BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 693 Hearing Date: 7/13/2015
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|Author: |Eggman |
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|Version: |6/16/2015 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Multifamily Affordable Housing Renewables Program
DIGEST: This bill would create the Multifamily Affordable
Housing Renewables Program, to provide financial incentives for
qualified renewable energy installations at multifamily
affordable housing properties funded from investor-owned
utility's greenhouse gas allowances.
ANALYSIS:
Existing law:
1)Establishes the California Public Utilities Commission (CPUC)
and empowers it to regulate privately-owned public utilities
in California. Specifies that the Legislature may prescribe
that additional classes of private corporations or other
persons are public utilities. (Article XII of the California
Constitution; Public Utilities Code §301 et seq.)
2)Provides the CPUC regulatory authority over public utilities,
including electrical corporations and gas corporations, as
defined. Authorizes the CPUC to fix the rates and charges for
every public utility, and requires that those rates and
charges be just and reasonable. (Public Utilities Code §§218
and 222)
3)Requires the California Air Resources Board (ARB), pursuant to
the California Global Warming Solutions Act of 2006, to adopt
rules and regulations, and consider the use of market-based
AB 693 (Eggman) Page 2 of ?
compliance mechanisms, that would reduce greenhouse gas (GHG)
emissions in the state to 1990 levels by 2020. (Health and
Safety Code §§38500 to 38599)
4)Requires the CPUC, except as provided, to require all
revenues, including accrued interest, received by an
electrical corporation as a result of the direct allocation of
GHG allowances to electric utilities to be credited directly
to the residential, small business, and emissions-intensive
trade-exposed retail customers of the electrical corporation.
(Public Utilities Code §748.5)
5)Authorize the CPUC to allocate 15 percent of these revenues
for clean energy and energy efficiency projects established
pursuant to statute that are administered by the electrical
corporation and that are not otherwise funded by another
funding source. (Public Utilities Code §748.5)
6)Requires CPUC to establish a program for assistance to
low-income electric and gas customers, referred to as the
California Alternate Rates for Energy (CARE) program. (Public
Utilities Code §739.1)
7)Creates the California Solar Initiative (CSI) with a goal to
install solar energy systems with a generation capacity of
3,000 megawatts (MWs), to make solar energy systems a viable
mainstream option for both homes and businesses in 10 years,
and to place solar energy systems on 50 percent of new homes
in 13 years. Specifies no less than 10 percent of the overall
CSI funding is to be directed toward programs assisting
low-income households in obtaining the benefits of solar
technology. (Public Utilities Code §2852)
8)Permits the CPUC to adopt decisions that established the
Single-Family Affordable Solar Homes Program (SASH) and the
Multifamily Affordable Solar Housing Program (MASH), which
provide monetary incentives for the installation of solar
energy systems on low-income residential housing. (Public
Utilities Code §2852)
9)Extends the SASH and MASH programs until December 31, 2021, or
until budgeted funds are exhausted, whichever occurs sooner.
(Public Utilities Code §2851)
10)Establishes the Energy Efficiency Low-Income Weatherization
Program in the Department of Community Services and
AB 693 (Eggman) Page 3 of ?
Development (CSD) from the appropriation of GHG emissions
reductions allowances from non-utility funds. The program
provides for weatherization and renewable energy installations
in disadvantaged communities defined the California
Environmental Protection Agency. (Government Code §12087.5)
This bill:
1)Requires the CPUC to authorize $100 million annually from the
investor-owned utilities' (IOUs) cap-and-trade allowance
revenues to fund a financial assistance program for qualifying
renewable energy systems on low-income multifamily properties,
as defined.
2)Establishes a target of installing 300 MWs of renewable energy
systems on multifamily affordable housing properties by 2030.
3)Requires that qualified multifamily affordable housing
properties are a multifamily residential complex of at least
five rental housing units that is low-income residential
housing.
4)Requires the funding for the program to be appropriated
annually beginning with the fiscal year commencing July 1,
2016 through the fiscal year commencing July 1, 2025.
5)Requires the program to be administered by a qualified third
party selected by the CPUC through a competitive bidding
system, with not more than 10 percent of the funds to be used
for administration.
6)Requires that systems installed under the incentive program be
primarily used to offset electrical usage by low-income
tenants.
7)Requires that low-income customers participating in the
program receive utility bill offsets through virtual net
metering tariffs (VNM).
8)Requires the CPUC to submit an annual assessment of the
program to the Legislature by July 30 of each year, beginning
in 2018.
Background
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IOUs' GHG allowance revenues. With the passage of the Global
Warming Solutions Act of 2006, the ARB has implemented
regulations to achieve the goal of reducing GHG emissions to
1990 levels by 2020. Under the GHG Cap-and-Trade Regulation,
ARB allocates GHG emissions allowances to capped sectors,
including electric IOUs. ARB requires IOUs to sell these
allowances at ARB's quarterly allowance auctions, and requires
that all proceeds be used for ratepayer benefit, subject to CPUC
oversight.
In 2012, the Legislature adopted budget trailer language in SB
1018, which further restricted the CPUC's discretion related to
the use of the funds. Specifically, SB 1018, requires that
revenues from the GHG allowances be credited back to
residential, small business and emissions-intensive
trade-exposed businesses (businesses that are most at risk for
moving their activities out of California because they aren't
able to pass the costs on). Under CPUC Decision 12-12-033, the
CPUC allows the three large electric utilities to allocate
allowance proceeds to temporarily offset GHG costs from
residential rates. As such, all remaining funds, less any
proceeds used for approved clean energy and energy efficiency
projects, are distributed to residential customers as the
California Climate Credit. Each utility calculates the
semi-annual residential California Climate Credit by dividing
the total amount of revenues forecast to be available for the
Climate Credit by the number of eligible households (and then
dividing by two because the credit is distributed twice a year).
Since residential customers are the last to be compensated, the
amount of revenue they received is reduced when clean energy and
energy efficiency projects are funded with these funds. Among
the three largest IOUs in the state, the semi-annual climate
credit is roughly $26-40 per ratepayer, depending on the
utility.
By appropriating $100 million annually from the roughly $1
billion in annual allowance revenues, AB 693 will reduce the
funding available, by about 10 percent, for the climate credit
and other clean energy and energy efficiency projects.
Currently, San Diego Gas and Electric has submitted an
application to the CPUC to fund its proposed 22 year, $100
million electric vehicle charging pilot program with allowance
proceeds. Additionally, individual climate credits could be
reduced from nine to 20 percent, or roughly $2-6 less per $30
semi-annual credit.
AB 693 (Eggman) Page 5 of ?
Virtual Net Energy Metering (VMN). VNM is an arrangement of
rates and terms that enables a multi-meter property owner to
allocate a solar system's energy credits to other tenants.
Historically, multi-tenant building with individual electric
meters for each tenant faced difficulties installing distributed
solar systems because of the problem of assigning the benefits
of the generation to each occupant. A system could easily be
connected to a common area load or to an individual tenant, but
if it was connected directly to multiple loads, there would be
no way of ensuring equitable distribution of the generation.
Some tenants would benefit more than others. Installing
multiple systems, one for each tenant or load in the building,
is cost prohibitive. However, VNM allows participants to
install a single solar system to cover the electricity load of
both common and tenant areas connected at the same service
delivery point. The electricity does not flow directly to any
tenant meter, but rather it feeds directly back onto the grid.
The participating utility then allocates the kilowatt hours from
the energy produced by the solar photovoltaic generating system
to both the building owner's and tenants' individual utility
accounts, based on a pre-arranged allocation agreement. The
intent of VNM is to help low-income multifamily residents
receive direct benefits of the building's solar system, rather
than all of the benefits going to the building owner.
Net Energy Metering (NEM) 2.0. The NEM program supports onsite
solar installations up to 1 MW designed to offset a portion, or
all, of the customer's electric load. A 2013 report by the CPUC
on the costs and benefits of the NEM program suggested that NEM
generation resulted in a net cost to ratepayers. However, the
report also noted that the costs of NEM are largely a function
of retail rates designs. With the passage of AB 327 (Perea,
Chapter 611, Statutes of 2013) the CPUC is undergoing rate
reform of utilities, as well as, a new proceeding to reform the
NEM program with the intent to better level the playing field
between participants and non-participants. By encouraging the
installation of renewable energy technologies and therefore
increasing the number of customers enrolled in NEM, AB 693 has
the potential to impact non-participant ratepayers.
More of the same? There are existing programs that provide
solar and weatherization services to low-income residents.
Specifically the SASH and the MASH programs, and the Low-income
Weatherization program at the CSD.
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The Low-Income Weatherization program is funded from the state's
Greenhouse Gas Reductions Fund (GGRF), with $25 million from the
2014-15 budget directed to renewable energy projects for
low-income residents in disadvantaged communities. The budget
directed $75 million to the CSD for weatherization and renewable
projects working with their network of local organizations and
government agencies. The Legislature has not taken action on
the 2015-16 GGRF budget, however, the governor has proposed more
funding for this program.
The passage of the CSI, capped program spending to reach one
million solar roofs to $2.5 billion of ratepayer funds over a 10
year period for solar incentives with some funding available for
projects for low-income residents. In 2007, in response to
legislation, the CPUC issued a decision which established $108
million SASH incentive program for low-income homeowners. In
October 2009, the CPUC established a $108 million MASH incentive
program for affordable housing developments. In 2013, the
Legislature extended the programs to 2021 and authorized $108
million in new funding for both programs. MASH currently has a
wait list of projects and is closed to new applicants, pending
approval of the updated MASH program details.
Benefitting tenants. The current programs provide the greatest
incentives to property owners in order to incentivize their
participation in installing a solar energy project. While those
efforts are working at getting solar to more low-income
residents who live in single-family homes, the proponents for AB
693 argue that tenants of affordable housing units have largely
not benefitted. With the required use of VNM, AB 693 is
intended to help tenants realize the benefits of renewable
energy installations. AB 693 proposes to use many of the MASH
elements, including utilizing VNM to provide tenants with
financial incentives on their utilities bills. The MASH program
provides for two approaches with VNM, one for individual metered
properties where each rental property has its own meter and one
for master-metered, such as mobile home parks. Unlike MASH, AB
693 would make the affordable housing installs exclusively
available to individual metered properties.
Administration. AB 693 requires the use of a third-party
administrator to implement the program. The utilities have
raised concerns with this approach, stating that they can
provide the service more cost-effectively and with greater
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knowledge of their respective customers. However, the author
and sponsors have raised concerns with having the utilities
administer a statewide program and their belief that a
third-party administrator will be more cost-effective and
effective.
A 10-year commitment. AB 693 commits $1 billion in funding over
10 years, regardless if the program was working or not. As this
bill's approach to more directly benefit tenants is new, it is
warranted that the program be assessed and adjusted sooner. The
author and committee may wish to amend this bill to provide for
a more near-term review and assessment by the CPUC to provide
for adjustments, as needed.
In order to clarify low-income eligibility, the author and
committee may wish to amend this bill to clarify the low-income
definition for eligibility and remove reference to the CARE
program where it is not needed.
Prior/Related Legislation
SB 862 (Chapter 36, Statutes of 2014) Committee on Budget: GHG
emission reduction. Appropriates funding from the sale of GHG
emissions allowances, including establishing a low-income
weatherization and renewable energy program at the CSD.
AB 217 (Bradford/De León, Chapter 609, Statutes of 2013)
extended the low-income programs of the CSI from 2016 until
2021, authorizes the collection of an additional $108 million
for these programs, and adds additional standards to the
program, as specified.
SB 1 (Murray, Chapter 132, Statutes of 2006) established the
electric portion of the CSI with a 10-year budget of $2.2
billion collected from ratepayers.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
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ASSEMBLY VOTES:
Assembly Floor (79-0)
Assembly Business and Professions Committee (14-0)
SUPPORT:
California Solar Energy Industries Association (source)
Justice Alliance (source)
California's Multifamily Affordable Solar Homes Coalition
Center Coast Alliance United for a Sustainable Economy
Center for Community Action and Environmental Justice
Center on Race, Poverty & the Environment
Communities for a Better Environment
Community Advancement
Environment California
Everyday Energy
Pacoima Beautiful
SolarCity
Union of Concerned Scientists
Vote Solar
OPPOSITION:
CalTax
ARGUMENTS IN SUPPORT: According to the sponsors, the program
goal is to create a million solar renters and provide direct
economic benefits to tenants. Low-income renters have largely
been bypassed by the growth of solar in California's residential
markets because of split incentive barriers. Solar CARE will
demonstrate that solar investments to underserved low-income
markets can be made while providing an equivalent ratepayer
benefit through reductions in CARE outlays.
ARGUMENTS IN OPPOSITION: CalTax states it is opposed to this
bill because "it distorts the nature of a regulatory fee."
CalTax further states: "Pending litigation will determine if
the auction component of the cap-and-trade program constitutes
an illegal tax."
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