Amended in Senate June 14, 2016

Amended in Assembly May 31, 2016

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 maximum funding 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 thermal systems throughout the state, set the maximum funding for the program between January 1, 2017, and July 31, 2022, at $250,000,000, reserve 50% of the total program budget for the installation of solar thermal systems in low-income residential housing or in buildings in disadvantaged communities, and extend the operation of the program through July 31, 2022. 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, 2022, to adopt, implement, and finance a solar thermal 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 thermal 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 begin delete sold or end delete 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 begin insert already, at the time
of the funding commitment pursuant to this article, end insert 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 begin delete Code, for a period of
not less than 30 years. end delete begin insert Code. end insert

(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 thermal system” means a solar energy device that
has the primary purpose of reducing demand for natural gas or
electricity through water heating, space heating or cooling, or other
methods of capturing heat energy from the sun to reduce natural
gas or electricity consumption in a home, business, or any building
or facility receiving natural gas that is subject to the surcharge
established pursuant to paragraph (2) of subdivision (b) of Section
2863, or exempt from the surcharge pursuant to paragraph (4) of
subdivision (b) of Section 2863, and that meets or exceeds the
eligibility criteria established pursuant to Section 2864. “Solar
thermal systems” include multifamily residential, industrial,
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) The 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 thermal 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 thermal 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 thermal 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 thermal 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 thermal systems that directly reduces demand for
natural gas in homes, businesses, schools, industrial and
government buildings, and buildings occupied by nonprofit
organizations.

(c) It is the intent of the Legislature that the solar thermal system
incentives created by this article should lead to cost-effective
investments by gas customers. Gas customers will recoup the cost
of these investments 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 as it read on December 31, 2016, applicable to the
service territories of a gas corporation to promote the installation
of solar thermal 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
two hundred fifty million dollars ($250,000,000) over the course
of the period from January 1, 2017, to July 31, 2022, inclusive.

(3) Fifty percent of the total program budget shall be reserved
for the installation of solar thermal 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.

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

(5) 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.

(6) 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.

(7) 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 thermal 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 thermal 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 thermal 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
thermal 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 applications 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 thermal 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 thermal collectors have a warranty
of not less than 10 years to protect against defects and undue
degradation.

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

(5)  begin insert (A) end insert begin insert   end insert A requirement that solar thermal 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. begin delete The cost of monitoring the system shall
not exceed 2 percent of the system cost. end delete

begin insert

(B) The commission shall exempt from this requirement system
types for which the cost of monitoring a system is likely to exceed
2 percent of the system cost. After a public stakeholder process,
the commission may adjust this percentage to ensure reasonable
balance between customer cost and value received, taking into
account factors including, but not limited to, customer class, system
type, system size, or changes in the market.

end insert

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

begin insert

(7) A requirement that, when the property is not owner-occupied,
the tenant shall not contract for the installation of a solar thermal
system. The tenant may request that the owner participate in such
a program.

end insert

(b) Gas customer funded incentives shall not be made for a solar
thermal 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
thermal 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 thermal 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 thermal 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, 2022, 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 begin insert and paragraph (3) of subdivision (b) of Section 2863 end insert
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 thermal system receiving
incentives pursuant to subdivision (a) benefit from the installation
of the solar thermal 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 thermal
systems that ensure properties on which solar thermal 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 thermal 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 thermal 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 thermal 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 thermal 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 thermal
system incentive program that does all the following:

(a) Ensures that any solar thermal 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
thermal 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,
2022, and, as of January 1, 2023, is repealed, unless a later enacted
statute, that becomes operative on or before January 1, 2023,
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.