BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1537|
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THIRD READING
Bill No: SB 1537
Author: Kehoe (D)
Amended: 5/1/12
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 10-1, 4/24/12
AYES: Padilla, Corbett, De Le�n, DeSaulnier, Emmerson,
Kehoe, Pavley, Rubio, Simitian, Wright
NOES: Berryhill
NO VOTE RECORDED: Fuller, Strickland
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/24/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
SUBJECT : Energy: rates: net energy metering
SOURCE : Sullivan Solar
DIGEST : This bill prohibits the Public Utilities
Commission (PUC) from adopting any new demand charge,
standby charge, customer charge, minimum monthly charge,
interconnection charge, or other fixed charge that applies
only to customers receiving electric service pursuant to a
net energy metering contract or tariff until January 1,
2014.
ANALYSIS : Existing law establishes the California Solar
Initiative (CSI), a $3.6 billion program which provides
incentives for the installation of solar photovoltaic
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systems for customers of the state's investor-owned
utilities (IOUs) and publicly owned utilities (POUs).
Existing law requires the state's IOUs, 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 renewable energy
system against the customer's usage of electricity sold by
the utility, on a kilowatt hour (kWh) basis, a procedure
known as "net energy metering" (NEM). Participation by all
utilities is capped at 5% of each utility's aggregate peak
electricity demand and the size of renewable energy systems
is limited to those that will offset all or part of the
customer's own electrical requirements to a maximum of one
megawatt (MW). This program also exempts the customer from
paying transmission and distribution costs. This is
commonly referred to as full retail NEM.
Existing law permits NEM customers to roll-over excess kWh
beyond the first 12-month billing cycle or receive
compensation at a rate set by the PUC for net surplus
generation.
This bill creates a one-year moratorium on the PUC adopting
any new demand charge, standby charge, customer charge,
minimum monthly charge, interconnected charge, or other
fixed charge that only applies to NEM customers.
Background
NEM . 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
renewable energy systems are eligible for the full retail
NEM tariff under which the electricity purchases of the
customer are netted against the electricity generated by
the customer's own renewable 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
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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 renewable energy customer at the full
retail rate, the utility is using ratepayer funds to pay
the renewable energy 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 renewable energy 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 made the
CSI so successful. Due to the intermittent nature of solar
and the original costs of installation, at the program's
inception rooftop systems would not pencil out for most
customers without the exemption from transmission and
distribution costs provided by full retail NEM. The
program has been known to be a subsidy but one historically
thought worth its value by the Legislature as part of its
effort to stimulate the solar industry and bring down the
costs of solar which has occurred.
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
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costs typically comprise one-half to two-thirds of a
residential customer's billing.
In March, 2010 the PUC issued a report which analyzed the
cost of full retail NEM to non-NEM ratepayers. At that
point, based on 386 MWs of installed rooftop solar, the
cost to non-NEM ratepayers was estimated at $20 million per
year. Installed rooftop solar now exceeds 112,000 projects
with 1,173 MWs installed in the IOU territories so that the
cost impacts would have likely tripled since the time of
the study. The most telling impact of that study was that
full retail NEM amounted to a cost of $0.12 per kWh to
non-NEM ratepayers.
NEM cap/new math . When the Legislature increased the cap
on NEM to 5% of the utility's aggregate customer peak
demand in 2009, the capacity was designed to coincide with
the capacity goals of the CSI and therefore had a form of
sunset. However, after 15 years of using one set formula
for the cap calculation, the PUC has suddenly decided to
consider that maybe it's been using the wrong math all of
this time. The PUC has issued a proposed decision using
the new math which is estimated to at least double the MWs
of rooftop solar permissible under the cap which is
contrary to Legislative intent.
Network Use Charge . Last fall San Diego Gas & Electric
Company (SDG&E), as part of its general rate case proposed
a new rate element - a Network Use Charge (NUC) - for all
customers. The impact of the NUC would have been to charge
customers for their actual use of the electric distribution
grid as power comes in from the grid and, in the case of
solar customers, as power is exported to the grid. Non-NEM
customers are already paying more than their share of
distribution grid charges for power they use; NEM customers
do not. Consequently NEM customers would have been subject
to costs for the power coming and the power going out for
the first time. �Note: Non-residential NEM customers do
have some fixed charges.] Consequently the impacts of the
NUC would have fell on NEM customers.
The PUC presiding commissioner on the case opined that
"development of such a rate element could affect not only
SDG&E and solar customers, but also PG&E, Southern
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California Edison and other distributed generation and
self-generation customers and needed to be considered
outside of a rate case. The NUC proposal was dismissed
from the rate case."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, likely
one-time costs of hundreds of thousands of dollars to the
General Fund and special funds to offset the costs of net
energy meeting until 2014.
SUPPORT : (Verified 5/24/12)
Sullivan Solar (source)
AEE Solar, Inc.
Cities of Encinitas and Solano Beach
Mainstream Energy Corp.
Mission Bay Aquatic Center
REC Solar, Inc.
School Energy Coalition
Solar Energy Industries Association
OPPOSITION : (Verified 5/24/12)
Public Utilities Commission
RM:kc 5/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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