BILL ANALYSIS
SB 32
Page A
SENATE THIRD READING
SB 32 (Negrete McLeod)
As Amended August 31, 2009
Majority vote
SENATE VOTE :34-0
UTILITIES & COMMERCE 10-4 NATURAL
RESOURCES 7-1
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|Ayes:|Fuentes, Buchanan, |Ayes:|Skinner, Gilmore, |
| |Carter, Fong, Furutani, | |Chesbro, De Leon, Hill, |
| |Huffman, Krekorian, | |Huffman, Logue |
| |Skinner, Swanson, Torrico | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Duvall, Tom Berryhill, |Nays:|Knight |
| |Fuller, Villines | | |
| | | | |
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APPROPRIATIONS 13-3
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|Ayes:|De Leon, Ammiano, | | |
| |Charles Calderon, Coto, | | |
| |Davis, Fuentes, Hall, | | |
| |John A. Perez, Skinner, | | |
| |Solorio, Audra | | |
| |Strickland, Torlakson, | | |
| |Hill | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Conway, Harkey, Nielsen | | |
| | | | |
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SUMMARY : Expands the current feed-in-tariff (FIT) program to
allow for renewable resources that are up to three megawatts
(MWs) in size to qualify and to require the California Public
Utilities Commission (PUC) to include the value of environmental
compliance costs in the rate paid to generators under the FIT.
Specifically, this bill :
1)Expands the current FIT program by requiring investor owned
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utilities (IOUs) to purchase all electricity produced by
eligible renewable generation that is less than three MWs in
size and is located within the service territory of that IOU.
2)Provides that the price paid by IOU for electricity purchased
under this program shall be a price determined by the PUC that
reflects the cost of fossil fuel generation in the state and
the value of environmental compliance costs.
3)Provides that the price paid by IOUs for electricity from an
eligible facility shall be set so that ratepayers that do not
receive the payments under this program are indifferent to the
tariff rate paid to the generators.
4)Requires an IOU to provide expedited interconnection
procedures to eligible generation facilities that are located
on a distribution circuit that generates electricity at a time
and in a manner so as to offset peak demand on the
distribution circuit.
5)Provides that no electric utility is required to offer
additional FITs once the utility meets its proportionate share
of a statewide total capacity cap of 750 MWs is reached or
until each utility has reached the caps on above market cost
under the California Renewables Portfolio Standard (RPS).
6)Provides that each kilowatt hour (kWh) purchased from the
electric generation facility shall count toward IOUs RPS
obligations.
7)Authorizes PUC to reduce the maximize size of eligible
resources in this program if PUC finds that the reduction is
necessary to maintain system reliability.
8)Provides that a customer who receives a ratepayer-funded
incentive for the renewable generation facility prior to
January 1, 2010, shall be eligible to participate in FIT
program if the customer reimburse ratepayers for the cost of
the incentives he or she received prior to 2010.
9)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
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generation that is less than three MWs.
10)Makes legislative findings.
EXISTING LAW :
1)Requires IOUs to offer customers with solar electricity or
wind generation a net-metered tariff where the customer can
sell back electricity produced from the solar or wind facility
that exceeds that customer's demand at that moment in time as
a bill credit against electricity that the customer receives
from the utility when their renewable facility produces less
than the customer is consuming.
2)Creates a FIT program that requires electric utilities to
purchase all electricity from an eligible renewable resource
that is no larger than 1.5 MWs at a rate determined by PUC.
The rate is the Market Price Referent (MPR), which represents
the average cost of natural gas fired generation plus the
added costs of carbon emissions from a natural gas generator.
3)Requires electric utilities to meet a RPS where at least 20%
of their electricity production comes from renewable resources
by 2010.
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 one MW and above electrical generation
facilities.
COMMENTS : According to the author, the purpose of this bill is
to ensure that renewables are properly valued for their
locations' benefits, time-of-delivery attributes, and
furtherance of the goals of 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 RPS solicitation program."
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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 the 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 rate that is higher
than what the utility would pay for other generation.
In 2006, AB 1969 (Yee), Chapter 731, Statutes of 2006, created a
FIT by mandating that IOUs purchase all electricity generated
from renewable facilities that are owned by water and waste
water agencies that are smaller than one MW in size at specified
rates set by PUC. When PUC adopted the final rules necessary to
implement AB 1969, it expanded the eligibility of the AB 1969
program to allow ANY customer to take part of FIT and to allow
for renewable generators up to 1.5 MWs in size. This program
has been referred to as "the AB 1969 program."
The rate paid under the AB 1969 program is the market price
referent MPR. MPR represents a calculation performed by 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 RPS.
What is new : This bill modifies the AB 1969 program by:
1)Increasing the size of eligible generation from 1.5 MW to 3.0
MWs.
2)Requiring PUC to consider the cost of environmental compliance
and the value of distributed generation when setting the price
for the FIT.
3)Capping the total program size so that utilities are no longer
required to purchase electricity under FITs once there are 750
MW of statewide capacity from FITs.
4)Clarifying that electric utilities may count their FIT
purchases toward their RPS obligations.
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5)Requiring POUs that have more than 75,000 customers to offer
FITs under similar terms as the IOU program.
The new price : Under the current AB 1969 pricing mechanism, a
renewable generator that went online in 2009 would receive at
least $0.093 per kWh of electricity produced. However, this
price is increased to $0.189 per kWh for electricity produced
during peak periods of the day in the summer and to $0.096 per
kWh during peak times of day in the winter months. Since solar
energy produces almost all of its electricity at peaks times,
PUC estimates that under the current AB 1969 program, a solar
generator's payment will average $0.11/kWh.
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 of them were solar projects). Additionally, PUC recently
approved a small scale solar program where Southern California
Edison (SCE) will either own the solar panels themselves or sign
separate contracts for other solar generators to sell 100% of
the output to SCE where SCE will pay $0.24 per kWh.
This bill attempts to address the issues of accurately pricing
generation under the AB 1969 program without creating a new
subsidy by giving PUC the authority to mandate a higher 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 RPS. Since RPS requires utilities to
competitively bid renewable projects, capping the prices under
FIT based on RPS could help ensure the price of FITs reflect the
true value and costs of renewable energy.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
SB 32
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