BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 489|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 489
Author: Wolk (D)
Amended: 5/11/11
Vote: 21
SENATE ENERGY, UTIL. & COMM. COMMITTEE : 9-2, 4/28/11
AYES: Padilla, Fuller, Berryhill, Corbett, De Le�n,
DeSaulnier, Pavley, Rubio, Simitian
NOES: Strickland, Wright
SENATE APPROPRIATIONS COMMITTEE : 8-0, 5/26/11
AYES: Kehoe, Walters, Alquist, Lieu, Pavley, Price,
Runner, Steinberg
NO VOTE RECORDED: Emmerson
SUBJECT : Electricity: net energy metering
SOURCE : California Agriculture and Climate Network
DIGEST : This bill expands eligibility for the full
retail net energy metering (NEM) to all renewable resources
eligible under the states Renewable Portfolio Standard
Program (RPS). 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.
CONTINUED
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ANALYSIS :
Existing law
1.Requires the state's investor owned utilities, publicly
owned utilities
(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".
Participation by all utilities is capped at 5 percent of
each utility's aggregate peak electricity demand.
2.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 California Public
Utilities Commission (CPUC) for net surplus generation.
Background
Net Energy Metering
The primary benefit of the California Solar Initiative
(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.
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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
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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
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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
According to the author's office, 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.
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Expanding the program will also help the state reach both
its greenhouse gas emissions reduction goals and also its
renewable energy goals.
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.
Related Legislation
AB 1023 (Wagner) - code maintenance bill. Status: in
Senate.
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:
Pending hearing in Assembly Utilities & Commerce Committee.
AB 1391 (Assembly Committee on U&C) - deletes an outdated
reporting requirement. Status: Passed the Assembly 77-0.
SB 370 (Blakeslee) - permits aggregate NEM for agricultural
customers. Status: Placed on Senate Appropriations
Suspense file.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: Yes
According to Senate Appropriations Committee:
Fiscal Impact (in
thousands)
Major Provisions
2011-12 2012-13 2013-14
Fund
Public Utilities Commission Likely costs of $150 to $300
Special *
rulemaking
Increased energy costs to Unknown costs
Various
state agencies
* Public Utilities Commission Utilities Reimbursement
Account.
SUPPORT : (Verified 5/26/11)
California Agriculture and Climate Network (Source)
Agriculture Council of California
Almond Hullers & Processors Association
California Alliance for Family Farms
California Certified Organic Farms
California Climate and Agriculture Network
California Farm Bureau Federation
California Refuse Recycling Council
Californians Against Waste
Center for Land-Based Learning
Clean World Partners
Clover Flat Landfill
Community Alliance with Family Farmers
Dixon Ridge Farms
Earthbound Farm
Ecological Farming Association
Environmental Defense Fund
Food & Water Watch
Full Belly Farm
Hedgerow Farms
Lagier Ranches
Marin Sanitary Service
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Morris Grassfed Beef
National Center for Appropriate Technology
Okuye Almond Farm
Pena's Disposal Company
Phippen Bros.
Public Utilities Commission Ridge Vineyards
Roots of Change
Soil Born Farms Urban Agriculture & Education Project
Solano County Board of Supervisors
Sustainable Agricultural Education
Sustainable Conservation
Travaille and Phippen, Inc
Upper Valley Disposal Service
Yolo County Board of Supervisors
OPPOSITION : (Verified 5/26/11)
California Municipal Utilities Association
Southern California Edison
ARGUMENTS IN SUPPORT : The Inland Empire Utilities Agency
supports SB 489 and states, "IEUA has been a strong
advocate for development of renewable energy through
distributive generation programs, and has sponsored both
Biogas Net Metering and Renewable Energy Feed-In Tariff
legislation. As a municipal water district that has a
large energy load as well as the opportunity (through
available space and outstanding technical staff) to install
and operate a combination of solar, wind, biogas and other
renewable sources of generation, we recognize that water
agencies like IEUA throughout California can play an
important role in helping the state to diversify its mix of
energy resources and achieve the 33% Renewable Portfolio
Standard while reducing interconnection and administrative
costs for electricity suppliers. California's Net Energy
Metering Program currently offers a suite of options that
are intended to incentivize the development of renewable
energy projects throughout California. However, current
law constraints the types of renewable energy generation
that can participate in these programs as well as the value
of the energy that is generated. For example, some
programs, like solar and wind net energy metering, enable
the generator to obtain the retail value of the electricity
while other programs, such as biogas net metering do not"
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ARGUMENTS IN OPPOSITION : Southern California Edison
opposes SB 489 stating this bill "would expand the net
energy metering program by expanding the list of eligible
technologies, currently limited to solar and wind, to
include all RPS eligible renewable generation. The net
energy program provides an unfair subsidy to net exporting
customer-generators by paying for their generation at
retail rates, effectively failing to charge for
transmission, distribution and other services on all
exported power. This creates an ongoing cross-subsidy of
other customers to this customer class. Expanding the
range of eligible renewable technologies that qualify for
full retain net metering will likely increase the amount of
subsidy flowing to the customer-generator class of
customers at the expense of other ratepayers, and will put
upward pressure on the current net metering ceiling."
RM:rm 5/31/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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