BILL ANALYSIS 1 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE MARTHA M. ESCUTIA, CHAIRWOMAN AB 1348 - Runner Hearing Date: June 30, 2005 A As Amended: May 2, 2005 FISCAL B 1 3 4 8 DESCRIPTION Current law provides for discounts for large-scale photovoltaic (PV) installations through the California Public Utilities Commission (CPUC). Current law allows large-scale PV installations to net meter, a mechanism that permits the PV customers to run their electric meter backwards when the PV installation is generating electricity. Current law allows large-scale PV installations to avoid stand-by charges. This bill requires the CPUC to approve a special rate for electrical service offered to the Antelope Valley Fairgrounds (AVF) which, in combination with the discount for PV installations and other PV benefits, will result in a 10-year payback for the PV system. This bill requires biennial reporting on the actual electricity usage and electrical production by AVF. BACKGROUND PV systems have benefited from state and federal ratepayer and taxpayer subsidies for many years. (See the committee analysis of SB 1 (Murray and Campbell) for a complete discussion.) Large commercial-sized PV installations, such as that envisioned by this bill, are eligible for a subsidy of $3.50/watt from the Self-Generation Incentive Program (SGIP) administered by the CPUC. This subsidy is 40%-50% of the system cost. In addition, PV systems benefit from subsidies created by net metering and avoidance of stand-by charges. This bill authorizes the AVF Energy Efficiency and PV Synergy Demonstration project. The purpose of this project is to examine the potential synergies between energy efficiency projects and PV installations. AVF is a 135 acre complex with several buildings and an RV park. The buildings include two 4000 square foot pavilions that are available for rent and a Turf Club for watching and wagering on horse races. Numerous events are held at the AVF, including the fair, garden shows, demolition derbys and rodeos. AVF is located in Lancaster. AVF would like to install a 630 kilowatt PV system. This is a very large system; an average residential PV system is 3 kilowatts. AVF has applied for the CPUC's SGIP rebate which, if approved, will reduce the PV project cost by more than $2.2 million. To further reduce the cost of the project, this bill also requires Southern California Edison (SCE) to provide the AVF with discounted electric service so that the combination of the electric discount and PV rebate makes the PV system pay for itself in ten years. COMMENTS 1. Another Solar Subsidy - This Committee recently passed SB 1, which creates a ten-year subsidy program for residential and commercial PV systems that will cost ratepayers $2.5 billion, according to supporters. This bill does the concept of a PV subsidy one better by also layering on an additional ratepayer subsidy in the form of reduced electric rates for this customer only, guaranteeing that this solar project will pay for itself in 10 years. According to the terms of the bill, the cost of this additional subsidy will be shouldered by commercial customers, not residential customers. 2. Little Gain for Ratepayers - The point of this bill is to examine the potential synergies resulting from a combination of energy efficiency measures and PV. But is this a question worth studying? All new California buildings must comply with current energy efficiency building standards. So every PV installation on new buildings will test whether such installations make sense, with the risk that such installations are not cost effective being shouldered by the building owner. With 3000 MW of new PV required under SB 1, the AVF's circumstances will not be unique. The reporting requirements built into SB 1 will assure that information gleaned from these projects will improve California's PV programs. There seems to be little additional information gained from studying this project, and therefore little reason to ask ratepayers to further subsidize this installation. 3. No Risk to AVF - Supporters assert that this bill is necessary to insulate the AVF from any risks that the PV system won't pay for itself in 10 years. But what are those risks? There is the risk that the PV system won't perform as advertised, but shouldn't that risk be born by the seller/manufacturer of the PV system, rather than ratepayers? There is the risk that electric rates increase, but increasing electric rates will improve the PV system payback because the electricity generated by the PV system will be worth more. There is the risk that electric rates decrease, but while lower electric rates lengthen the PV system payback, the PV system owner will benefit from lower electricity bills. Under all these scenarios there seems to be little risk to AVF and therefore little reason for this bill. If AVF believes that the PV installation is too risky for them they can simply decline to install the PV system and pay the usual electricity bills like everyone else. SCE believes that AVF's PV system may well pay for itself within 10 years given California's generous PV subsidies and that the additional ratepayer subsidy provided for in this bill will not be needed. 4. Only One Beneficiary - The special electric rate required by this bill will be available to only one customer, the Antelope Valley Fairgrounds. It is extremely unusual to establish a discounted rate for a single customer. ASSEMBLY VOTES Assembly Floor (74-0) Assembly Appropriations Committee (18-0) Assembly Utilities and Commerce Committee (8-0) POSITIONS Sponsor: Antelope Valley Fairgrounds Support: Southern California Edison Oppose: None on file Randy Chinn AB 1348 Analysis Hearing Date: June 30, 2005