourage the cost-effective 
             deployment of solar heating systems in both residential 
             and commercial markets and in each end-use application 
             sector in a balanced manner.  It is the intent of the 
             Legislature that the PUC monitor and adjust incentives 

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             created by the article so that they are cost-effective 
             investments sufficient to significantly increase markets 
             and promote market transformation. 

          4. Provides that the PUC ensure that increased, uniform 
             growth in each market sector is achieved through program 
             incentives or structure adjustments that prevent 
             overutilization of program resources by any single 
             sector.

           Background
           
           CSI  .  In January 2007, the PUC launched the CSI, a $2.16 
          billion ratepayer-funded incentive program with a goal of 
          installing 1,940 megawatts of new solar generation and 
          creating a sustainable solar industry by 2016.   

          In early 2006, the PUC, in collaboration with the 
          California Energy Commission, established the CSI, a $2.5 
          billion incentive program to promote solar development 
          through 2016, to be funded from the distribution rates of 
          gas and electric ratepayers.  At that time, the PUC stated 
          its intent to consider incentives for SWH as part of the 
          CSI program, and directed San Diego Gas and Electric 
          Company (SDG&E) to contract with California Center for 
          Sustainable Energy to administer a pilot program for SWH 
          incentives in the SDG&E territory.  Subsequently, with the 
          passage of SB 1 (Murray), Chapter 132, Statutes of 2006, in 
          August of 2006, funds for CSI were limited to $2.16 billion 
          and could no longer be collected from gas ratepayers.  At 
          the same time, SB 1 included a provision allowing $100.8 
          million of total CSI funds to be used for incentives for 
          solar thermal technologies, such as SWH.  With CSI funding 
          now limited to collections from electric ratepayers, the 
          PUC concluded that although CSI would include as part of 
          its total budget $100.8 million for incentives to solar 
          thermal technologies, CSI should only pay incentives to 
          solar thermal technologies that displace electric usage.

          The SWH pilot in the SDG&E territory, budgeted at $3 
          million, was allowed to proceed to provide useful 
          information on SWH incentives in general.  In February 
          2007, the PUC approved the SWH pilot budget of $2.59 
          million and the pilot began operation in the SDG&E 

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          territory, with a scheduled end date of December 31, 2008.  
          The PUC later extended the pilot to December 31, 2009 or 
          until the budget was exhausted, whichever occurs first.

          In late 2007, the Legislature adopted AB 1470 (Huffman), 
          Chapter 536, Statutes of 2007, which authorized the 
          creation of a $250 million incentive program to promote the 
          installation of 200,000 SWH systems in homes and businesses 
          that displace the use of natural gas by 2017.  The statute 
          required the PUC to evaluate data from the SWH pilot and 
          determine whether an SWH program was "cost effective for 
          ratepayers and in the public interest" before designing and 
          implementing an incentive program for gas customers.

          In early 2010 the PUC established the CSI-Thermal program 
          to provide incentives to promote the installation of SWH 
          systems in the territories of Pacific Gas and Electric 
          Company, Southern California Edison, SDG&E, and Southern 
          California Gas Company.  The CSI-Thermal program was funded 
          by $250 million in collections from gas ratepayers, 
          pursuant to AB 1470 and up to $100.8 million in CSI for 
          solar thermal projects such as SWH.  Monies collected under 
          AB 1470 from gas ratepayers fund incentives to SWH that 
          displace natural gas usage, while funds collected through 
          CSI from electric ratepayers will fund electric displacing 
          SWH systems.  The single-family residential program was 
          launched in May 2010, the commercial/multi-family program 
          in October 2010, and the low-income program in March 2012. 

           Program goals  .  The CSI-Thermal program is designed to 
          significantly increase the adoption rate of SWH 
          technologies in the California marketplace.  The program 
          strategy and design principles are intended to address the 
          barriers to growth, namely installation costs, lack of 
          public knowledge about SWH, permitting costs and 
          requirements, and a potential shortage of experienced 
          installers.  The primary goals of the CSI-Thermal program 
          include the following:  (1) significantly increase the size 
          of the SWH market in California by increasing the adoption 
          rate of SWH technologies; (2) support reductions in the 
          cost of SWH systems of at least 16% through a program that 
          increases market size and encourages cost reductions 
          through market efficiency and innovation; (3) engage in 
          market facilitation activities to reduce market barriers to 

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          SWH adoption, such as high permitting costs, lack of access 
          to information, and lack of trained installers; and (4) 
          increase consumer confidence and understanding of SWH 
          technology and its benefits.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  Yes

          According to the Senate Appropriations Committee, $166,000 
          from the Public Utilities Reimbursement Account in 2012-13 
          and 2013-14 to the PUC to implement expanded program 
          eligibility requirements.

             $120,000 annually beginning 2014-15 to monitor the 
             program and ensure that the new requirements are met by 
             the utilities' program administrators.

             Unknown, likely major accelerated CSI-Thermal program 
             expenditures annually.

           SUPPORT  :   (Verified  8/22/12)

          California Solar Energy Industries Association (source)
          All Valley Solar, Inc.
          AMECO Solar
          Aquatherm Industries
          Aztec Solar, Inc.
          California Park and Recreation Society
          California State Association of Electrical Workers
          California State Pipe Trades Council
          City of Sacramento
          City of Santa Monica
          Coalition for Adequate School Housing
          Coalition of California Utility Employees
          County School Facilities Consortium
          East Bay Municipal Utility District
          Environment California
          FAFCO Solar Water Heating
          Los Angeles Unified School District
          Pacific Gas and Electric Company
          School Energy Coalition
          Sierra Pacific Home and Comfort, Inc.
          Skyline Innovations
          Solar Electrical Systems

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          Sun Light and Power
          Suntrek Industries, Inc.
          UMA Solar
          Western States Council of Sheet Metal Workers

           ARGUMENTS IN SUPPORT  :    Solar Electrical Systems supports 
          this bill, which helps schools, municipalities and other 
          large swimming pool owners install solar for pool heating.  
          Operators of these swimming pools are faced with enormous 
          heating bills in order to maintain the pool at usable 
          temperatures, and this bill would make available existing 
          funds for SWH systems to help owner/operators purchase 
          these systems.  Solar pool heating saves very large amounts 
          of natural gas, thereby saving money while also avoiding 
          the release of significant amounts of air emissions.  Also, 
          more than 85% of California's natural gas comes from out of 
          state; installing solar for swimming pools will help keep 
          those dollars here in California, creating local workforce 
          jobs.


           ASSEMBLY FLOOR  :  69-9, 5/30/12
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Charles Calderon, Campos, 
            Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, 
            Eng, Feuer, Fong, Fuentes, Furutani, Beth Gaines, 
            Galgiani, Gatto, Gordon, Gorell, Hagman, Hall, Harkey, 
            Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, 
            Jeffries, Knight, Lara, Bonnie Lowenthal, Ma, Mendoza, 
            Miller, Mitchell, Monning, Nestande, Nielsen, Olsen, Pan, 
            Perea, V. Manuel Pérez, Portantino, Silva, Skinner, 
            Smyth, Solorio, Swanson, Torres, Wagner, Wieckowski, 
            Williams, Yamada, John A. Pérez
          NOES:  Donnelly, Garrick, Grove, Halderman, Jones, Logue, 
            Mansoor, Morrell, Norby
          NO VOTE RECORDED:  Fletcher, Valadao


          RM:k  8/28/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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