BILL ANALYSIS �
AB 2514
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CONCURRENCE IN SENATE AMENDMENTS
AB 2514 (Bradford)
As Amended August 6, 2012
Majority vote
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|ASSEMBLY: |55-9 |(May 31, 2012) |SENATE: |30-5 |(August 20, |
| | | | | |2012) |
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Original Committee Reference: U. & C.
SUMMARY : Requires the California Public Utilities Commission
(PUC) to complete a study on the cost of net energy metering
(NEM) to ratepayers. Specifically, this bill :
1)Requires PUC to complete a study by June 30, 2013, to
determine the extent to which each class of ratepayers and
each region of the state receiving service under the net
energy metering tariff is paying the full cost of the services
provided to them by the investor owned utilities.
2)Requires PUC to report on the extent to which customers
receiving net metering pay their share of the costs of public
purpose programs, and the benefits of net energy metering.
3)Requires PUC to report the results of the study to the
Legislature within 30 days of its completion.
The Senate amendments extend the completion date for the study
to October 13, 2013, adds study parameters that were recommended
by PUC, and deletes a study parameter related to calculating NEM
capacity cap.
AS PASSED BY THE ASSEMBLY , required PUC to study and report on
the costs and benefits of NEM by no later than June 30, 2013.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS :
Background . Under net-metering, the electric utility is
required to "buy back" all electricity generated by a
customer-owned generator that is not consumed by the customer
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on-site. The price is set by the applicable retail rate under
the customer's existing contract. When the customer generates
electricity, he/she uses most of it for his or her own facility.
At the end of each 12-month NEM period, the electric
corporation calculates the amount of electricity distributed to
the grid by the customer and reduces the customer's annual bill
by the amount of electricity generated by the customer. If the
customer consumes more electricity than their facility generates
the utility calculates a bill based on the net consumption of
utility delivered kilowatthours.
This NEM statute allows the credit at the customer's retail
price - a price that is much higher than the generation costs
because the retail price includes non-generation charges,
including but not limited to transmission and distribution
service, the California Rates for Energy (CARE) subsidy, public
good charges, and service charges for billing and customer
service. (Note that transmission and distribution service
charges include, among other things funding for PUC and
California Independent System Operator (CAISO), and utility
return on investment.) If the customer-generator is being paid
the retail price, the non-generation costs are shifted to the
utilities' other ratepayers.
NEM is available to all utility customers, including
residential, commercial, industrial, agricultural, and
government.
NEM customers are not "off the grid." They are connected to the
utility services and use utility services at any time the
on-site generation facility is not operating. For customers
with solar generation, these will be nighttime, during inclement
weather, or when the generation facility is out of service.
Fixed costs and variable costs . PUC determines the rates to be
assessed all customers served by investor owned utilities (IOU).
These rates include fixed and variable costs. Fixed charges
include: public purpose programs, transmission and distribution
services, funding for PUC and CAISO, local utility user taxes,
low income subsidy programs, and other charges. The extent to
which a NEM customer has avoided fixed costs of utility
services, while still using utility services, means that those
costs must be shifted to another ratepayer. Fixed costs are
applied as a volumetric charge on each kilowatthour of energy
used by the customer. With NEM, the customer is billed for net
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kilowatthour usage, that is, those kilowatthours provided by the
utility after deducting excess kilowatthours generated by the
customer. This reduces the fixed charges that would have
otherwise been paid for by NEM customers.
In addition to this subsidy by non-NEM customers, non-NEM
customers also pay for the cost of utility safety inspections
and any electricity distribution upgrades that may be necessary
to ensure safety and reliability because of the total generation
added to the distribution system.
NEM capacity cap. 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 PUC but was left to the utilities. Recently, 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 NEM cap, 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 PUC's future policy for 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. PUC also directed IOUs to
suspend NEM program for new customer-generators at the end of
calendar year 2014, pending the issuances of new rules in a
rulemaking proceeding.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083
FN: 0004693
AB 2514
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