BILL ANALYSIS                                                                                                                                                                                                              1
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                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

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                                      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