BILL ANALYSIS
AB 1106
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Date of Hearing: May 20, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1106 (Fuentes) - As Amended: May 6, 2009
Policy Committee:
UtilitiesVote:10-4
Natural Resources 6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
Revises and expands the feed-in tariff program for eligible
renewable electric generation to eliminate the current statewide
cap of 500 megawatts (MW) and make the tariff available to
facilities of up to 20 MW in size instead of 1.5 MW.
FISCAL EFFECT
The Public Utilities Commission (PUC) would incur ongoing costs
of $335,000 for three positions to develop new rules for a
greatly expanded feed-in tariff program, including a commission
proceeding, and then to implement the program. The proceeding
would also require one-half position for an administrative law
judge at a one-time cost of $50,000. [Public Utilities
Reimbursement Account]
COMMENTS
1)Purpose . According to the author, this bill is intended to
ensure that renewables are properly valued for their
locations' benefits, time-of-delivery attributes, and for
furthering the goals of the state's renewable portfolio
standard (RPS). The author believes the state is missing
opportunities to expand the use of solar energy because
"excellent sites with space and interest in installing solar
energy equipment cannot use solar because they cannot
participate in either the California Solar Initiative
incentive program or the RPS solicitation program."
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2)Background . AB 1969 (Yee)/Chapter 731 of 2006, mandated that
the investor-owned utilities (IOUs) purchase all electricity
generated from renewable facilities that are owned by water
and waste water agencies that are smaller than 1 MW in size at
specified rates set by the PUC. This program was expanded
administratively by the PUC to allow any customer of an IOU to
take part of the program and to allow for renewable generators
of up to 1.5 MW. Programs like this, which require an
electric utility to purchase all the electricity produced by a
specified type of generator at a fixed price are known as
feed-in tariffs (FITs). These programs are really a standard
contract offered by each electric utility where the utility is
required to purchase all output of those generators that
accept the standard offer contracts. While there is general
acceptance of FITs in principle, there are generally two
points of contention: size and price.
There is little agreement on how big a generator can be and
still be considered small enough for the FIT program. The
California Energy Commission (CEC) has proposed that the
maximum size should be set at 20 MW, based on the fact that
any generation unit larger than 20 MW is subject to
interconnection rules set by the Federal Energy Regulatory
Commission and not the PUC's interconnection rules. The PUC
recently released a proposal to cap the size of FIT at 10 MWs.
The PUC's proposal states that developers building units
larger than 10 MWs have the expertise and resources to compete
for renewable contracts in the renewable portfolio standards
program (RPS).
The current FIT program caps the price paid to renewable
developers to the market price referent (MPR), which is the
price established by the PUC within the RPS program to measure
above market costs of renewable generation. The MPR may be
less than the actual cost of production of most smaller scale
renewable technologies. In fact, even many large RPS contracts
actually exceed the MPR today. Because the MPR is less than
the cost of the renewable generation, the current FIT program
may not create the needed incentives to develop more renewable
generation.
A number of environmental groups and solar industry
representatives have suggested that the California FIT program
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should follow the European model and set the tariff rate based
on the actual cost of production of each specific technology
plus a reasonable profit for the generator. They believe these
high prices would lead to a rapid expansion of small-scale
renewable generation. Conversely, the utilities and consumer
groups oppose this cost-based approach and believe that the
rate should be set to represent the actual benefit ratepayers
receive from the renewable resources. If all the quantifiable
benefits of small scale renewable resources were added
together it is likely they would exceed the MPR, but in some
cases, they still may be less than the cost of production of
some renewable technologies
AB 1106 adopts the CEC's proposal and allows for FITs for
eligible renewable resources up to 20 MW in capacity. The bill
also provides that the rate for FITs will be at the MPR.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081