BILL ANALYSIS
AB 920
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Date of Hearing: April 20, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 920 (Huffman) - As Introduced: February 26, 2009
SUBJECT : Solar and wind distributed generation.
SUMMARY : Expands the current net-metering programs for wind and
solar, to allow the net-metered customers to sell any excess
electricity they produce over the course of a year to their
electric utility.
EXISTING LAW :
1)Creates the California Solar Initiative (CSI), a $3.3 billion
declining rebate program to offset the cost of installing
solar panels on homes, businesses, and public buildings. The
program requires that in order to be eligible for CSI rebates,
among other requirements, the solar energy must be intended to
offset part or all of the consumer's own electricity demand
(the panels should not produce more electricity than the
customer's historic peak demand).
2)Requires investor owned utilities (IOUs) to offer customers
with solar or wind generation that is smaller than 1 megawatt
in size, a net-metered tariff where the customer can sell back
electricity produced from the solar or wind facility that
exceeds that customer's usage at a moment in time as a bill
credit against electricity that the customer receives from the
utility when their renewable facility produces less than the
customer is consuming. Caps the total amount of solar and wind
generation that can be subject to net-metering at 2.5 % of
each utility's aggregate peak demand.
3)Requires all publicly owned utilities (POUs) other than the
Los Angeles Department of Water and Power (LADWP) to offer a
net-metering tariff as provided in (2), or offer a co-metering
tariff where the bill credit is based only on the cost of
generation and not the entire retail rate. Exempts LADWP from
the net-metering and co-metering requirements.
4)Provides that all IOUs must purchase electricity from eligible
renewable resources that are no larger than 1.5 megawatts at a
rate determined by the California Public Utilities Commission
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(PUC). The rate is the Market Price Referent (MPR), which
represents the average cost of natural gas-fired electric
generation and the added costs of carbon emissions associated
with natural gas-fired generation.
5)Requires all IOUs to meet a renewable portfolio standard (RPS)
where at least 20% of the utility's electricity procurement
comes from renewable resources by 2010. Authorizes the PUC to
allow an electric corporation to use renewable energy credits
(RECs) associated with electricity that is delivered to
California to count toward the utility's RPS obligations, even
if the utility does not purchase the associated electricity.
THIS BILL :
.
1)Defines a "net surplus customer-generator" as a
customer-generator that generates more electricity in a
12-month period than the customer purchases from the utility
in that same period.
2)Requires all IOUs and POUs that offer net-metering to purchase
all net surplus electricity produced from the customer's wind
or solar generator at a rate set by the PUC or the POU. The
rate shall be set to provide the customer-generator "just and
reasonable" compensation for the surplus energy sales, leave
all other ratepayers indifferent, and shall not result in any
cost shifting to non-customer generators.
3)Caps the amount of net surplus electricity a utility must
purchase at 2.5 %of each electric utility's aggregate peak
demand.
4)Provides that the utility shall own all of the renewable
attributes or RECs associated with any net surplus electricity
it must purchase. The customer will retain the REC of any
renewable energy credit associated with any electricity
generated by the customer that is utilized by the customer.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to allow electric utility customers who install solar or wind
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generators on their property to be paid by their electric
utility for all the "surplus" electricity they produce. The
author believes this will encourage homeowners and businesses to
conserve more electricity (and thus have more surplus power they
can sell to the utility) and will allow property owners to
install the maximum number of solar panels on their home.
1) Background : Under net-metering, the electric utility is
required to "buy back" any electricity generated by a
customer-owned generator as measured by an electric meter that
can measure the flow of electricity in both directions. When
the customer generates electricity, he/she uses most of it for
his or her own facility. Any excess electricity passes through
the meter and is distributed to the electricity grid. At the
end of the year, the electric corporation calculates the amount
of electricity distributed to the grid by the customer and
reduces the customer's annual bill by the amount of electricity
generated by the customer. This results in the utility "buying"
the excess power and paying for it in the form of a bill credit.
For biogas and fuel cells, the credit is set at the value of the
utility's average generation costs -- meaning the
customer-generator is selling the electricity back to the
utility at the same price the utility pays for the generation
the customer-generator is replacing. These programs do not act
as subsidy programs since the utility is paying the same amount
it would pay for other generation.
For solar and wind, the credit is at the customer's retail cost
(a cost that is much higher than the generation costs since it
includes transmission, distribution, public good charges, and
the utility's rate of return). If the customer-generator is
being paid the retail price, the add-on costs are shifted to the
utilities' other ratepayers. The bill is settled at the end of
the year instead of on a monthly basis. This allows the customer
to balance high production months against low production months.
Since it is a bill credit, if for some reason the customer is a
net energy producer (meaning over the course of a year the
customer-generator produces more than he or she consumes) the
year-end bill will be zero, but no check will be written to the
customer.
Under PUC rules, the net-metered customer owns all of the RECs
associated with the electricity generated by the
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customer-generator, even if the power is "sold" back to the
utility as a bill credit.
2) California's numerous renewable and customer-generator
programs : Over the past 10 years or so, the Legislature has
created a vast array of special statutes to force electric
utilities to compensate customer-generators for various forms
and sizes of renewable and other preferred small energy projects
according to various payment methodologies. These "must take"
requirements are essentially commercial contracts by statute.
Each new program that is aimed at one technology or application
seems to create disincentives for other parties to install
similar technologies or at least creates the public appearance
the program is unfairly applied. The net-metering program this
bill is amending is an example of this problem.
Because net-metering is based on sizing the generation to meet a
customer-generator's own load, the customers has no incentive to
build larger solar energy systems. Net-metering also eliminates
the normal financial reward a customer-generator receives for
conserving electricity - a lower electricity bill. If the
customer generator has already installed sufficient generation
to zero out their electricity bill they would not receive any
additional benefit for reducing their own electricity usage.
Other "must take" programs include feed-in tariffs where the
utility is required to buy all the electricity produced from an
eligible renewable generator at a pre-set price. Under a feed-in
tariff, it does not matter if the utility wants that power or
not, all the customer-generator has to do is ask to have his or
her eligible renewable generator connected to the grid, and the
utility will have to purchase all the excess electricity the
customer produces. Feed-in tariffs do not require a generator to
size the generation to meet their own load. Instead, the
generation units can be sized up to the maximum capacity allowed
under the program.
The current net-metering program is specifically limited to
projects that are sized only to meet the customer's own demand.
The net-metering program works in tandem with the CSI with
provided grants to customer installing solar energy systems.
Given the current prices of solar panels, onsite solar energy is
not cost effective for most utility customers unless the
customer can receive both the CSI rebates and net-metering.
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The feed-in tariff programs that are in place today allow a
customer to use all of the generation from solar energy system
needed to meet on-site load and then sell all excess power back
to the utility, in a similar fashion that this bill does.
However, PUC rules preclude any party that is participating in
the feed-in tariff program from receiving CSI rebates.
4) What this bill does : This bill provides that a customer of
IOUs and most POUs that installs solar or wind generators on
their own property that produce more electricity than the
customer's own demand (up to 1 megawatt in size) will receive a
check from the utility for that surplus generation. To be
eligible for the CSI rebates the system must still be sized to
actual or projected load of the customer-generator at the time
the solar energy system is installed. This means that customers
cannot intentionally oversize a solar energy system and receive
a CSI rebate. If the customer's future electricity usage is less
than the usage at the time of installation the customer will be
under a net-metered tariff that gives the customer a bill credit
valued at the retail rate of electricity for any excess the
customer produces during the year, but at the end of the year if
bill credits exceed the total electricity the customer consumed
from the utility the customer will be a net surplus producer and
the utility would then owe the customer money for the net
surplus electricity. The net surplus power electricity would be
valued at a rate set by the PUC at a just and reasonable rate
that ensures no cost shifting. This rate will likely be less
than the value associated with retail rate for the electricity
credited against their bill.
Additionally, for all electricity that is "sold back" to the
grid as a bill credit, the utility would own all of the RECs
associated with that electricity.
5) Not quite good enough for everyone : Current statutory
provisions exempt the Los Angeles Department of Water and Power
(LADWP) from the requirements on every other IOU and POU to
provide net metering. Even so, LADWP has a net-metering program
that is actually already more generous than the current IOU's
programs. LADWP also provides that if the customer is a
net-surplus customer the customer can carry the credits into the
next year. The requirements in this bill exempt LADWP from the
requirements to purchase the surplus net-metered electricity.
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7) Why so many programs : Under existing law, there are numerous
programs in place that allow for or require electric utilities
to buy back excess power produced by customer generators. In the
2007-2008 Legislative session, there were at least 10 different
bills that create additional must buy programs. While most of
these programs would help the state achieve its goals of
increasing renewable resources, the committee may wish to
consider if ratepayers are best served by the complicated
network of buy-back programs that are in place and are proposed,
or if the state goals would be more successfully achieved and
the administrative costs of the programs could be reduced if
most of the customer-generator programs were consolidated into a
single policy.
8) Related Legislation :
AB 1106 (Fuentes), AB 1023 (Ruskin), SB 32(Negrete McCloud), SB
523 (Pavley) all propose expanding the current AB 1969
feed-in-tariff program by increasing the size of eligible
generators and increasing the rate paid to the generators.
SB 7 (Wiggins) is virtually identical to this bill.
SB 14 (Simitian), AB 64 (Krekorian/Bass) both increase
California's RPS to 33% by 2020.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
(AFSCME)
Environment California
Planning and Conservation League
Sierra Club California
The Utility Reform Network (TURN) (if amended)
Opposition
California Association of Small and Multi-jurisdictional
Utilities (CASMU) (unless amended)
Pacific Gas & Electric (PG&E)
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Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083