BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 550 (Hertzberg) - Net energy metering ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 4, 2015 |Policy Vote: E., U., & C. 6 - 3 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 550 would specify the methodology by which publically owned electric utilities (POU) are calculate the cap on net energy metering (NEM) programs. Fiscal Impact: 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 demand." 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 jurisdiction. 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. Related 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 ? Staff 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. -- END --