BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2249| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED AB 2249 Page 2 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 CONTINUED AB 2249 Page 3 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 CONTINUED AB 2249 Page 4 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 CONTINUED AB 2249 Page 5 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 CONTINUED AB 2249 Page 6 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 **** END **** CONTINUED AB 2249 Page 7 CONTINUED