BILL ANALYSIS
SB 118
Page 1
Date of Hearing: August 25, 2004
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
SB 118 (Bowen) - As Amended: August 23, 2004
SENATE VOTE : Not revelant.
SUBJECT : Solar energy generation.
SUMMARY : Establishes a Solar Energy Peak Procurement Program in
the California Public Utilities Commission (PUC) and a Solar
Rebate program within the California Energy Commission (CEC) for
the installation of grid connected solar energy systems as
specified and requires the development of a Solar Peak Energy
Affordable Housing Revolving Fund in the State Treasury.
Specifically, this bill :
1)Deletes previous contents of this bill dealing with conflicts
of interest for PUC Commissioners.
2)Requires CEC to create a solar energy rebate program by no
later than July 1, 2005 to support the installation of grid
connected solar energy systems and to adopt a schedule of
declining rebates.
3)Requires PUC to establish the Solar Energy Peak Procurement
Program to be funded by reducing purchases of electricity
during peak demand periods, spending unallocated funds
previously authorized for demand management and interruptible
programs, and substituting a photovoltaic incentive program
for less cost effective demand management and interruptible
programs.
4)Specifies that the maximum rebate in year one to be no more
than three dollars per watt and decline annually to the goal
of zero by January 1, 2015. The intent of the program being
that it would only last for ten years.
5)Specifies that the intent of the Legislature is to fund the
program at a level of $100,000,000 annually without raising
rates or fees.
6)Specifies that 5% of funding in the solar energy system rebate
program go towards supporting the installation of grid
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connected solar energy systems for affordable housing.
7)Defines affordable housing to mean owner occupied housing or
rental housing development for extremely low income
households, very low income households, lower income and
moderate income households.
8)Requires PUC by June 30, 2005 to develop a zero interest
revolving loan program to finance grid connected solar energy
systems for affordable housing projects funded out of the
Solar Peak Energy Affordable Housing Revolving Fund in the
State Treasury.
9)Allows electricity generated from net metered solar energy
systems to be counted towards meeting renewable portfolio
standard (RPS) targets.
10)Increases the cap on net metering from one half of 1% to 3%
of electric service provider's aggregate customer peak demand.
11)Establishes the Solar Peak Energy Procurement Fund in the
State Treasury.
12)Adds double joining language with AB 2006 (Nunez).
EXISTING LAW :
1)Specifies the development of a public goods surcharge to fund
energy efficiency, renewable energy, and research, development
and demonstration programs from January 1, 2002 to January 1,
2012. The surcharge is a nonbypassable element of the local
distribution service and collected on the basis of usage.
2)Establishes a program of assistance to low income electric and
gas customers called the California Alternate Rates for Energy
(CARE) program that establishes a discount on electric and gas
bills for eligible customers.
3)Establishes a net metering program whereby residential and
other customers can receive credits to their monthly
electricity bills for up to 12 months for producing and
placing electricity on the grid via photovoltaic or other
renewable generation as specified in statute. Larger net
metering programs require the customer to calculate how much
electricity has been placed and taken off the grid via
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customer generation in order to calculate the appropriate
generation charge to credit and collect public goods charges.
4)Establishes incentive programs for photovoltaic technologies
within CEC and PUC. These programs offer varying degrees of
incentive payments per kilowatthour for residential or
commercial customers purchasing certain types of renewable
technology like photovoltaic cells.
5)Establishes tax exemptions for property tax, interest on loans
or personal or corporate income tax credits for customers as a
result of increasing energy efficiency or purchasing renewable
technology like solar or wind.
FISCAL EFFECT : Unknown.
COMMENTS :
Solar Energy Rebate Program: This bill establishes a solar
energy rebate program within PUC and CEC to assist residential
and commercial customers in purchasing photovoltaic technology.
The program is structured to capture unused funds from demand
side reduction and interruptible programs administered by PUC.
Furthermore, the assumption is that as the program proceeds and
more customer generation via photovoltaic is placed on the grid
relieving investor owned utilities (IOU) from purchasing
expensive electricity during peak times the savings captured
through rates would go towards expanding the solar rebate
program.
Under this bill the rebates would decline over the life of the
program and sunset on
January 1, 2015. This bill also dedicates 5% of the total
amount of the fund available for rebates toward supporting the
installation of photovoltaic technology for affordable housing
and rental developments. This bill also requires PUC to create
by June 30, 2005 a zero interest revolving loan program to
finance the installation of photovoltaic technology for
affordable housing and rental developments.
Funding mechanism for the solar rebate program: Under this bill
the solar energy rebate program is developed out of using
unexpended funds in PUC interruptible program and demand
response program. Currently, the unexpended balances in these
two programs are $137 million for the interruptible program and
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$3 million for the demand response program. This bill proposes
to use money that would otherwise go towards these programs and
redirects them toward the solar energy rebate program.
Funding method is questionable for solar rebate program. It is
unclear whether redirecting unexpended balances in these two
programs will result in funding being available for the solar
rebate program since the costs associated with curtailment and
demand response programs have yet to fully materialize since
IOUs have until the completion of their next general rate case
and their next long term procurement filings to expend the rest
of the funds. Furthermore, decisions regarding the cost benefit
analysis between curtailment and demand response programs and
customer generation should be analyzed in the procurement
proceedings at PUC versus through legislation.
This bill should be clarified to state that the $100 million
funding cap is a ceiling not a floor. This bill states that it
is the intent of the Legislature that this program be funded at
a level of $100 million annually and that this program should
not result in a rate or fee increase. Suggested Amendment is to
require that this bill say the intent of the Legislature is to
fund the program up to $100 million annually instead of at a
level which clarifies that the amount is a ceiling and not a
floor.
Language on prohibiting any increases on fees or surcharges
should be strengthened. It should be made clear to PUC that the
creation of a solar rebate program should come out of changes in
existing policy that favors established programs like
interruptible and demand response programs in lieu of customer
generation programs. Suggested Amendment for this bill is to
provide solar rebates on a first come first serve basis.
Language should say that PUC is prohibited from increasing rates
to provide additional rebates even if the demand for the rebates
exceeds the funds available.
Solar rebate program should be integrated with PUC long term
procurement proceeding. This bill should be coordinated with
decisions made by PUC on demand side management, interruptible,
and long term procurement decisions in order to provide more
consistency with existing decisions on procurement and resource
adequacy.
Keep net metering cap at current level but require PUC at the
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next procurement filing for the IOUs to phase out some of the
interruptible program, demand reduction programs in lieu of a
Solar Rebate Program. Currently PUC has issued temporary
decisions on IOU interruptible programs and demand reduction
programs and integrated them into the long term procurement
proceedings. Suggested Amendment is to require PUC in the next
long term procurement proceeding begin the process of phasing
out some portions of the existing interruptible and demand
reduction programs for a new program that puts solar generation
facilities on residential and commercial homes after making a
determination of what is in the best interest for ratepayers.
Implement a voluntary dynamic pricing program tied to the solar
rebate program. PUC is working on the development of real time
and time of use pricing in the Energy Action Plan (EAP) adopted
by PUC, CEC and the California Power Authority. The goal of EAP
is to implement a voluntary dynamic pricing system to reduce
peak demand by as much as 1,500 to 2,000 MW by 2007. This goal
is consistent with a phase in of a solar rebate program since an
increase in the participation of dynamic pricing would mitigate
the cost shifts accompanying an expansion of net metering.
Suggested Amendment is to require PUC to integrate and
prioritize any future dynamic pricing program with the
development of a solar rebate program. This would modernize
residential and commercial meters and lay the foundation to
allow the generation costs of the production of electricity from
solar systems to be separated.
Plethora of incentives, credits, and tax reductions for solar
energy: This bill establishes a program to supplement not
supplant existing programs to encourage the growth of
photovoltaic technology for both residential and commercial
application. There are rebate programs within CEC and PUC
funded through the Public Goods Charge on monthly utility bills,
to provide incentives for purchasing and installing renewable
generation technology like solar and wind. Furthermore, there
are tax credits and exemptions for interest on loans or personal
or corporate income tax credits for customers that make energy
efficiency improvements or purchase and installation of
renewable generation like solar or wind.
Suggested amendment to consolidate the plethora of incentives,
credits, and tax reductions for solar energy. This bill should
identify a single entity like an IOU to administer and market
the various incentives for purchasing and installing renewable
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generation. Currently, CEC, PUC and the Franchise Tax Board
administer various incentive programs for solar generation
technology but currently there is little to no coordination that
occurs between the various agencies to promote these programs.
This lack of coordination results in duplication of efforts and
lack of participation due to customers not knowing what
incentives are available to them. Suggested Amendment is to
also incorporate the inclusion of existing energy efficiency
programs within PUC into a single entity like an IOU for purpose
of administrating both the solar rebate program and the energy
efficiency programs since both are interrelated.
Local publicly owned utilities not required to participate in a
solar energy rebate program. This bill does not include a
similar requirement for local publicly owned utilities to
develop a solar rebate program. The absence of a similar
program for local publicly owned utilities would result in a
cost shift to IOU ratepayers since electricity generated through
an increase in residential and commercial solar generation would
benefit grid reliability for all customers not just IOU
customers.
REGISTERED SUPPORT / OPPOSITION :
Support
Southern California Edison
The Utility Reform Network (TURN)
Opposition
Pacific Gas and Electric (unless amended)
San Diego Gas and Electric (unless amended
Golbal Green (unless amended)
Sempra Energy (unless amended)
Analysis Prepared by : Daniel Kim / U. & C. / (916) 319-2083