BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 585|
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                                 THIRD READING


          Bill No:  SB 585
          Author:   Kehoe (D)
          Amended:  5/31/11
          Vote:     27 - Urgency

           
           SENATE ENERGY, UTIL. & COMM. COMMITTEE  : 10-1, 4/05/11
          AYES: Padilla, Fuller, Berryhill, Corbett, De León, 
          DeSaulnier, Pavley, Rubio, Simitian, Strickland
          NOES: Wright

           SENATE APPROPRIATIONS COMMITTEE  :  6-2, 5/26/11
          AYES:  Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
          NOES:  Walters, Runner
          NO VOTE RECORDED:  Emmerson


           SUBJECT  :    Energy: solar energy systems: funding

           SOURCE  :     California Solar Energy Industry Association
                      Solar Alliance


           DIGEST  :   This bill requires the Public Utilities 
          Commission (PUC) to utilize accrued interest from 
          California Solar Initiative (CSI) funds to meet the 
          incentive payments for non-residential installations and to 
          increase collections from electric ratepayers of the 
          state's 3 largest electrical corporations for any remaining 
          shortfalls in funding.  Requires the discount rate to be 
          set at 4 percent, unless the commission determines the rate 
          should be reduced.  Defines "discount rate" as a financial 
          mechanism that provides a given amount of interest as an 
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          offset to the loss of the time value of money on solar 
          projects that receive performance-based incentives.  

           ANALYSIS  :   

           Existing law  

          1.Establishes the CSI, a $3.3 billion program which 
            provides incentives for the installation of solar 
            photovoltaic (PV) systems for customers of the state's 
            investor-owned utilities (IOUs) and publicly owned 
            utilities (POUs).

          2.Requires the PUC, in implementing the CSI, to adopt 
            incentive payments that decline not less than an average 
            of 7% per year which shall be zero as of December 31, 
            2016 and to adopt performance-based incentives (e.g. 
            payments based on the amount of electricity produced) all 
            PV systems over 100 kilowatts (kW) and for half of all 
            systems over 30 kW.
           
          Background 

          California Solar Initiative (CSI)  

          Effective in 2007, the CSI calls for the installation of 
          3,000 megawatts (MW) of new, solar-produced electricity by 
          2016. Targeted expenditures under the CSI, funded by 
          ratepayers, are $3.3 billion over ten years, distributed 
          among three distinct program components:

          1.IOUs - $2.167 million/1940 MW for existing residential 
            homes, as well as existing and new commercial, 
            industrial, government, non-profit, and agricultural 
            properties; 

          2.New Solar Homes Partnership, $400 million/360 MW, 
            administered by the California Energy Commission and 
            funded by the Public Goods Charge for new residential 
            homes; and 

          3.POUs $784 million/700 MW.

          In July 2010, the PUC reported that "three years into the 







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          state's 10-year solar program, California is already 42 
          percent of the way towards its general market program goal 
          in the territories of the IOUs. This figure included both 
          projects already installed and those holding reservations 
          for incentives and in the process of being installed. As of 
          last summer, California had over 600 MW of solar connected 
          to the electric grid at nearly 65,000 customer sites. Of 
          the 598 MW of capacity installed in investor-owned utility 
          territories, 342 MW were installed under the CSI Program at 
          31,000 sites, as well as 256 MW installed through other 
          programs."  


          Comments

           According to the author's office, funding for 
          non-residential incentives in the CSI's 10-tier'd, 
          performance based declining incentive program, is exhausted 
          in two IOU service territories - PG&E & SDG&E.  At the 
          eighth tier incentives make up about 5% of the total costs 
          for non-residential solar installation.  SB 585 is needed 
          to ensure that the goals of the program are met and seeks 
          to provide a means to identify additional funding for that 
          purpose.   
           
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Senate Appropriations Committee:

                          Fiscal Impact (in thousands)

           Major Provisions                2011-12     2012-13    
           2013-14  Fund  
          Program oversight                                      
          Absorbable within existing resources                   
          Special*
          Increased electricity costs                            
          $2,400 over the next several years                     
          Various
             to state agencies
          Incentive payments to state             Unknown revenues 
          Various 
             agencies







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          * Public Utilities Commission Utilities Reimbursement 
          Account. 
           
          SUPPORT  :   (Verified  5/26/11)

          California Solar Energy Industry Association (co-source)
          Solar Alliance (co-source)
          AEE Solar, Inc.
          CA Public Utilities Commission
          Clean Water Action
          Clovis Unified School District
          Coalition for Adequate School Housing
          Fowler Unified School District
          Kings Canyon Unified School District
          KyotoUSA
          Mainstream Energy Corp.
          REC Solar, Inc.
          San Diego Gas and Electric (if amended)
          School Innovations & Advocacy
          Sharp Solar Electricity
          Silicon Valley Leadership Group
          SolarCity
          Solaria Corporation
          SPG Solar Inc.
          TerraVerde Renewable Partners
          The Vote Solar Initiative

           OPPOSITION  :    (Verified  5/26/11)

          Southern California Edison (unless amended)
          The Utility Reform Network (unless amended)

           ARGUMENTS IN SUPPORT  :    The Silicon Valley Leadership 
          Group would like to offer support for SB 585.  The 
          California Solar Initiative has funded nearly 80,000 solar 
          projects making California the leading state for solar 
          installations across the country.  CSI has led to 
          employment, business growth, and has helped to reduce the 
          cost of solar energy systems from $10/W in 2007 to $8.56/W 
          in December 2010 for systems under 10kW.  Addressing the 
          shortfall in funding for private and public sector projects 
          will help to continue the success of this program.  The 
          Public Utilities Commission states this bill allows the PUC 







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          to fully fund the CSI program's budget shortfall.  The CSI 
          program is very popular, and is helping to create a strong 
          solar industry in California.  The CSI program is a key 
          component in the State's ability to achieve reduced 
          greenhouse gas emissions through the use of clean, 
          distributed technology.  The proposed bill is a reasonable 
          effort to increase funding for this worthwhile effort.  The 
          bill will allow the State's ratepayers to reap the benefits 
          of the most cost-effective phase of the program where they 
          will stimulate the most MWs of solar installations for the 
          least incentive payment.  The Clean Water Action states SB 
          585 is critical to the growth of renewable energy in 
          California.  In light of the pending commitment to achieve 
          a 30% renewable portfolio, passage of SB 585 will be 
          critical to help meet that requirement.  This is the time 
          to further diversify the sources and location of energy in 
          order to build a safe and sustainable system.  California 
          must reduce dependence on energy sources that threaten 
          oceans with oil spills, require enormous amounts of water 
          for cooling or put our citizens at risk of radiation 
          exposure.  


          RM:rm  5/31/2011   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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