BILL ANALYSIS �
SB 594
Page 1
Date of Hearing: June 25, 2012
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 594 (Wolk) - As Amended: May 15, 2012
SENATE VOTE : vote not relevant.
SUBJECT : Energy: net energy metering.
SUMMARY : Allows an electric utility customer to aggregate
their electricity usage on multiple meters for purposes of
establishing the maximum project size for renewable generation
and fuel cells for purposes of net energy metering (NEM).
Specifically, this bill :
1)Allows the electric utility to use the sum of the electric
load on multiple electric meters located on property adjacent
or contiguous to the property on which the generation facility
is located, if those properties are solely owned, leased, or
rented by the eligible customer-generator.
2)Allows the customer-generator to use the sum of the load for
purposes of establishing the maximum size generation renewable
generation to be used for both NEM credits and maximum rebates
allowed through the California Solar Initiative (CSI).
3)Allows aggregation of electricity usage of multiple meters for
purposes of establishing the maximum project size for fuel
cell customer-generation.
4)Prohibits an electric utility customer who uses aggregated NEM
from receiving compensation for surplus kilowatt-hours (kWh).
EXISTING LAW :
1)Authorizes the California Public Utilities Commission (PUC) to
fix the rates and charges for every public utility and
requires those rates and charges to be just and reasonable.
(451 Public Utilities Code)
2)Requires inclining block rates (known as tiers) on residential
customers. An Inclining Block Rate means that customers are
charged more for greater electricity usage. As a result,
usage in a higher tier is charged a higher price per kWh,
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irrespective of the cost of energy or energy services. (739
Public Utilities Code)
3)Establishes nonbypassable charges and recovery of those
charges via from customers of investor owned utilities.
(848.1 Public Utilities Code)
4)Created the California Alternate Rates for Energy (CARE)
program to provide affordable service to low-income
residential electric and gas customers and provides rate
discounts for CARE customers. (739.1 Public Utilities Code)
5)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, on a kWh basis, 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. (2827 Public Utilities Code)
6)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. (2827 Public Utilities Code)
7)Permits fuel cell customer-generators to participate in a
modified NEM program that allows electricity generation to be
credited at the full retail rate against the customer's usage
of electricity only. The fuel-cell customer generator pays
all non-energy charges. (2827.10 Public Utilities Code)
8)Allows a Renewable Energy Bill Credit Transfer allowing local
governments to transfer the excess bill credits related to
generation among various accounts for up to 250 MW. (2830
Public Utilities Code)
9)Provides for a standard fixed price contract for sale of
electricity to a local utility. (399.20 and 399.23 Public
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Utilities Code)
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement . Customers with multiple meters, for
example, farmers with separate meters for each of their
irrigation pumps and other functions, are currently required
to have separate renewable facilities for each meter to
utilize NEM. In some cases, customers are told they are only
allowed to have one facility on their premises connected to
one meter. Installing multiple facilities, if it is allowed is
incredibly costly and inefficient and does not allow the
customer to optimize the location of the renewable facility on
the property, since the incentive is to join the facility with
the largest energy usage. SB 594 removes this obstacle by
allowing customers to aggregate all the energy consumed at
each of their meters located on the same property as the
renewable energy facility, or on their contiguous property,
and net that use against the power produced at a single
renewable facility.
2)Who pays for NEM. The cost of NEM is paid by ratepayers. The
cost of NEM is not paid by utility shareholders (in the case
of a publicly owned utility, there are no shareholders, only
ratepayers). NEM allows utility customers to avoid paying for
the costs of using transmission and distribution
infrastructure and maintenance. Those costs are then shifted
to the non-NEM customer. In addition, NEM customers are
allowed to use excess bill credit to offset their obligation
to contribute to public good programs, such as the low-income
assistance program, energy efficiency programs, and renewable
energy rebates (customers on low-income assistance programs
are exempt from paying charges for public goods programs).
Because those costs are fixed, if one group of ratepayers
doesn't pay their share of these costs, those costs are
shifted to the remaining ratepayers. These costs typically
comprise 40% to 45% of a customer's bill.
3)Otherwise Applicable Tariff. The value of the NEM credit
varies based on the customer's electricity rate schedule
(known as a tariff). Each utility has multiple tariffs for
various customer types (e.g., residential, residential time of
use, multifamily, industrial, small commercial, commercial,
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street lights, agricultural, etc.). Each of these tariffs has
a variety of rates for a kWh of electricity - as low as
$0.08/kWh for a large agricultural customer, to as high as
$0.52/kWh for a residential customer (i.e., PG&E E-7 tariff
schedule).
SB 594 allows a transfer of credits between meters but is not
clear if the higher value of the kWh on one meter can be
transferred to a meter that is on a different, lower cost kWh
tariff.
The author may wish to consider an amendment to clarify that
the value of the NEM credit can only be applied at a rate
equal to the tariff on the meter to which the credit will be
applied.
4)Cap on NEM Cost Shift . Since the inception of NEM, the
Legislature has limited the total capacity (megawatts) of NEM
accounts, based on aggregated peak demand, in order to limit
the costs that NEM shifts onto other ratepayers utility bills.
The Legislature has periodically raised the cap. In 2010,
the Legislature approved a cap on NEM equal to 5% of
aggregated peak demand. Recently the 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 who 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). To the extent that aggregated NEM increases
the use of NEM, non-NEM customers will be further affected by
the cost shift.
In March 2010, the PUC issued a report which analyzed the
impact of NEM. 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 1,200 MW so that cost has now at least tripled.
However, the PUC NEM report did not fully quantify the NEM
cost shift, particularly for grid use and maintenance and
public purpose programs offset by NEM customers. Nor did it
quantify the cost of interconnection services.
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AB 2514 (Bradford, 2012) is pending in the Senate and would
require the PUC to study and report on the costs and benefits
of NEM by June 2013. When the PUC modified the capacity cap
on NEM it also included a provision it would not authorize new
NEM after January 1, 2015. The PUC has also initiated a study
to examine the costs and benefits of NEM and the impacts of
the program for nonparticipating customers. The study will
examine the costs and benefits by utility, customer class, and
income group and to consider possible revisions to NEM and
evaluate alternatives.
5)In addition to the costs shifts described above, SB 594 would
impose a new cost for non-NEM ratepayers: the cost of billing
services to calculate the credits and reconcile the billing
statements for an unknown number of meters located on adjacent
and contiguous properties. Opponents to the bill point out
that customers eligible for aggregated NEM may have one or
more accounts. Reconciling bill credits among various
accounts that are potentially on different tariffs imposes an
unknown administrative cost on non-NEM customers.
The author may wish to consider an amendment to allow the cost
of billing services to be charged to aggregated NEM customers.
6)Project Size Cap . Current NEM statute limits the maximum
project size to 1 MW and intended primarily to offset part or
all of the customer's own electrical requirements. Some of
the customers eligible for aggregated NEM may have electrical
requirements that are in excess of 1 MW. If aggregated NEM is
allowed, it may be necessary to clarify that the customer's
own electrical requirements applies to the sum of the demand
of all of the meters. Without clarification, some might
interpret the 1 MW project cap to apply to each meter. This
incorrect interpretation could have the unintended consequence
of increasing the maximum project size allowed under NEM.
The author may wish to clarify that the maximum project size
of 1 MW applies, regardless of the number of meters that are
aggregated.
7)Aggregated NEM, also known as "Wheeling. " This bill will
allow a customer to credit the excess generation from one
renewable facility connected to one meter against all other
separate meters so that, on paper, the customer receives the
benefits associated with renewable generation and the full
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retail NEM credit 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 NEM credit offsets the charges
for the services.
Currently, NEM customers are limited to offsetting their load
at only one meter. To the extent that SB 549 allows customers
to use generation at one site to offset demand at another
site, this amounts to wheeling. By allowing wheeling, the
cost of NEM will increase costs for non-NEM ratepayers to
cover the costs of NEM customers using wires and lines. In a
PUC decision on Virtual NEM for multifamily buildings, the PUC
recognized that customers with multiple meters may have
multiple service delivery points that are maintained by the
utility. The PUC considered adding a distribution charge for
this situation but instead limited Virtual NEM to single
Service Delivery Point.
Some supporters of this bill suggest that wheeling costs are
paid for through demand charges. Demand charges are a method
used to pay for the cost of extra equipment needed for a
commercial or industrial customer so that power is available
during peak demand. Facility-related demand charges are
calculated by using the maximum demand that occurs during the
billing period, which is the maximum average kilowatt input
indicated or recorded by instruments at 15-minute intervals.
Time-related charges vary by time period (on-peak, off-peak
and super-off-peak). Once the maximum demand is established
in each time period, the respective time period's maximum
demand is multiplied by the corresponding time-related demand
rate. Demand charges can vary based on the customer's
interconnection level (secondary, primary, or transmission).
Some utility rate schedules include demand charges. Some do
not. In addition to demand charges, these customers pay
transmission and distribution charges to cover the costs of
maintaining the grid.
The author may wish to consider an amendment to clarify that
customers who receive the aggregate NEM tariff shall pay their
proportionate share of grid usage charges for those kWh that
are wheeled among the aggregated meters.
8)NEM impacts on Publicly Owned Utilities (POU). The current
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statute applies to allow publicly owned utilities in
California, with the exception of Los Angeles Department of
Water and Power. For small POUs, the loss of revenue due to
NEM may cause rate increases to non-NEM customers to maintain
utility service. A small POU, with fewer ratepayers to spread
the costs to, would have to pass on proportionally higher
rates than utilities with more customers. In addition, one
POU has raised concern that aggregated NEM could have
electrical system impacts such as frequency and voltage
problems. Managing these problems and keeping systems stable
and reliable will require expensive system upgrades that would
ultimately be paid for by nonNEM customers. This may also be
true in the rural areas served by IOUs.
9)Support for Aggregated NEM. The PUC supports SB 594 because
it is "a helpful way to support the State's achievement of
distributed generation-related policy goals."
The PUC suggests one clarifying amendment to allow parcels
that are divided by a street, highway, or public thoroughfare
as long as they are otherwise contiguous, and under the same
ownership to qualify for aggregated NEM.
The PUC suggests also that this bill "would improve the cost
effectiveness of NEM by enabling larger more efficient
installations which represent a lower marginal cost to
ratepayers." It is unclear if NEM aggregation would alter the
participation rates in the NEM program between residential and
non-residential customers, however on a project for project
basis any subsidy would be the same (i.e., combining two 500kW
projects into one 1MW project would result in the same amount
of subsidy).
The School Energy Coalition and the Coalition for Adequate
School Housing also supports SB 594 as it addresses an
'inequity because schools and other multi-metered customers
may not receive full credit toward their true system-wide
electricity use."
10)Support and Opposition to Aggregated NEM . Supporters assert
that individuals who have multiple meters on their contiguous
parcels are precluded from the using the NEM program because
the cap on NEM is limited to load serving a single meter. In
the specific case of agricultural businesses, who may have
large parcels of land and several electric service drops to
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serve isolated loads (such as pumps) they argue that this
prevents them from combining the loads and installing a single
large solar facility.
A number of utilities have taken positions in opposition to
aggregated NEM. Their opposition centers on several issues
raised in this analysis: rate impacts to non-NEM customers,
administrative cost borne by non-NEM customers to administer
this program; potential impacts on electricity reliability.
11)Summary of proposed amendments . The author may wish to
consider the following amendments as discussed in this
analysis:
Add the following to 2827(4):
(C) If an eligible customer-generator chooses to aggregate
pursuant to subparagraph (A), the net metering tariff applied
to each meter shall be identical to the tariff on the meter
pursuant to Section 2827 (h) (2) (A, B, C, as applicable) such
that the credit is no more than the otherwise applicable
tariff for each kilowatthour that is credited to each meter.
(D) Section 2827 (h)(4) shall not take effect until the
commission has determined whether or not allowing
customer-generators to aggregate their load from multiple
meters will result in an increase in expected revenue
obligation for customers who are not net energy metering. In
making this determination, the commission shall determine if
there are any public purposes, or other non-commodity charges
that, compared to the net energy metering program that existed
prior to enactment, would otherwise be recovered from a
customer absent the aggregation under this paragraph, but that
the customer would no longer be paying as a result of the
aggregation. The commission shall make this determination no
later than March 31, 2013. If the commission determines that
allowing customer-generators to aggregate their loads from
multiple meters will increase any expected revenue obligation
from net energy metering, then section 2827 (h)(4) shall be
inoperative.
(E)For purposes of aggregating pursuant to subparagraph (A),
parcels divided by a street, highway or public thoroughfare
are considered contiguous as long as they are otherwise
contiguous and under the same ownership.
(F) For purposes of aggregating pursuant to subparagraph (A),
the maximum eligible renewable electrical generation facility
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shall have a total capacity of not more than one megawatt.
(G) Notwithstanding Section 2827(g), an eligible
customer-generator who chooses to aggregate pursuant to
subparagraph (A) shall remit to an electric utility providing
service charges for the cost of billing services.
RELATED LEGISLATION
Currently the Legislature is considered several bills related to
NEM:
AB 2514 (Bradford): requires a study by the PUC to investigate
and report on costs and benefits.
AB 2165 (Hill): expands the current NEM cap on fuel cell
facilities.
SB 1473 (Kehoe): places a moratorium on changes to NEM rates.
PRIOR LEGISLATION
A number of bills to allow aggregated NEM were introduced in
prior Legislative Sessions. All of these bills limited
aggregated NEM to agricultural customers. AB 594 is the first
bill to propose offering aggregated NEM to all customer classes
(residential, commercial, industrial, and agricultural
customers). None of the bills reached enactment:
SB 370 (Blakeslee, 2011)
AB 2519 (Arambula, 2010)
SB 1512 (Wiggins, 2008)
AB 51 (Blakeslee, 2008)
AB 1223 (Arambula, 2007)
REGISTERED SUPPORT / OPPOSITION :
Support
AEE Solar, Inc.
Ag Biomass Center, Inc.
Agricultural Energy Consumers Association (AECA)
American Farmland Trust
BLT Enterprises
California Climate and Agriculture Network (CalCAN)
California Compost Coalition
California Cotton Ginners and Growers Association (CCGGA)
California Farm Bureau Federation
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California Off-Road Vehicle Association (CORVA)
California Public Utilities Commission (CPUC)
California Solar Energy Industries Association (CALSEIA)
Citizens (4 letters)
City of American Canyon City Council
Clean World Partners
Coalition for Adequate School Housing (C.A.S.H.)
Community Alliance with Family Farmers (CAFF)
Creekside Ranch
D.T. Locke Ranch
Del Mesa Carmel Community Association
Dixon Ridge Farms
Domaine Carneros
Environment California
First Northern Bank
Four Winds Growers
Full Belly Farm
Green Build Energy Group
Hedgerow Farms
International Center for Peace and Development
Lundberg Family Farms
Mainstream Energy Corp.
Mira International
Napa County Board of Supervisors
Napa Valley Vintners (NVV)
REC Solar, Inc.
Recolte Energy
Regional Council of Rural Counties (RCRC)
Ridge Vineyards, Inc.
School Energy Coalition (SEC)
Sierra Club California
Solar Energy Industries Association (SEIA)
Sonoma Valley Unified School District
South San Joaquin Irrigation District
Sustainable Agriculture Education (SAGE)
Sustainable Conservation
Sustainable Napa County (SNC)
Swanton Berry Farms, Inc.
The Gasser Foundation
United Cerebral Palsy of the North Bay
Vista Livestock Company
Vote Solar Initiative
Western Agricultural Processors Association (WAPA)
Wine Institute
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Opposition
California Municipal Utilities Association (CMUA)
California State Association of Electrical Workers (CSAEW)
Coalition of California Utility Employees (CCUE)
Golden State Power Cooperative (GSPC)
Northern California Power Agency (NCPA)
Pacific Gas and Electric Company (PG&E)
San Diego Gas & Electric Company (SDG&E)
Southern California Edison (SCE)
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083