BILL ANALYSIS �
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THIRD READING
Bill No: AB 2514
Author: Bradford (D)
Amended: 8/6/12 in Senate
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 7-2, 7/3/12
AYES: Padilla, Fuller, De Le�n, DeSaulnier, Rubio,
Strickland, Wright
NOES: Corbett, Pavley
NO VOTE RECORDED: Berryhill, Emmerson, Kehoe, Simitian
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/6/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 55-9, 5/31/12 - See last page for vote
SUBJECT : Net energy metering
SOURCE : San Diego Gas and Electric Company
DIGEST : This bill requires the Public Utilities
Commission (PUC) to complete a study on the net energy
metering (NEM) program, to address the benefits and burdens
of the program on ratepayers.
ANALYSIS : Existing law requires the state's
investor-owned utilities (IOUs), publicly-owned utilities
(except the Los Angeles Department of Water and Power), and
other entities offering retail electric service, to credit
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all electricity generated by a customer-owned renewable
electric generation facility against the customer's usage
of electricity sold by the utility, on a kilowatt hour
basis (kWh), a procedure known as NEM. Participation by
all utilities is capped at 5% of each utility's aggregate
peak electricity demand and the size of individual
renewable electric generation facilities is limited to
those that will offset all or part of the customer's own
electrical requirements to a maximum of one megawatt (MW).
This program also exempts the customer from paying
transmission and distribution costs. This is commonly
referred to as full retail NEM.
Current decisions of the PUC define aggregate peak
electricity demand, for purposes of calculating the NEM
cap, as the highest sum of all customers' non-coincident
peak demands that occurs in any calendar year.
This bill requires the PUC to complete a study on the NEM
program, to address the benefits and burdens of the program
on ratepayers. This bill requires the PUC to expand the
scope of the study that has already been ordered in a PUC
decision. For example, this bill requires the study to
address electricity generated and used onsite as well as
electricity returned to the electrical grid.
Background
The issues of net metering . Utility customers that
generate power from a renewable facility are eligible for
full retail NEM under which the electricity purchases of
the customer are netted against the electricity generated
by the customer's own renewable electric facility. When
the sun is shining or the wind is blowing, for example, the
generated electricity spins the meter backward, making it
financially equivalent to using less electricity for the
customer with the same effect as the electric utility
paying the customer the full retail price for the
electricity. When the sun stops shining and the wind stops
blowing, the customer draws electricity from the grid and
their meter spins forward using the credit on the meter.
In theory, depending on weather patterns, system size and
customer behavior, the customer will have a zero energy
bill at the end of a 12-month cycle.
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Although all renewable resources sized up to one MW which
offset a customer's load are eligible for full retail NEM,
most of the facilities are solar photovoltaic. Fuel cells
are eligible for full retail NEM if biogas is used to
generate the power. If a fuel cell is powered by natural
gas it is eligible for a more limited NEM program which
credits the customer only for the value of the kilowatt
hours at the time the electricity is generated. Under this
program or tariff, the customer pays for transmission and
distribution costs as well as public purpose programs.
The impacts of NEM have raised significant concerns, such
as:
1. At what point does net metering stop looking like energy
efficiency and start looking like a competitor who sells
higher priced electricity than could be found elsewhere?
2. Will other customers have to pay for these higher rates
and is that fair?
3. If net metering is adopted by a significant percentage
of customers in the future, how will the utility
continue to cover fixed costs as revenues decline?
4. Is the utility providing a storage service with the
electric grid, for which the costs aren't being
compensated?
5. Can renewable energy be acquired elsewhere at lower
costs than through net metering?
At the same time, NEM can potentially provide utility,
social and generator benefits, such as:
1. Reduction of air emissions (social)
2. Lower costs of energy during some peak time periods
(utility)
3. Some peak capacity benefits (utility)
4. Avoiding transmission and distribution losses (utility)
5. Avoiding the need for batteries (generator)
6. Getting paid more for renewable electricity than
wholesale rates (generator)
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These issues continue to be discussed but there are few
definitive answers and many opinions.
NEM cost shift . In March, 2010 the PUC issued a report
which analyzed the cost of full retail NEM to non-NEM
ratepayers. At that point, based on 386 MW of installed
rooftop solar, the cost to non-NEM ratepayers was estimated
at $20 million per year. Installed rooftop solar is now
over 1,200 MW so that cost has now at least tripled.
Although the total net cost of the NEM at that point was
less than one-tenth of 1% of total utility revenue average
net cost, the more telling cost that was reported was that
full retail NEM amounted to a cost-shift of $0.12 per kWh
to non-NEM ratepayers.
New math . Aggregate peak demand is the basis for the
calculation of the full retail NEM for renewable
facilities. The phrase has been in statute for 14 years
and was not defined by the PUC but was left to the
utilities. Recently the PUC decided to define the phrase
"aggregate peak demand" which resulted in a significant and
controversial expansion of the full retail NEM program.
The action was contrary to legislative history. Even
parties to the proceeding which argued for the new math and
expansion of the full retail NEM cap admitted that the
calculation was not technically possible until the full
installation of Smart Meters which will not be accomplished
in the largest IOU territories until the end of this year
at the earliest.
In conjunction with its expansion of the NEM cap, the PUC
ordered a study to examine the costs and benefits of full
retail NEM and the impacts of the program for
nonparticipating customers. The study will form the basis
of the PUC's future policy for the NEM program and is
intended to provide full awareness of the economic impacts
of any policy choices on all classes of ratepayers. The
study is due October 13, 2013. The PUC also directed the
IOUs to:
Suspend the NEM program for new customer-generators at
the end of calendar year 2014, pending the issuance of
new rules in a rulemaking proceeding to be undertaken in
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the wake of the study. This temporary suspension of the
NEM program for new customers, effective January 1,
2015, will remain in effect until such new rules are
issued. If new rules are issued by December 31, 2014,
then no suspension of the program need occur.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, the PUC
has recently ordered a study on the costs and benefits of
the NEM program. According to PUC, this bill will require
the PUC to expand the scope of that report, increasing the
costs to prepare the report by about $100,000 (PUC
Utilities Reimbursement Account).
SUPPORT : (Verified 8/7/12)
San Diego Gas and Electric Company (source)
AARP
California Asian Pacific Chamber of Commerce
California Black Chamber of Commerce
California Chamber of Commerce
California Hispanic Chambers of Commerce
California Manufacturers & Technology Association
Pacific Gas and Electric Company
PacifiCorp
Southern California Edison
The Greenlining Institute
The Utility Reform Network
OPPOSITION : (Verified 8/7/12)
Sierra Club California
Solar Energy Industries Association (unless amended)
ASSEMBLY FLOOR : 55-9, 5/31/12
AYES: Achadjian, Alejo, Atkins, Bill Berryhill, Block,
Bonilla, Bradford, Buchanan, Carter, Cedillo, Conway,
Cook, Davis, Donnelly, Eng, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gorell, Grove, Hagman,
Halderman, Hall, Harkey, Hayashi, Roger Hern�ndez, Huber,
Hueso, Jeffries, Jones, Knight, Lara, Logue, Bonnie
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Lowenthal, Ma, Miller, Mitchell, Monning, Morrell,
Nestande, Olsen, Pan, Perea, V. Manuel P�rez, Portantino,
Silva, Smyth, Solorio, Swanson, Torres, Wagner, John A.
P�rez
NOES: Allen, Beall, Brownley, Feuer, Hill, Huffman,
Nielsen, Skinner, Yamada
NO VOTE RECORDED: Ammiano, Blumenfield, Butler, Charles
Calderon, Campos, Chesbro, Dickinson, Fletcher, Fong,
Gordon, Mansoor, Mendoza, Norby, Valadao, Wieckowski,
Williams
RM:k 8/8/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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