BILL ANALYSIS                                                                                                                                                                                                    



                                                                            



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          |SENATE RULES COMMITTEE            |                        AB 792|
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                                    THIRD READING


          Bill No:  AB 792
          Author:   Mullin (D), et al.
          Amended:  8/29/13 in Senate
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 7/3/13
          AYES:  Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu

           ASSEMBLY FLOOR  :  Not relevant


           SUBJECT  :    Utility user tax:  exemption:  distributed  
          generation systems

           SOURCE  :     Author


           DIGEST  :    This bill, until January 1, 2020, exempts from a  
          utility users tax (UUT), the consumption of electricity  
          generated by a distributed clean energy resource, as defined,  
          for use by a single consumer, or the customer's tenants.

           Senate Floor Amendments  of 8/29/13 expand the types of  
          electricity generation systems that qualify for a UUT exemption,  
          impose a January 1, 2020 sunset date on the tax exemption, and  
          make other clarifying changes.

           ANALYSIS  :    The California Constitution allows a city, with the  
          consent of the local voters, to govern its "municipal affairs"  
          by adopting a charter.  The constitutional municipal affairs  
          doctrine allows charter cities to levy taxes which are not  
          preempted by the state or federal governments.  66 charter  
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          cities levy a UUT.

          A general law city can impose only those taxes that are allowed  
          by state statutes.  However, the Government Code allows all  
          general law cities to levy any tax which may be levied by any  
          charter city unless a different general law limits or prohibits  
          such a tax.  87 general law cities levy a UUT.

          This bill, until January 1, 2020, exempts from any UUT imposed  
          by a local jurisdiction, a customer's consumption of electricity  
          generated by a clean energy resource, as defined, for the  
          exclusive use of a single customer, or the customer's tenants.

          This bill specifies that it does not exempt, from a UUT, any  
          electricity or gas that is not from a "clean energy resource"  
          and is provided to a customer by an electrical corporation,  
          publicly owned utility, electrical cooperative, or irrigation  
          district.

          This bill defines "local jurisdiction" as any city, county, city  
          and county, including any charter city, county, or city and  
          county, district, or public or municipal corporation.  Defines  
          "clean energy resource" as devices or technologies used for a  
          renewable electrical generation facility or other technologies  
          that meet specified emissions and electrical efficiency  
          standards, as defined in state law.

           Comments
           
          Access to solar electricity is critical to California's  
          achieving its clean energy and greenhouse gas emission goals,  
          while also enabling more homeowners to reduce their electricity  
          bills.  Solar distributed generation is one of the  
          fastest-growing markets in California.  Industry participants  
          estimate that more than 150,000 customers in California  
          self-supply some or all of their electricity using solar  
          distributed generation, and that more than 43,000 Californians  
          are employed by firms that are involved in the market for solar  
          distributed generation.  Uncertainty about the potential  
          application of UUTs to electricity from distributed generation  
          systems poses a threat to continued growth of this dynamic  
          distributed solar generation market.  Applying a UUT to  
          third-party power purchase agreement financing would greatly  
          disadvantage this business model.  An internal analysis  

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          conducted by SunEdison found that applying a 7.5% UUT to would  
          make 15% of solar projects financially unviable for SunEdison's  
          customers.  By eliminating uncertainty about the application of  
          local UUT ordinances to renewable distributed generation and  
          ensuring consistent treatment for all customers, this bill will  
          enable the renewable distributed generation industry to continue  
          to grow throughout California.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

           SUPPORT  :   (Verified  9/5/13)

          Advanced Energy Economy
          California Solar Energy Industries Association
          Environment California
          Silicon Valley Leadership Group
          Solar Energy Industries Association
          SunEdison
          Surun
          Vote Solar

           OPPOSITION  :    (Verified  9/5/13)

          California Municipal Utilities Association
          City of Glendale
          City of Sacramento
          League of California Cities

           ARGUMENTS IN SUPPORT  :    The proponents write, "AB 792 provides  
          much needed certainty to California customers that have or are  
          planning investments in solar including retail businesses and  
          low- and middle-income homeowners by clarifying and preserving  
          the existing tax treatment of those investments through 2020.   
          Onsite solar generation is one of the few means available to  
          Californians to manage their electricity costs over the  
          long-term - solar systems are built to last for a minimum of 20  
          years. Investments in onsite solar generation create local jobs  
          and local sales and use tax revenue to California cities and the  
          state.  In order for customers to be able to make safe long-term  
          investments, they need long-term policy certainty, which AB 792  
          will provide."

           ARGUMENTS IN OPPOSITION  :    The League of California Cities  

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          write in opposition, "A proposal of this type - in essence, a  
          state-mandated exemption on local utility user taxes levied not  
          by the state, but by cities - should instead be locally  
          negotiated by the companies desiring the tax break with the city  
          councils whose cities will feel the pinch of the lost or  
          forgone, revenue.  AB 792 undertakes a different approach, a  
          state restriction on municipal sovereignty, and on the authority  
          of local governing bodies to make such critical budgetary  
          decision about their own revenue streams without external  
          influence.

          UUT's are one of the last unrestricted revenue sources of cities  
          - constituting 20% or more of some city General Funds.  On  
          behalf of our members, the League is compelled to resist any  
          further attempts to restrict this revenue stream, for whatever  
          purpose."  
           

          AB:d  9/5/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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