BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 2228 - Negrete McLeod Hearing
Date: June 25, 2002 A
As Amended: June 19, 2002 FISCAL B
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DESCRIPTION
Current law requires all investor-owned electric utilities (IOUs)
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."
This bill creates a pilot net metering program for customer-owned
electric generation projects fueled by manure methane production
that are less than 1 megawatt (mw, which is equal to 1000 kw).
The net metered customer must employ a time-of-use meter to value
both their production and consumption of electricity, and only
gets credit at the generation rate. The maximum amount of
generation capacity allowed under this pilot is 5 mw per utility
and bills will be issued annually.
This bill sunsets its provisions on January 1, 2006.
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.
The manure methane production facilities described by this bill
generate fuel through the breakdown of animal wastes, primarily in
dairies. The manure is collected and stored in ponds or digesters
where it decomposes, or is "digested," releasing methane. The
methane is collected and used to fuel a combustion engine or
turbine which then produces electricity.
Last year in SB 5X (Sher), Chapter 7, Statutes of the First
Extraordinary Session of 2001, the Legislature appropriated $10
million to be used for grants for encouraging manure methane power
projects. The California Energy Commission program mandated by
the bill provides 50% of the capital cost for such projects.
Supporters of this bill believe manure methane production provides
benefits that go beyond simply generating electricity. They note
that manure can contaminate groundwater and pollute the air with
ammonia, methane, and particulate matter. Digester gas
technologies are becoming operational. A manure methane
production facility in Chino, which opened in June, will be able
to process 225 tons of manure daily, producing 500 kilowatts (kw)
of electricity which will be used to power the digester and
partially power a water desalination plant.
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 energy consumed by the customer.
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/kilowatt hour (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, reducing the benefit of net metering. The net
metered customer would continue to pay the non-generation parts
of the retail electric rate, but only on the amount of
electricity delivered by the utility.
2)Time of Use . Electricity costs more during peak times.
Wholesale electricity bought off-peak can cost less than
$0.01/kwh, while that 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
at the least expensive time. Allowing the quantity of
electricity generated to be netted against the quantity used
provides a significant benefit to the net metered customers - a
benefit financed by all of the non-net metered customers.
This bill recognizes the changing cost of electricity during the
day by requiring net metered customers with a capacity greater
than 10 kw to utilize time-of-use meters. Under this change,
the electricity generated by the customer during peak times
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 is to
pay the net metered customer at the rate the utility charges for
its generation - no more and no less.
3)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
that 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, placing such language
into SB 1519 (Bowen), SB 1871 (Monteith), SB 1755 (Soto), and AB
80 (Havice). As such, the author and committee may wish to
consider adding the anti-cost shifting language to this measure.
4)What Does "Delivered" Mean? The bill provides that all
non-generation charges shall be based on the total kwh delivered
by the utility (Page 5, Line 26). The bill also provides that
bills will be rendered annually. Suppose during the first half
of the year, the customer consumes 500 kwh of which 200 kwh is
generated by the customer's manure-methane system and 300 kwh
comes from the utility. During the second half of the year the
customer consumes 500 kwh of which 700 kwh comes from the
customer's manure-methane system. Is the utility delivered
electricity 300 kwh or 100 kwh? 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?
5)Interconnection Charges . Interconnecting large, customer-owned
generation devices will require engineering studies, reviews,
and potentially the installation of interconnection facilities,
safety devices, and upgrades to transformers, circuit breakers,
and wires. 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.
6)Who Pays for the Meter? If a new meter is required to allow for
the measurement of energy production and consumption during the
time-of-use intervals, this bill provides that the customer
shall pay the cost of the meter (Page 3, Line 21).
7)Inconsistency with Related Bill . This committee is scheduled to
consider AB 58 (Keeley) during today's hearing. AB 58 extends
the sunset on large wind and solar net metering facilities.
Both AB 58 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 similar, is not
identical and there are a few issues the committee may wish to
reconcile.
a) AB 58 requires the utility to pay the customer for any
surplus electricity generated over a 12-month period. This
bill allows the utility to keep the surplus without paying.
This may be the preferable approach because the net metering
statutues are intended to allow the customer to meet his own
load, but not to "profit" as if it were a power generator.
b) AB 58 bars the imposition of stand-by fees. This bill
bars stand-by fees if they are already covered in
transmission and distribution charges. This may be the
fairer approach for large net metered customers.
8)Does It Really Work? While turning manure into something useful
is a superb goal, the technology to accomplish that goal is at
best in its infancy. Given that the state is investing $10
million in the technology and that there will be a cost to
ratepayers, the author and committee may wish to consider
requiring a report from the CEC which assesses the success of
this program in producing electricity and eliminating
environmental hazards.
9)Combustion Engines . Unlike traditional net metered technologies
which produce electricity directly, the manure methane projects
require combustion engines or turbines to produce electricity.
The air quality rules for these engines will be set by local air
quality management districts. The rules established under SB
28X (Sher), Chapter 12, Statutes of the First Extraordinary
Session of 2001, won't apply because the engines won't be
operational by September 1, 2002.
10) Technically Speaking . The bill
contains conflicting provisions regarding the payment of
non-generation charges. The author and committee may wish to
consider deleting the sentence beginning on page 4, line 7 that
starts with "The charges for all retail rate components ?" to
eliminate the conflict.
ASSEMBLY VOTES
Assembly Floor (75-0)
Assembly Appropriations Committee (23-0)
Assembly Utilities and Commerce Committee
(16-0)
POSITIONS
Sponsor:
Inland Empire Utilities Agency
Support:
Association of California Water Agencies
Chino Basin Watermaster
Inland Empire Utilities Agency
Pacific Gas and Electric Company (if amended)
Southern California Edison
Western United Dairymen
Oppose:
California Solar Energy Industries Association
Randy Chinn
AB 2228 Analysis
Hearing Date: June 25, 2002