BILL ANALYSIS
SB 32
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Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 32 (Negrete McLeod) - As Amended: July 13, 2009
Policy Committee:
UtilitiesVote:10-4
Natural Resources 7-1
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill expands eligibility under the existing feed-in-tariff
(FIT) program for renewable energy resources and requires
publicly-owned utilities (POUs) to establish FIT programs.
Specifically, this bill:
1)Expands the current FIT program by requiring the
investor-owned utilities (IOUs) to purchase all electricity
produced within their respective service territories by
eligible renewable generation less than 3 megawatts (MW)
rather than the current 1.5 MW limit.
2)Grants the PUC the authority to adjust the FIT rate price to
reflect the value of: (a) electricity generated on a
time-of-delivery basis; (b) other attributes of the renewable
generation; and (c) an electric generation facility located on
a distribution circuit that generates electricity at a time
and in a manner to offset the peak demand on that distribution
circuit.
3)Requires all publicly owned electric utilities (POUs) that
serve more than 75,000 customers to create a program to
purchase all electricity produced by eligible renewable
generation that is less than 3 MW.
4)Establishes a statewide cap of 750 MW for all FIT contracts
instead of a 500 MW cap for IOUs only. Requires each POU to
make FIT contracts available until its proportionate share of
the statewide cap is reached, and requires each IOU to make
FIT contracts available until either its proportionate share
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of the statewide cap is reached or the IOU has reached the cap
on paying above-market costs for renewable energy under the
renewable portfolio standard (RPS).
5)Provides that a customer who receives a ratepayer-funded
incentive for the renewable generation facility is eligible to
participate in the FIT program, but must reimburse the
incentive payments unless the PUC determines ratepayers have
received sufficient value from the facility.
6)Requires the PUC, in consultation with the Independent System
Operator, to monitor impacts on the transmission and
distribution grid and any effects on ratepayers resulting from
the FIT program.
7)Requires the PUC to establish performance standards for
generation facilities with capacity exceeding 1 MW to ensure
such facilities generated their expected annual production and
do not impact the reliability of the grid system.
8)Stipulates that the PUC shall not create or expand a FIT
program beyond the program authorized in statute.
FISCAL EFFECT
Annual special fund costs to the PUC of $380,000 for three
analyst positions and a half-time administrative law judge to
determine the appropriate FIT prices, review and approve FIT
tariffs, examine the impact on the transmission and distribution
grid and on ratepayers, and to establish performance standards
for 1 MW and above electrical generation facilities. [Public
Utilities Reimbursement Account]
COMMENTS
1)Background : A FIT is an obligation that utilities purchase
all the electrical output from specified generators under a
standard contract with the price and terms determined by
statute or a regulatory agency. Renewable FITs can help
promote the development of renewable generation by reducing
transaction costs and financing costs for renewable
developers, since the terms of an agreement are known ahead of
time and will not change over the life the project. FITs can
also act as a subsidy to help promote more expensive renewable
technologies if the price paid to the generator is set at a
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rate higher than what the utility would pay for other
generation.
In 2006, AB 1969 (Yee)/Chapter 731 of 2006 created a FIT by
mandating that the IOUs purchase, at rates set by the PUC, all
electricity generated from renewable facilities smaller than 1
MW and owned by water and wastewater agencies. When the PUC
adopted the AB 1969 rules, it expanded the program to allow
any customer to take part of the FIT and to allow for
renewable generators up to 1.5 MWs.
The rate paid under the AB 1969 program is the market price
referent (MPR), which represents a calculation performed by
the PUC on an annual basis to determine the market cost of
power from natural gas facilities. The calculation is used to
determine the above-market cost of contracts signed under the
RPS.
2)Purpose . According to the author, the purpose of SB 32 is to
ensure that renewables are properly valued for their
locations' benefits, time-of-delivery attributes, and
furtherance of the goals of the RPS. The author believes that
California 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."
The supporters of this bill believe the current pricing
mechanism does not adequately reimburse a renewable generator
for all of the benefits they provide. Since the current price
is based on the average price of natural gas generation, it
may not take into account the benefits created by reduced grid
transmission costs, reduced emissions, and promotion of new
technologies.
Additionally, the current price under the AB 1969 program is
likely set at a level that is below the cost of installing
solar generation. This is evident by the fact that to date
only 13 projects have requested to participate in the AB 1969
program (none were solar projects).
This bill attempts to address the issues of accurately pricing
generation under the AB 1969 program, without creating a new
subsidy, by giving the PUC the authority to mandate a higher
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price for electricity purchased under the AB 1969 FIT, while
capping the total price based on the prices the utilities pay
for renewable energy under the RPS. Since the RPS requires
utilities to competitively bid renewable projects, capping the
prices under the FIT based on the RPS could help ensure the
price of FITs reflect the true value and costs of renewable
energy.
3)Publicly Owned Utilities . This bill also requires all POUs
with more than 75,000 customers to adopt a FIT program that is
identical to the one the IOUs are required to offer.
Currently, all POU's offer net metering for solar energy.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081