BILL ANALYSIS Ó
SB 843
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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
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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