BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 370 - Blakeslee Hearing Date:
April 28, 2011 S
As Introduced: February 15, 2011 FISCAL B
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DESCRIPTION
Current law establishes the California Solar Initiative (CSI), a
$3.3 billion program to subsidize the installation of
photovoltaic (PV) systems for customers of the state's
investor-owned utilities (IOUs) and publicly owned utilities
(POUs).
Current law requires the state's investor owned utilities
(IOUs), publicly owned utilities (POUs) (except the Los Angeles
Department of Water and Power), and other entities offering
retail electric service, to credit all electricity generated by
a customer-owned solar or wind system against the customer's
usage of electricity sold by the utility, on a kilowatt hour
basis (kWh), a procedure known as "net energy metering" (NEM).
Participation by all utilities is capped at 5 percent of each
utility's aggregate peak electricity demand and the size of
individual solar and wind systems is limited to those that will
offset all or part of the customer's own electrical requirements
to a maximum of 1 megawatt. This program also exempts the
customer from paying transmission and distribution costs. This
is commonly referred to as full retail NEM.
This bill permits an agricultural customer, who uses solar or
wind generation to offset the customer's own electrical needs,
to aggregate the electricity use of all meters on the property
and adjacent or contiguous properties, to its full electricity
usage over a 12-month cycle at the retail rate.
Current law permits a customer enrolled in NEM to apply excess
kWh accumulated at the end of the 12-month billing cycle to the
next 12-month cycle or receive reasonable compensation as
determined by the commission.
This bill prohibits an agricultural customer who uses aggregated
NEM as authorized by this bill from receiving compensation for
surplus kWh.
BACKGROUND
California Solar Initiative (CSI) - The CSI calls for the
installation of 3,000 megawatts (MW) of new, solar-produced
electricity by 2016 to be installed on the customer's side of
the meter. Targeted expenditures under the CSI, funded by a
surcharge on all ratepayers, are $3.3 billion over ten years,
distributed among three distinct program components:
investor-owned utilities (IOUs) ($2.167 million/1940 MW); New
Solar Homes Partnership ($400 million/360 MW); and publicly
owned utility programs ($700 million/700 MW).
California now has over 827 MW of solar PV in the IOU
territories at almost 80,000 residential, commercial and
governmental sites. This includes installed generation and
pending applications.
Net Energy Metering - The primary benefit of CSI program is
derived from the solar customer's eligibility for full retail
NEM which is authorized under state law separately from the CSI
program. Utility customers that generate power from a wind or
solar system 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 solar or wind
electric system. When the sun is shining or the wind is
blowing, 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.
The full retail price of electricity includes the utility's cost
of generating, distributing and transmitting the power, public
goods programs (e.g. energy efficiency), low-income customer
assistance (e.g. CARE), energy crisis costs and other charges
not related to generation. By compensating the solar or wind
customer at the full retail rate, the utility is using ratepayer
funds to pay the solar or wind customer at a rate well above the
value of the generated power, which is about one-third of the
total cost of a typical residential customer's bill. The solar
or wind customer does not pay transmission or distribution costs
even though they are still connected to the electrical grid and
use it for all their generation needs when the sun isn't shining
and the wind isn't blowing (approximately 18 hours a day).
Consequently, those unpaid transmission and distribution costs
and public goods charges are a subsidy, the cost of which is
ultimately shifted to all other ratepayers in the class. All
customer classes are eligible for NEM.
Full retail NEM is really the foundation of what makes the CSI
so successful. Due to the intermittent nature of solar and the
costs of installation, rooftop systems would not pencil out for
most customers without the exemption from transmission and
distribution costs provided by full retail NEM. The program is
known to be a subsidy but one thought worth its value by the
Legislature as part of its effort to stimulate the solar
industry and bring down the costs of solar. The capacity of
full retail NEM is designed to coincide with the capacity goals
of the CSI and therefore has a form of sunset.
NEM Cost Shift - The fundamental effect of NEM is that the
participating customer avoids the costs of transmission,
distribution and public goods charges which fund programs such
as the CARE and energy efficiency. Because those costs are
fixed, if one class of ratepayers is excluded from paying those
costs, then those costs are shifted to the remaining ratepayers.
Transmission and distribution costs typically comprise one-half
to two-thirds of a customer's billing.
In March, 2010 the CPUC issued a report which analyzed the cost
of full retail NEM to non-NEM ratepayers. At that point, based
on 386 megawatts of installed rooftop solar, the cost to non-NEM
ratepayers was estimated at $20 million per year. Installed
rooftop solar is now over 800 MW so that cost has now at least
doubled. Although the total net cost of the NEM at that point
was less than one-tenth of one percent of total utility revenue
average net cost, the more telling cost that was reported was
that full retail NEM amounted to a cost of $0.12 per kilowatt
hour (kWh) to non-NEM ratepayers.
COMMENTS
1. Author's Purpose . The purpose of this bill is to allow
agricultural customers to combine electrical needs from
each of the meters on their properties, to be netted
against the amount of electricity produced. Agricultural
customers are a potentially large source of new renewable
energy generation. Farms in sunny areas of the state have
the potential to generate significant amounts of peak
summertime solar power, offsetting their own off-peak use,
and thereby benefiting other ratepayers by reducing peak
demand.
A typical farmer may operate a dozen or more different
irrigation pumps, an equipment shop, and perhaps a packing
or refrigeration facility, all located on contiguous
property. Currently, each of these locations is metered
separately and is considered an individual "account."
Electricity generated by a central facility to meet a
farm's average overall need currently cannot be credited
against the customer's total energy consumed and does not
reflect the true amount of "net" electricity provided back
to the utility.
2. Aggregate Net Metering: aka Wheeling . Larger electrical
users such as agricultural customers often have multiple
facilities which are each separately metered and separately
connected to the distribution system. When self-generation
resources such as solar or wind are installed to offset the
customer's load, the generation is directly wired to the
customer's side of the meter which achieves the state's
goal of reducing peak demand on the distribution grid. For
larger properties this means that each separately-metered
facility has to have its own renewable generation or each
facility has to be re-wired to run through one meter to
obtain the benefits of solar and meet the state's goals.
To avoid the expense of re-wiring a property, the intent of
this bill is to allow an agricultural customer to credit
the excess generation from one renewable facility against
all other separately metered service so that, on paper,
they receive the benefits associated with renewable
generation and the full retail NEM tariff for all metered
service. This is also referred to as the wheeling power
because the customer's load at the separately metered sites
is still fully serviced by the utility but the customer is
exempt from charges for that service to the extent that the
load is offset, on paper, by the renewable generation.
Exempting that NEM customer's service from transmission and
distribution costs shifts the costs to other customers.
Solar customer generators in every rate class have been
specifically excluded from aggregating usage going back to
the time of the first solar net-metering subsidy in 1995.
Conceptually the subsidy was structured to act like energy
efficiency incentives and to reduce the use of electricity
at the location at which it is generated. Aggregation
conflicts with that goal.
3. Customer Options . Other programs are available to meet
the customer's needs in this situation. First, under the
provisions of AB 920 (Huffman, 2010) currently being
implemented by the CPUC, the customer can now choose to be
paid for generation in excess of the customer's usage of
the solar generation. The committee heard from several
wineries during the deliberations on this bill and a
related bill SB 7 (Wiggins, 2010), that this program
modification for the NEM was important to their operations.
Another option for customer-generators is the
feed-in-tariff. This standardized contract allows small,
renewable generators to sell power to a utility at
predefined terms and conditions, without contract
negotiations. The customer is allowed to offset their load
when the renewable facility is generating power and be
compensated for generation not used and fed back to the
grid. When no generation is available to the customer they
draw and pay for power as a regular utility customer. This
program is more equitable in its application because the
renewable generation, power drawn from the grid, and
transmission and distribution usage, more accurately match
the true costs and use of service from the utility.
Customers prefer full retail NEM because they are exempted
from transmission and distribution costs even though they
benefit from and utilize the grid. Although full retail
NEM is not an energy procurement program, this is a cost to
other ratepayers of $0.12 per kWh. The consequence of this
bill is that the remotely metered facilities which have no
generation on the customer's side of the meter would be
eligible for this subsidy. It is important for the
Legislature to consider whether an investment of $0.12 per
kWh could be better spent elsewhere that would offer
broader green benefits to all ratepayers rather than the
individual NEM customers.
To avoid the cost shifting associated with full retail NEM
the author and committee should consider amending the bill
to strike the full retail NEM for the remotely metered
sites and instead permit agricultural customers to
aggregate their electrical load using a gen-to-gen NEM
which would credits the excess generation of the solar
facility against the electrical load of the remote
facilities at the generation rate not the full retail rate.
4. Related Legislation . The following bills in the current
session also modify the NEM program:
AB 1023 (Wagner) - code maintenance bill.
Status: Set in Assembly Judiciary Committee, May 10,
2011.
AB 1361 (Perea) - increases the size of
eligible generating solar and wind facilities under
the NEM to 5 MW. Status: Set for hearing in Assembly
Utilities & Commerce Committee April 25, 2011.
AB 1391 (Assembly Committee on U&C) - deletes
an outdated reporting requirement. Status: Pending
hearing in Assembly Natural Resources Committee.
SB 489 (Wolk) - designates all renewable
resources eligible under the state's RPS program to be
eligible for full retail NEM and increases eligible
systems to a size of 1.5 MW. Status: Set for hearing
in Senate Energy, Utilities & Communications
Committee, April 28, 2011.
1. Prior Legislation .
AB 51 (Blakeslee, 2010) - permitted aggregate
NEM for agricultural customers. Held on Senate
Appropriations Suspense File.
AB 2519 (Arambula, 2010) - permitted aggregate
NEM for agricultural customers. Held in Assembly
Utilities & Commerce Committee.
AB 1223 (Arambula, 2007) - permitted aggregate
NEM for agricultural customers. Held in Senate
Energy, Utilities & Communications Committee.
POSITIONS
Sponsor:
Agricultural Energy Consumer Association
Wine Institute
Support:
AEE Solar, Inc.
California Farm Bureau Federation
Chappellet Vineyard
Chateau Montelena Winery
Clarksburg Wine Growers & Vintners Association
Dolce Winery
Domaine Carneros
EnRoute Winery
Far Niente Winery
Fitzpatrick Winery & Lodge
Mainstream Energy Corp.
Napa Valley Vintners
Nickel & Nickel Winery
PacifiCorp
REC Solar, Inc.
Sierra Club California
Solar Alliance
Solaria
Union of Concerned Scientists
Oppose:
None on file
Kellie Smith
SB 370 Analysis
Hearing Date: April 28, 2011