BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 843
                                                                  Page  1

          Date of Hearing:   June 25, 2012

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                       SB 843 (Wolk) - As Amended:  May 9, 2012

           SENATE VOTE  :   vote not relevant
           
          SUBJECT  :   Energy: electrical corporations: City of Davis PVUSA 
          solar facility: Community-Based Renewable Energy Self-Generation 
          Program.

           SUMMARY  :   Establishes a new business model that would allow 
          developers of renewable projects to sell electricity to 
          customers of Investor Owned Utilities (IOUs).  Specifically, 
           this bill  :   

          1)Makes findings and declarations regarding state distributed 
            generation policy, benefits of distributed generation, job 
            creation, military renewable energy goals, and school budgets.

          2)Repeals existing statute allowing the City of Davis to receive 
            bill credits for power generation from a former research 
            facility developed by the California Energy Commission (CEC) 
            (The research facility was known as PVUSA and ultimately sold 
            to the City of Davis).

          3)Allows developers of eligible renewable energy projects to 
            sell shares in projects and sell electricity to retail 
            customers of IOUs.

          4)Establishes a maximum program capacity of 2.0 gigawatts (GW) 
            and a maximum per project size of 20 megawatts (MW).

          5)Provides the California Public Utilities Commission (PUC) 
            discretionary authority to increase the capacity to 2.0 
            gigawatts.

          6)Requires a utility to purchase excess generation not allocated 
            to subscribers.

          7)Exempts developers from State Securities laws and regulations.

          8)Exempts developers from PUC oversight.









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          9)Restricts future rate changes to program participants.

          10)Establishes intent to maintain ratepayer indifference.

          11)Specifies method of calculating a payment rate for generation 
            from a facility to be shown as a bill credit on a utility bill 
            and requires the PUC to develop a method for establishing a 
            value for payments made to program participants and to update 
            the method triennially.

          12)Specifies that the bill credit can only be used against the 
            generation component of a customer's utility bill.

          13)Restricts placement of generation facilities to locations 
            within the IOU service area or if by mutual agreement, may be 
            located in an area served by an adjacent service area of a 
            Publicly Owned Utility (POU).

          14)Requires the PUC to establish and maintain a public database 
            of existing and proposed renewable energy facilities and 
            requires those facilities to report size, location, and 
            commercial operation date.

          15)Establishes a facility rate based on the weighted average 
            time of delivery price paid for a comparable technology using 
            prior year data published by the PUC.

          16)Allows participants to own up to 2 MW (or equivalent 
            kilowatthours) of a project.

          17)Allows the value of Renewable Energy Certificates (REC) to 
            remain with the participant.  RECs associated with excess 
            procured go to the utility that purchases the excess 
            generation. 

           EXISTING LAW  : 

          1)California Constitution grants PUC authority to fix rates 
            charged by public utilities under its jurisdiction. (Article 
            XII, Section 6, California Constitution)

          2)Defines the term "Electric service provider" as an entity that 
            does not include an IOU and establishes a requirement that 
            Electric Service providers meet minimum criteria and register 
            with the PUC. (394 Public Utilities Code).








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          3)Specifies minimum criteria to disclose civil, criminal, or 
            regulatory sanctions or penalties imposed within 10 years 
            prior to registration; proof of financial viability, and proof 
            of technical and operation ability.

          4)Authorizes the PUC to address consumer complaints regarding 
            electricity service providers, conduct investigations. (394.2 
            Public Utilities Code)

          5)Establishes a requirement on retail electricity suppliers to 
            meet the 33% RPS by 2020 and establishes reporting 
            requirements for retail sellers of electricity. (399.11 et 
            seq. Public Utilities Code)

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           1)Author's Statement  .  Many cities throughout California have 
            for decades invested in trees to provide shade, cool homes, 
            and reduce energy consumption, making homes poorly suited for 
            rooftop solar.  Further, home or business owners with roofs 
            not appropriately oriented for solar, and California's 
            millions of renters, have been shut out of cost effective ways 
            to pursue clean renewable power.  Programs set up to offer 
            schools and local governments an avenue to invest in off-site 
            renewable energy have proven uneconomical, with too many 
            barriers to ensure the projects could pencil out. 

            Without shifting cost to customers who chose not to 
            participate and without spending state money, SB 843 opens up 
            access to affordable renewable energy to the millions of 
            residential, business, schools and municipal customers who 
            currently cannot participate in our renewable self-generation 
            programs.  SB 843 will support the construction of new 
            renewable energy systems right when our state needs them most. 
             Opening up the renewable self-generation market to those 
            currently shut out will save ratepayers money on their utility 
            bills and lead to the creation of millions in new tax revenue 
            for the state and thousands of new jobs.

            According to a study commissioned by Vote Solar, SB 843 will 
            lead to the creation of at least 12,000 new jobs in 
            California, $230 million in tax revenue, and $7.5 billion in 








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            economic activity in the state.  SB 843 brings more private 
            capital into California projects, secured by the project 
            developer, to build community renewable energy facilities.  
            The increase in demand helps to drive down costs and increase 
            competition for all renewables.  SB 843 reduces pressure for 
            large scale, desert facilities by creating a market for 
            distributed generation using small and midsized infill 
            facilities located close to demand.

           2)Author's Amendments.   The author has worked with many 
            stakeholders to develop language to address their concerns.  
            According to the author, their amendments are intended to 
            address:

             a)   Opportunities for full participation by IOU customers
             b)   Consumer protection
             c)   Ameliorating developer risk if a project is not fully 
               subscribed
             d)   Transferring value of RPS credit when IOU purchases 
               unsubscribed energy generation
             e)   Accounting for "green" energy attributes
             f)   Assuming responsibility for transmission, distribution, 
               and public purpose costs
             g)   Limiting bill credits against generation only on 
               customer utility billing accounts
             h)   Establishing ratepayer indifference
             i)   Clarifying obligation for interconnection costs remain 
               with the developer
             j)   Establishing that these projects would reduce utility 
               Renewable Portfolio Standard (RPS) obligations and count 
               toward utility Resource Adequacy capacity requirements
             aa)  Requiring the PUC to calculate a rate for electricity 
               sales from these projects that is based on published data 
               on the average rate paid to utilities for RPS projects

           1)Renewable Program Gaps?   A number of programs currently exist 
            that provide the state's IOU ratepayers with opportunities to 
            procure competitively priced renewable electricity.  For 
            example: the annual RPS contract solicitation, the Reverse 
            Auction Mechanism (RAM), the Renewable Energy Market Adjusting 
            Tariff (Re-MAT), and utility direct procurement.  The RPS has 
            resulted in over 2.5 gigawatt of operational renewable energy 
            projects and over 17 gigawatts of contracts.  RAM and Re-MAT 
            combine to approximately 1.5 gigawatt of procurement.  
             








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            Thus, all ratepayers, including tenants and schools are 
            receiving ever-increasing levels of renewable generation via 
            their local electricity provider.
           
             In addition to these programs, the Net Energy Metering program 
            is available for those who choose to self-generate. 

            While it is true that tenants may not be able to self-generate 
            because they do not own their premises, they are receiving 
            renewable generation.

            While this new program may hold promise with respect to 
            addressing a program gap, the scale of the program is quite 
            large relative to the unknowns about how the program. This 
            program may be better suited as a small pilot program until a 
            better understanding of how this program compliments existing 
            programs.
             
           2)How Much will a Participant Pay for Renewable Electricity 
            through SB 843?  SB 843 proposes to set a price that is based 
            on one-year-old weighted average time of delivery cost of 
            technology-comparable RPS projects.  With significant price 
            reductions occurring in the renewable energy market, it is not 
            clear what would be gained by locking participants into a 
            payment that is based on an out-of-date average price.

            According to the PUC: "The weighted average time-of-delivery 
            adjusted cost of all contracts approved from 2003-2011 was 
            approximately 11.9 cents per kilowatt hour (kWh), with a range 
            of 5.4 cents in 2003 to 13.3 cents in 2011.  Most recently, 
            bids from the 2011 RPS Solicitation, not yet available for 
            inclusion in the report, show significantly lower costs than 
            bids from the past few years, which will be reflected in 
            future IOU contracts."

            Additionally, the weighted average time of delivery costs are 
            only available if there are sufficient numbers of projects to 
            allow confidentiality of specific contract prices. This may 
            mean that for some technologies, no price will be available.

            It is not clear if entering into this agreement will save 
            money for a participant.  However, it could have the effect of 
            increasing the amount of renewable generation allocated to 
            their account if the participant retains the value of 
            renewable energy. 








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            SB 843 also directed the PUC to establish a 'value adder' to 
            this price to reflect benefits of the facility.

           3)Developer Risk Protection  .  The bill proposes that if a 
            developer has not sold all of the generation its facility 
            produces to subscribers, the local utility should be mandated 
            to purchase the remaining generation.  The pricing is set at 
            the price of the default load aggregation point, which has 
            recently ranged from 3 to 4 cents per kilowatthour. 

            The PUC adopts IOU procurement plans every other year.  It is 
            not clear if the generation purchased by the utility will 
            reduce the PUC adopted procurement obligations.

           4)Consumer Safeguards .  The bill provides a number of 
            disclosures in the event of a sale or resale of a facility 
            describing costs and benefits, explaining the contract, the 
            price, and the potential costs and benefits.

            Currently, the PUC registers Electricity Service Providers 
            (ESP) after verification of information provided regarding 
            civil, criminal, or regulatory sanctions or penalties imposed 
            within 10 years prior to registration; proof of financial 
            viability, and proof of technical and operation ability.  In 
            addition, the PUC has authority to investigate consumer 
            complaints.

            Since there is potentially no limit to the number of 
            developers who can enter into this market, there is potential 
            for opportunists to prey on consumers or potential facility 
            investors.  A similar program of verification and authority to 
            investigate may be warranted for this program.

           5)Grid use/management fees?   This bill allows facilities up to 
            20 MW to place power on the electricity grid.  In general, 
            rules limit the size of facilities on the distribution lines 
            to no more than 15% of the distribution line's capacity.  
            Generally this will limit facilities on distribution lines to 
            no more than 3 MW.  Any size project up to 20 MW could 
            interconnect to the transmission grid.  The bill does not make 
            clear that it is the developer who is responsible for the grid 
            use and management fees, imbalance charges, or other costs 
            allocated by the California Independent System Operator 
            (CAISO).  








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          6)Potential to shift costs to non-participating ratepayers.   The 
            proposed language asserts a goal and endeavor to achieve 
            ratepayer indifference.  While goals and endeavoring are 
            helpful, the language should be explicit that the ratepayer 
            indifference language applies generally to procurement.  In 
            the case of this specific program, it is more appropriate to 
            use language that leaves other ratepayers unaffected, such as: 


            "The implementation of a community solar program shall not 
            result in a shifting of costs between the customers of the 
            community solar and the bundled service customers of an 
            electrical corporation."

            In addition, the bill seeks to clarify that the bill credit 
            program does not otherwise impact the rates and rate structure 
            of a participant in this program.  The language goes beyond 
            this by stating that participants not be assessed other 
            charges (including interconnection charges, standby charges, 
            etc.).  This language should be modified and simplified to 
            state that the normal charges and structure of rates of a 
            participant shall not be affected by the ratepayer's 
            participation in this program.

           7)Technicalities in the findings and declarations.   A number of 
            comments in the findings and declarations are made regarding 
            benefits that are not yet assessed.  Therefore, a number of 
            sentences in the findings and declarations should be modified, 
            particularly those that state the "Legislature recognizes the 
            advantage of this proposal;" will assist in meeting the 
            state's zero net energy building goals (the state has not yet 
            defined a zero net energy building); "it is in the public 
            interest?for participants Ýto be] entitled to generate 
            electricity and receive credit for that electricity on their 
            bills."

           8)Support and Opposition.   Supporters of this bill assert that 
            SB 843 will further California's renewable energy goals and 
            would result in at least 12,000 new California jobs.  
             
            The Department of Defense (DoD) supports this bill, if 
            amended, to allow direct access customers to participate in 
            the bill credit provisions.  They state that their support is 
            contingent on a new section that would state:








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             "If a participant is in a Direct Access (DA) relationship with 
            an ESP that does not provide distribution services for the 
            direct transactions, the ESP is obligated to provide a bill 
            credit to the participants benefitting account pursuant to 
            this subdivision (e)."
             
            Sempra Energy provides a number of suggested amendments that 
            address potential cost shifting to non-participating 
            ratepayers including: the price should be approved by the PUC; 
            reduce other obligations by utilities to obtain distributed 
            generation; set program cap and size limit flexibility with 
            regard to operating impacts and cost exposure to the 
            ratepayers; and to provide discretion, if necessary to the PUC 
            to suspend the program.

            PG&E opposes, unless amended, to address new procurement 
            requirements, cost-shifting, and require utilities to pay a 
            rate for electricity to pay higher costs for renewable energy 
            than they can procure from other renewable energy facilities.

           9)Suggested Amendments  .  In order to address the issues of 
            program assessment, cost-shifting, and consumer safeguards, 
            the author may wish to consider the following amendments:

             a)   Modify language in the findings and declarations as 
               indicated in this analysis.
             b)   Modify language to direct the PUC to conduct a pilot 
               program for up to 250 MW of community renewable projects 
               (up to 20 MW each) and publish an evaluation of the 
               results.
             c)   Include in the pilot program provisions that direct the 
               PUC to implement the program no later than September 1, 
               2013, establish rules for pricing facility generation, and 
               implement consumer safeguards similar to the Electric 
               Service Provider registration.
             d)   Revise ratepayer indifference language to clarify that 
               cost-shifting is not to occur under this program.

               With respect to utility billing services for participants: 
               The implementation of a community self-generation program 
               shall not result in a shifting of costs to provide billing 
               or other services between the customers of the community 
               self-generation and the bundled service customers of an 
               electrical corporation. 








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               With respect to rates paid for generation from community 
               solar facilities: The commission shall ensure with respect 
               to rates and charges that ratepayers that do not receive 
               service pursuant to the community self-generation program 
               are indifferent to whether a ratepayer who participate in a 
               community self-generation program receives service pursuant 
               to the tariff.

             e)   Clarify language with respect to rates assessed 
               participating ratepayers, as follows:

               (B) The tariff applicable to a participant shall be 
               identical, with respect to rate structure, all retail rate 
               components, and any monthly charges, to the charges that 
               the participant would be assigned if the participant did 
               not receive a bill credit.  Participants shall not be 
               assessed standby charges on the community renewable energy 
               facility or the kilowatthour generation of a community 
               renewable energy facility. Any new or additional demand 
               charge, standby charge, customer charge, minimum monthly 
               charge, interconnection charge, or any other charge that 
               would increase a participant's costs beyond those of other 
               customers who are not participants in the rate class to 
               which the participant would otherwise be assigned if the 
               participant did not receive a bill credit is contrary to 
               the intent of this chapter, and shall not form a part of 
               the participant's tariff.  

             f)   Specify that grid use and management fees, imbalance 
               charges, or other costs allocated by the California 
               Independent System Operator are the responsibility of the 
               facility owner.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Affordable Housing Alliance
          Alameda County Supervisor, Keith Carson
          American Lung Association in California
          Androit Solar Energy & Design
          Breathe California
          California Interfaith Power & Light (CIPL)
          California League of Conservation Voters








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          California Native Plant Society
          California School Boards Association (CSBA)
          California State Association of Electrical Workers
          Christiansen Consulting
          City of Brea
          City of Chula Vista
          City of Davis
          City of Ventura
          Clean Tech Energy
          CleanPath Ventures
          CleanTECH San Diego
          Coalition of California Utility Employees (CCUE)
          Consumer Federation of California 
          County School Facilities Consortium (CSFC)
          Davis Joint Unified School District
          Department of Defense (DoD) (if amended)
          Division of Ratepayer Advocates (DRA) (if amended)
          El Peco Energy, LLC
          Environment California
          Environmental Entrepreneurs (E2)
          Green Collar Job Campaign of the Ella Baker Center for Human 
          Rights
          GreenBuild Energy
          Hansen Financial Management
          Homeboy Industries
          Individuals (8 letters)
          Lincoln Renewable Energy
          LMI of San Diego
          LTS Energy
          Mayor Jean Quan, City of Oakland
          Natural Resources Defense Council (NRDC)
          Oakland Rising
          Oakland Technical High School Green Academy/Green Team
          Oakland Unified School District (OUSD)
          Octus Energy
          PaulinNeal
          Planning and Conservation League
          Recurrent Energy
          Renewable Funding
          San Diego County Solar
          San Diego Gas & Electric Company (SDG&E) (if amended)
          Santa Ana Unified School District
          School Energy Coalition (SEC)
          Sierra Club California
          Small Business California








                                                                  SB 843
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          Solar Energy Industries Association (SEIA)
          Solar Training Institute
          Solar West Design Build
          Sonoma County Board of Supervisors
          Sonoma County Water Agency
          The Workforce Collaborative
          Tom Torlakson, State Superintendent of Public Instruction (SSPI) 
          (Sponsor)
          Ufficio Energia e Clima (Office of Energy and Climate)
          Vote Solar
          Yolo County Board of Education
          Yuba Community College District (YCCD)
           
            Opposition 
           
          California Farm Bureau Federation
          Pacific Gas and Electric Company (PG&E) (unless amended)
          Southern California Edison (SCE)



           Analysis Prepared by  :    Susan Kateley / U. & C. / (916) 
          319-2083