BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 51 - Blakeslee Hearing Date: June
29, 2010 A
As Amended: May 17, 2010 FISCAL B
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DESCRIPTION
Current law establishes the California Solar Initiative (CSI), a
$3.3 billion program to subsidize the installation of
photovoltaic (PV) systems for customers of the states
investor-owned utilities (IOUs) and publicly owned utilities
(POUs).
Current law requires IOUs, POUs (except the Los Angeles
Department of Water and Power), or any other entity offering
retail electric service, to credit all electricity generated by
a customer-owned solar or wind system against the customer's
usage of electricity sold by the utility, on a kilowatt hour
basis (kWh), a procedure known as "net energy metering" (NEM).
Participation by all utilities is capped at 5 percent of each
utility's aggregate peak electricity demand.
This bill permits an agricultural customer, who uses solar or
wind generation to offset the customer's own electrical needs,
to aggregate the electricity use of properties adjacent or
contiguous to the generator that are under the same ownership,
to its full electricity usage over a 12 month cycle at the
retail rate.
BACKGROUND
California Solar Initiative (CSI) - The CSI calls for the
installation of 3,000 megawatts (MW) of new, solar-produced
electricity by 2016 to be installed on the customer's side of
the meter. Targeted expenditures under the CSI, funded by a
surcharge on all ratepayers, are $3.3 billion over ten years,
distributed among three distinct program components:
investor-owned utilities (IOUs) ($2.167 million/1940 MW); New
Solar Homes Partnership ($400 million/360 MW); and publicly
owned utility programs ($700 million/700 MW).
California now has over 736 MW of solar PV in the IOU
territories at over 43,000 residential, commercial and
governmental sites. This includes installed generation and
pending applications. The POUs have installed 26 MW of
generation at 7,712 sites and the NHSP reports 7.8 MW of solar
PV at 3,002 sites.
All CSI programs combined, California has approximately
installed 770 MW of solar generation on the customer's side of
the meter - 27% of goal.
Net Energy Metering - The primary benefit of CSI program is
derived from the solar customer's eligibility for NEM which is
authorized under state law separately from the CSI program.
Utility customers that generate power from a wind or solar
system are eligible for NEM under which the electricity
purchases of the customer are netted against the electricity
generated by the customer's own solar or wind electric system.
When the sun is shining or the wind is blowing, the generated
electricity spins the meter backward, making it financially
equivalent to using less electricity for the customer with the
same effect as the electric utility paying the customer the full
retail price for the electricity. When the sun stops shining
and the wind stops blowing, the customer draws electricity from
the grid and their meter spins forward using the credit on the
meter. In theory, depending on weather patterns, system size
and customer behavior, the customer will have a zero energy bill
at the end of a 12-month cycle.
The full retail price of electricity includes the utility's cost
of generating, distributing and transmitting the power, public
goods programs (e.g. energy efficiency), low-income customer
assistance (e.g. CARE), energy crisis costs and other charges
not related to generation. By compensating the solar or wind
customer at the full retail rate, the utility is using ratepayer
funds to pay the solar or wind customer at a rate well above the
value of the generated power, which is about one-third of the
total cost of a typical residential customer's bill. The solar
or wind customer does not pay transmission or distribution costs
even though they are still connected to the electrical grid and
use it for all their generation needs when the sun isn't shining
and the wind isn't blowing (approximately 18 hours a day).
Consequently, those unpaid transmission and distribution costs
and public goods charges are a subsidy, the cost of which is
ultimately shifted to all other ratepayers in the class. All
customer classes are eligible for NEM.
NEM Cost Shift - The fundamental affect of NEM is that the
participating customer avoids the costs of transmission,
distribution and public goods charges which fund programs such
as the CARE and energy efficiency. Because those costs are
fixed, if one class of ratepayers is excluded from paying those
costs, then those costs are shifted to the remaining ratepayers.
Transmission and distribution costs typically comprise one-half
to two-thirds of a customer's billing.
The CPUC released a report earlier this year evaluating the
impacts of NEM.<1> Although a small fraction of the annual
electricity revenue (less than one-tenth of one percent) in
California, the CPUC reported that, based on 2008 solar
installations of 386 MW, the costs of NEM to ratepayers was $20
million per year. When the CSI program is fully subscribed in
the IOU territories (2,550 MW by 2017) the annual cost to
ratepayers is estimated to be $137 million per year.
COMMENTS
1) Author's Purpose . The purpose of this bill is to allow
agricultural customers to combine electrical needs from
each of the meters on their properties, to be netted
against the amount of electricity produced. Agricultural
customers are a potentially large source of new renewable
energy generation. Farms in sunny areas of the state have
the potential to generate significant amounts of peak
summertime solar power, offsetting their own off-peak use,
and thereby benefiting other ratepayers by reducing peak
demand.
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<1> Because the vast majority of NEM generators and NEM
generation is solar, the evaluation did not include wind.
A typical farmer may operate a dozen or more different
irrigation pumps, an equipment shop, and perhaps a packing
or refrigeration facility, all located on contiguous
property. Currently, each of these locations is metered
separately and is considered an individual "account."
Electricity generated by a central facility to meet a
farm's average overall need currently cannot be credited
against the customer's total energy consumed and does not
reflect the true amount of "net" electricity provided back
to the utility.
2) Aggregate Net Metering: aka Wheeling . Larger electrical
users such as agricultural customers often have multiple
facilities which are each separately metered and separately
connected to the distribution system. When self-generation
resources such as solar or wind are installed to offset the
customer's load, the generation is directly wired to the
customer's side of the meter. For larger properties this
means that each separately-metered facility has to have its
own renewable generation or each facility has to be
re-wired to run through one meter to obtain the benefits of
solar.
To avoid the expense of re-wiring a property, the intent of
this bill is to allow an agricultural customer to credit
the excess generation from one renewable facility against
all other separately metered service so that, on paper,
they receive the benefits associated with renewable
generation and the NEM tariff for all metered service. This
is also referred to as the wheeling power because the
customer's load at the separately metered sites is still
fully serviced by the utility but the customer is exempt
from charges for that service to the extent that the load
is offset, on paper, by the renewable generation. The
result is that from the NEM are exacerbated and the
shifting of the costs of exempting that customer's service
from transmission and distribution are shifted to other
customers.
Solar customer generators in every rate class have been
specifically excluded from aggregating usage going back to
the time of the first solar net-metering subsidy in 1995.
Conceptually the subsidy was structured to act like energy
efficiency incentives and to reduce the use of electricity
at the location at which it is generated. Aggregation
conflicts with that goal.
3) Customer Options . Other programs are available to meet
the customer's needs in this situation. First, under the
provisions of AB 920 (Huffman, 2010) currently being
implemented by the CPUC, the customer can now choose to be
paid for generation in excess of the customer's usage of
the solar generation. The committee heard from several
wineries during the deliberations on this bill and a
related bill (SB 7, Wiggins), that this program
modification for the NEM was important to their operations.
Another option for customer-generators is the
feed-in-tariff. This standardized contract allows small,
renewable generators to sell power to a utility at
predefined terms and conditions, without contract
negotiations. The customer is allowed to offset their load
when the renewable facility is generating power and be
compensated for generation not used and fed back to the
grid. When no generation is available to the customer they
draw and pay for power as a regular utility customer. This
program is more equitable in its application because the
renewable generation, power drawn from the grid, and
transmission and distribution usage, more accurately match
the true costs and use of service from the utility.
Customers prefer NEM because they are exempted from
transmission and distribution costs even through they
benefit from the grid.
4) Oversizing Renewable Generation . In order for the
customer to have sufficient renewable power to offset the
load of separately metered facilities, the central
generator must be sized to generate enough power for the
customer's load at the renewable site as well as the remote
load. This bill does not expand the requirement under the
most-utilized program - the CSI - to allow an agricultural
customer to over-size a CSI installation but does create
pressure for a change in that limit. A customer is
currently allowed to roll-over excess generation or receive
compensation.
5) Ratepayer Impacts . Small scale solar PV remains the
most expensive means of generating electricity. The
Legislature recognized this factor when it adopted the CSI
but intended to subsidize installations through a limited
program in an effort to stimulate the market and bring down
prices. In the meantime the program is heavily subsidized
through ratepayer subsidies for installations (CSI)
(roughly 20% buy down), taxpayer subsidies (30% federal tax
credit), waived interconnection fees, and NEM. Allowing a
customer to avoid transmission and distribution costs of
separately metered facilities will exacerbate the cost
shifts of the NEM and create additional burdens on managing
and funding a distribution system that was not designed to
accommodate all the new opportunities for greening the
grid.
Additionally, the value of self-generation and excess
electricity sent to the grid as a result of that generation
such as roof top solar is misunderstood. In real time, the
utility does not know how much electricity is going onto
the grid - the customer gets the power first - and their
usage can fluctuate along with weather patterns that affect
generation. Consequently, the utilities cannot and do not
count or value excess generation coming back onto the grid
as delivered energy to other customers. Moreover, excess
generation on an aging distribution system and "dumb grid"
can actually have adverse impacts. Where the impacts of
self-generation are valued and measured is over-time and in
hindsight. When the utility evaluates its resource needs
in a given area, the self-generation will reduce its needs
over time.
6) Related Legislation . The following bills in the current
session also modify the NEM program.
AB 228 (Huffman) - increases the NEM cap from 5 to
6% with 1% reserved for installations of large customers
and increases the size of solar and wind generation
eligible for the NEM to 5 MW. Status: Set in the Senate
Energy, Utilities and Communications Committee June 29,
2010.
AB 510 (Skinner) - Increased the NEM cap from 2.5%
to 5% of the each utility's aggregate peak electricity
demand. Status: Chapter 6, Statutes of 2010.
AB 560 (Skinner) - Proposed to lift the NEM cap to
ten percent. Status: held in Senate Business &
Professions Committee.
AB 920 (Huffman) - Requires utilities to allow NEM
customers to roll over excess generation not used in a
12-month billing cycle, on a kWh basis, or to compensate
customers for any generation in excess of their usage
over a 12-month billing cycle at a rate to be determined
by the CPUC. Status: Chapter 376, Statutes of 2009.
SB 7 (Wiggins) - Requires that NEM customers be
permitted to roll over excess NEM generation to two
subsequent 12-month cycles. Status: Assembly Inactive
File.
ASSEMBLY VOTES
Not relevant.
POSITIONS
Sponsor:
Wine Institute
Support:
California Association of Realtors
California Farm Bureau
Clean Power Campaign
Mainstream Energy
Oppose:
California Public Utilities Commission (unless amended)
Pacific Gas & Electric Company
San Diego Gas & Electric Company
Southern California Edison
Kellie Smith
AB 51 Analysis
Hearing Date: June 29, 2010