BILL ANALYSIS
SB 1
Page 1
Date of Hearing: April 17, 2006
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Lloyd E. Levine, Chair
SB 1 (Murray) - As Amended: April 4, 2006
SENATE VOTE : 30-5
SUBJECT : Energy: renewable energy resources: California Solar
Roofs Initiative.
SUMMARY : Makes statutory changes necessary to implement the
California Solar Initiative (CSI), a solar incentive program
developed by the California Public Utilities Commission (PUC)
with the goal of installing 3,000 MW of solar power in
California by 2017. Specifically, this bill :
1)Requires the PUC in implementing the CSI to :
a) Authorize the award of monetary incentives for eligible
solar energy systems that must decline by an average of 7%
per year until the rebate is zero in 2017.
b) Adopt a performance based incentive (PBI) program by
2010, such that at least 50% of rebate funds are expended
on performance based incentives.
c) Require reasonable and cost effective energy efficiency
improvements in existing buildings as a condition of
providing incentives for the installation of solar energy
systems.
2)Prohibits the PUC from allocating money from the CSI for
research, development, and demonstration projects.
3)Requires the PUC to submit an annual report to the Legislature
on the success of the CSI.
4)Requires the California Energy Commission (CEC) to develop
eligibility criteria for solar energy systems that qualify for
the rebates, including:
a) The solar energy generated by the system must be
used to offset part or all of the customer's electricity
demand.
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b) The solar energy system must have at least a 10-year
manufacturer's warranty.
c) The solar energy system must be located on the same
premises of the end-use customer where that customer's
electricity demand is located.
5)Raises the net metering cap from 0.5% to 2.5%.
6)Requires the CEC to:
a) Provide educational materials and assistance to
builders to help them understand how to integrate solar
energy systems into new construction.
b) Conduct random audits of installed solar energy
systems to evaluate their operational performance.
c) Evaluate the costs and benefits of having an
increased number of solar energy systems as part of the
electrical systems with respect to the solar energy
systems' impact on distribution, transmission, and the
supply of electricity.
d) Develop incentives that require or encourage siting
and installation of solar energy systems to maximize the
performance of the systems so that the solar energy
system produces the greatest energy production per
ratepayer dollar.
e) Develop incentives that require or encourage optimal
solar production during peak demand periods.
f) Develop incentives that require or encourage energy
efficiency improvements in the structure where the solar
energy system is to be placed.
g) Initiate a public proceeding to determine under what
conditions a solar energy system shall be required on new
buildings. Restricts the CEC from require solar energy
systems on new residential structures unless it is
determined to be cost effective.
7)Requires municipal utilities to adopt a similar program with
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proportionate expenditures.
8)Requires sellers of production homes, as defined, to offer
solar energy systems on new homes for which tentative
subdivision maps are completed on or after January 1, 2011.
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 is collected on the basis of usage.
2)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
customer generation in order to calculate the appropriate
generation charge to credit and collect public goods charges.
3)Establishes incentive programs for photovoltaic technologies
within the CEC and PUC. These programs offer varying degrees
of incentive payments per kilowatt-hour for residential or
commercial customers purchasing certain types of renewable
technology like photovoltaic cells.
4)Establishes tax exemptions for property taxes, 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.
5)Requires investor-owned utilities (IOUs) to increase their
existing level of renewable resources by one percent of sales
per year until a portfolio of 20 percent renewable resources
is achieved by no later than 2017. PUC regulations have
accelerated this goal to 20 percent by 2010. Municipal
electric utilities are not subject to these standards, but are
required to implement and enforce their own renewable resource
procurement programs.
FISCAL EFFECT : Unknown.
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COMMENTS : The purpose of this bill is to make statutory
changes necessary to implement the California Solar Initiative
(CSI) adopted by the PUC; to codify certain aspects of the CSI;
and to correct aspects of the CSI that are inconsistent with the
intent of the Legislature.
1) History : In 2005, this committee considered a different
version of SB 1 which would have created the Million Solar Roofs
Initiative (MSRI). The goal of SB 1 and the MSRI was to install
3,000 MW of solar power in California by 2017 through a $2.5
billion declining rebate program. The declining rebate program
was specifically designed to drive down the costs of solar
panels such that by 2017 solar energy systems would be cost
effective without the use of public subsidies. The MSRI as
developed in SB 1 was also designed to maximize production of
solar power at times of peak electricity demand. SB 1 passed
this committee on a vote of 7 to 0. However, the bill was
substantially amended on the Assembly Floor and was referred
back to this committee but was not considered again before the
Legislature adjourned for the Interim Recess.
In December 2005, the PUC approved a decision that created the
CSI as a $3.2 billion solar program with the goal of installing
3,000 MW of solar power by 2017. Since the PUC jurisdiction is
limited to IOUs and since certain aspects of the MSRI required
specific statutory changes, the CSI differs from the MSRI in
several key aspects:
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| | Million Solar Roofs | California Solar |
| | Initiative | Initiative |
| | | |
|---------+---------------------------+---------------------------|
|Costs |Caps total IOU costs at |Total funding for CSI will |
| |$1.8 billion. Anticipates |be $3.2 billion |
| |that municipal utilities |with no municipal utility |
| |will contribute $700 |contribution. There is no |
| |million for a total cost |hard cost cap. |
| |of $2.5 billion. | |
|---------+---------------------------+---------------------------|
|Builder's|Builders of new home |No builder's mandate. This |
| Mandate |projects of 50 or more |would require legislation. |
| |homes for which | |
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| |applications for tentative | |
| |maps are completed after | |
| |Jan. 1 2010, shall offer | |
| |solar systems to all | |
| |buyers. | |
|---------+---------------------------+---------------------------|
|Funding |Orders the PUC to open a |Costs would be paid by |
| |proceeding to determine |electricity and natural |
| |how to fund the solar |gas customers. |
| |program. The PUC then has | Contains exemption |
| |authority to increase | for CARE customers but |
| |electricity rates to fund | not FERA. |
| |the program. | Will exempt customers |
| | The rate increase | whose use is below |
| | would apply to all | 130% of baseline. |
| | customers including | Legislation would be |
| | those that use less | needed to change the |
| | than 130% of | rate structure. |
| | baseline. | |
| | The rate increase | |
| | would not apply to | |
| | CARE customers | |
| | (income below 180% of | |
| | poverty level) or | |
| | FERA customers | |
| | (families under 220% | |
| | of poverty level). | |
|---------+---------------------------+---------------------------|
|Rebate |Rebates starting at $2.80 | Declining rebate |
|Mechanism|per watt in 2007. ($5,600 | programs similar to |
| |per average residential | Million Solar Roofs |
| |unit) and decline by 7% | Initiative (MSRI). |
| |per year until the rebate | Will look into idea of |
| |is $0 in 2015. | increased rebates for |
| | | new construction energy |
| | |efficient homes. |
|---------+---------------------------+---------------------------|
|Performan|Requires that by 2010 at | Agencies will work on |
|ce Based |least 50% of all rebate | developing PBI. |
|Incentive|money be used for | Incentives may be |
|s (PBI) |performance based | limited only to largest |
| |incentives. | customers. |
| | | Appears that PBI will |
| | | only apply to retrofits |
| | | and not new |
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| | | construction. |
|---------+---------------------------+---------------------------|
|Rebates |At least 10% of the funds |Sets aside 10% of funding |
|for |must be set aside for |for affordable housing. |
|Affordabl|affordable housing. | |
|e | | |
|Housing | | |
|---------+---------------------------+---------------------------|
|Technolog|1)SB 1 only applies to |1)Will also apply to solar |
|ies | solar systems that | heating and cooling |
|Allowed | produce electricity. | systems. |
| |2)Caps size of units to no |2) Caps the size at 5 MW. |
| | larger than 1 MW. | |
|---------+---------------------------+---------------------------|
|Municipal|Requires municipal |No requirements for |
| |utilities to adopt their |municipal utility |
|Utilities|own solar homes program |participation. Legislation |
| |consistent with the |would be needed to include |
| |Million Solar Roofs |municipal utility |
| |program. |participation. |
|---------+---------------------------+---------------------------|
|Net |Raises the current cap on |Legislation would be |
|Metering |net metering from 0.5% of |needed to raise net |
|Cap |total peak load to 2.5% of |metering cap. |
| |total peak load in each | |
| |IOU's service territory. | |
|---------+---------------------------+---------------------------|
|Misc. |1)Requires the CEC to |1)No reporting |
|Provision| annually report to the | requirements. Though |
|s | Legislature. | annual evaluations will |
| |2)Requires the PUC to | be conducted by third |
| | create time-variant | parties. |
| | pricing tariffs for all |2)PUC will require time |
| | customers. | variant pricing for |
| |3)Requires new | commercial customers. |
| | installation standards | Will study time variant |
| | for solar panels. | pricing for residential |
| | | customers. |
| | |3) No requirements for new |
| | |installation standards. |
|---------+---------------------------+---------------------------|
|Energy |1) Requires the CEC to |1)Requires energy |
|Efficienc| develop standards for | efficiency audits to |
|y | energy efficiency | receive solar incentive |
| | improvements on | funding. |
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| | buildings where solar |2) Requires new |
| | systems are installed. | construction |
| | | applications to |
| | | participate in utility's |
| | | energy commission |
| | |programs. |
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2) The Legislature now needs to act : Several necessary aspects
of a successful statewide solar program cannot be implemented
through PUC action and instead requires legislation. SB 1 now
addresses several of these issues.
First, for solar panels to be economically feasible to the
customers, they must be able to sell unused power back to the
utility through a process know as net metering. Current law caps
the amount of power that can be net metered in Pacific Gas and
Electric's (PG&E) and Southern California Edison's (SCE) service
territory to 0.5% of total peak load in the service territory
and in San Diego Gas and Electric's service territory to 50 MW.
However, the cap will be reached in PG&E's service territory
this year and within the next two years for SCE's service
territory. This bill raises the cap to 2.5%.
Second, the CSI does not apply to municipal utilities since the
PUC has no authority to require municipal utilities to implement
a solar program. Since municipal utilities represent 27% of the
total load served in California, a successful statewide solar
program must include municipal utilities. The PUC has tried to
address this problem by imposing a surcharge on all IOU natural
gas customers in the state to help fund the CSI. All natural gas
customers that pay the surcharge are then eligible for solar
rebate programs. Since most Californians who are customers of
municipal electric utilities receive natural gas from the IOUs,
this surcharge mechanism is a rough way of capturing municipal
utility customers and creating a statewide solar program. The
problem is that it results in ratepayers who receive both their
natural gas and electricity from an IOU paying the surcharge
twice and ratepayers who receive their electricity from a
municipal utility and natural gas from an IOU only paying one
surcharge even though all customers would be equally eligible
for the same rebates.
SB 1 now corrects part of this problem by requiring municipal
utilities to implement their own solar programs consistent with
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the goals of SB 1. However, SB 1 does not eliminate the natural
gas surcharge. The committee may want to consider amending the
bill to specifically eliminate the natural gas surcharge so
customers are not required to pay into the CSI multiple times .
Additionally, since SB 1 expresses much of the municipal utility
language in terms of legislative intent, concerns have been
raised these intent provisions may allow some municipal
utilities to avoid meeting their targets. To address this
concern the committee may want to consider amending the bill to
strike the intent of the Legislature language so that the
provisions are clearly affirmative requirements .
Third, the MSRI developed in the 2005 version of SB 1 contained
a builder's mandate that required builders of new developments
of 50 or more homes to offer the option of installing solar
energy system to all buyers. The PUC could not implement this
provision but it continues to be a provision of this bill.
3) The CSI can be made better : There are multiple areas where
further legislative action is not necessary to implement the CSI
but should be addressed to help guarantee that the CSI reaches
its goals of creating 3,000 MW of solar power in California and
of creating a self-sustaining solar market. SB 1 now implements
some of these provisions.
SB 1 requires that the rebates must decline over time and shall
be zero by 2017, and codifies that a portion of the rebates
shall be used for performance based incentives where rebates are
only given for power that is actually produced. While the PUC's
CSI contains these provisions, some parties are concerned that
it is too easy for the PUC to change these provisions if prices
for solar panels do not fall. Codifying these provisions will
send a strong message to the solar industry that they must lower
their costs.
The bill also requires that, as a condition of receiving solar
rebates, building owners must make reasonable and cost-effective
energy efficiency improvements in their existing buildings. The
CSI requires new buildings to meet certain energy efficiency
standards but does not require existing structures to make
needed upgrades. Requiring energy efficiency upgrades helps
maximize overall ratepayer benefits from the solar program. Some
parties have argued that requiring energy efficiency upgrades
would increase the overall project costs of installing a solar
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energy system and thus make it uneconomical in some cases.
However, the PUC has also required the IOUs to spend $2 billion
on energy efficiency programs over the next three years and
these programs can be used in conjunction with the CSI funds to
pay for needed energy efficiency upgrades.
The MSRI initiatives also required the CEC to develop design and
installation standards for eligible solar energy systems to
ensure that ratepayer money was only used to fund panels that
were built and installed to maximize output. The PUC did not
specifically address this issue in the CSI. SB 1 will require
the CEC to develop these standards.
4) Other provisions of the MSRI not in the CSI : There are
several other provision that were included in the MSRI which
most parties believed would have helped the program reach its
overall goals that are not addressed in the CSI or in the
current version of SB 1. In order to assure that the CSI reaches
its goals and is an effective use of ratepayer money, the
committee may wish to consider the following amendments:
a)Imposing an absolute cost cap . The MSRI contained in SB 1
capped the total amount of ratepayer funds that could be used
on a rebate program at $2.5 billion ($1.8 billion from IOU
ratepayers, $700 million from municipal utilities). This cap
was developed based on information provided to the Legislature
from the solar industry and solar advocates on what was the
maximum potential cost. The cap was intended as a means of
signaling developers that they must lower their costs over
time or the program funding would end and as a means of
insuring that costs did not spiral out of control.
These same advocates then told the PUC that the solar program
could not be implemented for less that $3.2 billion. The CSI
uses the $3.2 billion number to establish their estimated
total costs ($2.8 billion will come from a new ratepayer
surcharge administered by the PUC and $400 million dollars
from existing solar programs administered by the CEC). The
$3.2 billion dollar figure could be increased by the PUC at
anytime. To ensure that the programs costs do not continue to
grow and in order to send appropriate signals to developers
that they must lower their costs, the committee may want to
consider amending the bill to impose a cost cap on the CSI
based on the cost estimates developed by the PUC .
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b)Time variant pricing . The MSRI developed in SB 1 required the
PUC to make the option of time-variant pricing available for
all ratepayers with a solar energy system. This provision was
to reward customers for placing solar energy panels on their
buildings to maximize electricity production during the time
of day when California faces peak electricity demand, in the
late afternoon. Time variant pricing results in larger
decreases in customer bills when solar power is produced at
peak demand periods. In the CSI, the PUC requires time
variant pricing for business customers but not for residential
customers. Statutory provisions prevent the PUC from
designing effective time variant pricing for residential
customers. The committee may want to consider amending the
bill to make the statutory changes needed to allow for
time-variant pricing for residential customers and to require
the PUC to make that option available for residential
customers.
c)Cost shifts . The MSRI contained in the prior version of SB 1
that was approved by this committee provided that all
electricity ratepayers, excluding low income ratepayers, paid
the surcharge for the MSRI. This included residential
customers that used less than 130% of their baseline usage
each month. Current law prohibits the PUC from increasing
rates for electricity usage below 130%. Consequently, in
implement the CSI the PUC was able to exempt low income
ratepayers from the CSI surcharge, but could not impose the
surcharge on the below 130% of baseline customers. This
results in the costs of the program being shifted to larger
residential customers and business customers. To avoid this
cost shift, the committee may wish to consider amending the
bill to restore the prior SB 1 language that required all
ratepayers, excluding low income ratepayers, to fund the CSI .
d)Eligible solar energy systems . The MSRI contained in the prior
version of SB 1 that was approved by this committee limited
the solar energy systems that were eligible for rebates to
systems that converted the sun's energy into electricity and
were less than 1 MW in size. In the CSI, the PUC allows rebate
money to be used for solar systems that do not actually
produce electricity, but instead do other things like heat hot
water and allows rebates for solar energy systems that are up
to 5 MW in size. To assure that the CSI meets the goal of
creating 3,000 MW of solar electricity, the committee may wish
to consider amending the bill to limit rebate money to those
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systems that produce electricity and may want to consider
amending the bill to limit the rebates to cover the cost of up
to 1 MW of solar installations .
REGISTERED SUPPORT / OPPOSITION :
Support
Environment California (sponsor)
Better World Group
California Public Interest Research Group (CALPIRG)
Clarum Homes
Clean Power Campaign
Global Green USA
League of Conservation Voters
Pacific Gas & Electric (PG&E) (if amended)
Pacific Environment
PV Now
Sierra Club California
Southern California Edison (SCE) (if amended)
Union of Concerned Scientists
Vote Solar
Opposition
California State Association of Electrical Workers
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083