BILL ANALYSIS
AB 1470
Page A
Date of Hearing: April 16, 2007
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Lloyd E. Levine, Chair
AB 1470 (Huffman) - As Amended: April 12, 2007
SUBJECT : Solar energy: The Solar Hot Water and Efficiency Act
of 2007.
SUMMARY : Creates the Solar Hot Water and Efficiency Act of
2007 (SHWEA), a $250,000,000 subsidy program for solar hot water
heaters with the goal of promoting the installation of 200,000
solar hot water systems in California by 2017.
EXISTING LAW : Establishes a surcharge on all natural gas
consumed in the state to fund low-income assistance programs,
energy efficiency programs, and public interest research and
development programs.
THIS BILL :
1)Provides that the California Public Utilities Commission (PUC)
shall fund the SHWEA through a surcharge applied to all
ratepayers of gas corporations based on the amount of natural
gas consumed by each ratepayer. In developing the surcharge:
a. No moneys shall be diverted from any existing low
income assistance programs or any cost-effective energy
efficiency programs.
b. The surcharge shall not be imposed on customers
participating the California Alternate Rates for Energy
Program (CARE) or Family Electric Rate Assistance Program
(FERA).
c. The total amount collected through the surcharge
over the life of the program shall not exceed
$250,000,000.
2)Provides that a "solar hot water system," which would be
eligible for the subsidy program in the SHWEA, means a solar
energy device that has the primary purpose of reducing demand
for natural gas through water heating, space heating or other
methods of capturing energy from the sun that is located on
the premises of a ratepayer who pays into the surcharge
AB 1470
Page B
created to fund SHWEA, but does not include solar pool heating
systems.
3)Requires the PUC, by July 1, 2008, to create a program to
promote the installation of 200,000 solar hot water systems in
homes and business throughout the state by 2017.
4)Requires the PUC, by July 1, 2008, to establish eligibility
criteria for solar hot water systems receiving ratepayer
funded incentives.
5)Provides that in establishing the incentive structures and
criteria for SHWEA, the PUC shall draw upon the experience of
San Diego with the Solar Hot Water Pilot program currently
being conducted by the San Diego Regional Energy Organization
(SDREO).
6)Requires the PUC, by July 1 2008, to establish conditions on
ratepayer funded incentives that include appropriate siting
and high quality installation of the solar hot water systems
and appropriate energy efficiency improvements in the
structure where the solar hot water system is installed.
7)Provides that not less than 10% of the SHWEA funds shall be
used for low income and affordable housing projects.
8)Provides that the rebates funded in the SHWEA shall decline
over time
9)Requires the PUC to report to the Legislature by July 1, 2010,
the effectiveness of the program and make recommendations as
to any changes that should be made to the program.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author the purpose of the bill is
"to give the PUC critical direction and parameters for the
implementation of a statewide, solar hot water program. A
statewide program is needed to grow the market [for solar hot
water systems] and make better use of this largely untapped yet
common-sense renewable energy and energy efficiency resource."
1) Background : In 2006, the Legislature approved SB 1
(Murray/Levine), Chapter 132, Statutes of 2006, which authorized
the California Solar Initiative (CSI). The CSI is a $3.2 billion
AB 1470
Page C
program with the goal of installing 3,000 megawatts (MW) of
solar electricity through a declining rebate program. The
rebates in the CSI are required to decline by an average of 7%
per year an be zero by 2017. Additionally, the CSI requires that
most of the rebates be performance based incentives (PBI) so
that incentives are only paid for actual electricity produced.
The CSI is limited to solar energy systems that convert the
sun's energy into electricity. This limitation excludes systems
that primarily offset the need for natural gas. SB 1 did contain
a provision allowing for $100,800,000 to be expended on solar
thermal devices that do not directly produce electricity, but in
implementing the SB 1 the PUC determined that they could not
spend this money on devices that only offset the need for
natural gas because the CSI was funded only through electricity
rates and electricity rate payers could not be required to fund
a program that only benefited natural gas ratepayers
2) Why solar hot water heaters?: Supporters of this bill believe
that solar hot water heaters could be an important part of
California's energy future. A solar hot water heater could save
the average home owner between 100 and 200 therms of natural gas
a year after installing a $6,000 solar hot water heater. This
would be between 18% and 37% reduction in average usage. Based
on 2006 average residential gas prices, California residential
customers pay roughly $720 per year. At this rate, customers
who install solar hot water heaters would save the average
residential user between $130 and $266 a year on their natural
gas bills. Even with that savings, it would still take more than
7-10 years for the customer to recover his initial investment.
Solar hot water heaters appear to have the potential to reduce
residential and natural gas consumption more than twice as much
as any other available energy efficiency technologies.
If the goals of this program were fully met, the programs could
result in a savings of 4,200,000 therms per year or a reduction
of 18% of California's current demand for natural gas.
Last year, the PUC looked at creating a solar hot water heater
program but expressed concerns over an incentive program for
solar hot water heaters. The PUC's Final Decision implementing
the CSI stated:
" ?solar water heating may already be cost-effective and
AB 1470
Page D
providing incentives under theses circumstances may have
the unintended effect of increasing the cost of solar water
heaters. In the past, this Commission provided incentives
for installations of solar water heaters and later
determined that the impact of the incentives was mainly to
increase the cost of the technology, which suggested that
sellers received a windfall profit and that public funds
were not required to motivate product sales." <1>
Based on this assessment the PUC opted to create a pilot project
that would allow it to evaluate the impacts on equipment
prices, demand, and overall cost-effectiveness of a solar hot
water heating program before developing a new statewide program.
The PUC authorized the SDREO to administer a $2.7 million pilot
project to test the feasibility of a broad based incentive
program for solar hot water systems. Substantive data from the
pilot project will likely not be available until the end of
2008.
This bill funds a program that is similar in structure to the
SDREO pilot project and requires the PUC to take into account
information obtained from the pilot project in developing the
incentive levels for the SHWEA. The SHWEA, however, requires the
PUC to implement the incentive program by July 1, 2008, six
months before substantive data will be available from the pilot
project. To assure that the lessons of the SDREO pilot project
are fully integrated into the rebate program developed by the
PUC, the committee may wish to consider delaying implementation
of the program until the results of the pilot program are
available.
3) Is $250,000,000 the right amount of money? : The bill was
recently amended to increase the cost cap on the program from
$100,000,000 to $250,000,000. The sponsor has stated that they
determined that this was the necessary amount of funding to meet
the goals of the program based on revised estimates for the
goals, costs and rebate levels they believe are necessary to
build a mainstream solar hot water market.
While these estimates are based on good faith approach by the
supporters of this bill on what funding levels will be needed to
drive the market for new solar hot water systems and meet the
---------------------------
<1> California Public Utilities Commission Decision 06-01-024,
January 12, 2006, pages 12 - 13.
AB 1470
Page E
goals of the bill, the results of the pilot project will give
the PUC solid data on what the appropriate spending levels will
be to meet the goals of the program. The pilot project may
indicated that smaller rebates and less overall funds are needed
for the program. Given these facts, the $250,000,000 sum in the
bill was set as a cap on total spending and not a set spending
target. If the PUC finds that less money is sufficient to meet
the goals, they will have the flexibility to collect a reduced
amount of funding. The language in the bill however does not
directly tie the goals of the programs to the authority to raise
the funds for the program. This could result in the PUC using
this program to justify raising funds for projects that do not
meet the goal of installing 200,000 solar hot water systems in
California. To assure that the PUC correctly determines the
amount of money needed to fund the SHWEA, the committee may wish
to consider amending the bill to directly tie the collection of
funds to the goal of installing 200,000 solar hot water systems
in California.
4) Related Legislation : This committee approved AB 1064 (Lieber)
which expanded the Self Generation Incentive Program (SGIP), an
existing subsidy program for clean distributed generation to
include solar thermal energy systems and solar hot water
systems, on April 9, 2007. The PUC has the authority to set the
level of money collected from rate payers to fund SGIP. In 2006,
the PUC collected $119.6 million to fund SGIP.
REGISTERED SUPPORT / OPPOSITION :
Support
AFSCME
Association of California Community and Energy Services (ACCES)
American Institute of Architects
Americans for Solar Power (ASPv)
Arise Solar
California Solar Energy Industries Association (CALSEIA)
Central Coast Energy Services, Inc.
Clean Power Campaign
Coalition for Clean Air
Environment California
LIHEAP Service Providers Committee
Natural Resources Defense Council (NRDC)
Northern California Solar Energy Association (NorCal Solar)
AB 1470
Page F
Planning and Conservation League
Sierra Club California
Sierra Pacific Home & Comfort Inc.
Southern California Forum
SPG Solar, Inc.
Working Assets
Opposition
None on file
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083