BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 489|
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UNFINISHED BUSINESS
Bill No: SB 489
Author: Wolk (D)
Amended: 7/12/11
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
SENATE FLOOR : 31-7, 6/2/11
AYES: Alquist, Berryhill, Blakeslee, Cannella, Corbett,
Correa, De Le�n, DeSaulnier, Dutton, Evans, Fuller,
Hancock, Harman, Hernandez, Kehoe, La Malfa, Leno, Lieu,
Liu, Lowenthal, Negrete McLeod, Padilla, Pavley, Price,
Rubio, Simitian, Steinberg, Vargas, Wolk, Wyland, Yee
NOES: Anderson, Calderon, Emmerson, Gaines, Huff,
Strickland, Wright
NO VOTE RECORDED: Runner, Walters
ASSEMBLY FLOOR : 59-18, 8/29/11 - See last page for vote
SUBJECT : Electricity: net energy metering
SOURCE : Author
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DIGEST : This bill revises the definition of an eligible
customer-generator to instead require that the generating
facility utilize a renewable source listed in the
definition of a renewable electrical generation facility
that is used for purposes of the Renewable Energy Resources
Program, administered by the State Energy Resources
Conservation and Development Commission (Commission). This
bill repeals an expired pilot project which for "wholesale"
net energy metering (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.
Assembly Amendments (1) require the generating facility be
a renewable electrical generation facility for purposes of
the Renewable Energy Resources Program administered by the
Energy Commission, (2) provide that a small hydroelectric
generation facility is not an eligible renewable electrical
generation facility if it will cause an adverse impact on
instream beneficial uses or cause a change in the volume or
timing of streamflow,
(3) make other conforming changes to reflect the repeal of
that pilot program, (4) require that the customer of an
electrical corporation use technology that the Commission
determines will achieve reductions in emissions of
greenhouse gases and meets emission requirements for
eligibility for funding pursuant to the self-generation
incentive program instead of an electrical corporation use
technology that meets the definition of an "ultra-clean and
low-emission distributed generation" in a specified statute
and (5) make other clarifying changes.
ANALYSIS : Existing law:
1.Establishes NEM for solar (typically photovoltaic, PV)
and wind electricity generating technologies. Requires
the state's investor owned utilities (IOUs) and publicly
owned utilities (POUs) (except the Los Angeles Department
of Water and Power) to provide a utility bill credit,
based on the retail price of electricity for every
kilowatt-hour of electricity generated by a
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customer-owned solar or wind system.
2.Establishes a pilot NEM for biogas generator projects up
to 1 Megawatt (MW) and 3 biogas projects with generating
capacity between 1 and 10 MW.
3.Establishes NEM for fuel cells until 2013, on a first
come first serve basis for up to 45 MWs of capacity or
22.5 MWs of capacity depending on the peak demand of an
electrical utility �45 MWs each in Pacific Gas & Electric
(PG&E) and Southern California Edison service areas and
22.5 MW in San Diego Gas & Electric service area] and
capped to a total of 112.5 MW.
4.Requires IOUs and POUs to apply the customer's NEM
credits to the entire customer bill so that a net metered
customer can 'zero out' their utility bill, which means
that by virtue of net metering, the following non-energy
cost could be offset:
A. Distribution costs (e.g., poles, wires,
transformers, service technicians, call centers, and
other customer services)
B. Transmission costs (e.g., high voltage transmission
lines used to deliver remotely produced energy at all
hours, including renewables)
C. Total Rate Adjustment Component - the cost shift
from lower tier below cost rates to the upper tiers)
D. California Solar Initiative (CSI)
E. Self-Generation Incentive Program
F. CARE (low-income support - residential only)
G. Low-Income Energy Efficiency (LIEE - residential
only)
H. Public Interest Energy Research
I. The Public Goods Charges for renewable energy,
energy efficiency, and demand reduction programs
J. Nuclear decommissioning
1.Allows NEM customer to connect their facility at no cost
to the net metering customer, regardless of whether
transmission or distribution upgrades are needed to
accommodate the new generation.
2.Requires the state's investor owned utilities to provide
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compensation or billing credits to NEM utility customer
for excess generation to when the customers' net metered
systems produces more electricity than the customer used
over a fixed time period.
3.Limits the maximum project size for net metering to no
more than 1 MW.
4.Requires IOUs and POUs to offer NEM to their customers
until the utility reaches five percent of each utility's
aggregate peak demand.
5.Establishes a net energy metering program that is
available to an eligible fuel cell customer-generator, as
defined. The existing definition of an eligible fuel
cell customer-generator requires that the customer of an
electrical corporation use technology that meets the
definition of an "ultra-clean and low-emission
distributed generation" in a specified statute.
This bill:
1.Allows technologies not currently eligible for NEM to
participate in utility-administered net metering programs
(biomass, solar thermal, geothermal, fuel cells using
renewable fuels, small hydroelectric generation
facilities that meet certain criteria, digester gas,
municipal solid waste conversion, landfill gas, ocean
wave, ocean thermal, tidal current, and any additions or
enhances to a facility using these technologies).
2.Retains current requirements that limit the maximum size
of the project to 1 MW, limits the generation from the
project to primarily offset on-site electricity demand
and limits the location of the project to on the premises
owned, rented, or leased by a customer of the electric
utility.
3.Retains the total capacity cap for net metering at 5% of
the utility's aggregate peak demand.
4.Repeals an existing NEM program for biogas generator
projects.
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5.Provides that a small hydroelectric generation facility
is not an eligible renewable electrical generation
facility if it will cause an adverse impact on instream
beneficial uses or cause a change in the volume or timing
of streamflow.
6.Requires that the customer of an electrical corporation
use technology that the Commission determines will
achieve reductions in emissions of greenhouse gases and
meets emission requirements for eligibility for funding
pursuant to the self-generation incentive program.
Background
Net Energy Metering
The primary benefit of the 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
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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 Public Utilities Commission (PUC) 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
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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 PUC 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
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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
PUC due to increasing demand for renewable interconnection
on the distribution grid. According to the PUC, 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 PUC'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, this bill proposes to
open California's 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.
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
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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.
AB 1113 (Galgiani) - extends and expands the biogas
digester gen-to-gen NEM program.
AB 1361 (Perea) - increases the size of eligible generating
solar and wind facilities under the NEM to 5 MW.
AB 1391 (Assembly Committee on U&C) - deletes an outdated
reporting requirement.
SB 370 (Blakeslee) - permits aggregate NEM for agricultural
customers.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the 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
costsVarious
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state agencies
* Public Utilities Commission Utilities Reimbursement
Account.
SUPPORT : (Verified 8/29/11)
Agricola
Agricultural Council of California
Agricultural Energy Consumers Association
Almond Hullers & Processors Association
American Farmland Trust
California Clean Energy Fund
California Climate and Agriculture Network
California Compost Coalition
California Farm Bureau Federation
California Grain & Feed Association
California Public Utilities Commission
California Refuse Recycling Council
California Rice Commission
California Seed Association
California Warehouse Association
Californians Against Waste
Capstone Turbine Corporation
CCOF
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
First Northern Bank
Food & Water Watch
Full Belly Farm
Hedgerow Farms
Inland Empire Utilities Agency
Intermountain Disposal
Lagier Ranches
Morris Grassfed Beef
National Center for Appropriate Technology
Occidental Arts & Ecology Center
Pacific Egg and Poultry Association
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Pacific Institute
Pe�a's Disposal Company
Phippen Bros.
Planning and Conservation League
Ridge Vineyards
Rominger Brothers Farms
Roots of Change
SAGE
Sierra Orchards
Soil Born Farms
Solano County Second District Supervisor Linda J. Seifert
Sustainable Agriculture Education
Sustainable Conservation
Swanton Berry Farm
Synergex International Corporation
Travaille and Phippen
Valley Fig Growers
Yolo County Board of Supervisors
OPPOSITION : (Verified 8/29/11)
California Municipal Utilities Association
Pacific Gas and Electric Company
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
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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"
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."
ASSEMBLY FLOOR : 59-18, 8/29/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Davis, Dickinson, Eng,
Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines,
Galgiani, Gatto, Gordon, Hayashi, Roger Hern�ndez, Hill,
Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma,
Mendoza, Mitchell, Monning, Nestande, Olsen, Pan, Perea,
V. Manuel P�rez, Portantino, Skinner, Solorio, Swanson,
Torres, Valadao, Wieckowski, Williams, Yamada, John A.
P�rez
NOES: Cook, Donnelly, Garrick, Grove, Hagman, Halderman,
Harkey, Jeffries, Jones, Knight, Mansoor, Miller,
Morrell, Nielsen, Norby, Silva, Smyth, Wagner
NO VOTE RECORDED: Gorell, Hall, Logue
RM:rm:nl 8/30/11 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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