BILL ANALYSIS
AB 1348
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Date of Hearing: April 18, 2005
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Lloyd E. Levine, Chair
AB 1348 (Runner) - As Amended: April 7, 2005
SUBJECT : Electricity: voluntary time-of-use tariff rates.
SUMMARY . Requires every electrical corporation to file a
voluntary time-of-use rate with the California Public Utilities
Commission (PUC) which will be available to commercial and
industrial customers and customers with on site solar energy or
ultra clean distributed generation. Specifically this bill :
1)Requires electrical corporations to file a voluntary
time-of-use rate that allocates the costs of electricity and
distribution costs on a per kilowatt-hour basis without a
demand charge which will be available for:
a) Commercial or industrial customers with an
electrical usage of less than 1,000 kilowatts per month
or
b) Commercial or industrial customers that generate 25
percent or more of the electricity used by the customer
from a solar energy system or other ultra clean
distributed generation source.
2)States that commercial or industrial customers with an
electrical usage of less than 1,000 kilowatts per month or
that generate 25 percent or more the electricity used by the
customer from a solar energy system or other ultra clean
distributed generation source are eligible for net energy
metering.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to eliminate demand charges for larger electrical customers that
install on-site photovoltaic (PV) energy systems to meet part of
their electricity needs. The author believes that demand charges
provide a disincentive for the installation of on-site PV
generation since they reduce the potential rate savings from
solar energy systems.
AB 1348
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1) What is a demand charge? : Most residential customers of
electrical corporations are billed for their electrical usage by
paying one charge that covers all of the costs of providing them
electricity. Many commercial and industrial customers of
electrical corporations are billed by paying separate charges
which reflect the different costs to the utility. Their bills
have both an energy charge which reflects the costs of the
actual generation needed to provide the electricity and a demand
charge which reflects fixed costs that the utility incurs
regardless of the amount of actual electricity consumed. These
fixed costs include the costs of maintaining the transmission
and distribution system and the costs of holding power in
reserve in case demand increases.
When large customers install on-site generation they take less
electricity from the utility and their energy charges decrease
accordingly. The utility continues to be obligated to provide
those customers with the total amount of power they need. If
these customers' on-site generation malfunctions, none of their
energy demand will be offset by the on-site system. This
obligation to provide service on demand means the utility must
continue to incur the fixed costs of maintaining the
transmission and distribution systems needed to meet the
customer's peak demand and the costs of holding adequate
reserves to meet peak demand if the solar system fails.
Consequently, most larger customers with on-site generation are
obligated to continue to pay demand charges even though they are
taking less actual electricity from the utility.
Currently, Pacific Gas & Electric (PG&E) imposes a demand charge
on customers with peak demand at 500 kW or above. Southern
California Edison (SCE) and San Diego Gas and Electric (SDG&E)
both impose a demand charge for customers with peak demand at
20kW or above.
2) Net Metering : In order to help reduce the total costs of
installing on-site generation, the state has created a number of
programs that subsidize solar installation or off set some
installation costs. One program is net metering which allows the
customer's electric meter to spin backwards when they are
producing more electricity than they are consuming. By spinning
the meter backwards, the excess solar power offsets the power
the customer already consumed from the utility. However, net
metering only reduces the customer's generation charge and not
their demand charge.
AB 1348
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The author and sponsors of this bill believe that if net
metering can only be used to offset generation charges and not
to offset demand charges, large electricity customers will never
see a savings in their utility bill that is high enough to
offset the cost of installing the solar system. The hope is that
creating a rate category that eliminates the demand charge will
promote the installation of more solar energy systems.
3) Cost Shifts : This bill will encourage the installation of
solar systems by reducing the utility bills of large customers
that install new solar energy systems. However, the utility's
fixed costs remain and will now be shifted to other ratepayers.
Existing law limits the number of net meter customers in a
utility's service territory to no more that one half of one
percent of the utility's total load. If this limitation is left
in place, any cost shift that results from eliminating demand
charges will limited, but several other bills pending in the
Legislature propose increasing the net metering caps. Larger
caps on net metering will lead to larger cost shifts.
In order to assure that this bill does ultimately lead to large
costs shifts from commercial and industrial customers to other
customer class, the committee may wish to consider amending the
bill to provide that the no tariff required under this act can
result in a cost shift to other customer classes .
4) Broader than intended: According to the author, the intent
of this bill is to promote the installation of PV energy systems
by creating a new rate category for larger customers that
install PV systems. The rate category created in this bill,
however is much broader and could apply to all customers with a
usage of 1000 kW or less. To assure that the bill is narrowly
tailored to meet the intent of the author, the committee in the
author may wish to amend the bill to clarify that any new tariff
created by this bill will only apply to customers that install
solar energy systems .
AB 1348
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REGISTERED SUPPORT / OPPOSITION :
Support
Antelope Valley Fairgrounds (Sponsor)
Planning and Conservation League
Powerlight Solar Electric Systems
Vote Solar
Opposition
Pacific Gas & Electric (PG&E)
Sempra
Southern California Edison
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083