BILL ANALYSIS                                                                                                                                                                                                    

                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 550 (Hertzberg) - Net energy metering
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          |Version: May 4, 2015            |Policy Vote: E., U., & C. 6 - 3 |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 18, 2015      |Consultant: Marie Liu           |
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          This bill meets the criteria for referral to the Suspense File. 

          Summary:  SB 550 would specify the methodology by which  
          publically owned electric utilities (POU) are calculate the cap  
          on net energy metering (NEM) programs. 

           Ongoing annual costs of $111,000 from the Energy Resources  
            Program Account (General Fund) to the CEC to collect and post  
            information from POUs regarding their NEM subscribership.
           Unknown, but potentially minor, costs from the Energy  
            Resources Program Account (General Fund) to the CEC to approve  
            alternative estimation techniques.
           Unknown cost shifts to the General Fund and various special  
            funds to the state as a ratepayer. 

          Background:  Existing law requires that each electric utility offer a NEM  
          program to eligible customer-generators, upon request, on a  


          SB 550 (Hertzberg)                                     Page 1 of  
          first-come, first-served basis until the total rated generating  
          capacity used by eligible customer-generators exceeds five  
          percent of the electric utility's "aggregate customer peak  
          How the "aggregate customer peak demand" is calculated has been  
          the subject of discussion by the California Public Utilities  
          Commission (CPUC) in the past few years. In the past, the three  
          large investor-owned utilities (IOUs) calculated peak demand  
          using various methodologies that all relied on a summation of  
          demand happening in the same period of time to determine  
          aggregate customer peak demand. In 2012, the CPUC adopted a  
          controversial decision that require the IOUs to determine the  
          peak demand as the highest noncoincident demand for electricity  
          for each customer, that is, the sum of the highest demand of  
          electricity for each customer regardless of when that individual  
          peak demand occurred. According to the IOUs, the change in  
          calculation of peak demand effectively increased the NEM cap  
          from 5% to 12% based on the old methodology.

          Proposed Law:  
            This bill would require POUs and other non-IOUs to calculate  
          aggregate customer peak demand as a sum of the highest  
          noncoincident demand for electricity for each customer in its  
          This bill would allow the non-IOUs to determine aggregate  
          customer peak demand using an estimation technique that has been  
          determined to be reasonable by the California Energy Commission.

          The POUs would be required to report quarterly with the CEC  
          detailing its progress toward meeting the program limit. The CEC  
          would be required to post this information on its website.

          Legislation:  AB 327 (Perea) Chapter 611, Statutes of 2013  
          codified the requirement for IOUs to calculate aggregate  
          customer peak demand as a sum of each customer's noncoincident  
          peak demand.


          SB 550 (Hertzberg)                                     Page 2 of  

          Comments:  In order to collect the quarterly information from  
          the POUs and post it on its website, the CEC estimates that it  
          would need one additional position at the Energy Analyst  
          classification for an annual cost of $111,000. 
          This bill allows a POU to elect to use an estimation technique  
          that the Energy Commission has determined to be reasonable. It  
          is not clear how this determination would be made. Should the  
          CEC determine that the reasonable estimation technique is the  
          technique that is currently approved for the IOUs by the CPUC,  
          there would be no additional costs to the CEC. However, if this  
          language is interpreted to allow each POU to propose an  
          estimation technique that has to be reviewed and determined  
          reasonable by the CEC, there could be additional costs to the  
          CEC, possibly in the low hundreds of thousands of dollars for a  
          limited period of time.

          Staff notes that full-retail NEM involves cost shifts to the  
          non-participating customers as the NEM customer is exempt from  
          paying transmission and distribution costs on the electricity  
          provided by the utility. Instead, these costs must be paid by  
          the non-NEM customers. In addition NEM customers are allowed to  
          use excess bill credit to offset their obligation to contribute  
          to public good programs. As those public good programs have  
          fixed costs, non-NEM customers have to make up the difference.  
          It is uncertain how much the new peak demand calculation in this  
          bill will ultimately increase NEM participation in the POUs.  
          However, staff notes that the state is a customer of the POUs,  
          and as a customer, the state may have additional costs to the  
          extent that the state is a non-NEM customer.

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