BILL ANALYSIS Ó
AB 1150
Page 1
Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1150 (V. Manuel Perez) - As Amended: April 25, 2011
SUBJECT: Self-generation incentive program.
SUMMARY: Extends the sunset date for the annual collection of
the Self Generation Incentive Program (SGIP) through December
31, 2016 and authorizes the Public Utilities Commission (PUC) in
consultation with the California Energy Commission (CEC) to
continue to administer the program until January 1, 2018.
Specifically, this bill:
1)Extends the sunset date for the SGIP through December 31, 2016
to authorize the investor owned utilities (IOUs) to continue
the annual collection of $83 million in ratepayer funds for
SGIP and extends the administration of the program through
January 1, 2018.
2)Provides that the PUC may adjust the amount of SGIP incentives
and evaluate other public policy interest such as,
job development, technology competitiveness, maximizing fund
development across all technologies, localized energy
generation deployment, protection of ratepayers, energy
efficiency, peak load reduction, load management, and
environmental interests.
3)The bill also caps the maximum amount of incentives a company
can earn to no more than 25% of the annual amount of money
collected for SGIP and restricts the per watt rebate to $2.50.
4)Includes intent language signaling that the program should
increase deployment of distributed generation and distributed
storage systems to facilitate integration of those resources
into the electrical grid and reduce ratepayer costs.
EXISTING LAW:
1) Authorizes the PUC to administer the SGIP to provide rebates
for distributed generation (DG) technologies until January 1,
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2016, and to authorize electrical corporations to annually
collect not more than the amount authorized for the SGIP in the
2008 calendar year through December 31, 2011.
2) Limits eligibility for incentives to distributed energy
resources that the PUC in consultation with the State Air
Resources Board, determines will achieve reductions in emission
of greenhouse gases pursuant to the California Global Warming
Solutions Act of 2006.
FISCAL EFFECT: Unknown.
COMMENTS: According to the author of the bill, "AB 1150 will
permit the extension of a vital program for incentivizing the
development of distributive on-site renewable energy facilities.
These are needed to meet increasing statewide demand for
electricity, to reduce peak demand pressures on the grid and
help meet California public policy goals of reducing greenhouse
gas emissions and increase the supply of clean renewable
energy." The bill is sponsored by the Foundation Windpower and
they claim that, "under current law, SGIP will receive no new
funds after 2011 and, while the program itself will not expire
until 2016, the Public Utilities Commission projects will have
little or no funds left in the program after 2011." Therefore,
AB 1150 is needed to "authorize the collection of new ratepayer
funds through 2018 and would extend the period for making
incentive payments available through 2016.
BACKGROUND: During the 2000-01 energy crisis the PUC was
directed to create a program of incentives for renewable and
super clean, gas-fired distributed generation resources to
reduce electricity demand. As a result, the PUC established the
SGIP in March 2001 which has offered rebates for installation of
technologies such as photovoltaics, wind, fuel cells, waste gas,
and ultra-clean and low emission gas-fired distributed
generation (combined heat and power, CHP). Legislation adopted
in 2004 eliminated CHP from the program as of January 1, 2008.
In 2006 photovoltaic incentives were moved out of the SGIP to
the California Solar Initiative (CSI) effective January 1, 2007.
With the passage of AB 2778 (Lieber) Chapter 617, Statutes of
2006, only fuel cell and wind technologies were eligible for
incentives. AB 2267 (Fuentes) Chapter 537, Statutes of 2008,
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established a 20% rebate incentive bonus for California
suppliers and SB 412 (Kehoe) Chapter 182, Statutes of 2009,
extended SGIP to 2016 and charges PUC with selecting eligible
GHG reducing technologies for inclusion in SGIP.
SGIP Funding . The program is funded by a charge on all
ratepayers (CARE customers are excluded) which is reflected in
the distribution charges paid in each billing. This costs the
ratepayer less than $5 dollars per year. According to the PUC,
the SGIP program has completed 1,320 self-generation projects
for 355MW and still has an additional 169 pending projects for
82 MW. Since the inception of the program in 2001 until now,
$865 million has been available to customers under SGIP. The
SGIP budget was initially set at $125 million per year in 2001,
with cost responsibility allocated across ratepayers of the
Investor-Owned Utilities (IOUs). With the creation of the
California Solar Initiative (CSI) in 2006, the PUC redirected
the portion of the SGIP budget that supported solar photovoltaic
incentives into the CSI program, which does not include
SoCalGas, since it does not have a CSI program. As a result,
the SGIP budget was reduced to $83 million per year for 2007 and
2008 to reflect the elimination of the solar photovoltaic
incentives that CSI now funds. That budget level was maintained
for 2010 and 2011 by D.09-12-047; the PUC adopted an annual
budget of $83 million for the SGIP in 2010 and 2011. In that
decision, the PUC ordered the PA's to obtain an independent
entity to conduct an audit of the SGIP expenditures and
ratepayer collections to ensure expenditures do not exceed
authorized budgets and the proper management of carryover funds
(will be discussed later).
SGIP provides $83 million ($75 million for incentives, $8
million for program administration) per year until December 31,
2011 when collection of the funds sunsets. Incentive budget
splits 50% for renewable and 50% for non-renewable. SGIP offers
upfront incentives to offset the cost of capital investment.
Incentive payments are $1.50 per watt for wind turbines, $2.50
per watt for fuel cells, $4.50 per watt for biogas fuel cells,
$2.00 per watt for storage, and $2.50 for natural gas.
According to the PUC, the maximum eligible system size is 5 MW
per site, or the load limited system size whichever is less.
For systems larger than 1 MW, the maximum incentive is capped at
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3 MW per site. However, incentives are lower for projects above
1 MW on the portion of their SGIP funded system(s) that exceed
1MW for that site based upon a tiered incentive structure
approved by the PUC.
SGIP Program Budget Status, $ Millions (Compiled on February 2,
2011)
----------------------------------------------------------------------
| |Reported |Received |Budget as |2011 Budget |Budget |
| |Budget |Between |of | |Remaining|
| |Available |12/22 and |12/31/2010 | | |
| |as of |12/31/2010 |if Motion | |including|
| |12/22/2010 | |is | | 2011 |
| | | |Effective | |Budget |
| | | |12/31/10 | | |
|--------+------------+------------+------------+------------+---------|
|Renewabl|$ -17.40 |$ 24.37 |$ -41.77 |37.5 |-4.27 |
|e | | | | | |
|Budget | | | | | |
|--------+------------+------------+------------+------------+---------|
|Non-Rene|$ 110.37 |$ 41.60 |$ 68.77 |37.5 |106.27 |
|wable | | | | | |
|Budget | | | | | |
|--------+------------+------------+------------+------------+---------|
|Cumulati|$ 92.97 |$ 65.96 |27.00 |75.0 |102.0 |
|ve | | | | | |
|Budget | | | | | |
----------------------------------------------------------------------
Note: All figures in $ Millions. A negative number implies a
waitlist figure.
Implementation of SB 412: On October 11, 2009, the Governor
signed SB 412 (Kehoe), Chapter 182, Statutes of 2009, into law
to take effect in January 2010 which extended the administration
of the SGIP program until 2016 but sunsets the collection of the
funds in 2011, SB 412 did not extend authorization to collect
funds for the program. Importantly, SB 412 authorizes the PUC,
in consultation with the California Air Resources Board (CARB),
to determine eligible technologies for the SGIP based on the
requirement that they "achieve reductions of greenhouse gas
emissions pursuant to the California Global Warming Solutions
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Act of 2006 and consider adding additional technologies to the
program that meet these requirements.
Pursuant to SB 412, the PUC opened a new rulemaking, R.10-05-004
to continue to handle matters related to the SGIP and CSI
programs and revise the staff proposal intended to assess
eligible technologies, incentive levels, and incentive
structure. The purpose of the Energy Division Staff Proposal is
to recommend modifications to the SGIP program. PUC staff used
the opportunity provided by SB 412 to take a broader look at
SGIP and consider a full range program modifications intended to
improve program outcomes which could address some of the
concerns mentioned above. The proposal would only provide
preliminary recommendations on the SGIP program goals and
principles and staff intends to update certain identified
portions of this proposal in response to information expected in
the future. On January 7, 2010, the PUC hosted a workshop to
take ideas from parties on how to modify the program in response
to SB 412. This proposal is still pending and until now has not
been released.
PG&E Motion to Temporary Suspend SGIP: On May 6, 2010, the
Pacific Gas and Electric (PG&E) and the SGIP Program
Administrators (PA) including Southern California Edison,
Southern California Gas Company, and the Center for Sustainable
Energy requested that the PUC temporarily suspended the SGIP
program to become effective December 22, 2010, until the
decision of implementing SB 412 is approved by the PUC and takes
effect. They were concerned that unless a moratorium on new
applications is put in place, projects of currently eligible
technologies could consume all available SGIP funding.
According to the PUC, applications submitted in the 2010 program
year were granted due process rather than suspending the program
as PG&E requested. However, new applications for the 2011 year
were suspended. The PUC reported that some SGIP PAs stopped
accepting applications as of December 22, 2010. However, there
was still a waitlist for $17 million in renewable projects and
$24 million more renewable projects received in last nine days
of the year. As of December 22, 2010, there was $110 million
available for non-renewable projects, and $41 million were
received in the last nine days of the year.
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PUC's Independent Audit Report: Under existing law, SGIP
encourages merit-based competition on a first come first serve
basis among distributed energy technologies, promoting
technology innovation and allowing Californians to install the
clean energy solution that best meets their needs. However, it
was represented that certain technologies were benefiting from
incentives more than others and that there were inaccuracies in
reporting. As a result, the PUC ordered participating utilities
to have a third party audit the SGIP budget to resolve any
questions about available funds.
The PUC commissioned the audit based on budget discrepancies
between expenditures and ratepayer collections for the period
2001-2009. The PUC released its audit and placed it on its
website on April 13, 2011. The audit cost $250,000 and was paid
for by the SGIP administrative, measurement, and evaluation
budget. PUC decisions set the SGIP budget at an annual maximum
of 10 percent for each Program Administrator (PA) for
administration costs. However, the audit reported that there
has been some unspent administration monies that have been
transferred to the incentive budgets. Due to the different
reporting styles of some of the PAs it is unclear to know if all
carryover administration funds have actually been used for
incentives. PG&E, for example had unspent admin monies in the
amount of $56 million which were transferred to incentive
budgets between 2001 and 2009. The biggest issue identified was
a need for more consistent reporting and better accounting
(e.g., recording incentives paid in the year a reservation of
incentives is granted as opposed to the year an application is
received). Many of the discrepancies between reservation
amounts and actual incentives paid can be explained by changes
in project size after a reservation is granted or limitations on
maximum incentives that can be paid.
Accountability: Currently, the PUC requires PAs to report their
portfolio quarterly. Perhaps better accountability from the PUC
and PAs needs to be addressed to ensure that there are no
discrepancies and ensure that if there are unused administration
funds that they be transferred to be used for incentives. The
PUC has already started implementing some of the audit's
recommendations including, revamping the PUC's statewide
database, which will facilitate automated reporting, include an
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interactive database, and most importantly, impose uniform
reporting requirements. As for the PG&E office remodeling that
was reported in the audit, while it may not seem like an
appropriate administrative expense, utilities usually seek cost
recovery for this type of activity in their general rate cases.
PUC should not allow this to happen and provide more oversight
over the PAs.
Who Pay's and Who Benefits: According to critics of the SGIP
program, this $83 million is ratepayer money that is being used
to subsidize large companies. The proponents argue that the
SGIP program has substantial benefits to ratepayers such as
providing construction and operation jobs within the state;
reducing stress on the grid during peak consumption hours;
mitigating the expensive cost of transmission and distribution
lines; and providing incentives to promote localized clean power
near the load center. Additionally, SGIP was intended to
incentivize market transformation for those technologies that
meet the policy goals of promoting in-state manufacturing and
ensuring GHG emission reductions. In this way, SGIP is public
policy that benefits all Californians regardless of whether they
participate in the program directly or not. Those who do
participate directly lower their energy bills on site while
everyone benefits from that participation in the ways outlined
above. SGIP is a smart investment for ratepayers because it
provides upfront incentives for customers who install clean
energy projects, with the customers still covering the majority
of the costs. Without these incentives most projects would not
go forward. Large scale utility procurement projects often cost
in the billion dollar range, with high transaction costs and
where the ratepayer most often bares all the cost risk. By
making smaller investments that leverage private equity, the
ratepayer and the customer see reduced transaction costs. More
importantly, with the help of SGIP, customers like Adobe, eBay,
Safeway, Staples, and others, are reducing their electricity
costs which enables them to become more competitive in the
global economy and enables them to keep prices down for their
customers
Benefit to the Residential Ratepayer: SGIP program costs the
residential ratepayer less than $5 a year and supports
residential applications. For example, Clear Edge Power a
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company from Portland, Oregon, provides fuel cell for
residential applications. In one year there have been about 83
applications for this product by residential customers. As
other companies scale, they will lower their costs and be able
to sell a residential product as well. Furthermore, the
programs is helping grow our economy since these ratepayer
funded incentive dollars, leveraged by over $1 billion dollars
of capital investment from investors around the world, have
fueled thousands of jobs and significant economic impact into
our state's economy.
For instance, Bloom Energy's advanced fuel cell technology was
invented in California, is manufactured in California and is
generating clean distributed power for Californians. Because of
the growing customer demand enabled by SGIP, Bloom Energy grew
its California employee base by 70% in 2010, and over 525% over
the past four years. Ten years ago Bloom was 8 people; now
Bloom is responsible for 1,000 California jobs. Bloom's
California manufacturing and operations footprint grew four
times over the past year and Bloom has gone from manufacturing
one fuel cell system per month two years ago to one system per
day in 2011. If the SGIP customer is a business all of those
who do transactions with that business will also see lower
prices down stream. For example, if ABC Grocery, for instance,
reduces its energy costs the customer of ABC Grocery also sees
reduced costs as ABC Grocery would otherwise pass on high energy
costs to their customer.
Stakeholder's Concerns:
PG&E currently does not have a position on the bill, but they do
believe that the implementation of SB 412 will answer many of
the questions about what technologies should qualify and how
incentives should be determined and allocated.
Bloom Energy, TechNet, Environmental Defense Fund, and a
coalition of consumers strongly support the extension of the
SGIP program to continue to promote and enable clean energy
engineering, manufacturing and installation jobs in California.
They also suggest that the PUC should ensure a fair allocation
of the SGIP funding so that no company's technology monopolizes
SGIP funding but strongly opposes and encourages to "delete
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incentive caps from AB 1150." They believe SGIP legislation
should take a technology-neutral approach; and that it should
authorize the PUC to continue to enable increased diversity in
our state's energy mix, and may include declining incentives as
appropriate to ensure ratepayer subsidies support market
transformation, not a long-term crutch.
The Utility Reform Network (TURN) has concerns with the
authorization to continue the collection of $83 million a year
for another five years to spend on the SGIP program. Their
primary concern is that ratepayers do not benefit from this
program since most of the SGIP projects are almost exclusively
installed by larger commercial and industrial customers to
generate electricity for their own use. TURN also mentions that
to spend another $415 million or more on this program is "unfair
to residential utility customers and violates the deal struck in
SB 412." They recommend that the problem could be fixed by
requiring that the costs of this program be allocated to the
customer's class whose members benefit from the program
subsidies.
The Sonoma County Water Agency believes AB 1150 should provide
equal incentives for all renewable energy sources since the
current language in the bill could be interpreted to favor one
type of renewable energy over another by offering a higher
incentive rates for certain technologies. They recommend that
the same incentive be offered for all renewable technologies
including biogas projects using biodigester and landfill gas
energy sources. They also believe that the SGIP program should
increase allowable project size since currently the program sets
declining incentive rates for projects larger than 1MW. They
recommend that the allowable project size limit be removed, and
that the full incentive be made available for up to 5MW of power
generation, and that projects be sized to serve all or a portion
of the host customer's power load regardless of location.
Are we playing leap frog? The PUC is currently in the process
of implementing SB 412, which may address some of the issues
brought up in this bill such as, adjusting the current SGIP
incentive levels. According to the PUC's initial staff
proposal, they are working to consider changes in incentive
tiers, similar to the declining CSI incentive design, which
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declines the incentive as more solar is developed. In 2007,
when the CSI program began, the incentive for solar PV was $2.50
per watt now it is as low as $0.35 per watt in some service
territories. However, for the SGIP program this structure might
not work since there are different technologies and the
relatively small number of projects of each technology makes it
difficult to establish a MW trigger for declining incentives but
the PUC can have technology specific declining incentives. Even
if this staff recommendation is preliminary, the PUC is looking
to adopt a 10% incentive decline starting on January 1, 2012
which should decline by 10% annually. Placing a cap of 25% per
company and a $2.50 per watt incentive essentially takes away
the PUC's authority to adjust the incentive level (which they
are working on) and placing it in statute will create a
precedent which will require legislative modification of the
incentive levels. This committee is interested in seeing that
the PUC will ensure equitable distribution of funding to all
eligible technologies and program participants and that the PUC
should assess technology penetration in underserved regions of
the state affected by environmental blight and economic stress.
The author and this committee may wish to amend this bill to
remove the 25% per company cap and the $2.50 per watt cap. The
committee may also wish to amend the bill to require the PUC to
periodically evaluate the program to adjust the amount of
rebates and other program design elements to ensure that there
is equitable distribution of incentives to all eligible
technologies and program participants and assess technology
penetration in underserved areas of the state that are
environmentally blighted and economically stressed.
Prior Legislation
Last year, SB 412 (Kehoe) extended the sunset date of the
Self-Generation Incentive Program (SGIP) through January 1,
2016, restricted the amount the PUC can direct the utilities to
collect, and expanded the eligible resources to include all
self-generation technologies PUC determines will support the
state's goals for the reduction of emissions of greenhouse
gases, that meet specified efficiency standards.
REGISTERED SUPPORT / OPPOSITION :
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Support
A123 Systems, Inc.
Associated General Contractors of America
Bloom Energy (if amended)
California Business Properties Association
California Energy Storage Alliance (CESA)
California Institute of Technology (Caltech)
California Large Energy Consumers Association (CLECA)
California Manufacturers & Technology Association (CMTA)
CALMAC Manufacturing Corporation
CalWEA
Capstone Turbine Corporation
Cemex
Clean Power Campaign (if amended)
Debenham Energy LLC
Deeya Energy, Inc.
EnerVault Corporation
Fluidic Energy
Foundation Windpower (Sponsor)
Fuel Cell and Hydrogen Energy Association (FCHEA)
Greensmith Energy Management Systems, LLC
Ice Energy, Inc.
LightSail Energy, Inc.
Mitsubishi Cement Corporation
Pacific Environment
Pacific Environment
Powergetics, Inc.
Prudent Energy Corporation
RES Americas, Inc.
Saft America
Samsung SDI America, Inc.
Seeo, Inc.
Silent Power, Inc.
Solar Turbines Incorporated (if amended)
Sonoma County Water Agency (if amended)
Sumitomo Electric
SunEdison
Sunverge Energy, LLC
SustainX, Inc.
UTC Power Corporation (if amended)
Xtreme Power, Inc.
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Younicos, Inc.
Opposition
The Utility Reform Network (TURN) (unless amended)
Analysis Prepared by: Crystal Quezada / U. & C. / (916) 319-2083