BILL ANALYSIS Appropriations Committee Fiscal Summary 426 (Richman) Hearing Date: 8/28/03 Amended: 7/10/03 Consultant: Lisa Matocq Policy Vote: A & W 10-2 E, U & C 5-2 ____________________________________________________________ ___ BILL SUMMARY: AB 426 requires the Department of Water Resources (DWR) to establish a program to lease space above the state water project to private entities for the purpose of installing solar panels to generate electricity. Fiscal Impact (in thousands) Major Provisions 2003-04 2004-05 2005-06 Fund DWR Increased of costs of $280-300 annually, General/ offset by lease revenues Various STAFF COMMENTS: SUSPENSE FILE. The bill, among other things, requires DWR to, upon request, evaluate proposals for installing solar photovoltaic systems. The requester pays for the evaluation. It also allows requires DWR to recover its costs from lease revenues. DWR leased space to wind energy producers to install facilities in the Altamont area. The arrangement resulted in litigation which, to date, has cost state water project contractors more than $3.5 million. DWR also negotiated an agreement with a telecommunications company to use the state water project right-of-way to install a fiber optic cable, in exchange for communications and surveillance services by the company. Apparently, this arrangement has been successful. Recent author amendments reduce costs by (1) requiring, rather than authorizing, DWR to charge lease fees that are at least sufficient to cover its costs, (2) clarifying that the lessee is responsible for connecting the solar panels to the grid, and (3) requiring that contracts include a hold harmless agreement protecting the state from liability arising out of any injury or damage resulting from the installation, operation or maintenance of the solar panels. STAFF RECOMMENDS that the bill be amended to require that DWR negotiate lease revenues based on fair market value.