BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 58 - Keeley Hearing Date:
June 25, 2002 A
As Amended: June 20, 2002 Non-FISCAL B
5
8
DESCRIPTION
Current law requires all energy service providers, which include
investor-owned electric utilities (IOUs), municipal utilities,
or any other entity 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, a procedure known as "net metering."
Current law allows net metering customers to employ solar or
wind electric generation systems as large as 1 megawatt (Mw).
This size limitation is reduced to 10 kilowatts (kw) as of
January 1, 2003.
This bill deletes that sunset, allowing net metering for systems
up to 1 Mw to continue indefinitely.
Current law doesn't limit the overall amount of net metered
capacity in any energy service provider's service area. As of
January 1, 2003, the overall amount of net metered capacity is
limited to one-tenth of 1 percent of the peak electrical demand
for each utility.
This bill raises the total cap on net metered capacity tenfold,
to 1 percent of the peak electric demand for each energy service
provider.
This bill requires net metered customers with a capacity of
greater than 10 kw but less than 1 Mw to use time-of-use meters
to measure electricity consumed and generated, and to value the
electricity appropriate to the time of use. The electricity
produced by the net metered customer is credited at the value
for electric generation at that time of use.
This bill requires that net metered customers are responsible
for non-generation charges based on the net kilowatt hours (kwh)
consumed.
This bill requires energy service providers to make all
necessary forms and contracts for net metered service available
on the Internet.
This bill requires the California Public Utilities Commission
(CPUC) to assess the cost and benefits of net metering and
report to the Legislature by January 1, 2007.
BACKGROUND
In 1995, the Legislature passed SB 656 (Alquist), Chapter 369,
Statutes of 1995, which required all electric utilities to buy
back any electricity generated by a customer-owned solar and
wind systems system. This buy-back program is known as "net
metering" because the electricity purchases of the customer are
netted against the electricity generated by the customer's solar
electric system. The generated electricity spins the meter
backward, making it equivalent to the customer using less
electricity. Thirty-five states have net metering programs today
with the maximum size of the net metered system limited to 100
kw.
Net metering was initially permitted for systems up to 10 kw
making it suitable for residential-sized applications. (A
typical residential net-metered system is 2 kw - 4 kw). The
total amount of capacity that could be net metered was capped at
0.1% of the utility load. In 2001, the Legislature passed AB
29X (Kehoe), Chapter 8, Statutes of the First Extraordinary
Session of 2001, which expanded the net metering program to
large commercial and industrial customers by raising the maximum
size of the net-metered system to 1 Mw and lifting the cap on
total net metered capacity. Because of concerns over the effect
of these changes, the provisions of AB 29X relating to net
metering were sunsetted on January 1, 2003.
There are about 2,200 net-metered customers today, with pending
applications for an additional 700. Total net-metered capacity
is about 6 Mw, with an additional 3 Mw pending. Including the
pending projects, total net-metered capacity in California is
only about 0.02% of utility peak load.
This bill makes a number of substantive changes to existing net
metering rules. Conceptually, the bill changes the concept of
net metering from one where the net metered customer is treated
the same as a non-net metered customer to one where the net
metered customer is considered a generator whose output is paid
for at the utility's cost.
COMMENTS
1)Credit Against Generation Cost Only . The original net
metering statute allowed the amount of generated electricity
to be credited against the amount of consumed energy. The
production was netted against consumption, which had the
effect of "paying" for generation at the full retail rate.
That retail rate includes not just the charge for the
electricity, but also the charges for distribution and public
purpose programs. On the average residential bill the cost of
generation is about $0.06-0.07/kwh while the total charge is
$0.13/kwh.
This bill gives the net metered customer credit for the
electricity produced at the cost of generation, not the full
retail rate.
The net metered customer would continue to pay the
non-generation parts of the retail electric rate, but only on
the net electricity consumed.
2)Time of Use . Electricity costs more during peak times.
Wholesale electricity bought off-peak can cost less than
$0.01/kwh, while the same electricity bought during the middle
of the day can cost $0.05/kwh or more. The current net
metering law doesn't account for this difference because it
credits the customer with electricity as if it were generated
during the most expensive time, even though the actual
generation may occur off peak. Allowing the quantity of
electricity generated to be netted against the quantity
consumed provides a significant benefit to the net metered
customers, a benefit that's paid for by non-net metering
customers. The value of the benefit is further enhanced
because, thanks to the tiered pricing structure adopted by the
CPUC last year designed to charge large energy users more
money per kwh used by increasing the cost per kwh as usage
increases. For the net metered customer, this means the
energy produced is in effect netted against the most expensive
energy consumed.
This bill recognizes the changing cost of electricity during
the day by requiring net metered customers with a capacity
greater than 10 kw to use time-of-use meters. Under this
change, the customer's system generated electricity during
peak times he would be credited the utility peak generation
rate. If the electricity were generated off-peak, the
customer would be credited at the utility's off-peak
generation rate. This change provides for a more accurate
accounting of the value of customer generated electricity.
Taken together, the effect of the time-of-use metering and the
credit at the generation rate will be to pay the net metered
customer at the rate the utility charges for its generation.
3)Wind Included? One of the concerns about AB 29X was that it
allowed large wind customers to net meter and get full credit
for their production, despite the fact that wind isn't as
reliable a power source as solar and its production doesn't
coincide as well with peak usage. The California Energy
Commission derates the capacity of wind power by about 80%
because it's not reliably available during peak usage times,
while solar electric applications are not derated at all.
However, by requiring that large net metered customers get
paid for production based on the time the power is generated,
this concern has been largely mitigated.
4)Recovery of DWR Charges and Utility Undercollection . This
bill retains the provision in current law regarding new
charges: No new or additional charge that would increase a
net metered customers costs beyond those of other customers in
the same rate class may be included (Page 4, Line 11). Under
this provision, the net metered customer would be responsible
for any Department of Water Resources (DWR) and utility
undercollections for power already delivered to the net
metered customer. However, charges for any stranded DWR
procurements could not be charged to the net metered customer.
Presumably charges for any undercollections will be assessed
on a per kwh basis, meaning the net metered customer will pay
these charges only on the total kwh delivered to the customer
by the utility. This committee has had a consistent policy of
imposing the requirement that a customer leaving utility
service not cause any costs to shift to remaining customers.
This bill doesn't incorporate the anti-cost shifting language
that the committee has asked to be incorporated into a number
of other bills including SB 1519 (Bowen), SB 1871 (Monteith),
SB 1755 (Soto), and AB 80 (Havice). As such, the author and
committee may wish to consider including that same anti-cost
shifting language into this bill.
5)Calculating Question . While the bill is clear that
non-generation charges must still be paid by the net metering
customer, it's not clear what the basis for such calculation
will be. If the customer consumes 500 kwh of which 200 kwh is
generated by the customer's system and 300 kwh comes from the
utility, are the non-generation charges assessed on the 300
kwh or the 500 kwh? If the charges are assessed on the 300
kwh supplied by the utility, is that offset by any surplus
customer generation made during the year? In other words,
does the customer's generation in excess of usage get credited
against the utility-delivered electricity for purposes of
calculating the non-generation charges?
6)Interconnection Charges . Expanding the maximum size of net
metered installations from 10 kw to 1 Mw (or 1,000 kw)
increases the likelihood that modifications to the utility
distribution system may be needed. Appropriate studies,
reviews, and installation of interconnection facilities,
including safety devices, and upgrades to transformers,
circuit breakers, and wires may be needed. In March 2002, the
California Public Utilities Commission (CPUC), in a unanimous
vote, issued an order (D.02-03-057) requiring utilities to be
responsible for the costs of the interconnection studies and
modifications to their distribution systems. The net metered
customer is responsible for the costs of interconnection
facilities necessary to meet safety and performance
requirements. This bill doesn't effect that order.
7)Inconsistency with Related Bill . The committee is scheduled
to consider AB 2228 (Negrete-McCloud) today, which allows net
metering for customers using biogas digesters. Both AB 2228
and this bill are similar in concept in that they both require
large net metered customers to use time-of-use meters, only
permit the credit for the generation component of the bill,
and bar the assessment of additional fees and charges.
However, the language in the two bills, while is similar, is
not identical, and a few minor issues are dealt with
differently:
a) This bill requires the utility to pay the customer for
any surplus electricity generated over a 12-month period.
AB 2228 allows the utility to keep the surplus without
paying. The author and committee may wish to consider
amending this bill to mirror the approach taken in AB 2228
because it's more consistent with the original intent of
the net metering statutes. That intent was to allow the
net metered customer to reduce its costs, but not to
"profit" as if it were a power generator.
b) This bill bars the imposition of stand-by fees. AB 2228
bars stand-by fees if they are already covered in
transmission and distribution charges. The author and
committee may wish to consider amending this bill to mirror
the approach taken in AB 2228 for net metered customers
with systems greater than 10 kw. Given that the ability to
remain connection to the grid and receive power upon demand
is a benefit that accrues to the net metered customer - and
that the CPUC is in the middle of reviewing stand-by
charges to make them more closely resemble the utilities'
actual cost - it may be unwise to provide net metered
customers with a blanket exemption from stand-by charges,
thus allowing them to shift those costs to other
ratepayers.
ASSEMBLY VOTES
Assembly Utilities and Commerce Committee
(17-0)
Assembly Floor (69-0)
POSITIONS
Sponsor:
Author
Support:
-----------------------------------------------------------------
|Abel Greenhouse Company |National Solar Power |
|Brummitt Energy Associates Inc. |Offline Independent Energy |
|CAL-AIR, Inc. |Systems |
|California Construction |Office of Ratepayer Advocates |
|Authority |PFG Energy Capital |
|California Solar Energy |Powerlight Solar Electric |
|Industries Association |Systems |
|City of Arcata |Real Goods Design & consulting |
|City of Santa Rosa |Group |
|Clean Power Campaign |Schott Applied Power |
|Coalition of California Utility |Shell Solar Industries |
|Employees |Short Electric |
|Dale Enterprises |Sierra Club |
|Enertron Consultants |Solar Depot |
|Harmony Farm Supply & Nursery |Solar Technologies |
|International Brotherhood of |UNI-SOLAR |
|Electrical |Verve Enterprises |
| Workers, Local 332 |15 |
|Marin County Community |Individuals |
|Development | |
| Agency | |
-----------------------------------------------------------------
Oppose:
None on file
Randy Chinn
AB 58 Analysis
Hearing Date: June 25, 2002