BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 920 - Huffman Hearing Date:
July 7, 2009 A
As Introduced: February 26, 2009 FISCAL B
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DESCRIPTION
Current law establishes the California Solar Initiative (CSI), a
$3.3 billion program to subsidize the installation of
photovoltaic (PV) systems for customers of the state's
investor-owned-utilities (IOUs) and publicly owned utilities
(POUs).
Current law requires IOUs, POUs (except the Los Angeles
Department of Water and Power), 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, on a kilowatt hour
basis (kWh), a procedure known as "net energy metering" (NEM).
This bill requires utilities to allow NEM customers to roll over
excess generation not used in a 12-month billing cycle, on a kWh
basis, or to compensate customers for any generation in excess
of their usage over a 12-month billing cycle at a rate to be
determined by the CPUC.
This bill provides that participation in NEM will not limit the
customer's eligibility for any other rebate, incentives or
credit under any other utility or government program.
BACKGROUND
California Solar Initiative (CSI) - The CSI calls for the
installation of 3,000 megawatts (MW) of new, solar-produced
electricity by 2016 to be installed on the customer's side of
the meter. Targeted expenditures under the CSI, funded by a
surcharge on all ratepayers, are $3.3 billion over ten years,
distributed between three distinct program components: CSI
($2.167 million/1940 MW); New Solar Homes Partnership ($400
million/360 MW); and publicly owned utility programs ($700
million/700 MW).
California now has over 515 MW of cumulative installed solar PV
in IOU territories at nearly 50,000 residential, commercial and
governmental sites; 226 MW was installed under the CSI.<1>
California has the highest level of solar installations in the
country.
Net Energy Metering - The primary benefit of CSI program is
derived from the solar customer's eligibility for NEM which is
authorized under state law separately from the CSI program.
Utility customers that generate power from a wind or solar
system are eligible for NEM under which the electricity
purchases of the customer are netted against the electricity
generated by the customer's own solar or wind electric system.
When the sun is shining or the wind is blowing, the generated
electricity spins the meter backward, making it financially
equivalent to using less electricity for the customer with the
same effect as the electric utility paying the customer the full
retail price for the electricity. When the sun stops shining
and the wind stops blowing, the customer draws electricity from
the grid and their meter spins forward using the credit on the
meter. In theory, depending on weather patterns, system size
and customer behavior, the customer will have a zero energy bill
at the end of a 12-month cycle.
The full retail price of electricity includes the utility's cost
of generating, distributing and transmitting the power, public
goods programs (e.g. energy efficiency), low-income customer
assistance (e.g. CARE), energy crisis costs and other charges
not related to generation. By compensating the solar or wind
customer at the full retail rate, the utility is using ratepayer
funds to pay the solar or wind customer at a rate well above the
value of the generated power, which is about one-third of the
total cost of a typical residential customer's bill. The solar
or wind customer does not pay transmission or distribution costs
even though they are still connected to the electrical grid and
use it for all their generation needs when the sun isn't shining
and the wind isn't blowing (approximately 18 hours a day).
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<1> Prior to 2007 solar photovoltaic installations were funded
through the CPUC's Self-Generation Incentive Program.
Consequently, those unpaid transmission and distribution costs
and public goods charges are a subsidy, the cost of which is
ultimately shifted to all other ratepayers in the class. All
customer classes are eligible for NEM.
Although NEM has been permitted since the mid 1990s the growth
of the CSI program has brought hundreds of more customers under
the NEM umbrella. Because experience with NEM was limited until
the past few years, many customers jumped into the program
without understanding its purpose or impact. As a consequence
some net metered customers are coming to the fore with concerns
about its structure and seeking revisions.
COMMENTS
1. NEM Excess Generation - The author is concerned about
perceived inequities in the current net-metering program
for CSI customers. He is aware of constituents who have
installed solar but are generating more electricity in a
12-month net-metering cycle than they can use.
Consequently, the customer sees unused electricity for
which they receive no compensation and feel that they
should be compensated for that excess generation.
The utilities and CPUC have reported that there is excess
generation occurring for some customers. According to the
CPUC, "there are a number of customers whose systems for a
wide range of reasons -- ranging from not understanding net
metering?to changing utility rates, installation of energy
savings measures and/or climatic variation in a given year
-- have produced more electricity than the customer has
consumed?Better public outreach by the utilities about
optimal system sizing, and how net metering actually works
is also necessary to educate customers." It has also been
suggested that many of these customers could have had
systems in stalled under the CPUC's Self-Generation
Incentive Program which funded solar photovoltaic
installations prior to the adoption of the CSI program
which had different standards for installation than the
CSI. The issue is most prominent in PG&E's service
territory where nine percent of NEM customers have excess
generation.
The perception that the utility is receiving something of
value without compensating the customer ignores several
factors. First, that the utility cannot plan on a customer
delivering excess generation to the grid because the
customer is under no obligation to do so as a generator
would be. Consequently the utility must plan on making
adequate electricity available (and thus procure that
generation) as if the excess generation will not occur.
Second, the distribution grid is technically limited in the
ability to track net metered customers on a real-time
basis. Finally, through NEM the customer not only receives
credit for electricity generation but is completely
relieved of paying for the costs of transmission,
distribution, and public goods charges which can add up to
as much as 2/3 of the full retail rate for electricity
delivery. Because the net metered customer does not pay
for their portion of the transmission and distribution
costs those costs are shifted to ratepayers that do not
have NEM or solar PV.
2. Committee Acted Earlier this Year - The committee
reviewed the issue of excess generation under the NEM
program in April when it considered SB 7 (Wiggins). That
measure also proposed to compensate NEM customers for
excess generation. However, the committee did not support
compensation for the excess generation and permitted a
customer to roll-over excess generation for two consecutive
12-month cycles. Amendments to the bill also extended a
study of NEM by the CPUC currently due in January, 2010 to
June 30, 2010 and require the report to also evaluate the
impact of the generation of excess kilowatt-hours and
excess credit based on time-of-use rate on participating
and non-participating customers. For consistency, the
author and committee may wish to consider amending this
bill to conform to the committee's actions in SB 7.
3. Expanded Eligibility - This bill also provides that NEM
participation will not limit a customer's eligibility for
any other utility or government program. Clearly NEM
customers should also be eligible for the CSI but beyond
that it is not clear what programs would be affected by
this broad provision. If other programs are in need of
revision or evaluation for the interplay and impact of NEM
participation then those programs should be specifically
addressed. The author and committee may wish to strike
this provision to ensure that unintended consequences do
not occur as a result of this sweeping language.
4. Related Legislation - The following bills in the current
session also modify the NEM program.
a) AB 560 (Skinner) - Proposes to lift the NEM
cap to ten percent. Scheduled for hearing in the
Senate Committee on Energy, Utilities and
Communications on July 7th.
b) SB 7 (Wiggins) - Requires that NEM customers
be permitted to roll over excess NEM generation to two
subsequent 12-month cycles. Set for hearing in the
Assembly Utilities and Communications Committee July
6th.
ASSEMBLY VOTES
Assembly Floor (51-26)
Assembly Appropriations Committee (12-5)
Assembly Natural Resources Committee
(6-3)
Assembly Utilities and Commerce Committee
(11-3)
POSITIONS
Sponsor:
Environment California
Support:
American Federation of State, County and municipal Employees,
AFL-CIO
Breathe California
California Association of REALTORS
California State Grange
Clean Power Campaign
Coalition for Clean Air
Non-Profit Housing Association of Northern California
Pacific Environment
Planning and Conservation League
San Diego County Board of Supervisors
Sierra Club California
2 Individuals
Oppose:
California Public Utilities Commission (unless amended)
Kellie Smith
AB 920 Analysis
Hearing Date: July 7, 2009