BILL ANALYSIS Ó
AB 792
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 792 (Mullin)
As Amended August 29, 2013
Majority vote
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|ASSEMBLY: | |(May 9, 2013) |SENATE: |39-0 |(September 9, |
| | | | | |2013) |
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(vote not relevant)
Original Committee Reference: L. GOV.
SUMMARY : Prohibits a local jurisdiction, until January 1, 2020,
from levying a utility user tax (UUT) on the consumption of
electricity generated by a clean energy resource.
The Senate amendments :
1)Prohibit a local jurisdiction, until January 1, 2020, from
levying a UUT on the consumption of electricity generated by a
clean energy resource that is located on the customer's
premises and used solely by the customer or the customer's
tenants.
2)Define "clean energy resource" to mean either of the
following:
a) A device or technology used for a renewable electrical
generation facility which uses biomass, solar thermal,
photovoltaic, wind, geothermal, fuel cells using renewable
fuels, small hydroelectric generation of 30 megawatts or
less, digester gas, municipal solid waste conversion,
landfill gas, ocean wave, ocean thermal, or tidal current;
or,
b) Any technology that meets all of the following
requirements:
i) The emissions standards adopted by the State Air
Resources Board pursuant to the distributed generation
certification program requirements, as specified;
ii) Produces de minimis emissions of sulfur oxides and
nitrogen oxides;
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iii) The greenhouse gases emission performance standard
established by the Public Utilities Commission (PUC), as
specified;
iv) Has a total electrical efficiency of not less than
45%;
v) Is sized to meet the generator's onsite electrical
demand;
vi) Has parallel operation to the electrical
distribution grid;
vii) Utilizes renewable or nonrenewable fuel; and,
viii) Pays any applicable UUT for nonrenewable fuels used
in electricity generation.
3)Clarify this bill does not exempt from any UUT imposed by any
local jurisdiction any electricity or gas, not described in 2)
above, that is provided to a customer by an electrical
corporation, publicly owned utility, electrical cooperative,
or irrigation district.
4)Define "local jurisdiction" to mean "any city, county, city
and county, including any chartered city, county, or city and
county, district, or public or municipal corporation."
5)Find and declare that exempting the consumption of
electricity, generated by a renewable distributed generation
system that is installed for the exclusive use of a single
customer from local UUTs will ensure statewide uniformity and
fairness in the overall imposition of the UUT.
6)Declare that this matter is of statewide concern and therefore
not a municipal affair.
EXISTING LAW :
1)Authorizes a city or county to levy a utility user tax on the
consumption of electricity, gas, water, sewer, telephone,
telegraph, and cable television services.
2)Defines "advanced electrical distributed generation
technology" to mean any electric distributed generation
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technology that generates useful electricity and meets all of
the following conditions:
a) The emissions standards adopted by the State Air
Resources Board pursuant to the distributed generation
certification program requirements, as specified;
b) Produces de minimis emissions of sulfur oxides and
nitrogen oxides;
c) Meets the greenhouse gases emission performance standard
established by the commission, as specified;
d) Has a total electrical efficiency of not less than 45%;
e) Is sized to meet the generator's onsite electrical
demand;
f) Has parallel operation to the electrical distribution
grid; and,
g) Utilizes renewable or nonrenewable fuel.
AS PASSED BY THE ASSEMBLY , this bill clarified that legislative
bodies of local agencies may conduct regular and special
meetings and take official actions even if technical barriers
have prevented pre-meeting posting of agendas and notices on
their Web sites.
FISCAL EFFECT : None
COMMENTS : A city may impose a UUT on the consumption of utility
services, including, but not limited to, electricity, gas,
water, sewer, telephone, sanitation and cable television. The
city determines the rate of the tax and the use of its proceeds.
UUTs can be imposed as a special tax and are therefore
dedicated for a specific purpose, or a general tax to be used
for whatever purpose the city council decides. UUTs are levied
by the city, collected by the utility as part of its regular
billing, and then remitted to the city. A county may levy a UUT
on the consumption of electricity, gas, water, sewer, telephone,
telegraph and cable television services in the unincorporated
area. In California 153 cities and four counties impose a UUT
on electricity.
In most jurisdictions, UUTs provide vital funding for municipal
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or county services. Reduced funding by the state and other
sources of funding for local governments over the last several
decades have increased the popularity of UUTs, which are most
commonly used to fund police, fire, parks, and libraries.
A small number of municipal ordinances specify that the
consumption of electricity generated from renewable sources on
the consumer's property for the consumer's use is exempt from a
UUT. It is currently unclear to the how many cities or counties
collect UUT revenues from electricity generated by a clean
energy resource.
This bill exempts, until January 1, 2020, a customer's
consumption of electricity generated by a clean energy resource
that is located on the customer's premises and used solely for
the customer or the customer's tenants from any UUT imposed by a
local jurisdiction. This bill defines "local jurisdiction" to
mean "any city, county, city and county, including any charter
city, county, or city and county, district, or public or
municipal corporation."
This bill defines clean energy resource to mean either a device
or technology used for a renewable electrical generation
facility, pursuant to the Public Resources Code, or a technology
that meets specified conditions, pursuant to the PUC, to define
"advanced electrical distributed generation technology." This
definition includes electricity generated by an advanced
electrical distributed generation technology which uses
non-renewable resources, but meets specified criteria. This
bill provides the same UUT exemption to a single homeowner with
solar panels as it does to a business such as Walmart utilizing
fuel cells, which use an electrochemical reaction to produce
electricity from fuels.
Some renewable energy firms sell renewable electricity
generation facilities, like solar panels, directly to property
owners to finance the cost of the system and recover their
initial investments over time through reduced energy bills. As
an alternative, several energy firms have developed a new way to
finance distributed generation systems in which the renewable
energy system is owned by a third-party and the property owner
is responsible only for paying for the power generated by the
system. Using third-party ownership and power purchase
agreements (PPA) to finance distributed generation renewable
systems expands the renewable energy market by allowing property
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owners to self-supply electricity from renewable sources with
little or no up-front cost.
SunEdison uses this type of third-party ownership business model
and has concerns over the lack of clarity in current law and the
potential application of a UUT to the payments that a property
owner makes under the terms of a PPA. According to SunEdison,
the application of a UUT would significantly enhance the
downward pressure on project economics already under way from
declining residential solar incentives. They estimate that the
application of a 7.5% UUT would lower average solar project
internal rates of return and would make 15% of solar projects
uneconomical for customers.
According to the author, "Significant issues about the
practicality of collecting taxes from [electricity generated by
a clean energy resource] raise fairness and equity issues
regarding who gets taxed and how. Cities and counties should
not impose a UUT only on monthly bills sent to consumers under
the terms of a PPA without also taxing the consumption of
electricity generated on-site [by a clean energy resource] owned
by other consumers. However, there are currently no known
accurate or even feasible means of collecting taxes on a
renewable electricity generation facility owned (rather than
leased) by the energy consumer. In other words, the application
of a UUT to [electricity generated by a clean energy resource]
would effectively vary based on the ownership of the renewable
generation system - only those who receive a monthly bill could
easily be taxed and those who can afford all of the upfront
costs of a system can't realistically be taxed."
This bill exempts all on-site electricity generated by a clean
energy resource from UUTs and incentivizes on-site production
versus the use of electricity from renewable sources that are
transmitted through the grid. While proponents argue that
property owners who cannot afford upfront costs should not be
treated differently because of economic disadvantages, the
Legislature may also wish to consider the other parties that
will benefit from the exemption created by this bill. Further,
the Legislature may wish to consider if a blanket exemption
should be granted in a response to a specific business model.
The revenue generated by UUTs varies in each local jurisdiction.
The Legislature may wish to consider if maintaining local
discretion, but providing some statewide standards instead of an
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all-out exemption to achieve uniformity is more appropriate.
The Legislature previously granted UUT exemptions in AB 2009
(Hernandez), Chapter 221, Statutes of 2008, which exempted
compressed natural gas used as a motor vehicle fuel by a local
agency or public transit operator for the purposes of a
county-imposed UUT. AB 1257 (Hernandez), Chapter 213, Statues
of 2012 expanded the exemption beyond counties to include any
UUT imposed by a local jurisdiction.
Support arguments : Supporters argue that this bill will provide
consistent treatment of UUT for all customers self-supplying
electric from clean distributed generation, irrespective of
financing model.
Opposition arguments : Opposition argues that exempting
electricity generated by a clean energy resource from UUTs
erodes local officials' ability to manage local affairs by
making it more difficult for them to raise general fund
revenues, and that numerous state and federal incentives are in
place to promote the use of renewable energy, making this bill
unnecessary.
This bill was substantially amended in the Senate and the
Assembly-approved provisions of this bill were deleted. The
subject matter of this bill, as amended in the Senate, has not
been heard in any Assembly policy committee this legislative
session.
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958
FN: 0002287