BILL ANALYSIS
SB 1
Page 1
SENATE THIRD READING
SB 1 (Murray)
As Amended June 8, 2006
Majority vote
SENATE VOTE : 30-5
HOUSING APPROPRIATIONS
(vote not relevant)
(vote not relevant)
UTILITIES & COMMERCE 6-1
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|Ayes:|Levine, Blakeslee, Baca, | | |
| |Cohn, | | |
| |De La Torre, Keene | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Bogh | | |
| | | | |
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SUMMARY : Makes statutory changes necessary to expand the scope
of a California Solar Initiative (CSI), a solar program
implemented by the California Public Utilities Commission (PUC),
to apply to all electricity utilities; imposes specific
requirements on PUC in implementing CSI; and, requires
developers to provide the option of solar panels on new homes.
Specifically, this bill :
1)Requires PUC in implementing 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) Only award monetary incentives for up to the first one
megawatt (MW) of electricity generated by an eligible solar
energy system;
c) Adopt a performance based incentive (PBI) program by
2010, such that 100% of incentives for installations of
solar energy systems that are larger than 100 kilowatts
(kW) are performance based incentives (PBI) and that at
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least 50% of the incentives for installations of solar
energy systems that are between 30 kW and 100 kW are PBI;
d) Require reasonable and cost effective energy efficiency
improvements in existing buildings as a condition of
providing incentives for the installation of solar energy
systems;
e) Require time-variant pricing for all ratepayers with a
solar energy system;
f) Not impose any charge on natural gas ratepayers to fund
CSI; and,
g) Impose any charge necessary to fund CSI on all
electricity ratepayers expect for specifically defined low
income ratepayers.
1)Prohibits PUC from allocating money from CSI for research,
development, and demonstration projects.
2)Requires PUC to submit an annual report to the Legislature on
the success of CSI.
3)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;
b) The solar energy system must have at least a 10-year
manufacturer's warranty; and,
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.
4)Raises the net metering cap from 0.5% to 2.5%.
5)Requires CEC to:
a) Provide educational materials and assistance to builders
to help them understand how to integrate solar energy
systems into new construction;
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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;
and,
d) Initiate a public proceeding to determine under what
conditions a solar energy system shall be required on new
buildings.
6)Requires municipal utilities to adopt a similar program with
proportionate expenditures.
7)Caps the total cost of CSI statewide at $3.2 billion.
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.
9)Requires the State Contractors Licensing Board to review and,
if needed, revise its licensing classifications to ensure that
contractors authorized to install solar energy systems have
the requisite qualifications.
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
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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 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 1% of sales per year
until a portfolio of 20% renewable resources is achieved by no
later than 2017. PUC regulations have accelerated this goal
to 20% 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
COMMENTS : In December 2005, PUC approved a decision that
created CSI as a $3.2 billion solar program with the goal of
installing 3,000 MW of solar power by 2017. CSI was similar to
the Million Solar Roofs Initiative (MSRI) proposed in an earlier
version of SB 1. Since the PUC jurisdiction is limited to IOUs
and since certain aspects of the MSRI in SB 1 required specific
statutory changes, CSI differs from MSRI in several key aspects:
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| | Million Solar Roofs | California Solar |
| | Initiative | Initiative |
| |(August 18, 2005 version) | |
|---------+---------------------------+---------------------------|
|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. | |
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|---------+---------------------------+---------------------------|
|Builder's|Builders of new home |No builder's mandate. This |
| Mandate |projects of 50 or more |would require legislation. |
| |homes, for which | |
| |applications for tentative | |
| |maps are completed after | |
| |Jan. 1 2010, shall offer | |
| |solar systems to all | |
| |buyers. | |
|---------+---------------------------+---------------------------|
|Funding |Orders PUC to open a |Costs would be paid by |
| |proceeding to determine |electricity and natural |
| |how to fund the solar |gas customers. |
| |program. 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 | MSRI. |
| |unit) and decline by 7% | Will look into idea of |
| |per year until the rebate | increased rebates for |
| |is $0 in 2015. | 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. |
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| | | Appears that PBI will |
| | | only apply to retrofits |
| | | and not new |
| | | 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. |
| |consistent with the |Legislation would be |
| |Million Solar Roofs |needed to include |
| |program. |municipal utility |
| | |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 CEC to annually |1)No reporting |
|Provision| report to the | requirements. Though |
|s | Legislature. | annual evaluations will |
| |2)Requires PUC to create | be conducted by third |
| | time-variant pricing | parties. |
| | 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. |
|---------+---------------------------+---------------------------|
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|Energy |Requires CEC to develop |1)Requires energy |
|Efficienc|standards for energy | efficiency audits to |
|y |efficiency improvements on | receive solar incentive |
| |buildings where solar | funding. |
| |systems are installed. |2) Requires new |
| | | construction |
| | | applications to |
| | | participate in utility's |
| | | energy commission |
| | |programs. |
| | | |
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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:
1)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%.
2)CSI does not apply to municipal utilities since 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. PUC has tried to
address this problem by imposing a surcharge on all IOU
natural gas customers in the state to help fund 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
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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
this problem by requiring municipal utilities to implement
their own solar programs consistent with the goals of SB 1 and
eliminates the natural gas surcharge.
3)MSRI developed in the 2005 version of SB 1 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. PUC could not implement this provision, but it
continues to be a provision of this bill.
CSI can be made better. There are multiple areas where further
legislative action is not necessary to implement CSI but should
be addressed to help guarantee that 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.
This bill 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 PUC's CSI contains these provisions, some parties are
concerned that it is too easy for 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.
This 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. 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 energy system and thus make it uneconomical in some
cases. However, 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.
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The MSRIs also required 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 CEC to develop
these standards.
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. PUC states
that CSI will cost $3.2 billion. SB 1 now caps the statewide
cost of the program at $3.2 billion.
Current law prohibits PUC from increasing rates for electricity
usage below 130%. Consequently, in implementing the CSI, 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 CSI.
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083
FN: 0015086