BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 560 - Skinner Hearing Date:
June 30, 2009 A
As Amended: April 16, 2009 FISCAL B
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DESCRIPTION
Current law requires the state's investor owned utilities
(IOUs), publicly owned utilities (POUs) (except the Los Angeles
Department of Water and Power), and 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, a procedure known as "net energy metering" (NEM).
Participation by all utilities is capped at 2.5 percent of each
utility's aggregate peak electricity demand.
This bill increases the NEM cap to ten percent.
Current law requires the California Public Utilities Commission
(CPUC) to submit a report to the Governor and the Legislature no
later than January 1, 2010 on the costs and benefits of net
energy metering, wind energy co-metering, and co-energy metering
to participating customers and nonparticipating customers and
with options to replace the economic costs and benefits of net
energy metering, wind energy co-metering, and co-energy metering
with a mechanism that more equitably balances the interests of
participating and nonparticipating customers.
BACKGROUND
Net Energy Metering - The primary benefit of the California
Solar Initiative (CSI)<1> 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.
COMMENTS
1. CSI Drives the Cap - With each CSI installation the
amount of NEM grows. Currently solar customers of Southern
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<1> The CSI is a $3.3 billion ratepayer-funded program to
subsidize the installation of photovoltaic (PV) systems for
customers of the state's investor-owned-utilities (IOUs) and
publicly owned utilities (POUs).
California Edison and San Diego Gas & Electric have used
less than 1 percent of their NEM cap. However, CSI
installations in the territory of Pacific Gas & Electric
(PG&E) have resulted in 1.3 percent of the 2.5 percent cap.
Based on past CSI installation rates, PG&E could reach its
cap in 4 to 19 months. The sponsors of this bill, the
Solar Alliance, are concerned that PG&E could reach its cap
and stall CSI participation in that service territory.
Their response is to raise the cap to 10 percent which
would quadruple the NEM cap for all IOUs and POUs.
2. NEM Impact Study - The need for a ten percent cap for
NEM is not stated or known. The 2.5 percent cap was
instituted to provide the Legislature and regulatory
authorities with the opportunity to assess the costs and
benefits of NEM on participating and non-participating
customers.
A comprehensive study of NEM is now due from the CPUC in
2010. PG&E states that it needs an increase to only three
percent to insure that CSI installations are not stalled
before the report is received. The CPUC reports that a
five percent NEM cap would be sufficient to fully meet the
state's commitment under the CSI for 3,000 megawatts of
rooftop solar installations.
An increase of the NEM cap, beyond the nominal increase
necessary to maintain CSI installations in the PG&E
territory, before the study is completed and evaluated is
premature and unnecessary.
3. 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. The NEM
subsidy in particular is viewed as inequitable. As noted
by the State Association of Electrical Workers allowing the
NEM customer to "enjoy the full retail rate for the
generation it produces further exacerbates such inequities
by forcing lower income customers the continual
subsidization of those with the financial ability to
install solar and wind generation."
In response the sponsor of this bill, the Solar Alliance,
reports its findings that "given today's rate structures
and avoided costs, it appears that solar customers' net
metering of solar systems are providing roughly equivalent
value to non-solar ratepayers as the value of adding new
ratepayer-funded generation." The fault in this analysis
is that they have only valued assessed the impacts of the
installation and net metering when the sun is shining and
the panels are producing electricity. For the remainder of
the day, roughly 18 hours, the net metered customer is just
like any other customer and is pulling electricity from the
grid receiving the full benefits of the transmission and
distribution system without paying for it.
4. The RPS & Renewable Energy Credits - Although ratepayers
and taxpayers are heavily subsidizing the CSI and NEM
programs, in order for the solar generation to count toward
the utilities' RPS obligations (which are ultimately all
funded by ratepayers), ratepayers would have to pay again
to buy the renewable energy credit (REC). The Utility
Reform Network (TURN) argues that this further exacerbates
the inequities of the CSI and its related cost subsidies.
They opine that "it is wholly unreasonable for ratepayers
to subsidize renewable distributed generation while being
denied the opportunity to count the purchased electricity
towards RPS targets" and that purchase of the REC would
result in ratepayers paying twice for the RPS energy.
To mitigate the ongoing inequities of net metering and the
CSI program, the author and committee may wish to consider
conditioning an expansion of net metering on the
requirement that all renewable energy credits for the solar
or wind generation should count directly to the RPS
obligation.
5. Related legislation - SB 7 (Wiggins) is pending hearing
in the Assembly Utilities & Communications Committee and
would all NEM customers to roll-over excess kilowatt hours
for two additional, consecutive 12-month billing cycles.
AB 920 (Huffman) is set for hearing in this committee on
July 7 and would require a utility to allow a customer to
roll-over excess kilowatt hours beyond the first 12-month
billing cycle or receive compensation at a rate set by the
CPUC.
ASSEMBLY VOTES
Assembly Floor (47-22)
Assembly Appropriations Committee (11-5)
Assembly Utilities and Commerce Committee
(10-3)
POSITIONS
Sponsor:
The Solar Alliance
Support:
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|AEE Solar, Inc. |Large-scale Solar Association |
|Applied Materials |Lennar Corporation |
|Borrego Solar Systems |Macy's Inc. |
|Brightline Defense Project |Mainstream Energy Corporation |
|California Building Industry |Natural Resources Defense |
|Association |Council |
|California Business Properties |Pacific Environment |
|Association |Planning and Conservation |
|California Interfaith Power & |League |
|Light |REC Solar, Inc. |
|California Public Utilities |San Francisco Board of |
|Commission |Supervisors |
|California Retailers |Sharp Solar |
|Association |Sierra Club California |
|California Solar Energy |SolarCity |
|Industries Association |Solar World California |
|City of San Jose |SPG Solar, Inc. |
|Clean Power Campaign |Standard Pacific Homes |
|Coalition for Clean Air |SunPower Corporation |
|Conergy |SunTech American |
|County School Facilities |Tioga Energy, Inc. |
|Consortium |Tim Lewis Communities |
|East Bay Municipal Utility |Union of Concerned Scientists |
|District |Village at Heritage Springs, |
|Environment California |LLC |
|Evergreen Solar, Inc. |Vote Solar Initiative |
|Family Winemakers of California |Woodside Homes of Northern |
|Global Green USA |California |
|GRID Alternatives |109 Individuals |
|Inland Empire Utilities Agency | |
|Kyocera International, Inc. | |
|KyotoUSA | |
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Oppose:
Coalition of California Utility Workers (unless amended)
Pacific Gas and Electric Company
Sempra Energy (unless amended)
Southern California Edison
State Association of Electrical Workers (unless amended)
The Utility Reform Network (unless amended)
Kellie Smith
AB 560 Analysis
Hearing Date: June 30, 2009