BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
SB 816 - Kehoe Hearing Date:
April 5, 2005 S
As Introduced: February 22, 2005 FISCAL B
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DESCRIPTION
Existing law:
1. Requires all "energy service providers" (ESPs),
including investor-owned utilities (IOUs), municipal
utilities or any other entity offering retail electric
service, to credit all electricity generated by a
customer-owned solar or wind system against the customer's
usage of electricity sold by the utility, a procedure known
as "net metering."
2. Permits solar or wind electric generation systems as
large as one megawatt (MW) to be eligible for net metering.
3. Requires ESPs to offer net metering until net metering
customers account for one-half of one percent (0.5%) of the
ESP's aggregate peak demand.
4. Requires the CPUC to hire an independent party to
prepare a report assesses the economic and environmental
costs and benefits of net metering to customer-generators,
ratepayers, and utilities by January 1, 2005.
This bill:
1. Permits continuation of net metering statewide until net
metering customers in San Diego Gas & Electric's (SDG&E)
service territory exceed 50 MW or 1.5% of SDG&E aggregate
peak demand.
2. Requires the California Public Utilities Commission
(CPUC), when net metering reaches 40 MW in SDG&E's
territory, to reevaluate this limit and prepare a report
recommending modifications to the limit.
BACKGROUND
SB 656 (Alquist), Chapter 369, Statutes of 1995, required all
electric utilities to buy back any electricity generated by a
customer-owned solar or wind system. This buy-back program is
known as "net metering" because the electricity purchases of the
customer are netted against the electricity generated by the
customer's own solar or wind electric system. The generated
electricity spins the meter backward, making it financially
equivalent to using less electricity for the customer.
Net metering was initially permitted for systems up to 10
kilowatts (kW) making it suitable for residential-sized
applications (a typical residential net-metered system is two to
four kW). The total amount of capacity that could be net
metered was capped at 0.1% of the utility load. AB 29X (Kehoe),
Chapter 8, Statutes of 2001, expanded the net metering program
to large commercial and industrial customers by raising the
maximum size of the net-metered system to one MW and lifting the
cap on total net metered capacity. The provisions of AB 29X
relating to net metering were to sunset on January 1, 2003, but
were subsequently extended by AB 58 (Keeley), Chapter 836,
Statutes of 2002, which also replaced the cap, but at a level
five times greater - 0.5% of utility peak demand.
According to the author, SDG&E is the only IOU close to meeting
the existing net metering cap (0.5%) and, without an adjustment
to the cap, SDG&E will no longer offer net metering to new
customers. The author states available remaining net metering
capacity will be used up within the next year when currently
proposed projects are installed. Further, the City of San Diego
has a goal of installing 50 MW of renewable energy by 2014.
According to SDG&E, it had 8.68 MW (1638 customers) of installed
net metering capacity as of August 2004, a bit less than half
the 0.5% cap, and another 3.98 MW (549 customers) in process - a
total of 12.66 MW or about two-thirds of the 0.5% cap. Tripling
the cap, as this bill proposes, would give SDG&E several years
of net metering expansion at the current pace, or room for a
dramatic short-term expansion.
Governor Schwarzenegger has proposed such dramatic expansion of
net metering and other subsidies for installation of new solar
electric systems. The Governor's proposal - the Million Solar
Roofs initiative - is contained in SB 1 (Murray and Campbell),
pending in this committee. Rather than take on the net metering
cap statewide, a controversial element of SB 1, this bill
discreetly addresses the issue for the SDG&E territory.
COMMENTS
1) Should statewide net metering caps be contingent on the
level of net metering in San Diego? While the author
apparently intends to only affect the net metering cap
within SDG&E territory, this bill as drafted requires all
ESPs throughout the state to continue to offer net metering
until SDG&E reaches the higher caps established by this
bill, regardless of whether they have exceeded the existing
0.5% cap for their own customers (at page 3, line 40, ESPs
are required to offer net metering "until the time that
both of the following events have occurred?" One of the
"events" is SDG&E exceeding its higher cap.) The author
and the committee may wish to consider correcting this
drafting error.
2) Should there be two different cap standards for San
Diego? This bill contains two inconsistent measurements
for the net metering cap - 50 MW or 1.5% of peak demand.
According to SDG&E, 1.5% of its current peak demand is
equivalent to 57 MW, and that will only grow. So the
functional cap in the bill is 50 MW and the 1.5% standard
is irrelevant. The author and the committee may wish to
consider choosing one standard or the other - i.e., 50 MW
if a lower cap is desired or 1.5% if a higher cap is
desired.
3) Should the CPUC be asked to second guess the net
metering cap? This bill requires the CPUC, when net
metering reaches 40 MW, to reevaluate the cap and recommend
any modification to the limit it determines necessary. Net
metering itself, and the cap in particular, have always
been statutory policies which resulted from political
compromise, rather than economic justification or other
evidence. The Legislature sets the policy on net metering
and the cap. The statutory cap is the cap, it is not a
regulatory decision and not something the CPUC should be
invited to second guess. As is the case with this bill and
prior legislation, when net metering capacity approaches
the existing cap, solar advocates come to the Legislature
to seek an increase. They haven't needed a CPUC study to
support their efforts.
This report also appears duplicative of a report required
by AB 58, which is now overdue from the CPUC. AB 58
required the CPUC to hire an independent party to prepare a
report assesses the economic and environmental costs and
benefits of net metering to customer-generators,
ratepayers, and utilities by January 1, 2005. The author
and the committee may wish to consider whether this CPUC
study provision should be removed from the bill and the
CPUC requested to submit the overdue AB 58 report.
4) Related legislation. SB 1, pending in this committee,
and AB 1547 (Levine), pending in the Assembly Utilities and
Commerce Committee, both raise the net metering cap
statewide.
SB 1 raises the cap to 5% in a provision "notwithstanding"
the section (Section 2827 of the Public Utilities Code)
amended by this bill. Thus, if both bills were enacted,
the 5% cap in SB 1 would prevail. SB 1 and this bill do
not have a technical conflict, but have a policy conflict,
as they establish different caps for SDG&E.
AB 1547 raises the cap to 1.5% by amending Section 2827 in
a different manner than this bill. AB 1547 and this bill
have a technical conflict, but not really a policy
conflict, as they both would result in a 1.5% cap for
SDG&E.
POSITIONS
Sponsor:
City of San Diego
San Diego Gas & Electric
Support:
None on file
Oppose:
None on file
Lawrence Lingbloom
SB 816 Analysis
Hearing Date: April 5, 2005