BILL ANALYSIS Ó SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS Senator Ben Hueso, Chair 2015 - 2016 Regular Bill No: SB 793 Hearing Date: 4/21/2015 ----------------------------------------------------------------- |Author: |Wolk | |-----------+-----------------------------------------------------| |Version: |2/27/2015 As Introduced | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Jay Dickenson | | | | ----------------------------------------------------------------- SUBJECT: Green Tariff Shared Renewables Program DIGEST: This bill requires an investor-owned utility (IOU) that offers a Green Tariff Shared Renewables (GTSR) Program to permit a participating customer to subscribe to the program and receive a predictable bill credit and bill charge for a period of up to 20 years. The bill also deletes a January 2019 program sunset. ANALYSIS: Existing law: 1. Requires the electrical IOUs to permit customers to subscribe to the GTSR Program until there is statewide 600 megawatts (MW) of customer participation, with each utility responsible for its proportionate share of GTSR participation. Statute also sets aside the following GTSR Program components: (a) 100 MW for facilities 1 MW or less located in areas identified by the California Environmental Protection Agency (CalEPA) as the most impacted and disadvantaged communities; (b) 100 MW for residential customers; and (c) 20 MW for the City of Davis. Statute declares the intent of the Legislature that implementation of the GTSR Program not affect nonparticipating ratepayers. Statue further requires the California Public Utilities Commission (CPUC), by July 1, 2014, to issue a decision to approve or disapprove each IOU's GTSR Program, with or without modification. (Public Utilities Code §2831 et seq.) The California Constitution grants CPUC authority to fix SB 793 (Wolk) PageB of? rates charged by public utilities under its jurisdiction. (Article XII, Section 6, California Constitution.) 2. Requires retail sellers of electricity - investor-owned utilities (IOU), community choice aggregators (CCAs), and energy service providers (ESPs) - and publicly-owned utilities (POU) to increase purchases of renewable energy such that at least 33 percent of retail sales are procured from renewable energy resources by December 31, 2020. This is known as the Renewable Portfolio Standard (RPS). (Public Utilities Code §399.11 et seq.) This bill requires an IOU to allow a customer participating in its GTSR Program to subscribe to the program and receive a predictable bill credit and bill charge for a period of up to 20 years. Background Growing Demand for Access to Renewable Energy . Distributed electricity generation is not for everyone. For example, not every home or business can install solar panels on its roof, for a variety of reasons - structural limitations, directional alignment and ownership limitations, to name a few. Yet, as the state's distributed generation incentives - such as the California Solar Initiative (CSI) - led to increasing installation of renewable energy resources in the close of last decade, interest in expanding access to renewable resources grew. By 2012, the state's largest electrical IOUs -Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E) - had proposed to offer their customers "green" options that would provide greater access to renewable energy. Many individuals and organizations supported the proposal that "green" energy become more available to IOU customers. Several parties, however, expressed criticisms and concerns with the IOU proposals while they were under consideration at the CPUC. SB 43 and the Green Tariff Shared Renewables Program . In 2013, the Legislature approved a bill - SB 43 (Wolk) - that requires the IOUs to allow customers to subscribe to a GTSR Program, which was to expand access to renewable energy resources to all SB 793 (Wolk) PageC of? ratepayers who are unable to access the benefits of onsite generation. The IOUs were to implement the 600 MW program proportionately. The bill also set aside portions of the program for specific customer classes, including disadvantaged communities, residential customers and the City of Davis, which had operated a community solar pilot project prior to introduction of SB 43. The bill codified numerous findings and statements of intent. Among those statements was that IOU ratepayers not participating in the GTSR Program be unaffected by implementation of the program. The bill directs the IOUs each to submit a GTSR Program plan to the CPUC. The bill requires the CPUC, by July 1, 2014, to issue a decision to approve each of the plans if it determines the plan is reasonable and meets the bill's declarations and statements of intent. The bill also gives the CPUC the power to modify the IOUs' GTSR Program plans. CPUC Proposes GTSR Program Plan Decision - Limits Contracts to One Year . On January 29 of this year, the CPUC released a decision to approve the GTSR Program plans.<1> The CPUC decision, in interpreting the bill, understands the bill to require implementation of two, distinct programs: (a) a green tariff (Green Tariff) option, in which customers may purchase energy with a greater share of renewables, and (b) an enhanced community renewables (ECR) option, which allows customers to purchase renewable energy from community-based projects. Among the decision's provisions was a discussion of customer subscription terms for both components of the GTSR Program. As described in the decision, the IOUs had submitted plans that offered various subscription terms. SDG&E had proposed that customers be able to participate with a one-year minimum commitment or with long-term commitments of two, three, five or 10 years. PG&E proposed customers commit to a one-year contract, moving to month-to-month participation thereafter. SCE, in contrast, proposed month-to-month participation. The CPUC's proposed decision, in discussing the IOUs' proposals, --------------------------- <1> A.12-01-008 et al (http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M145/K819/1 45819809.PDF). SB 793 (Wolk) PageD of? declared a number of benefits to one-year GTSR Program contracts. First, the CPUC opined, one-year contracts provide the IOUs some certainty around program participation in the coming year. Second, the CPUC continued, a one-year commitment was long enough to allow participants to test the program without being locked in to the program for a longer duration. The proposed decisions also offered a number of drawbacks to longer-term contracts, such as those proposed by SDG&E, calling such contract terms "not viable." As support for its position, CPUC noted that program rates would automatically adjust to match changes in commodity prices; therefore, long-term contracts provided no value as a hedge against future cost increases. In the end, the proposed decision requires GTSR Program (both Green Tariff and ECR) subscription terms of one year. Bill Requires Terms, and Predictable Credits, for Up to Twenty Years . As described above, this bill requires the IOUs to offer GTSR Program subscription of 20 years duration. The bill also requires the subscriber to receive a predictable bill credit and bill charge for a period of up to 20 years. SB 43 requires customers participating in the GTSR Program to receive bill credits, in large part, for the generation of a participating eligible renewable energy resource using the class average retail generation cost.<2> This means that the credit is based upon the market prices of electricity, natural gas and other factors of generation. The market prices of such factors change frequently. Therefore, it is likely impossible to square the requirements with the bill - predictable bill credit and bill charge for a period of up to 20 years - with existing law. What's more, were the IOUs to implement the provisions of this bill, despite its inconsistency with existing law, it is likely implementation would result in costs to nonparticipating ratepayers, again contrary to existing law. This is because, should retail price factors increase, the terms of the GTRS subscription required by this bill would prevent the bill credit from reflecting the price change. In effect, should such a situation come to pass, nonparticipating ratepayers would shoulder the costs of program participants. To avoid such a --------------------------- <2> Public Utilities Code Section 2833(k). SB 793 (Wolk) PageE of? cost shift, the author and committee may wish to amend the bill to remove the requirement that a program participant receive a predictable bill credit and bill charge for a period of up to 20 years; instead the bill would require a reasonably estimated bill credit and bill charge, as determined by the CPUC, for a period of up to 20 years. Over So Soon ? The bill also deletes the program sunset of January 1, 2019. The sunset would end the statutory requirement that the IOUs offer the GTSR Program to customers. It is not clear what has changed since passage, in 2013, of SB 43, which includes the sunset. In any case, the CPUC would be free to continue the GTSR Program, even with the sunset in statute. The sunset would allow also for an evaluation of the program, which the CPUC could continue if successful and still needed, or modify if warranted. Or, the Legislature could pass new legislation extending the program, should it wish. Prior/Related Legislation SB 43 (Wolk, Chapter 88, Statutes of 2013) requires the IOUs to offer the GTSR Program to ratepayers. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT: Borrego Solar California Environmental Justice Alliance California Solar Energy Industries Association Environmental Defense Fund Large-Scale Solar Association, if amended Sierra Club California Solar Energy Industries Association, if amended Vote Solar CONCERN: Pacific Gas and Electric Company OPPOSITION: SB 793 (Wolk) PageF of? Office of Ratepayer Advocates, unless amended Southern California Edison The Utility Reform Network, unless amended ARGUMENTS IN SUPPORT: The author and proponents contend the bill removes a barrier to participation in the GTSR Program by allowing longer-term contracts and providing predictable stable rates to those participating in it. ARGUMENTS IN OPPOSITION: Opponents argue that the bill would result in a cost shift to ratepayers who do not participate in the program. SCE also objects that the bill inappropriately prevents the CPUC from completing its work on implementing the GTSR Program, in which the agency will resolve the question of subscription terms. -- END --