BILL ANALYSIS                                                                                                                                                                                                    



                                                                       


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                                      VETO
                                        

          Bill No:  SB 655
          Author:   Peace (D)
          Amended:  8/16/99
          Vote:     21

            
           SENATE ENERGY, U. & C. COMMITTEE  :  8-0, 4/13/99
          AYES:  Bowen, Baca, Brulte, Kelley, Mountjoy, Peace, Solis,  
            Speier
          NOT VOTING:  Alarcon, Hughes, Vasconcellos

           SENATE APPROPRIATIONS COMMITTEE  :  9-4, 5/27/99
          AYES:  Johnston, Alpert, Bowen, Burton, Escutia, Karnette,  
            McPherson, Perata, Vasconcellos
          NOES:  Johnson, Kelley, Leslie, Mountjoy

           SENATE FLOOR  :  31-2, 9/10/99
          AYES:  Alarcon, Alpert, Baca, Bowen, Brulte, Burton,  
            Chesbro, Costa, Dunn, Figueroa, Hayden, Hughes,  
            Johannessen, Johnston, Karnette, Kelley, McPherson,  
            Murray, O'Connell, Ortiz, Peace, Perata, Polanco,  
            Poochigian, Rainey, Schiff, Sher, Solis, Speier,  
            Vasconcellos, Wright
          NOES:  Leslie, Monteith
          NOT VOTING:  Escutia, Haynes, Johnson, Knight, Lewis,  
            Morrow, Mountjoy

           ASSEMBLY FLOOR  :  76-1, 9/7/99 - See last page for vote
           

           SUBJECT  :    California Energy Commission:  grant program:   
          solar energy 
                      systems

                                                           CONTINUED





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           SOURCE  :     Author

           
           DIGEST  :    This bill establishes a grant program to  
          increase consumer investment in solar and low-pollution  
          distributed generation systems.

           Assembly Amendments  (1) clarify the dates of implementation  
          and sunset of the grant program, (2) delete the requirement  
          that "CEC, subject to PUC approval" establish standards for  
          distributed generation and, instead, requires the PUC to  
          establish them, and (3) clarify the goals of the grant  
          program and the expedited process for distributed  
          generation.

           ANALYSIS  :    Existing law provides a variety of mechanisms  
          to support solar energy.  These include property tax  
          exemptions for installation of solar systems and grants for  
          development and operation of some solar generation  
          technologies.

          Since 1976, California tax law has provided a credit for  
          the cost of solar energy systems installed in California.   
          Existing federal law provides a credit equal to 10% of the  
          cost of energy property placed in service during the year.   
          In 1980, the California Constitution was amended by  
          initiative (Proposition 7) to provide that active solar  
          energy systems would not be assessed as "new construction"  
          under Proposition 13's property tax requirements.


          AB 1890 (Brulte), Chapter 854, Statutes of 1996, provided  
          $540 million, collected over four years, to operate and  
          develop new, emerging and existing renewable resources  
          technologies.  The California Energy Commission (CEC) was  
          charged with developing a spending plan for these funds, as  
          well as others dedicated in AB 1890 for various public  
          purpose programs.  The CEC spending plan was codified by SB  
          90 (Sher), Chapter 905, Statutes of 1997.

          Under SB 90, the grid-connected photovoltaic segment of the  
          solar industry (which is potentially eligible for grants  
          under this bill) is eligible to compete for 10% of the $540  
          million, which is the portion designated for new and  







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          emerging technologies.  That money is awarded according to  
          the number of kilowatt hours produced, not on a per-system  
          basis.  As a result, the solar water heating segment of the  
          solar industry is not eligible to compete for this funding  
          because no kilowatt hours are produced.  And, by  
          definition, the non-grid-connected photovoltaic segment is  
          also not eligible.

          Distributed generation (DG) is small scale production of  
          electricity at or near the point of use, as opposed to  
          central generation, where electricity is produced in large  
          quantities at a remote site and transmitted to multiple  
          users.  DG systems range from photovoltaics and fuel cells  
          to gas turbines and diesel engines in residential,  
          commercial and industrial applications.  They can operate  
          in conjunction with, or independent of, the electricity  
          grid.  Under this bill, solar and DG systems are required  
          to be interconnected with the electricity grid to be  
          eligible for grants.  DG systems are further required to be  
          used only to meet onsite electric load, and not sell power.

          This bill requires CEC, beginning July 1, 2000 and until  
          January 2005, to develop a program to provide grants to  
          offset a portion of the costs of qualified solar and DG  
          installations, contingent on funding of the program in the  
          annual Budget Act.  Solar systems would be eligible for up  
          to $750 and DG systems would be eligible for 10% of their  
          cost, up to $2,000.

          This bill further requires the PUC to establish operational  
          and safety standards for DG systems.

          This bill also expands the purpose of a "solar energy  
          system" to include "electricity generation" for the Civil  
          Code's definition of a "solar easement."

          The bill requires the PUC, to establish appropriate  
          interconnection and safety requirements and operating  
          agreements for DG systems.

           Prior Legislation

           This bill is similar to SB 116 (Peace) of 1998, which  
          established a grant program for solar systems, but not DG  







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          systems.  In addition, SB 116 reinstated a property tax  
          exemption for the installation of solar systems.  SB 116  
          was vetoed by Governor Wilson, who objected to the grant  
          program, stating a preference for "fair and open market  
          competition without government subsidization of one  
          particular industry."  Governor Wilson had already  
          reinstated the solar property tax exemption by signing AB  
          1755 (Keeley), Chapter 855, Statutes of 1998.  
           
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          Senate Appropriations Committee staff estimates the CEC  
          will have the following fiscal impacts:

          1.Consultant contracts totaling $180,000 one time to  
            evaluate the various distributed generation technologies  
            and develop performance standards.

          2.Consultant contracts estimated at $200,000 to develop the  
            operating agreement criteria, guidelines, and  
            requirements.

          3.To the extent interim requirements are needed, one CEC PY  
            may be needed to accomplish this task.

          4.Consultant contract estimated at $120,000 to assist the  
            CEC with establishing fair and reasonable standby rates.   
            The CEC will likely need one-half PY to work with the  
            California Public Utilities Commission in establishing  
            these rates.

          5.Unknown, probably two to three PY to develop and  
            administer the grant program.

           SUPPORT  :   (Verified  9/8/99)

          Ackler & Associates, Sacramento
          Alten, Palo Alto
          Alternative Solar Products, Los Angeles
          Ameco, Long Beach
          Astro Power, Walnut Creek
          Aztec Solar, Sacramento
          BP Solar







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          California Solar Energy Industries Association, Rio Vista
          California Manufacturers Association
          California Building Industry Association
          California State Association of Electrical Workers
          California State Council of Laborers
          Clean Power Campaign
          Concorde Battery Corporation
          Diablo Solar Services, Martinez
          Environmental Defense Fund, Oakland
          Environmental Solar, North Hollywood - 15 letters
          Goldline Electronic Controls, La Mesa
          Helioco, Napa
          Heliotrope General, Spring Valley
          Horizon Industries, Escondido
          Independent Energy, Inc. - Parent of Goldline Electronics  
          Controls, La Mesa
          Leveleg, Precision Solar Mounting Systems, San Diego
          Mark Naylor & Company, San Diego
          Morley Manufacturing, Cedar Ridge
          New Energy Ventures, Inc. (NEV)
          Off-Line Independent Energy Systems, North Fork
          Pacific Energy Company
          Photocomm, Inc. the Wireless Power Company, San Diego
          PVI Photovoltaic & International, Sunnyvale
          Real Goods, Ukiah
          Sacramento Municipal Utility District 
          San Diego Regional Energy Office
          Schofield Solar Energy Company, San Buena Ventura - 2  
          letters
          Science Applications International Corporation, San Diego
          Sierra Club
          Sierra Pacific Home and Comfort, Inc.
          Six Rivers, Eureka
          Solar Connection, Morro Bay
          SolarCraft Services, Inc. Novato
          Solar Depot, Sacramento
          Solar Depot, San Rafael
          Solar Unlimited, Burbank
          Solar Utility
          Solec, Carson
          South Bay Solar, San Jose
          SunEarth, Ontario
          Sunray Energy, Inc., Daggett, California
          SunSpot Mechanical, Escondido







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          Sun Utility Network, Los Angeles
          Westburne, Escondido
          Western Renewables Group, Mission Viejo
          Numerous individual letters

           GOVERNOR'S VETO MESSAGE:
           
             "While I am supportive of efforts to promote emerging  
             solar and distributed generation technologies, this  
             bill establishes a new grant program without  
             establishing the source or amount of funding. 

             "This program, while important, should compete with  
             other priorities in the annual budget process. 

           ASSEMBLY FLOOR  : 
          AYES:  Aanestad, Ackerman, Alquist, Aroner, Ashburn,  
            Baldwin, Bates, Battin, Baugh, Bock, Brewer, Calderon,  
            Campbell, Cardenas, Cardoza, Cedillo, Corbett, Correa,  
            Cox, Cunneen, Davis, Dickerson, Ducheny, Dutra,  
            Firebaugh, Florez, Floyd, Frusetta, Gallegos, Granlund,  
            Havice, Hertzberg, Honda, House, Jackson, Keeley, Knox,  
            Kuehl, Leach, Lempert, Leonard, Longville, Lowenthal,  
            Machado, Maddox, Maldonado, Margett, Mazzoni, Migden,  
            Nakano, Olberg, Oller, Robert Pacheco, Rod Pacheco,  
            Papan, Pescetti, Reyes, Romero, Runner, Scott, Shelley,  
            Soto, Steinberg, Strickland, Strom-Martin, Thompson,  
            Thomson, Torlakson, Vincent, Washington, Wayne, Wiggins,  
            Wildman, Wright, Zettel, Villaraigosa
          NOES:  McClintock
          NOT VOTING:  Briggs, Kaloogian, Wesson

          NC:cm  1/5/00   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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