BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 792| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 CONTINUED AB 792 Page 2 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 CONTINUED AB 792 Page 3 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 Cities of Glendale, Sacramento and Torrance 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 write in opposition, "A proposal of this type - in essence, a CONTINUED AB 792 Page 4 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 **** END **** CONTINUED