BILL ANALYSIS �
SB 1537
Page 1
SENATE THIRD READING
SB 1537 (Kehoe)
As Amended May 1, 2012
Majority vote
SENATE VOTE :32-6
UTILITIES & COMMERCE 10-2
APPROPRIATIONS 11-5
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|Ayes:|Bradford, Fletcher, |Ayes:|Blumenfield, Bradford, |
| |Buchanan, Fong, Roger | |Charles Calderon, Campos, |
| |Hern�ndez, Huffman, Ma, | |Davis, Gatto, Hall, Hill, |
| |Nestande, Skinner, | |Lara, Mitchell, Solorio |
| |Swanson | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Fuentes, Knight |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
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SUMMARY : Prohibits the California Public Utilities Commission
(PUC) from adopting any new charges that only apply to customers
with a net metering tariff until January 1, 2014. Specifically,
this bill :
1)Imposes a moratorium on PUC from adopting any new demand
charge, standby charge, customer charge, minimum monthly
charge, interconnection charge, or other fixed charge that
applies only to Net Energy Metering (NEM) customers who
receive net metering pursuant to Public Utilities Code Section
2827.
2)Sunsets this moratorium on January 1, 2014.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, negligible fiscal impact to PUC.
COMMENTS :
Author's Statement . A recent filing by San Diego Gas and
Electric Company (SDG&E), subsidiary of Sempra Energy, exposed
solar producers' vulnerability to drastic electric rate
restructuring. In SDG&E's filing they proposed to increase
certain charges paid by solar producers by over 600% while only
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increasing the same charge to non-solar producers by 52%. The
overall bill impact for a typical solar producer would be an
increase of 40% or more and only a 6% increase to a non-solar
producer. The filing would disproportionately increase costs to
solar producers when compared to non-solar producers.
In recent years, many entities that have gone solar have done so
using a financing mechanism which amortizes the cost of their
investments over as much as 25 years. The savings these
entities realize on their electricity bills often times just
barely offset the cost of the financing. By introducing drastic
rate hikes on solar producers such as those contemplated by
SDG&E, many times these entities' investments will go upside
down, resulting in a solar producer having a total monthly cost
greater than those who do not have solar. Among the largest
investors in solar technology in the state are school districts,
water districts, and local governments. Drastic electricity rate
fluctuations have the potential to derail this state's renewable
energy goals.
Net Energy Metering . Under NEM, the electric utility is
required to "buy back" all electricity generated by a
customer-owned generator that is not consumed by the customer
on-site. The price is set by the applicable retail rate under
the customer's existing contract. When the customer generates
electricity, he/she uses most of it for his or her own facility.
At the end of each 12-month NEM period, the electric
corporation calculates the amount of electricity distributed to
the grid by the customer and reduces the customer's annual bill
by the amount of electricity generated by the customer. If the
customer consumes more electricity than their facility
generates, the utility calculates a bill based on the net
consumption of utility delivered in kilowatthours.
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
customers. In addition, NEM customers are allowed to use excess
bill credits to offset their obligation to contribute to public
goods 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).
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Who benefits from NEM ? If the customer leases or enters into a
Power Purchase Agreement (PPA) for a solar facility on their
premises, the financier monetizes the value of NEM by charging
customers either a monthly fee or a charge for electricity. The
monthly fee or charge is calibrated to provide a net discount of
approximately 10% off of the customer's pre-solar electricity
bill. This allows the financier to "monetize the value of NEM."
The financier also retains the federal tax credit and
depreciation, the state solar incentive, ownership of the
renewable and environmental attributes. They also retain
ownership of the solar facility and retain the right to approve
any change in ownership of the premises upon which the solar
facility is located. In some contracts, the monthly charge
escalates annually over the term of the contract.
NEM cost shift . Because the cost of NEM is paid for by
ratepayers, the Legislature has limited the total capacity
(megawatts) of NEM accounts (since its inception) 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,
PUC decided to redefine 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.
Network Use Charge . In 2011, SDG&E, as part of its general rate
case proposed a new rate element called a Network Use Charge
(NUC) for all customers. The impact of 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. The
solar industry complained that NUC charge would adversely impact
the market for solar because the facility economics would be
undermined. PUC dismissed NUC proposal from the rate case.
Moratorium on NEM applies only to Investor Owned Utilities
(IOUs) . While there are six IOUs serving Californians, there
are also 45 electric Publicly Owned Utilities (POUs) in
California serving approximately 25% of all Californians. This
bill does not apply to POUs. Most POUs in California already
limit NEM credits so that the cost of using and maintaining
utility services must be paid by NEM customers. In regions
served by the Sacramento Municipal Utility District and Los
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Angeles Department of Water and Power, the solar market appears
to be thriving.
PUC examining rate structures . PUC issued an Order Instituting
Rulemaking to examine residential rate structures. Excerpts
from PUC order illustrates the complexity of statutory
restrictions on rate design that have allow NEM subsidy to be
maximized:
A potential benefit of establishing a different rate
design could be a smoother transition for NEM
customers. Each IOU has requested changes to the
rates structures to accommodate the increasing amount
of electricity generated by such customers. The
current policy for NEM customers offers a bill credit
to offset the customer's electricity bill at fully
bundled residential rates. NEM customers avoid paying
all charges that comprise the bundled rate for the
amount of generation they produce. Some of these
costs are then borne by non-participating customers
who fall into Tiers 3 and 4, which have raised equity
concerns about cost-shifting. Additionally, this may
also allow NEM customers to avoid paying for
distribution grid upgrades needed to integrate their
generation. A more efficient and equitable rate
structure could address these "cost causation" issues
in a fairer manner, and in a way that does not harm
solar investments.
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083
FN:
0004852