BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 489 - Wolk Hearing Date: April 28, 2011
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As Introduced: February 17, 2011 FISCAL B
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DESCRIPTION
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 (MW). This program also exempts the
customer from paying transmission and distribution costs. This
is commonly referred to as full retail NEM.
Current law permits solar and wind NEM customers to roll-over
excess kWh beyond the first 12-month billing cycle or receive
compensation at a rate set by the CPUC for net surplus
generation.
This bill expands eligibility for the full retail NEM to all
renewable resources eligible under the state's Renewable
Portfolio Standard program (RPS) and increases eligible systems
to a size of 1.5 MW.
This bill repeals an expired pilot project which for "wholesale"
NEM that permits biogas digester customer-generators to offset
their electricity usage with electricity generated from methane
emitted from manure or other forms of biogas digestion, sized to
offset part or all of the eligible biogas digester
customer-generator's own electrical requirements.
BACKGROUND
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.
Biogas Digester Pilot - Another type of NEM is referred to as
"gen-to-gen" and was authorized for use for biogas digesters in
2002 as a pilot program. The program netted out the customer's
generation from a biogas digester against generation charges by
the utility on a time-of-use basis. The eligible biogas
digesters were fueled by methane derived from manure and other
animal waste. The program sunset in 2009 and was limited to
projects sized to 1 MW which offset part or all of a customer's
electrical load. The CPUC was to report on the program but did
not. Two utilities, San Diego Gas & Electric and Southern
California Edison, reported that they have, combined, only five
agricultural customers on this tariff; PG&E did not respond to a
request for data.
Interconnection Challenges - At the heart of the issue presented
by the supporters of this bill is the time and cost involved in
connecting to the distribution grid, commonly referred to as
interconnection. If a customer has renewable generation which
is sized to offset their own electric load such as a CSI
eligible solar system, a simplified interconnection process is
triggered and the interconnection fees for solar generation
sized less than 1 MW are waived. These small-scale systems do
not export much power to the grid and by design have less risk
of negatively impacting the local distribution network.
The distribution grid was designed decades ago to move power
from the generator, to transmission, to distribution, and
ultimately to the end-user when they flip on the light switch.
Small scale generation (e.g. 1 to 3 MW) such as biogas digesters
call on the grid to move power backwards and are usually located
in very remote areas with even more limits on available capacity
on the distribution network which triggers extensive engineering
studies. The resulting analysis calling for grid upgrades and
significant expense can make these small-scale renewable
projects economically unfeasible for the customer or small-scale
developer.
This bill will not address that issue for small scale renewable
generators that want to sell excess electricity back to the
utility.
The challenges of interconnection are being studied by the CPUC
due to increasing demand for renewable interconnection on the
distribution grid. According to the CPUC, small scale projects
can achieve quicker project development timelines compared to
largescale renewable energy projects as a consequence the
increase in market interest over the past two years has
overwhelmed the existing interconnection processes, leading to
an interconnection application bottleneck.
A number of challenges have been identified that impact both
project developers and grid operators as increasing volumes of
renewable DG attempt to interconnect to the grid. As a result,
the CPUC's Energy Division created the Renewable Distributed
Energy Collaborative a working group that convenes utility grid
operators, renewable DG project developers, renewable DG
technology experts, and policymakers to better understand the
issues and identify solutions.
COMMENTS
1. Author's Purpose . SB 489 proposes to open California's
Net Energy Metering (NEM) Program to all eligible forms of
renewable energy. This will allow agricultural businesses
and homeowners to more easily and economically convert
their renewable byproducts into clean renewable energy and
to off-set their electricity use, help reduce the need for
new power plants and transmission infrastructure and save
money on their power bills. Expanding the program will also
help the state reach both its greenhouse gas emissions
reduction goals and also its renewable energy goals.
2. Baseload Generation & NEM . The unique characteristic of
wind and solar is the intermittency of the electrical
generation. Other renewables such as biomass and biogas
digesters can run to coincide with the customer's
electrical load. In doing so, the customer is able to avoid
using the electrical grid and incurring transmission and
distribution costs while running the generator.
Consequently, the need for full retail NEM is not the same
as it is for solar and wind. If the non-intermittent
customer-generator (e.g. biogas) were permitted to use full
retail NEM, they would be paid for excess generation not
just based on the price for the power generated and put
back on the grid but the retail price a customer would pay
for the power if they were drawing it from the grid which
would include transmission and distribution costs.
Moreover, it is not clear that the full retail NEM program
would actually serve the needs of these customers since the
eligible generation can only be sized to the customer's
average load over 12-months. Incidental surplus generation
created by fluctuating demand and weather patterns could be
compensated but the ag customer could not intentionally
oversize the system to meet the customers fuel supply (e.g.
manure, rice straw, nut hulls).
3. Options . The committee is not aware of any reason why
all renewable generation on the customer's side of the
meter, and sized to offset all or a portion of the
customer's load, should not and could not take advantage of
net energy metering. However, the cost shifts of full
retail NEM at $0.12 per kWh should be avoided by using the
gen-to-gen NEM. The author and committee should consider
striking the content of this bill and instead reauthorizing
a gen-to-gen NEM program for all eligible renewable
resources.
This bill also increases the size of an eligible renewable
facility under NEM to 1.5 MW from 1 MW. One of the primary
reasons the sponsors are seeking a NEM tariff is that it
offers a simplified interconnection process at little or no
cost to the renewable generator. If the facility size goes
over 1 MW this simplified process is lost due to increased
complexity required by the ISO and federal law. The author
and committee should consider lower the facility size to 1
MW to ensure simplified interconnection is maintained.
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 1113 (Galgiani) - extends and expands the
biogas digester gen-to-gen NEM program. Status:
Pending hearing in Assembly Utilities & Commerce
Committee.
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 370 (Blakeslee) - permits aggregate NEM for
agricultural customers. Status: Set for hearing in
Senate Energy, Utilities & Communications Committee
April 28, 2011.
POSITIONS
Sponsor:
California Agriculture and Climate Network
Support:
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|Agriculture Council of |Hedgerow Farms |
|California |Lagier Ranches |
|Almond Hullers & Processors |Marin Sanitary Service |
|Association |Morris Grassfed Beef |
|California Alliance for Family |National Center for Appropriate |
|Farms |Technology |
|California Certified Organic |Okuye Almond Farm |
|Farms |Pena's Disposal Company |
|California Climate and |Phippen Bros. |
|Agriculture Network |Ridge Vineyards |
|California Farm Bureau |Roots of Change |
|Federation |Soil Born Farms Urban |
|California Refuse Recycling |Agriculture & |
|Council | Education Project |
|Californians Against Waste |Solano County Board of |
|Center for Land-Based Learning |Supervisors |
|Clean World Partners |Sustainable Agricultural |
|Clover Flat Landfill |Education |
|Community Alliance with Family |Sustainable Conservation |
|Farmers |Travaille and Phippen, Inc |
|Dixon Ridge Farms |Upper Valley Disposal Service |
|Earthbound Farm |Yolo County Board of |
|Ecological Farming Association |Supervisors |
|Environmental Defense Fund | |
|Food & Water Watch | |
|Full Belly Farm | |
| | |
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Oppose:
California Municipal Utilities Association
Southern California Edison
Kellie Smith
SB 489 Analysis
Hearing Date: April 28, 2011