BILL ANALYSIS Ó
AB 1499
Page A
Date of Hearing: April 21, 2014
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1499 (Skinner) - As Amended: April 21, 2014
SUBJECT : Self Generation Incentive Program
SUMMARY : This bill extends authorization for the California
Public Utilities Commission (PUC) to collect funds from
ratepayers for specified technologies to receive incentives
under the Self Generation Incentive Program (SGIP) until 2017
and extend administration of the SGIP until 2019. Specifically,
this bill :
1)Provides an extension of the PUC's authority to collect funds
to be used for the SGIP program until 2017.
2)Provides for an extension of the authority to administer the
SGIP program until 2019.
EXISTING LAW
a)Specifies the intent that SGIP increase deployment of
distributed generation and energy storage systems to
facilitate the integration of those resources into the
electrical grid, improve efficiency and reliability of the
distribution and transmission system, and reduce emissions of
greenhouse gases, peak demand, and ratepayer costs. (Public
Utilities Code 379.6(a))
b)Specifies the intent of the Legislature that SGIP funds
provide an equitable distribution of the costs and benefits of
the program. (Public Utilities Code 379.6(a))
c)Authorizes the PUC, to authorize the annual collection of not
more than the amount authorized for SGIP program in the 2008
calendar year, through December 31, 2014. (Public Utilities
Code 379.6 (a))
d)Requires the PUC to require electrical corporations to
administer the SGIP until January 1, 2016. (Public Utilities
Code 379.6(a))
e)Requires the PUC to provide repayment of all unallocated funds
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collected for the SGIP on January 1, 2016, to reduce ratepayer
costs. (Public Utilities Code 379.6(a))
f)Restricts eligibility for SGIP incentives to those distributed
energy resources that the PUC, in consultation with the
California Air Resources Board (ARB), determines will achieve
reductions in emissions of greenhouse gases pursuant to the
California Global Warming Solutions Act of 2006. (Public
Utilities Code 379.6(b))
g)Specifies emissions criteria for SGIP incentives for
combustion technologies and combined heat and power
technologies. (Public Utilities Code 379.6(c))
h)Specifies certain conditions for projects that operate solely
on waste gas which, if not met, exclude them from receiving
SGIP incentives. (Public Utilities Code 379.6(c)(4))
i)Provides that the PUC may, in administering SGIP, adjust the
amount of rebates and evaluate other public policy interests,
including, but not limited to, ratepayers, energy efficiency,
peak load reduction, load management, and environmental
interests. (Public Utilities Code 379.6(e))
j)Requires the PUC to ensure that distributed generation
resources are made available in the program for all
ratepayers. (Public Utilities Code 379.6(f))
aa)Requires the PUC to provide an additional incentive of 20
percent from existing SGIP funds for the installation of
eligible distributed generation resources from a California
supplier. (Public Utilities Code 379.6(g))
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement . "Under current law, the SGIP expires on
December 31, 2014. With continued authorization, SGIP seeks to
help California meet our goals for clean air, reduced
greenhouse gas emissions, reduced electricity demand, and
enhance markets for preferred resources. The SGIP is also the
only incentive program for energy storage projects, which play
a critical role in reducing the need for "peaker plants,"
increasing the stability and reliability of our electrical
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system, and delivering and integrating renewable energy
resources."
2)Program History . On August 31, 2000, the final day of the
1999-2000 Legislative Session, AB 970 (Ducheny) was gutted and
amended. The bill included a variety of provisions quickly
cobbled together in an effort to respond to the emerging
energy crisis in San Diego, where San Diego Gas and Electric
was the first utility to expose its customers to unfrozen
rates under California's ill-fated experiment with electric
industry restructuring. Because the crisis was misunderstood
at the time to be the result of a physical supply shortage, AB
970's primary focus was to increase electric generation
supply, and most of the bill's provisions were related to
expediting the siting of power plants.
Buried on page 20 of the 22-page bill was a single sentence
requiring the Public Utilities Commission (PUC) to adopt
"(d)ifferential incentives for renewable or super clean
distributed generation resources" within 180 days of the
effective date of the bill. Aside from the objective to
"reduce demand for electricity and reduce load during peak
demand periods," no further definitions or instructions were
included in AB 970. The bill required the "reasonable costs"
of the PUC's action to be included in the distribution revenue
requirement of PUC-regulated utilities. This provision was
not even mentioned in the Senate or Assembly bill analyses.
Pursuant to this provision of AB 970, the PUC established the
SGIP in 2001, offering customer rebates for renewable and
"super clean" distributed generation resources. SGIP has been
extended and/or modified by at least six bills since then.
Over the last 13 years, the SGIP has offered rebates for
installation of solar, wind, fuel cell, and certain renewable
and fossil fuel combustion resources meeting specified
emissions and efficiency standards.
A 2005 report commissioned by the PUC to study the
cost-effectiveness of SGIP concluded that the program is
marginally cost-effective for participants (i.e., recipients
of funding), but is not cost-effective to non-participants
(i.e., ratepayers who pay for it). Because SGIP is funded
from distribution rates, its costs are disproportionately
borne by residential ratepayers. However, historically only
larger projects have been eligible for SGIP, so residential
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ratepayers haven't been able to access the incentives.
With the enactment of the California Solar Initiative (CSI)
through PUC order and SB 1 Murray (Chapter 132, Statutes of
2006), photovoltaic (PV) systems were no longer eligible for
SGIP incentives. PV incentives were provided instead under
the CSI. Severing solar from SGIP left a much smaller program
for wind, fuel cells and combustion projects which was to
continue until 2008. In 2006, AB 2778 Lieber (Chapter 617,
Statutes of 2006) extended SGIP for wind and fuel cells until
2012, but excluded combustion projects.
In 2009, SB 412 Kehoe (Chapter 182, Statutes of 2009) extended
SGIP collection through 2011, modified eligibility to include
fossil fuel projects that reduce greenhouse gas (GHG)
emissions, and required the PUC to administer the program
until 2016 (the additional time was allotted to spend a $200+
million surplus accumulated from prior years).
In response to a December 22, 2010 request from SGIP
administrators, the program was suspended by a PUC ruling
issued February 10, 2011, which froze applications received on
or after January 1, 2011. The reason for the suspension was
that a rush of awards and applications, mostly from a single
vendor, had nearly exhausted both the current budget and the
accumulated surplus, leaving less funding than expected for
future awards under SB 412. Later in 2011, the PUC adopted a
decision implementing SB 412 and reinstated the program. At
the same time, the PUC made advanced energy storage systems
(AES) eligible for SGIP incentives.
Notwithstanding the issues with the program and the SB 412
agreement to sunset SGIP in 2016, in 2011, AB 1150 V. Manuel
Pérez (Chapter 310, Statutes of 2011) allowed the PUC to fund
SGIP for an additional three years. Under AB 1150, the PUC
may authorize the utilities to collect up to $83 million per
year from their customers through December 31, 2014. However,
AB 1150 maintained the January 1, 2016 sunset on the program,
at which time the PUC must provide repayment of all
unallocated funds to reduce ratepayer costs.
3)2012 Program Evaluation. The most recent evaluation of SGIP,
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"2012 SGIP Impact Evaluation and Program Outlook,"<1> was
prepared by Itron under contract and published by the PUC on
February 7, 2014. Among the report's key findings are:
SGIP spent an average of $311 per metric ton of CO2
reductions through 2012.
Ratepayers paid $33 million in incentives for $7 million
in benefits (avoided costs) in 2012.
Of the completed SGIP projects (excluding PV projects),
o 52% of the project capacity remains
operational.
o 8% of the project capacity has been
decommissioned.
o 14% of the project capacity is offline.
o 26% of the project capacity has no information
available on the condition of the project.
Assuming build-out of the queue of pending SGIP projects
and continuation of the current program guidelines and
rules, GHG emission reductions and peak demand reductions
will grow.
There is insufficient independent information to
quantify market transformation impacts.
1)Projects receiving incentives under the newer, performance
based SGIP . The 2012 Program evaluation could not provide
insights into how projects were performing under revisions the
PUC made to the program to make it "performance based" in
order to address concerns expressed about less than stellar
performance reports in prior evaluations. In response to a
data request from the Natural Resources and Utilities &
Commerce Committees, the PUC provided supplemental information
on how the program is faring under its new performance based
criteria. The PUC reports that:
Greenhouse Gas Reduction Costs. Current estimates, from the
available data on funded projects, indicate a reduction in
total cost for SGIP technologies from an average of $311
per metric ton of CO2 for projects installed before
D.11-09-015 to an average of $232 per metric ton of CO2 for
projects installed after D.11-09-015.
-------------------------
<1>
2012 SGIP Impact Evaluation and Program Outlook"
http://www.cpuc.ca.gov/NR/rdonlyres/25A04DD8-56B0-40BB-8891-A3E29
B790551/0/SGIP2012ImpactReport_20140206.pdf
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Peak Demand Savings. There is not currently adequate data
available to accurately calculate or predict peak demand
savings for projects funded and in the queue since
D.11-09-015. The current lack of data can be attributed to
two factors:
1. There are simply too few systems installed since
D.11-09-015 that have been operating long enough to
provide a sufficient data set to accurately report or
predict peak demand savings.<2>
2. There are currently data transfer issues between the
SGIP database administrator and the program
administrators (PA). The database administrator is in the
process of adjusting the database so that it may receive
all data for all projects. As the database administrator
and the PAs were not anticipating the need to analyze
this data until June 2014, the database infrastructure to
receive certain data necessary for this analysis is not
in place at this time.
The PUC reports that the data transfer issue will be
resolved, and additional data will be available for the
2013 Annual Impact Assessment report and the SGIP
Cost-Effectiveness Analysis report, both expected later
this year.
2)SGIP Market Concentration. In testimony provided at the joint
hearing held by this committee with the Assembly Committee on
Natural Resources in March 2014, The Utility Reform Network
(TURN) stated that SGIP funds the most expensive technologies
(fuel cells and batteries, which achieve lower greenhouse gas
reductions and do not assist with current electricity system
needs for flexibility and ramping. They pointed out that there
is little evidence of decreasing costs for the technologies
receiving SGIP incentives and question the value to electric
---------------------------
<2> Itron notes that actual savings from projects installed
before D.11-09-015 are not suitable for estimation purposes
given that the performance-based incentive (PBI) requirements
implemented by D.11-0-015 are expected to result in increased
savings.
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ratepayers providing subsidies to Bloom Energy, GE, and Tesla.
According to TURN, between 2007 and the 3rd Quarter of 2013, 5
companies received the vast majority of the SGIP incentives:
-------------------------------------------------------------
|Manufacturer | Incentives | Pending |Total |
| | (2007-3Q2013) | Incentive | |
| | | Requests | |
|--------------------+----------------+------------+----------|
|Bloom Energy | $170,068,200|$116,676,100|$286,744,3|
|Corporation | | | 00 |
|--------------------+----------------+------------+----------|
|Fuel Cell Energy | $43,875,000| *|$43,875,00|
| | | | 0|
|--------------------+----------------+------------+----------|
|UTC Power / | $16,502,000| *|$16,502,00|
|ClearEdge | | | 0|
|--------------------+----------------+------------+----------|
|GE Energy | $10,801,000| $34,723,660|$45,524,66|
| | | | 0 |
|--------------------+----------------+------------+----------|
|Tesla | N/A| $26,184,124|$26,184,12|
| | | | 4|
|--------------------+----------------+------------+----------|
|Stem Inc. | *| $9,362,448|$9,362,448|
| | | | |
|--------------------+----------------+------------+----------|
|Caterpillar | *| $6,293,000|$6,293,000|
| | | | |
|--------------------+----------------+------------+----------|
|Mitsubishi Power | $5,250,000| *|$5,250,000|
|Systems | | | |
|--------------------+----------------+------------+----------|
|All Others | $18,912,476| $62,667,184|$81,579,66|
| | | | 0 |
|--------------------+----------------+------------+----------|
|Total | $265,408,676|$255,906,516|$521,315,1|
| | | |92 |
-------------------------------------------------------------
These companies may have received incentives that are in the
"All Other" category but were not ranked as high for the
period.
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3)Related Legislation.
AB 1624 (Gordon) would extend SGIP for 6 years and modify
participation criteria and evaluation criteria.
4)Support and Opposition.
Supporters request extension and emphasize the program's
benefits for reducing greenhouse gas emissions.
The contract administrator for SGIP, the California Center for
Sustainable Energy (CCSE), also supports extending SGIP.
TURN opposes extension of SGIP because it would extend a very
high subsidy for private commercial customers and a handful of
manufacturers, and is an ineffective and costly means to
reduce carbon emissions. TURN does not oppose allowing an
extension to expend funds already collected.
REGISTERED SUPPORT / OPPOSITION :
Support
Advanced Energy Economy
Agricultural Energy Consumers Association (AECA)
American Vanadium Corp.
Association of California Water Agencies (ACWA)
AT&T
Bergey Wind Power
Bioenergy Association of California
Bloom Energy
Bosch Energy Storage
California Association of Sanitation Agencies (CASA)
California Energy Storage Alliance (CESA)
California Manufacturers & Technology Association (CMTA)
California Solar Energy Industry Association (CalSEIA)
California State University
Capstone Turbine Corporation
ClearEdge Power
CODA Energy
Direct Access Customer Coalition
EDF Renewable Development, Inc.
EnerVault
Environmental Defense Fund
EtaGen
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EV Grid
Facebook
Fuel Cell Energy (FCE)
Green Charge Networks
Imergy Power Systems
Inland Empire Utilities Agency (IEUA)
LightSail Energy
Outback Power Technologies
Parker Hannifin's Global Energy Grid Tie
Powertree Services, Inc.
Primus Power
Providence Health & Services
Rosendin Electric
Seeo, Inc.
Solar Energy Industries Association (SEIA)
SolarCity
Stem, Inc.
TechNet
Yahoo!
Opposition
The Utility Reform Network (TURN)
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083