BILL ANALYSIS Ó SB 489 Page 1 Date of Hearing: June 27, 2011 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Steven Bradford, Chair SB 489 (Wolk) - As Amended: June 16, 2011 SENATE VOTE : 31-7 SUBJECT : Electricity; Net Metering SUMMARY : This bill expands net metering eligibility to include other types of renewable energy generating facilities, as defined. Specifically, this bill : 1)Would allow technologies not currently eligible for net metering (NEM) to participate in utility-administered net metering programs (biomass, solar thermal, geothermal, fuel cells using renewable fuels, small hydroelectric generation facilities, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, tidal current, and any additions or enhances to a facility using these technologies). 2)Retains current requirements that limit the maximum size of the project to 1 Megawatt (MW), limits the generation from the project to primarily offset on-site electricity demand and limits the location of the project to on the premises owned, rented, or leased by a customer of the electric utility. 3)Retains the total capacity cap for net metering at 5 percent of the utility's aggregate peak demand. 4)Repeals an existing NEM program for biogas generator projects. EXISTING LAW : Establishes NEM for solar (typically photovoltaic, PV) and wind electricity generating technologies. Requires the state's investor owned utilities (IOUs) and publicly owned utilities (POUs) (except the Los Angeles Department of Water and Power) to provide a utility bill credit, based on the retail price of electricity for every kilowatt-hour of electricity generated by a customer-owned solar or wind system. Establishes a pilot NEM for biogas generator projects up to 1 SB 489 Page 2 MW and 3 biogas projects with generating capacity between 1 and 10MW. Establishes NEM for fuel cells until 2013, on a first come first serve basis for up to 45 MWs of capacity or 22.5 MWs of capacity depending on the peak demand of an electrical utility (45 MWs each in PG&E and SCE service areas and 22.5 MW in SDG&E service area) and capped to a total of 112.5 MW. Requires the IOUs and POUs to apply the customer's NEM credits to the entire customer bill so that a net metered customer can 'zero out' their utility bill, which means that by virtue of net metering, the following non-energy cost could be offset: o Distribution costs (e.g. poles, wires, transformers, service technicians, call centers, and other customer services) o Transmission costs (e.g. high voltage transmission lines used to deliver remotely produced energy at all hours, including renewables) o Total Rate Adjustment Component - the cost shift from lower tier below cost rates to the upper tiers) o California Solar Initiative (CSI) o Self-Generation Incentive Program o CARE (low-income support - residential only) o Low-Income Energy Efficiency (LIEE - residential only) o Public Interest Energy Research (PIER) o The Public Goods Charges for renewable energy, energy efficiency, and demand reduction programs o Nuclear decommissioning Allows the NEM customer to connect their facility at no cost to the net metering customer, regardless of whether transmission or distribution upgrades are needed to accommodate the new generation. SB 489 Page 3 Requires the state's investor owned utilities to provide compensation or billing credits to the NEM utility customer for excess generation to when the customers' net metered systems produces more electricity than the customer used over a fixed time period. Limits the maximum project size for net metering to no more than 1 MW Requires IOUs and POUs to offer NEM to their customers until the utility reaches 5 percent of each utility's aggregate peak demand. FISCAL EFFECT : Unknown COMMENTS : The author proposes to open NEM to all forms of renewable energy to allow more utility customers to convert to renewable energy and offset their electricity bills. The bill will also help the state reach its greenhouse gas emissions and renewable energy goals. The author states that the current net metering statutes prevent cost-effective, clean renewable power from connecting to the grid. 1)Background: NEM is a billing arrangement which allows a renewable generator to get credit on their electricity bill when the renewable generation facility produces more electricity than is used on-site. For example, when the sun is shining or the wind is blowing and the customer is not using all of the electricity being produced, the electricity meter spins backwards. When the sun stops shining and the wind stops blowing, the customer draws electricity from the grid and their meter spins forward. The credits from when the meter was spinning backward are applied to the bill and used to offset the times when the meter is spinning forward. Utility customers who generate power from a wind or solar system receive retail credits on their electricity bill. If a customer accumulates enough credits over the 12-month billing period, they will receive have a net zero energy bill. A customer who has a net zero energy bill can still be a net consumer of electricity because the credits may accrue at a higher retail rate if the customer is on time of use rates and SB 489 Page 4 uses electricity in the evenings (billed to the customer at a lower retail rate because it is off-peak pricing). NEM shifts non-energy utility costs to non-participating ratepayers because non-energy customer service costs can be offset through the net metering billing credit (for example, transmission and distribution costs typically comprise one-half to two-thirds of a customer's billing). But, non-energy costs are fixed and on-going expenses so these costs are shifted to the remaining ratepayers - those who are not on NEM billing arrangements. As more NEM projects are added to the utility system this cost-shifting increases to the non-net metered customers. In March 2010, the California Public Utilities Commission (PUC) issued a report which analyzed the cost of NEM to non-NEM ratepayers. Based on 386 megawatts of installed rooftop solar, the cost to non-NEM ratepayers was estimated at $20 million per year. Installed rooftop solar is now over 800 MW so that cost has now at least doubled. Although the total net cost of the NEM at that point was less than one-tenth of one percent of total utility revenue average net cost, the more telling cost that was reported was that full retail NEM amounted to a cost of $0.12 per kilowatt hour (kWh) to non-NEM ratepayers. Sempra suggests that net metering statutes be revised to ensure that this cost-shifting does not occur. In 2010, the Legislature raised the aggregate cap on net metering from 2% to 5% in order to ensure that the amount of MWs available under the net metering cap would be sufficient in order to meet the goals of the CSI, administered by the PUC. The CSI has a goal of connecting 1,940 MW of customer-side renewable generation by 2016 (an additional 1,100 MW of customer-side generation is administered by the Energy Commission and POUs). According to the most recent information from the PUC (1st Quarter, 2011), the status of the IOU caps are as follows: Pacific Gas & Electric: 2.10% (peak load is 20,833 MW) Southern California Edison: 0.97% (peak load is 23, 163 MW) San Diego Gas & Electric: 2.05% (peak load is 4,642 MW) 1)Why limit NEM to only two renewable electricity technologies? This bill establishes the definition of an 'eligible renewable SB 489 Page 5 facility' by reference to a section in the Public Resources Code that defines eligible technologies under the State's Renewable Portfolio Standard (RPS). By referencing this particular statute, the bill would require that in order to qualify for net metering, projects would be those eligible to meet the State's RPS. This will allow other renewable electric generation technologies to participate in NEM programs, rather than limit NEM to two forms of renewable electric generation. 2)What about the capacity cap? If this bill is enacted, the net metering cap could be reached sooner, before all of the MWs have been subscribed under the CSI and the fuel cell NEM. 3)Is this bill solving the problem? Part of the impetus for this legislation may be related to barriers that small renewable developers are experiencing currently with procedures and policies that make interconnection to the electricity grid impossible from an economic and time perspective. From as early as 2009, small renewable developers have filed numerous comments at the PUC and the California Independent System operator regarding draconian, expensive, and lengthy interconnection rules that require typically more than a year and thousands of dollars just to get a preliminary response on whether or not a new small generator can interconnect to the electricity grid. While some of these delays can be caused by necessary safety reviews to identify transmission and distribution system upgrades necessary to accommodate new generation. But not all of the delays are due to safety reviews. The PUC and the regulated utilities are working on reforming the interconnection process, although there is no identified deadline for when the reforms will be implemented or if the time period for receiving a response on an interconnection request will be made reasonable. As a result of real frustrations with the interconnection process for small generators, NEM appears to be an attractive solution because the NEM statute requires the utility to interconnect NEM customers within 30 business days. 4)Is NEM for everyone? For utility customers with little on-site electricity demand the NEM arrangement will not be a solution for them because the size of a NEM project is limited to the amount of electricity consumed on site. These potential SB 489 Page 6 renewable generators will continue to be frustrated by an interconnection process. A streamlined, functional interconnection process and a reasonable payment for electricity delivered to the grid would probably serve the broader public interest to develop localized renewable generation and help deliver more renewable electricity to the grid. 5)Code clean-up needed. This bill deletes a code section which is referenced in the statute establishing the NEM for fuel cells. The author may wish to consider a technical amendment to address the deletion of a code reference in use in another statute. RELATED LEGISLATION SB 585 (Kehoe) would expand the PUC's authority to collect ratepayer funds to address a budget shortfall that would prevent reaching the PUC's portion of the State solar incentive program. SB 843 (Wolk) would establish a 'Community-based' self generation program to allow ratepayers to elect for a paid-'subscription' to receive renewably-generated electricity via an arrangement that would be administered, in part, by the local electric utility. REGISTERED SUPPORT / OPPOSITION : Support Agricultural Council of California (AgCouncil) Agricultural Energy Consumers Association (AECA) Almond Hullers & Processors Association California Certified Organic Farmers(CCOF) California Climate and Agriculture Network (CalCAN) (sponsor) California Compost Coalition California Farm Bureau Federation California Grain & Feed Association California Public Utilities Commission (CPUC) California Refuse Recycling Council (CRRC) California Rice Commission California Seed Association California Warehouse Association (CWA) SB 489 Page 7 Californians Against Waste Center for Land Based Learning Clean World Partners, LLC Clover Flat Landfill (CFL) Community Alliance with Family Farmers (CAFF) Dixon Ridge Farms Earthbound Farm Ecological Farming Association Environmental Defense Fund (EDF) First Northern Bank Food and Water Watch Full Belly Farm Hedgerow Farms Inland Empire Utilities Agency (IEUA) Intermountain Disposal, Inc. Lagier Ranches Linda J. Seifert, Solano County Board of Supervisors, District 2 Moira Burke, Solano County farmer Morris Grassfed Beef National Center for Appropriate Technology (NCAT) Occidental Arts& Ecology Center Pacific Egg and Poultry Association Pacific Institute Pena's Disposal Company, Inc. Phippin Bros. Planning and Conservation League Ralf Sauter, Okuye Almond Farm Rich Rominger, Farmer, Secretary California Department of Food and Agriculture 1977-1982; Deputy Secretary U. S. Department of Agriculture 1993-2001 Ridge Vineyards, Inc. Rominger Brothers Farms, Inc. Roots of Change Sierra Orchards Soil Born Farms Sustainable Agriculture Education (SAGE) Sustainable Conservation Swanton Berry Farms Synergex International Corporation Travaille & Phippen, Inc. Upper Valley Disposal Service (UVDS) Valley Fig Growers Yolo County Board of Supervisors Opposition SB 489 Page 8 California Municipal Utilities Association (CMUA) Pacific Gas and Electric Company (PG&E) San Diego Gas & Electric (SDG&E) Southern California Edison (SCE) Analysis Prepared by : Susan Kateley / U. & C. / (916) 319-2083