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 








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            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.








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           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 








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            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 








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            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 








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            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)








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          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 








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          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