BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1150 - V. Manuel Pérez Hearing
Date: July 5, 2011 A
As Amended: May 27, 2011 FISCAL B
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DESCRIPTION
Current law authorizes the California Public Utilities
Commission (CPUC) to administer the Self-Generation Incentive
Program (SGIP) through 2015 and permits the CPUC to annually
collect $83 million from gas and electric ratepayers to fund the
program through 2011. The program is intended to provide
incentive payments for generation on the customer's side of the
meter for any distributed generation resources (DG) that the
CPUC determines will support the state's goals for reduction of
emissions of greenhouse gases.
This bill authorizes the CPUC to collect funds for an additional
$83 million in 2012.
BACKGROUND
SGIP History - During the 2000-01 energy crisis the CPUC was
directed by the Legislature to create a program of incentives
for renewable and super clean, gas-fired DG to reduce
electricity demand. As a result, the CPUC 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 DG (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. Beginning in 2008
only fuel cell and wind technologies and storage if coupled with
wind or fuel cells were eligible for incentives.
In 2009 the Legislature expanded the SGIP to include any DG that
help to achieve the state's greenhouse gas reduction goals. The
CPUC has not concluded its rulemaking to implement SB 412. As a
consequence wind and fuel cells continued to be eligible. In
the winter of 2010 it became apparent that program funding could
be depleted before the CPUC established rules under SB 412 so
program applications were suspended January 1, 2011.
COMMENTS
1. Author's Purpose . According to the author, this 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.
2. Customer Side of the Meter or Wholesale Side ? The
increasing availability of technologies for customers that
can offset their own electric load is exciting and there is
a great deal of support in many circles for the increased
use of those technologies. However, the question for the
Legislature to consider is to what degree ratepayers should
subsidize the installation of technologies on the
customer's side of the meter which provide a direct benefit
to individual customers with the financial means to
participate.
What are the benefits to the remaining ratepayers on the
grid? What if greater GHG and local air emissions
reductions, job creation, and other benefits of the green
economy can be achieved with the same or less funding
through other means such as increased renewable generation
on the wholesale side of the meter? How and when will
those questions be evaluated?
3. Timing ? Coincidentally the statutory authority for the
SGIP sunsets this year along with the Emerging Renewables
Technology Program which is administered by the California
Energy Commission (CEC). The focus of the CEC's program
has narrowed over the years and, until suspended in the
spring, it funded small wind and fuel cells. At this same
time the Governor has broadly expressed support for
bringing 12,000 megawatts of DG to the grid. This goal has
yet to be defined, programs established, or funding levels,
if any, determined. There has been discussion that the
program could call for new DG programs to fund generation
on the customer's side of the meter. Consequently, this
bill may be premature. This may be the appropriate time
for the CPUC to conclude its administration of the SGIP and
for the Legislature to reflect on the broader goals to be
achieved by customer DG and to what degree the state can
afford to call on ratepayers to fund those efforts. It is
important to note that these programs do not count toward
the state's 33% RPS goal. The collections and program
requirements are also limited to IOU territories.
4. Market Maturity . Many technologies being funded today
and proposed to be funded in the CPUC's expansion of the
SGIP have reached market maturity. Depending on the size
of the technology, wind, solar, combined heat and power,
and biogas digesters customers can expect a return on their
investment of four to nine years. If the installation of a
technology can pay for itself through reduced utility bills
in four to nine years, and the technology has a useful life
of 20 years that means that the customer has zeroed out
their energy expense for 12 to 14 years. Are these
technologies in need of subsidies? The CPUC responds that
comments received in the SB 412 proceedings indicate that
the business community requires a faster payback and that
period needs to be three to five years in order to justify
participation. The CPUC staff analysis of the SGIP
justifies subsidies and opines that "by increasing the
potential rate of return for customers, incentives can
encourage greater adoption of newer technologies."
The other occurrence in the marketplace is that
increasingly the technologies are becoming more efficient
and coming down in price (market maturity) sometimes faster
than the programs can adjust. The CEC's Emerging
Renewables Program recently discovered that its subsidy
payments for wind far exceeded the cost of one wind
technology. They were flooded with hundreds of
applications and have now suspended the program until
further research can be done on subsidy payment levels.
They must also address whether performance-based payments
are needed since a good portion of program applicants
proposed to install technology regardless of whether there
would be any fuel source (wind) in the region to support
it. The owner of the company behind all of the
applications reported that they had "such a revolutionary
technology that it allows us to deliver our product at an
affordable price; a price so affordable that it qualifies
for a 100% rebate under ERP guidelines."
Should funding continue for technologies that have reached
market maturity?
5. Program Deficiencies . Earlier versions of this bill
called for major program modifications and extended
collections for up to five additional years. Many
questions have been raised about the administration of the
program including geographic disparities (more than half
the funds went to four counties), funding fuel sources at a
Louisiana landfill, participant inequities with virtually
all of the funding going to commercial customers and little
or none to residential, and funding disparities between
program vendors with one company driving the bulk of funded
technologies.
Given these questions the Assembly eliminated all program
modifications and extended collections for only one year
which will allow time to consider whether the CPUC
adequately addresses these issues and others in its
implementation of SB 412 which is expected later this
summer.
Should a program be extended that has a checkered
performance history?
6. Residential Customers . When SGIP was reauthorized, the
CPUC was directed to "ensure that distributed generation
resources are made available in the program for all
ratepayers." The intention of that language was that the
CPUC include specific technologies that could be utilized
by residential ratepayers who contributed significantly to
program funding. There is no indication that the CPUC will
be able to achieve that goal.
If the program is to be extended, should residential
ratepayers continue to fund a program in which they cannot
participate?
7. Ratepayer Impact . This bill would allow the CPUC to
direct the IOUs to collect an additional $83 million from
ratepayers for this program in 2012. Absent any policy
changes in this bill, the CPUC would not need to open a
rulemaking to implement the bill but would use the
additional funds to augment the program as called for in
current law as a result of SB 412 (Kehoe, 2009). The
balance of funds in the program coupled with 2011
collections is expected to be approximately $100 million
which when added to the new collection in this bill would
make $183 million available for allocation to technologies
once the CPUC concludes its rulemaking.
ASSEMBLY VOTES
Assembly Floor (52-19)
Assembly Appropriations Committee (12-5)
Assembly Natural Resources Committee
(6-2)
Assembly Utilities and Commerce Committee
(12-0)
POSITIONS
Sponsor:
Foundation Windpower
Support:
Associated General Contractors
California Business Properties Association
California Large Scale Consumer Association
California League of Conservation Voters
California Manufacturers & Technology Association
California Solar Energy Industries Association
California Wind Energy Association
Capstone Turbine Corporation
Center for Sustainable Energy
Clean Power Campaign
Distributed Wind Energy Association
Environment California
Environmental Defense Fund
FuelCell Energy
Industrial Environmental Association
Mitsubishi Cement Corporation
Sierra Club
Solar Turbines, Inc.
Sonoma County Water Agency (if amended)
TechNet
Union of Concerned Scientists
Oppose:
None on file
Kellie Smith
AB 1150 Analysis
Hearing Date: July 5, 2011