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. SB 843 Page 2 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). SB 843 Page 3 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 SB 843 Page 4 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. SB 843 Page 5 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. SB 843 Page 6 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). SB 843 Page 7 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: SB 843 Page 8 "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. SB 843 Page 9 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 SB 843 Page 10 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 Page 11 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