BILL ANALYSIS Ó SB 43 Page 1 Date of Hearing: June 24, 2013 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Steven Bradford, Chair SB 43 (Wolk) - As Amended: June 15, 2013 SENATE VOTE : 27-9 SUBJECT : Shared Renewable Energy Self Generation program SUMMARY : This bill establishes, until January 1, 2019, a Shared Renewable Self Generation Program (Program) allowing customers of investor-owned utilities (IOU) to purchase an interest in a "community renewable energy facility" and receive a bill credit for the generation component of the customer's electrical service. Specifically, this bill : a)Establishes a 500 Megawatt (MW) pilot program until July 1, 2016 for a Shared Renewable Self Generation Program to allow sellers of renewable energy to sell electricity directly to customers of the three largest IOUs. b)Allocates 100 MWs each to residential customers and for 1 MW facilities located in the disadvantaged communities. c)Limits each facility to no larger than 20 MW. d)Exempts sellers from regulation by the California Public Utilities Commission (PUC) for any prices paid by customers of IOUs to purchase an ownership interest in a renewable energy facility acquired through this program. The PUC may enforce disclosure requirements on the sellers of these facilities and the PUC may investigate a complaint and enforce consumer protection. e)Exempts sellers from certain provisions in State laws that apply to the sale of securities. f)Permits any customer of any one of the state's three largest IOUs to: 1) Pay a seller for electricity generated by a shared renewable energy facility; 2) Receive a credit on the customer's IOU bill for that SB 43 Page 2 electricity. 3) Acquire an interest of up to 2 MWs of capacity of a shared renewable energy facility, except for specified government entities for which there is no cap; a)Requires the state's three largest IOUs to: 1) Establish a pilot program of 500 MWs 2) Enter into contracts with sellers so that they may sell electricity directly to customers of the IOU. 3) Administer bill credits and billing services for the seller and purchaser of the renewable electricity through the customer's regular utility services bill. 4) Purchase any electricity generated by the seller that has not been allocated to a purchaser. The price to be paid is based on the price known as the default load aggregation point plus the value of the renewable energy attribute of that electricity. 5) Provide maps of the utility's distribution service area to the PUC indicating where the addition of distributed generation facilities would reduce line loss, lower transmission capacity constraints, and defer or avoid transmission and distribution upgrades and construction. 6) Abide by a PUC decision regarding commercial free speech related to the sellers of facilities and electricity through this program. 7) Requires, upon request, the IOU to provide municipalities with data on electricity generation that occurred within the municipalities' boundaries through this program. a)Requires sellers to: 1) Sell electricity from renewable energy facilities located in the City of Davis or be a newly constructed facility placed in service after June 1, 2014. 2) Locate the facilities within the service area of the IOU and its customer. 3) Make specified disclosures to persons who may be interested in purchasing a share of a renewable energy facility. a)Requires customers to: 1) Pay administrative costs to implement the program SB 43 Page 3 consistent with other existing similar voluntary optional rate schedules. a) Requires the PUC to: 1) By January 1, 2015 determine whether customer under existing alternative electricity purchase arrangements (Direct Access customers and Community Choice Aggregators) should participate in the Program. 2) By January 1, 2016 evaluate whether the goals of the program are being met no later than January 1, 2016. 3) Evaluate the program at any time by its own or by petition of an interested party and adopt modifications or rules necessary to ensure the goals are met if those modifications or rules do not result in costs to nonparticipating ratepayers. 4) Determine the method of billing and crediting utility customers. 5) Enforce disclosures required for facility sellers other rules to ensure consumer protection. a)Sunsets the provisions of this bill January 1, 2019. EXISTING LAW 1)California Constitution grants PUC authority to fix rates charged by public utilities under its jurisdiction. (Article XII, Section 6, California Constitution) 2)Defines the term "Electric Service Provider" as an entity that does not include an IOU and establishes a requirement that Electric Service Providers meet minimum criteria and register with the PUC. (394 Public Utilities Code). 3)Specifies minimum criteria to disclose civil, criminal, or regulatory sanctions or penalties imposed within 10 years prior to registration; proof of financial viability, and proof of technical and operation ability. (394 Public Utilities Code) 4)Authorizes the PUC to address consumer complaints regarding electricity service providers and conduct investigations on those complaints. (394.2 Public Utilities Code) 5)Establishes a requirement on retail electricity suppliers to SB 43 Page 4 meet the 33% RPS by 2020 and establishes reporting requirements for retail sellers of electricity. (399.11 et seq. Public Utilities Code) 6)Federal law provides the Federal Energy Regulatory Commission with authority to regulate the sale of wholesale electricity in interstate commerce. FISCAL EFFECT : Senate Appropriations estimates the following: 1)Ongoing costs of approximately $250,000 from the Public Utilities Reimbursement Account (special fund) for two PYs for program implementation. 2)One-time costs of $150,000 annually for two years from the Public Utilities Reimbursement Account for an administrative law judge for the development of necessary regulations. 3)Unknown costs to the state as a ratepayer for nonparticipant support of the program. COMMENTS : 1)Author's Statement. "While rooftop solar is a strong and growing business in California, at least 75% of households cannot participate because they are renters and don't own their roofs, they do not have strong enough credit, or their roof is too small or doesn't receive enough sunlight. The same is true of most businesses, 70% of whom rent or lease their facilities. Despite their inability to utilize renewable energy, these utility customers continue to pay into solar and renewable programs that fail to benefit them. Additionally, programs (MASH, SASH, Solar Share, etc.) designed to benefit low-income or rental utility customers by providing them the opportunity to utilize renewable energy either have no room for new participants or fail to provide consumers with access to affordable renewable energy. "Moreover, programs set up to offer schools and local governments an avenue to invest in off-site renewable energy have proven uneconomical, with too many barriers preventing projects from penciling out. SB 43 will allow all California households and businesses the ability to voluntarily buy up to 100% renewable power from a shared facility in their utility's territory and receive a credit on their current utility bill. SB 43 is not limited to solar but rather applies to any new renewable facility up to 20MW in size. SB 43 Page 5 "SB 43 establishes a pilot program that allows community renewable energy facilities to sign agreements with utility customers to sell them renewable energy, without shifting the cost to customers who choose not to participate and without spending state money. The pilot program will be capped at 500MW of generation." 2)Similar programs pending approval at the PUC. Two utilities have filed applications for approval of similar programs at the PUC: a) In January 2012 San Diego Gas & Electric (SDG&E) applied to the PUC for approval to administer a community renewables program. This application is pending at the PUC. b) In April 2012 Pacific Gas & Electric applied to the PUC for approval to administer a Green Tariff Program. In April 2013 Sierra Club California, the National Asian American Coalition, the Coalition Of California Utility Employees, Pacific Gas & Electric Company, the Black Economic Council, the Latino Business Chamber of Greater L.A., the California Clean Energy Committee, and The Utility Reform Network (TURN) reached a settlement on the PG&E application. The settlement would provide for a 250 MW program that would procure power from new renewable facilities and provide 100% renewable power to customers who voluntarily elect to participate. The amounts paid by the customers would be the actual cost of the new renewable generation. Customers who do not elect to participate would pay no costs for this program. It is unclear if it is the intent of the author to: add the 500 MW program specified in SB 43 to the combined 350 MW programs pending at the PUC terminate the pending applications at the PUC merge the provisions of SB 43 with the applications pending at the PUC The author may wish to modify SB 43 so that the program design in SB 43 is similar to the settlement reached in the PG&E Green Tariff application. This approach would maintain the goal of SB 43 to reach those customers who would like to receive electricity from renewable sources but are SB 43 Page 6 unable to participate in existing programs. Provisions made for the City of Davis, market the program to low-income and minority communities and customers, and fulfilling municipal data requests in SB 43 can be included in the amendments. 1)Cost shift. The term "cost shift" refers to when a ratepayer funded program relies on nonparticipating utility customer to pay for programs that meet the needs of a subset of all utility customers. This bill includes a provision where an IOU must purchase all electricity produced by a seller if the seller has not found a willing customer to purchase that electricity. This provision mandates an electric utility to purchase the power whether it does or does not need the power and specifies that the payment for that power be at the same rate as the "default aggregation load point plus the value of any renewable energy credits." The PUC has mandated that IOUs enter procure sufficient power to meet 115% of projected electricity demand. In addition, IOUs are mandated to procure electricity to meet the requirements of the schedule set forth in the Renewable Portfolio Standard. The cost of electricity purchases are passed through to all ratepayers. The mandate to purchase the unallocated generation from the community renewable facilities represents a cost shift to nonparticipating ratepayers. 2)Securities Law Exemption. SB 43 includes an exemption from California Corporation Code that, according to the author, eliminates the need for costly securities permitting for entities that sell or trade rights to bill credits or interests while retaining consumer protections available under the anti-fraud provisions of the Securities Law. However, this exemption also excludes sellers from important protections before entering into an arrangement to purchase bill credits or interests, specifically the requirement in the Corporation Code that would ensure that a purchaser is qualified to purchase bill credits or interests, or if the seller is qualified specifically: This exemption does not provide protections that would determine whether the entity or individual has the net worth to enter into such an agreement or has received information SB 43 Page 7 indicating the name, suitability of the seller, the financial stability of the seller, disposition of the shares, whether any relevant judgments have been against the seller or its officers or directors, and other provisions to protect purchasers from inappropriate risks. 3)Unclear Language in the Bill. Several parts of the bill do not appear to clearly state the intent of the author while parts of bill appear to be in conflict with each other. Several examples are: a) Default Load Aggregation Point Price. In the definition section of SB 43 it defines the default aggregation load point price as a commission-determined day-ahead price for electricity. This value is to be used later in SB 43 as one of the components in a mandatory price for a generation that must be purchased by an electrical corporation from the facility developer in the event that the developer has not been able to sell all of a facility's generation to subscribers. The day-ahead market varies (on a daily basis) based on near term forecasts for electricity demand and supplies of electricity available to meet that demand. The day-ahead market for electrical corporations affected by SB 43 is administered by the California Independent System Operator. It is not likely that the author intends for the PUC to determine daily day-ahead prices for electricity. b) Allocation of costs. In Section 2833(j)(2)(A) the bill states that the commission shall determine the appropriate method of allocation costs to implement the program. In 2833(j)(2)(B) the bill states that the participating customers shall pay the administrative costs. It is unclear if paragraph (A) what is meant by the PUC determining the method of allocating costs and how the commission is to use this together with paragraph (B). c) Maximum Program cap. In Section 2833(d) SB 43 specifies a pilot program cap of 500 MW for an 18 month period ending SB 43 Page 8 July 1, 2016. Elsewhere the bill sunsets the program on January 1, 2019. As written it is unclear if this bill is intended to allow the PUC to increase the program cap on its own accord (assuming the 500 MW pilot is fully allocated by July 1, 2016 or if the author intends that the Legislature increase the cap. According to the author it is the intent that the cap be 500 MW unless the Legislature increases the cap. d) All otherwise applicable charges. SB 43 allows a bill credit that can be used against the generation portion of the participant's utility bill. Implied in this is that the participant would remit for all charges that are not generation. However, since most charges are based on the amount of electricity delivered (called volumetric charges) it is not clear, as drafted, whether the author intends for those volumetric charges to be calculated before or after the bill credit is applied. According to the author, in order to ensure that there are no costs shifted to nonparticipating ratepayers as a result of this program, the intent is for the volumetric charges to be calculated before the bill credit is applied to ensure that participants are responsible for all otherwise applicable charges. e) Relationship to Net Metered Tariffs. As drafted, this bill allows a bundled customer of an IOU to participate in this program. It is unclear whether a customer who is on a net metering (NEM) tariff would be billed for costs and charges assessed through participation in this program that the NEM statute exempts that customer from paying. f) Excess generation from a NEM facility. It is unclear if excess generation from a facility on a NEM tariff is allowed to be sold through this program. As this scenario is currently not contemplated by this program, consideration for such an arrangement should only be considered if proposed by separate legislation. g) Minimum facility size. As drafted this bill would limit facilities to no larger than 20 MW, except in specified circumstances facilities are limited to 1 MW. This bill does not establish a minimum facility size. SB 43 Page 9 1)Related Legislation. SB 383 (Wolk, 2011), bill was amended to address a subject unrelated to community renewables. SB 843 (Wolk, 2012), died in Assembly. AB 1014 (Williams, 2013), held in Senate Rules AB 1295 (Hernández, 2013) in Senate Energy, Utilities, and Communications Committee 2)Suggested amendments. The author may wish to consider amendments to eliminate cost shifts to nonparticipating ratepayers, to address the disposition of similar programs pending approval at the PUC, and clarify the program cap. In addition, the author may wish to consider the following amendments to add specific allocations to specified communities and other clarifications as specified: Modify language regarding legislative intent to reinforce that it is the intent of the Legislature that this program will not result in shifting of costs to nonparticipating ratepayers. Revise program to establish a voluntary programs where utilities would procure renewable generation in response to customer who voluntarily elect to participate. The participants would pay for the cost of the program (energy and other costs). Customers who do not elect to participate would pay no costs for this program. Add language regarding treatment of an application by an electrical corporation for a similar program that has already been made to the PUC but is not yet approved. Reserves a minimum of 100 MW for facilities to be located within environmental justice areas and specifies that these facilities be small, 1 MW, and reserved a portion for residential customers. Specifies that no less than 100 MW of this program shall be reserved for residential customers Reserves 20 MW for City of Davis Add language specifying that a participating customer's rates will be credited with any other commission-approved costs or values applicable to the renewable resources contained in this program's portfolio. These additional costs or values will be applied to a new customer when they SB 43 Page 10 initially subscribe. Add language retiring GHG credit values on behalf of the participants Preserve provision allowing utilities to provide municipalities, upon request, data on program generation in their communities, subject to privacy limitations. Strike amendments to Corporations Code and Sections 216, 218, and 365.1 of the Public Utilities Code. Specifically: Strike lines 1 through 8 on Page 2 Strike pages 3-30 Insert: Chapter 7.6 (commencing with Section 2831) is added to Part 2 of Division 1 of the Public Utilities Code, to read: CHAPTER 7.6. Shared Renewable Energy Self-Generation Program The Legislature finds and declares all of the following: (a) The creation of renewable energy within California provides significant financial, health, environmental, and workforce benefits to the State of California. (b) The California Solar Initiative will achieve its goals, resulting in over 150,000 residential and commercial onsite installations of solar energy systems. However, it cannot reach all residents and businesses that want to participate and is limited to solar. A green tariff shared renewable program seeks to build on this success by expanding access to renewable energy resources to all ratepayers who are currently unable to access the benefits of onsite generation. (c) There is widespread interest from many large institutional customers, including schools, colleges, universities, local governments, businesses, and the military, for development of renewable generation facilities to serve more than 33 percent of their energy needs. (d) Public institutions will benefit from a green tariff shared renewable program's enhanced flexibility to participate in shared renewable energy facilities. (e) Renewable generation creates jobs, reduces emissions of greenhouse gases, and promotes energy independence. (f) Many large energy users in California have pursued onsite SB 43 Page 11 renewable energy generation, but cannot achieve their goals due to rooftop or land space limitations, or size limits on net metering. The enactment of this chapter will create a mechanism whereby institutional customers such as military installations, universities, and local governments, as well as commercial customers and groups of individuals, can serve their needs with renewable generation. (g) It is the intent of the Legislature that a green tariff shared renewable program be implemented in such a manner that facilitates a large, sustainable market for offsite renewable generation, while fairly compensating electrical corporations for the services they provide, without affecting nonparticipating ratepayers. (h) It is the further intent of the Legislature that a green tariff shared renewable program be implemented in such a manner that ensures nonparticipating ratepayer indifference for the remaining, bundled service, direct access, and community choice aggregation customers. 2831. (a) On or before March 1, 2014, an electrical corporation with at least 100,000 customers shall file with the commission an application requesting approval of a green tariff shared renewable program that the electrical corporation determines is consistent with the findings specified in Section 2832. (b) On or before July 1, 2014, the commission shall issue a resolution on the electrical corporation's application for a green tariff shared renewable program, determining whether to approve or disapprove it, with or without modifications. (c) After notice and an opportunity for public comment, the commission shall approve an application by an electrical corporation for a green tariff shared renewable program if the commission determines that the program is reasonable and consistent with the findings specified in Section 2832. (d) This chapter shall not apply to electrical corporations that have filed an application for a green tariff shared renewable program at the commission prior May 1, 2013 provided the commission approves the application with a determination that the program does not shift costs to non-participating customers and the application is consistent with this chapter. (e) Notwithstanding (d) the commission may approve an application that, by May 1, 2013, has reached a settlement agreement. The commission shall, within a reasonable time, require revisions to a settlement agreement previously adopted to be consistent with this chapter. SB 43 Page 12 2832. In implementing this chapter, the commission shall require a green tariff shared renewable program to be administered in accordance with this section. (a) Electrical corporations shall use existing commission-approved tools and mechanisms to procure additional renewable energy resources, as defined in Section 399.12, from incremental, additional renewable generation facilities, sized 20 megawatts and below. (b) An electrical corporation shall make the tariff available to customers within the service territory of the electrical corporation until the electrical corporation meets its proportionate share of a statewide cap of 600 megawatts of customer participation. The proportional share shall be calculated based on the ratio of each electrical corporation's retail sales to total retail sales by electrical corporations with at least 100,000 customers. The commission may place other restrictions on the availability of the tariff, such as restricting participation to a certain level of capacity each year. The following restrictions shall apply to the statewide cap: (1) 100 megawatts shall be reserved for facilities located in areas previously identified by the California Environmental Protection Agency as the most impacted and disadvantaged communities. These communities shall be identified as census tracts that are identified within the top 20 percent of results from the best available cumulative impact screening methodology by considering the following categories: (A) Areas disproportionately affected by environmental pollution and other hazards that can lead to negative public health effects, exposure, or environmental degradation. (B) Areas with socioeconomic vulnerability. (2) Of the 100 megawatts reserved pursuant to 2832(b)(1), they shall be allocated as specified: (A) Twenty percent shall be allocated to residential customers. (B) Projects shall be no larger than one megawatt. (2) No less than 100 megawatts shall be reserved to the residential class customers. (3) Twenty megawatts shall be reserved for the City of Davis. (c) To the extent possible, electrical corporations shall seek to procure renewable energy supplies that are located within a reasonable proximity to enrolled participants. (d) Electrical corporations shall ensure that the program supports diverse procurement and General Order 156 goals. SB 43 Page 13 (e) The tariff shall not allow a customer to subscribe to more than 100 percent of the customer's load to the green tariff shared renewable program. (f) The tariff shall not allow a customer to subscribe to more than two megawatts of generating capacity. This limitation does not apply to a federal, state, or local government, school or school district, county office of education, the California Community Colleges, the California State University, or the University of California. Electrical corporations shall ensure that no single entity or its affiliates or subsidiaries is awarded more than 20 percent of any single calendar year's total cumulative rated generating capacity made available pursuant to this program. (j) To the extent possible, the electrical corporation shall actively market the program to low-income and minority communities and customers. (h) Participating customers are to receive bill credits for the generation using the class average retail generation rate as established in the electrical corporation's approved tariff for the class to which the participant belongs plus a renewable adjustment value representing the difference between the time of day profile of the renewable resource used to serve the participant and the class average time of day profile and the resource adequacy value, if any, of the resource contained in this program. (i) Participating customers shall pay a renewable power rate established by the commission, the administrative costs of the electrical corporation, and pay any other charges the commission deems applicable to fully cover the cost of procuring a green tariff shared renewable program's resources to serve their needs. (j) A participating customer's rates shall be debited or credited with any other commission-approved costs or values applicable to the renewable resources contained in this program's portfolio. These additional costs or values shall be applied to new customers when they initially subscribe after the cost or value has been approved by the commission. (k) Participating customers shall pay all otherwise applicable charges without modification. (l) Electrical corporations shall provide support for enhanced community renewable programs to facilitate development of renewable projects close to load. (m) The commission shall ensure that charges and credits associated with this program are set in a manner that ensures nonparticipant ratepayer indifference for the remaining, SB 43 Page 14 bundled service, direct access, and community choice aggregation customers and that no costs are shifted from participating customers to nonparticipating ratepayers. (n) Electrical corporations shall track and account for all revenues and costs to ensure that the electrical corporation recovers the actual costs of the program and that all costs and revenues are fully transparent and auditable. (o) Any renewable energy credits associated with power procured by an electrical corporation for the green tariff shared renewable energy program, and utilized by a green tariff shared renewable energy program participant shall be retired by the electrical corporation on behalf of the participant. Those renewable energy credits shall not be further sold, transferred, or otherwise monetized by a party for any purpose. Any renewable energy credits associated with power procured by an electrical corporation for the green tariff shared renewable energy program, but not utilized by a green tariff shared renewable energy program participant shall be counted toward meeting that electrical corporation's renewables portfolio standard. For the purposes of this subdivision, the terms "renewable energy credit" and "renewables portfolio standard" have the same meanings as defined in Section 399.12. (p) An electrical corporation shall, in the event of participant attrition or related factors, apply the additional resources procured through this program to the electrical corporation's renewable portfolio standard procurement obligations or banked for future use to benefit all customers in accordance with renewable portfolio standard banking and procurement rules. (q) In calculating its procurement requirements to meet the requirements of the California Renewables Portfolio Standard Program (Article 16 (commencing with Section 399.11) of Chapter 2.3 of Part 1), an electrical corporation may exclude from total retail sales the kilowatthours generated by a shared renewable energy facility and credited to a participating customer, commencing with the point in time at which the facility achieves commercial operation. (r) All renewable energy procured on behalf of participants will be compliance with the Air Resources Board Voluntary Renewable Electricity Program. California-eligible greenhouse gas allowances associated with these purchases must be retired on behalf of participants as part of the Air Resources Board Voluntary Renewable Electric Program. (s) Electrical corporations shall provide municipalities with SB 43 Page 15 aggregated consumption data for participants within their jurisdiction to allow for reporting on progress toward climate action goals. Electrical corporations shall also publicly disclose, on a geographic basis, consumption data and greenhouse gas reductions achieved by participants, on an aggregated basis consistent with privacy protections. (t) This chapter shall remain in effect only until January 1, 2019, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2019, deletes or extends that date. REGISTERED SUPPORT / OPPOSITION : Support All Power Labs American Lung Association Black Rock Solar California Apartment Association (CAA) California Environmental Justice Alliance California Interfaith Power and Light California League of Conservation Voters California Native Plant Society (CNPS) California Rural Legal Assistance Foundation Cascade Hydro City of Davis (sponsor) Clean Power Campaign CleanFocus Energy, Inc. Cleanpath Ventures CleanTECH San Diego Coalition for Adequate School Housing (C.A.S.H.) Community Environmental Council (CEC) El Peco Energy, LLC Energy and Financial Consulting LLC Environment California Environmental Health Coalition Imani Energy, Inc. Individuals in Support (14 letters) League of California Cities League of Women Voters of California Los Angeles Business Council (LABC) Mainstream Energy Corp. Natel Energy Inc. Navy Region Southwest SB 43 Page 16 Paula Perotte, Councilmember, City of Goleta Redwood Coast Energy Authority Ritual Coffee Roasters School Energy Coalition (SEC) Sierra Club California Silicon Valley Leadership Group Small Business California Solar Energy Industry Association (SEIA) (if amended) SolarCity Sonoma County Board of Supervisors SPP Energy Partners SunEdison Sungevity Sunible Sunrun TerraVerde Renewable Partners The Vote Solar Initiative (Vote Solar) The Western Center on Law and Poverty Tom Torlakson, State Superintendent of Public Instruction UltraSystems Environmental Yolo County Board of Supervisors Opposition California Farm Bureau Federation Coalition of California Utility Employees Independent Energy Producers (IEP) (unless amended) Pacific Gas and Electric Company (PG&E) San Diego Gas and Electric Company (SDG&E) San Francisco Public Utilities Commission (SFPUC) (unless amended) Southern California Edison (SCE) The Utility Reform Network (TURN) (unless amended) Analysis Prepared by : Susan Kateley / U. & C. / (916) 319-2083