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 SB 1222 - 4/9/12 -- Page 2 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 SB 1222 - 4/9/12 -- Page 4 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 SB 1222 - 4/9/12 -- Page 5 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. SB 1222 - 4/9/12 -- Page 6 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 stateand federalfunds 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.