BILL ANALYSIS                                                                                                                                                                                                    Ó




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  SB 1222                     HEARING:  4/25/12
          AUTHOR:  Leno                         FISCAL:  Yes
          VERSION:  4/9/12                      TAX LEVY:  No
          CONSULTANT:  Phan                     

                             SOLAR ENERGY: PERMITS
          

          Caps solar rooftop permit fees at $300, with exceptions, 
          and requires cities and counties to report on their solar 
          permitting standards. 


                           Background and Existing Law

           California has historically shown a strong support for 
          solar energy.  In 1978, the Legislature enacted the Solar 
          Rights Act to make it easier for people to install solar 
          energy systems (AB 3250, Levine, 1978).  To further promote 
          solar installations, AB 2437 (Wolk, 2004) declared, among 
          other things, that the implementation of statewide 
          standards for solar energy systems is not a municipal 
          affair but a matter of statewide concern. 

          A rooftop solar energy system is a system of panels 
          installed on a building's rooftop that converts sunlight 
          into electricity.  Although exact procedures vary by 
          location, the approval procedure for a solar permit is 
          similar to the procedure for approving a building permit.  
          Typically, the solar installation company or customer 
          submits an electrical diagram and roof layout plan to the 
          city or county planning department.  If the plan is 
          approved, the installer or customer pays a permit fee and 
          starts the installation project.  

          When a local agency charges fees for building permits, 
          those fees may not exceed the estimated reasonable cost of 
          providing the service for which the fee is charged.  Fees 
          charged in excess of the estimated reasonable cost of 
          providing the services are taxes and must be approved by a 
          2/3 vote.  Building permit fees generally pay for the cost 
          of the project plan examination and on-site inspection.  

          Currently, each local authority having jurisdiction over 




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          solar installations determines its fee structure for 
          rooftop permits.  Fees vary widely by location, with the 
          City of Lawndale charging the highest fee at $1,471 for a 
          3kW system, while 31 cities have a $0 permit fee.  The 
          average solar permit fee across all cities and counties is 
          $343.  

          Although the state has tried to encourage the installation 
          of solar energy systems, obstacles still exist.  High 
          permit fees and cumbersome permit processes hinder solar 
          installations by increasing costs to consumers.
                                         

                                  Proposed Law
           
          Senate Bill 1222 prohibits a city, county, or city and 
          county, including any charter city, county, or city and 
          county, with a population of over 10,000 residents, from 
          charging permit fees for rooftop solar energy systems that 
          exceed the estimated reasonable cost of providing the 
          service for which the fee is charged, which shall not 
          exceed $300.  

          SB 1222 allows cities and counties to charge permit fees 
          for rooftop solar energy systems that exceed $300 if, as 
          part of a written report, they can provide a calculation 
          related to the administrative cost to issue the permit.  

          Cities and counties must submit a report to the State 
          Energy Resources Conservation and Development Commission, 
          no later than December 1, 2013, with all of the following 
          information:
             1.   Whether its jurisdiction has modernized its 
               building standards code and permitting procedures to 
               reduce costs for installing rooftop solar energy 
               systems based on state law and the California Building 
               Standards Commission's current guidelines. 
             2.   Whether it has adopted fees that equal the 
               administrative cost related to the issuance of a 
               permit for rooftop solar energy system installation. 
             3.   Whether it has an electronic permit submittal 
               process available to the public.  

          SB 1222 declares the Legislature's intent to prioritize 
          access to state and federal funds related to distributed 
          energy generation planning, permitting, training, or 





          SB 1222 - 4/9/12 -- Page 3



          implementation for municipalities that have permit fees 
          that 
             1.   Do not exceed $300, or 
             2.   Can justify why their fees exceed $300.  

          SB 1222 also provides that if the Commission on State 
          Mandates determines that this act contains costs mandated 
          by the state, reimbursement to local agencies and school 
          districts for those costs shall be made pursuant to current 
          law.  


                               State Revenue Impact
           
          No estimate.   


                                         
                                    Comments  

           1.Purpose of the bill  .  According to a Sierra Club report, 
            there is no correlation between the cost of a solar 
            permit fee and the staff-hours a municipality must devote 
            to review plans.  SB 1222 reduces a barrier to rooftop 
            solar energy installation by capping solar permit fees at 
            $300 and allowing a higher fee only if the municipality 
            can justify the higher administrative cost.  This cap 
            will reduce the overall installation cost of solar energy 
            and increase installations in some areas.  A more 
            standardized permit fee will also help solar companies 
            calculate their customers' total installation costs.

            According to the author, more than 1 million additional 
            net energy metered residential rooftops could be deployed 
            in the state in the coming years, adding over $28 billion 
            to the state economy and support nearly 22,000 jobs.  
            More solar energy consumption will reduce consumption of 
            electricity from traditional, environmentally harmful 
            sources and reduce consumers' electricity bill.  By 
            helping to increase solar installation, SB 1222 will help 
            California realize its ambitious solar energy goals. 

           2.Necessary  ?  The California Constitution and statutes 
            clearly prohibit local governments from charging a fee 
            that exceeds the reasonable cost of providing the service 
            for which the fee is charged.  If local governments' fees 





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            for solar permits already comply with state law, then SB 
            1222's provisions merely clarify state law for rooftop 
            solar energy installations and will have little effect on 
            the cost of installing a solar energy system. If local 
            governments aren't limiting their fees for solar permits 
            to comply with state law, why would they comply with SB 
            1222? The practice of overcharging for permits may be a 
            regulatory problem, not a legislative problem.  The 
            Committee may wish to consider amendments that will help 
            fee payers dispute fees they consider too high. 

           3.Residential versus commercial installations  .  SB 1222 
            does not differentiate between residential and commercial 
            installations.  Typically, residential installations are 
            easier and quicker while commercial installations, being 
            bigger and more complex, are more labor intensive to 
            approve.  According to Solar City, $300 is a reasonable 
            permit fee for a 3 kW residential system.  For commercial 
            projects, the company has paid a fee of $17,000 for a 
            3,300 kW project, $13,000 for a 1,000 kW project, and 
            $284 for a 166 kW project.  A flat rate of $300 for both 
            residential and commercial installation ignores the fact 
            that permitting approval for residential and commercial 
            solar installations may not require the same labor.  The 
            Committee may wish to amend SB 1222 to require different 
            caps for different systems. Colorado, for example, 
            recently passed legislation that capped fees for a 
            residential solar installation at $500 and for a 
            commercial system at $1000. Alternatively, the bill could 
            impose a flat rate for residential systems (under 5 kW) 
            and a per kilowatt rate for commercial systems. 

           4.Not a real cap  .  SB 1222 allows cities and counties to 
            charge a fee that exceeds $300 if they prove the higher 
            fee covers administrative costs.  Without defining what 
            "administrative costs" include, cities and counties could 
            claim many external costs to justify charging a fee 
            higher than $300.  Putting a cap on solar permit fee may 
            also cause cities or counties charging below $300 to 
            raise their permit fee to meet this new norm, causing 
            consumers in areas that charge a low fee to pay a higher 
            fee than they would have had to.  The Committee may wish 
            to amend this bill to include a clearer definition of 
            "administrative costs." 

           5.Short notice  .  SB 1222 requires cities and counties to 





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            submit a report to the State Energy Resources 
            Conservation and Development Commission by December 1, 
            2013.  If this bill goes into effect on January 1, 2013, 
            cities and counties will have less than a year to update 
            their building codes and submit the report.  This may be 
            too short a period of time for cities and counties, 
            leaving them vulnerable to litigation for either not 
            updating their codes or not meeting the reporting 
            deadline.  The Committee may wish to consider amending SB 
            1222 to extend the reporting deadline. 

           6.Reporting  .  The reports that SB 1222 requires serves only 
            to let municipalities justify their administrative cost.  
            Rather than imposing this new reporting requirement, the 
            Committee may wish to amend SB 1222 to, instead, require 
            cities or counties that wish to charge more than $300 to 
            justify their fee by issuing a written finding and adopt 
            a resolution or ordinance. This would place the burden of 
            proof for administrative costs on cities and counties, 
            and allow the public to have input on the amount of the 
            fee.

           7.State mandate  .  This bill requires that a city or county 
            submit a report to the State Energy Resources 
            Conservation and Development Commission about updating 
            its building code and permitting process, which is a 
            state mandate, and allows cities and counties to be 
            reimbursed for state mandated costs pursuant to current 
            law.  The Commission of State Mandates will likely be 
            inundated with claims for reimbursement stemming from 
            this bill.  The Committee may wish to amend this bill to 
            allow cities and counties to include the cost of this 
            report in their list of administrative costs in order to 
            reduce reimbursement costs from the State General Fund.  

           8.Special treatment  .  The solar industry has already 
            received numerous subsidies and special programs from the 
            state government.  SB 1222 is another effort to help the 
            solar industry. Some critics argue the benefits have not 
            outweighed the costs to the state, especially since solar 
            energy has not reached price parity with grid 
            electricity. The Committee may wish to consider whether 
            solar rooftop installation permits merit a different 
            treatment than other building permits such as those for 
            wind, solar thermal, or solar ground installations.  






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           9.Technical amendments  .  To clarify SB 1222's provisions, 
            the Committee may wish to consider making the following 
            technical amendments to the bill:
                 Page 3, lines 13-14, strike out "A city, county, or 
               city and county, including any charter city,  county, 
               or city and county  ".  Charter counties' fees are 
               governed by the general laws of California, so it is 
               unnecessary to distinguish between charter and general 
               law counties. 
                 Page 3, line 28, strikeout "  modernized  " and insert 
               "updated".  
                 Page 3, line 28, strikeout "  their  " and insert 
               "its".  
                 Page 4, line 1, strikeout "priority access to state 
                and federal  funds for the purposes of," because the 
               state has no control over federal funds.  
                 This bill should clarify whether the qualification 
               from subdivision (a) of city, county, or city and 
               county above 10,000 residents also applies to 
               subdivisions (b), (c), and (d).  


                         Support and Opposition  (4/19/12)

           Support  :  School Energy Coalition; Sunrun; Mainstream 
          energy Corp.; REC Solar, Inc.; AEE Solar, Inc.; Distributed 
          Energy Consumer Advocates; Sungevity; Suntech. 

           Opposition  :  League of California Cities; California State 
          Association of Counties; Regional Council of Rural 
          Counties; Urban Counties Caucus; American Planning 
          Association, California Chapter.