Amended in Assembly April 20, 2016

Amended in Assembly March 17, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2460

Introduced by Assembly Member Irwin

February 19, 2016

An act to amend Sections 2861, 2863, 2864, 2865, 2866, 2867, and 2867.3 of, to amend and renumber Section 2862 of, to repeal Sections 2860, 2867.1, and 2867.2 of, and to repeal and add Section 2867.4 of, the Public Utilities Code, relating to energy.

LEGISLATIVE COUNSEL’S DIGEST

AB 2460, as amended, Irwin. Solar thermal systems.

The Solar Water Heating and Efficiency Act of 2007, until August 1, 2017, requires the Public Utilities Commission, if it determines that a solar water heating program is cost effective for ratepayers and in the public interest, to implement a program to promote the installation of 200,000 solar water heating systems in homes, businesses, and buildings or facilities of eligible customer classes receiving natural gas service throughout the state by 2017. The act establishes the funding cap for the program, for the collective service territories of all gas corporations, at $250,000,000. The act, until August 1, 2017, requires the governing body of each publicly owned utility providing gas service to retail end-use customers to adopt, implement, and finance a solar water heating system incentive program to encourage the installation of 200,000 solar water heating systems by 2017.

This bill would revise the program to, among other things, promote the installation of solar begin delete water end delete begin insert thermal end insert systems throughout the state, set the funding cap for the program between January 1, 2017, and July 31, 2027, at $1,000,000,000, reserve 50% of the total program budget for the installation of solar begin delete water heating end delete begin insert thermal end insert systems in low-income residential housing or in buildings in disadvantaged communities, and extend the operation of the program through July 31, 2027. Because a violation of any order, decision, rule, direction, demand, or requirement of the commission implementing these revisions would be a crime, this bill would impose a state-mandated local program. The bill would also require the governing body of each publicly owned utility providing gas service, until August 1, 2027, to adopt, implement, and finance a solar begin delete water heating end delete begin insert thermal end insert system incentive program. Because the bill would extend the obligations of a publicly owned electric utility to adopt, implement, and finance the program, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for specified reasons.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 2860 of the Public Utilities Code is
repealed.

SEC. 2.  

Section 2861 of the Public Utilities Code is amended
to read:

2861.  

As used in this article, the following terms have the
following meanings:

(a) “Disadvantaged community” means a community identified
by the California Environmental Protection Agency pursuant to
Section 39711 of the Health and Safety Code.

(b) “Gas customer” includes both “core” and “noncore”
customers, as those terms are used in Chapter 2.2 (commencing
with Section 328) of Part 1, that receive retail end-use gas service
within the service territory of a gas corporation.

(c) “kW_th” or “kilowatts thermal” means the unit of measure of
the equivalent thermal capacity of a solar begin delete water heating end delete begin insert thermal end insert
system that is calculated by multiplying the aperture area of the
solar collector area of the system, expressed in square meters, by
a conversion factor of 0.7.

(d) “kWh_th” means kilowatthours thermal as measured by the
number of kilowatts thermal generated, or displaced, in an hour.

(e) “Low-income residential housing” means either of the
following:

(1) Residential housing financed with low-income housing tax
credits, tax-exempt mortgage revenue bonds, general obligation
bonds, or local, state, or federal loans or grants, and for which the
rents of the occupants who are lower income households, as defined
in Section 50079.5 of the Health and Safety Code, do not exceed
those prescribed by deed restrictions or regulatory agreements
pursuant to the terms of the financing or financial assistance.

(2) A residential complex in which at least 20 percent of the
total units are sold or rented to lower income households, as defined
in Section 50079.5 of the Health and Safety Code, and the housing
units targeted for lower income households are subject to a deed
restriction or affordability covenant with a public entity that ensures
that the units will be available at an affordable housing cost
meeting the requirements of Section 50052.5 of the Health and
Safety Code, or at an affordable rent meeting the requirements of
Section 50053 of the Health and Safety Code, for a period of not
less than 30 years.

(f) “New Solar Homes Partnership” means the 10-year program,
administered by the Energy Commission, encouraging solar energy
systems in new home construction.

(g) “Solar heating collector” means a device that is used to
collect or capture heat from the sun and that is generally, but need
not be, located on a roof.

(h) “Solar begin delete water heating end delete begin insert thermal end insert system” means a solar energy
device that has the primary purpose of reducing demand for natural
gas begin insert or electricity end insert through water heating, space begin delete heating, end delete begin insert heating or
cooling, end insert or other methods of capturing begin insert heat end insert energy from the sun
to reduce natural gas begin insert or electricity end insert consumption in a home,
business, or any building or facility receiving natural gas that is
subject to the surcharge established pursuant to begin insert paragraph (2) of end insert
subdivision (b) of Section 2863, or exempt from the surcharge
pursuant to begin insert paragraph (4) of end insert subdivision begin delete (c) end delete begin insert (b) end insert of Section 2863,
and that meets or exceeds the eligibility criteria established
pursuant to Section 2864. “Solar begin delete water heating end delete begin insert thermal end insert systems”
include multifamily residential, begin insert industrial, end insert governmental,
educational, and nonprofit solar pool heating systems, but do not
include single-family residential solar pool heating systems.

SEC. 3.  

Section 2862 of the Public Utilities Code is amended
and renumbered to read:

2860.  

(a) Legislature finds and declares all of the following:

(1) California is heavily dependent on natural gas.

(2) The storage and delivery of natural gas relies on aging
infrastructure that is prone to leaks that can damage the
environment and imperil public health.

(3) Natural gas is a fossil fuel and a major source of global
warming pollution and the pollutants that cause air pollution,
including smog.

(4) California’s growing population and economy will put a
strain on energy supplies and threaten the ability of the state to
meet its global warming goals unless specific steps are taken to
reduce demand and generate energy cleanly and efficiently.

(5) Water heating for domestic and industrial use relies almost
entirely on natural gas and accounts for a significant percentage
of the state’s natural gas consumption.

(6) Solar begin delete water heating end delete begin insert thermal end insert systems represent the major
untapped natural gas saving potential in California.

(7) In addition to financial and energy savings, solar water
heating systems can help protect against future gas and electricity
shortages and reduce our dependence on foreign sources of energy.

(8) Solar begin delete water heating end delete begin insert thermal end insert systems can also help preserve
the environment and protect public health by reducing air pollution,
including carbon dioxide, a leading global warming gas, and
nitrogen oxide, a precursor to smog.

(9) Growing demand for these technologies will create jobs in
California as well as promote greater energy independence, protect
consumers from rising energy costs, and result in cleaner air.

(10) Installing solar begin delete water heating end delete begin insert thermal end insert systems in
disadvantaged communities can provide local economic benefits
while advancing the state’s clean energy goals and policies to
reduce the emissions of greenhouse gases.

(11) It is in the interest of the State of California to promote
solar begin delete water heating end delete begin insert thermal end insert systems and other technologies that
directly reduce demand for natural gas in homes and businesses.

(b) It is the intent of the Legislature to build a mainstream
market for solar begin delete water heating end delete begin insert thermal end insert systems that directly reduces
demand for natural gas in homes, businesses, schools, begin delete and nonprofit end delete
begin insert industrial end insert and government begin delete buildings. end delete begin insert buildings, and buildings
occup end insert begin insert ied by nonprofit organizations. end insert

(c) It is the intent of the Legislature that the solar begin delete water heating end delete
begin insert thermal end insert system incentives created by this article should begin delete be a end delete begin insert lead
to end insert cost-effective begin delete investment end delete begin insert investments end insert by gas customers. Gas
customers will recoup the cost of begin delete their investment end delete begin insert these investments end insert
through lower energy bills as a result of avoiding purchases of
natural gas.

SEC. 4.  

Section 2863 of the Public Utilities Code is amended
to read:

2863.  

(a) By July 31, 2017, the commission shall do all of the
following:

(1) Implement changes to the program as authorized pursuant
to this section begin insert as it read end insert on December 31, 2016, applicable to the
service territories of a gas corporation to promote the installation
of solar begin delete water heating end delete begin insert thermal end insert systems in homes, businesses, and
buildings or facilities of eligible customer classes receiving natural
gas service throughout the state. Eligible customer classes shall
include single-family and multifamily residential, commercial,
industrial, governmental, nonprofit, and primary, secondary, and
postsecondary educational customers. The commission shall
implement program changes in phases, if necessary, to enable
seamless continuation of the availability of rebates as of January
1, 2017.

(2) The program shall be administered by gas corporations or
third-party administrators, as determined by the commission, and
subject to the supervision of the commission.

(3) The commission shall coordinate the program with the
Energy Commission’s programs and initiatives, including, but not
limited to, the New Solar Homes Partnership, to achieve the goal
of building zero-energy homes.

(b) (1) The commission shall fund the program through the use
of a surcharge applied to gas customers based upon the amount of
natural gas consumed. The surcharge shall be in addition to any
other charges for natural gas sold or transported for consumption
in this state.

(2) Funding for the program established by this article shall not,
for the collective service territories of all gas corporations, exceed
one billion dollars ($1,000,000,000) over the course of the period
from January 1, 2017, to July 31, 2027, inclusive.

(3) Fifty percent of the total program budget shall be reserved
for the installation of solar begin delete water heating end delete begin insert thermal end insert systems in
low-income residential housing or in buildings in disadvantaged
communities. The commission may revise the percentage if the
budget for other types of customers becomes depleted.

begin insert

(4) Ten percent of the total program budget shall be reserved
for the installation of solar thermal systems for industrial
applications. The commisison may revise the percentage if the
budget for other types of customers becomes depleted.

end insert begin delete

(4)

end delete

begin insert (5) end insert  The commission shall annually establish a surcharge rate
for each class of gas customers. Any gas customer participating
in the California Alternate Rates for Energy (CARE) or Family
Electric Rate Assistance (FERA) programs shall be exempt from
paying any surcharge imposed to fund the program designed and
implemented pursuant to this article.

begin delete

(5)

end delete

begin insert (6) end insert  Any surcharge imposed to fund the program designed and
implemented pursuant to this article shall not be imposed upon the
portion of any gas customer’s procurement of natural gas that is
used or employed for a purpose that Section 896 excludes from
being categorized as the consumption of natural gas.

begin delete

(6)

end delete

begin insert (7) end insert  The gas corporation or other person or entity providing
revenue cycle services, as defined in Section 328.1, shall be
responsible for collecting the surcharge.

(c) Funds shall be allocated in the form of customer rebates to
promote utilization of solar begin delete water heating end delete begin insert thermal end insert systems.

(1) On and after January 1, 2017, the rebate amount shall be
consistent with the amount the commission established for the
calendar year 2016 until revised by the commission pursuant to
paragraph (2).

(2) Beginning in 2017, and every two years thereafter, the
commission shall consider revisions to the rebate amount, taking
into account the cost of installing solar begin delete water heating end delete begin insert thermal end insert
systems and the price of natural gas to end-use customers.

(3) The commission shall ensure that a cap on the maximum
rebate amount does not unreasonably impair the ability of industrial
customers to participate in the program.

(d) In designing and implementing the program required by this
article, no moneys shall be diverted from any existing programs
for low-income ratepayers or cost-effective energy efficiency
programs.

SEC. 5.  

Section 2864 of the Public Utilities Code is amended
to read:

2864.  

(a) The commission, in consultation with the Energy
Commission and interested members of the public, shall establish
eligibility criteria for solar begin delete water heating end delete begin insert thermal end insert systems receiving
gas customer funded incentives pursuant to this article. The criteria
should specify and include all of the following:

(1) Design, installation, and energy output or displacement
standards. To be eligible for rebate funding, a residential solar
begin delete water heating end delete begin insert thermal end insert system shall be certified by an accredited
listing agency in accordance with standards adopted by the
commission. Solar collectors used in systems for multifamily
residential, commercial, government, nonprofit, educational, or
industrial begin delete water heating end delete begin insert applications end insert shall be certified by an
accredited listing agency in accordance with standards adopted by
the commission. Energy output of collectors and systems shall be
determined in accordance with procedures set forth by the listing
agency, and shall be based on testing results from accredited testing
laboratories.

(2) A requirement that solar begin delete water heating end delete begin insert thermal end insert system
components are new and unused, and have not previously been
placed in service in any other location or for any other application.

(3) A requirement that solar begin delete water heating end delete begin insert thermal end insert collectors
have a warranty of not less than 10 years to protect against defects
and undue degradation.

(4) A requirement that solar begin delete water heating end delete begin insert thermal end insert systems are
in buildings or facilities connected to a natural gas utility’s
distribution system within the state.

(5) A requirement that solar begin delete water heating end delete begin insert thermal end insert systems have
meters or other kWh_th measuring devices in place to monitor and
measure the system’s performance and the quantity of energy
generated or displaced by the system. The cost of monitoring the
system shall not exceed 2 percent of the system cost.

(6) A requirement that solar begin delete water heating end delete begin insert thermal end insert systems are
installed in conformity with the manufacturer’s specifications and
all applicable codes and standards.

(b) Gas customer funded incentives shall not be made for a solar
begin delete water heating end delete begin insert thermal end insert system that does not meet the eligibility
criteria.

(c) The commission may adopt consensus solar standards
applicable to products or systems as developed by accredited
standards developers.

SEC. 6.  

Section 2865 of the Public Utilities Code is amended
to read:

2865.  

(a) The commission shall establish conditions on gas
customer funded incentives pursuant to this article. The conditions
shall require both of the following:

(1) Appropriate siting and high-quality installation of the solar
begin delete water heating end delete begin insert thermal end insert system based on installation guidelines that
maximize the performance of the system and prevent qualified
systems from being inefficiently or inappropriately installed. The
conditions shall not impact housing designs or densities presently
authorized by a city, county, or city and county. The goal of this
paragraph is to achieve efficient installation of solar begin delete water heating end delete
begin insert thermal end insert systems and promote the greatest energy production or
displacement per gas customer dollar.

(2) Appropriate energy efficiency improvements in the new or
existing home or facility where the solar begin delete water heating end delete begin insert thermal end insert
system is installed.

(b) The commission shall set rating standards for equipment,
components, and systems to ensure reasonable performance and
shall develop procedures that provide for compliance with the
minimum ratings.

SEC. 7.  

Section 2866 of the Public Utilities Code is amended
to read:

2866.  

(a) The commission may establish a grant program or
a revolving loan or loan guarantee program for low-income
residential housing consistent with the requirements of Chapter
5.3 (commencing with Section 25425) of Division 15 of the Public
Resources Code. Notwithstanding Section 2867.4, all loans
outstanding as of August 1, 2027, shall continue to be repaid in a
manner that is consistent with the terms and conditions of the
program adopted and implemented by the commission pursuant
to this subdivision, until repaid in full.

(b) The commission may extend eligibility for funding pursuant
to this section to include residential housing occupied by ratepayers
participating in a commission approved and supervised gas
corporation Low-Income Energy Efficiency (LIEE) program and
who either:

(1) Occupy a single-family home.

(2) Occupy at least 50 percent of all units in a multifamily
dwelling structure.

(c) The commission shall ensure that lower income households,
as defined in Section 50079.5 of the Health and Safety Code, and,
if the commission expands the program pursuant to subdivision
(b), ratepayers participating in a LIEE program, that receive gas
service at residential housing with a solar begin delete water heating end delete begin insert thermal end insert
system receiving incentives pursuant to subdivision begin delete (a), end delete begin insert (a) end insert benefit
from the installation of the solar begin delete water heating end delete begin insert thermal end insert systems
through reduced or lowered energy costs.

(d) The commission shall do all of the following to implement
the requirements of this section:

(1) Maximize incentives to properties that are committed to
continuously serving the needs of lower income households, as
defined in Section 50079.5 of the Health and Safety Code, and, if
the commission expands the program pursuant to subdivision (b),
ratepayers participating in a LIEE program.

(2) Establish conditions on the installation of solar begin delete water heating end delete
begin insert thermal end insert systems that ensure properties on which solar begin delete water heating end delete
begin insert thermal end insert systems are installed under subdivision (a) remain
low-income residential properties for at least 10 years from the
time of installation, including property ownership restrictions and
income rental protections, and appropriate enforcement of these
conditions.

SEC. 8.  

Section 2867 of the Public Utilities Code is amended
to read:

2867.  

(a) Consistent with subdivision (c) of Section 2863, the
commission shall consider reductions over time in rebates provided
through the program. The rebate shall be structured so as to drive
down the cost of the solar begin delete water heating end delete begin insert thermal end insert technologies, and
be paid out on a performance-based incentive basis so that
incentives are earned based on the actual energy savings, or on
predicted energy savings as established by the commission.

(b) The commission shall consider federal tax credits and other
incentives available for this technology when determining the
appropriate rebate amount.

(c) The commission shall consider the impact of rebates for
solar begin delete water heating end delete begin insert thermal end insert systems pursuant to this article on
existing incentive programs for energy efficiency technology.

(d) In coordination with the commission, the Energy
Commission shall consider, when appropriate, coupling rebates
for solar begin delete water heating end delete begin insert thermal end insert systems with complementary energy
efficiency technologies, including, but not limited to, efficient hot
water heating tanks and tankless or on demand hot water systems
that can be installed in addition to the solar begin delete water heating end delete begin insert thermal end insert
system.

SEC. 9.  

Section 2867.1 of the Public Utilities Code is repealed.

SEC. 10.  

Section 2867.2 of the Public Utilities Code is
repealed.

SEC. 11.  

Section 2867.3 of the Public Utilities Code is
amended to read:

2867.3.  

The governing body of each publicly owned utility
providing gas service to retail end-use gas customers shall, after
a public proceeding, adopt, implement, and finance a solar begin delete water
heating end delete begin insert thermal end insert system incentive program that does all the
following:

(a) Ensures that any solar begin delete water heating end delete begin insert thermal end insert system
receiving monetary incentives complies with eligibility criteria
adopted by the governing body. The eligibility criteria shall include
those elements contained in paragraphs (1) to (6), inclusive, of
subdivision (a) of Section 2864.

(b) Includes minimum ratings and standards for equipment,
components, and systems to ensure reasonable performance and
compliance with the minimum ratings and standards.

(c) Includes an element that addresses the installation of solar
begin delete water heating end delete begin insert thermal end insert systems on low-income residential housing.
If deemed appropriate in consultation with the California Tax
Credit Allocation Committee, the governing board may establish
a grant program or a revolving loan or loan guarantee program for
low-income residential housing consistent with the requirements
of Chapter 5.3 (commencing with Section 25425) of Division 15
of the Public Resources Code.

SEC. 12.  

Section 2867.4 of the Public Utilities Code is
repealed.

SEC. 13.  

Section 2867.4 is added to the Public Utilities Code,
to read:

2867.4.  

This article shall become inoperative on August 1,
2027, and, as of January 1, 2028, is repealed, unless a later enacted
statute, that becomes operative on or before January 1, 2028,
deletes or extends the dates on which it becomes inoperative and
is repealed.

SEC. 14.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
a local agency or school district has the authority to levy service
charges, fees, or assessments sufficient to pay for the program or
level of service mandated by this act or because costs that may be
incurred by a local agency or school district will be incurred
because this act creates a new crime or infraction, eliminates a
crime or infraction, or changes the penalty for a crime or infraction,
within the meaning of Section 17556 of the Government Code, or
changes the definition of a crime within the meaning of Section 6
of Article XIII B of the California Constitution.