BILL ANALYSIS
AB 560
Page 1
Date of Hearing: April 20, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 560 (Skinner) - As Amended: April 16, 2009
SUBJECT : Net energy metering.
SUMMARY : Increases the current cap on the amount of
electricity that can be generated under the net-energy metering
program from 2.5% to 10% of each utility's aggregate peak
demand.
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
primarily offset part or all of the consumer's own electricity
demand (the panels cannot 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 no larger 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 demand at that moment in time as
a kilowatthour (kWh) bill credit against electricity that the
customer receives from the utility when their renewable
facility produces less than the customer is consuming.
3)Caps the total amount of solar and wind generation that can be
subject to net-metering at 2.5% of each electric utility's
aggregate peak demand.
4)Requires all publicly owned utilities (POUs) other than the
Los Angeles Department of Water and Power (LADWP) to offer the
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.
THIS BILL : Increases the cap on net metering for IOUs and most
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POUs from 2.5% of aggregate peak demand to 10% of each utility's
aggregate peak demand.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to remove unnecessary barriers to meeting the goals of the CSI.
Net metering is an important piece of the overall financing of
rooftop solar, without net-metering few solar installations
would be economically viable.
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.
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2) The current cap : SB 656 (Alquist), Chapter 369, Statutes of
1995, caped net-metering at 0.1% of the utilities load. That cap
was increase to 0.5% by AB 57 (Keeley), Chapter 836, Statutes of
2002. The cap was raised to 2.5% under SB 1 (Murray), Chapter
132, Statutes of 2006. SB 1 implemented the CSI which has the
goals of installing 3,000 megawatts (MW) of distributed
generation sized solar energy system in California by 2017 while
creating a self-sustaining solar industry that can operate
without subsidies.
According to recent estimates by the PUC, each IOU share of the
3,000 megawatt goal represents between 4.5% to 5% of the
utility's aggregate peak load. Even with the grant program
created under the CSI and federal tax credits, distributed
generation solar is not economical for the customer generator
unless the utility participates in some form of a buy back
program such as net-metering. If the goals of CSI are to be
met, the 2.5% cap on net-metering must be increased or a similar
buy back program must be put into place.
At the time SB 1 passed, it was generally understood that the
2.5% cap was not sufficient to meet the 3,000 MW solar goals.
However, the cap was set at 2.5% to give the Legislature the
opportunity to review the effectiveness of the CSI and of
net-metering at the mid-point of the program. At the time SB 1
was approved the assumption was the 2.5% cap would not be
reached until after 2010.
The cap on net-metering was put into place to achieve two
different purposes. The first purpose is to insure that
intermittent solar generation does not create grid reliability
problems. The utilities were concerned that this "must take"
power could result in voltage spikes if the percentage of solar
connections grew too high. The second purpose was to cap the
subsidy that net-metering represent.
To help ensure the Legislature could fully review the success of
the CSI, SB 1 required the PUC to provide reports on the CSI and
on the cost and benefits of net metering. The reports require:
1) On or before June 30, 2009, and by June 30 of every year
thereafter, the PUC shall submit to the Legislature an
assessment of the success of the CSI program. That assessment
shall include the number of residential and commercial sites
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that have installed solar thermal devices for which an award
was and the dollar value of the award, the number of
residential and commercial sites that have installed solar
energy systems, the electrical generating capacity of the
installed solar energy systems, the cost of the program,
total electrical system benefits, including the effect on
electrical service rates, environmental benefits, how the
program affects the operation and reliability of the
electrical grid, how the program has affected peak demand for
electricity, the progress made toward reaching the goals of
the program, whether the program is on schedule to meet the
program goals, and recommendations for improving the program
to meet its goals. If the commission allocates additional
moneys to research, development, and demonstration that
explores solar technologies and other distributed generation
technologies pursuant to paragraph (1), the commission shall
include in the assessment submitted to the Legislature, a
description of the program, a summary of each award made or
project funded pursuant to the program, including the
intended purposes to be achieved by the particular award or
project, and the results of each award or project. (PU Code
Section 2851(c)(3))
2) By January 1, 2010, the PUC, in consultation with the Energy
Commission, shall submit a report to the Governor and the
Legislature on the costs and benefits of net energy metering,
wind energy co-metering, and co-energy metering to
participating customers and nonparticipating customers and
with options to replace the economic costs and benefits of
net energy metering, wind energy co-metering, and co-energy
metering with a mechanism that more equitably balances the
interests of participating and nonparticipating customers.
(PU Code Section 2827(c)(4))
3) How close are we to the cap : As of December 2008, the total
installed capacity of net-metered customers in PG&E's service
territory represented 1.3% of PG&E's peak load. Southern
California Edison (SCE) net-metered customers represented 0.5%
of their peak load and San Diego Gas & Electric (SDG&E) was at
.6% of peak load.
While SCE and SDG&E will not come close to the net-metering cap
for several years, based on estimates of the growth of PG&E
program it is possible that the cap will be reached in their
service territory in 2010. If the cap were reached before the
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Legislature could increase the cap or an alternative program was
put into place the CSI would likely come a halt in PG&E's
service territory.
4) What to do : The sponsor of this bill, Solar Alliance, and
other supporters believe that since the CSI has been successful
and net-metering is a key part of that success, the cap on net
metering should be eliminate entirely or increased to a level
that exceeds the 3,000 megawatt goal of the CSI this year. They
argue, "If California expects to achieve the goals of the
California Solar Initiative, continue to be a leader in the
deployment of solar, and build a sustainable, long term
renewable energy economy, then the cap on net metering must be
lifted." The supporters also argue that there is no evidence
that the net-metered solar power creates any negative impact on
grid stability so this is no longer a valid reason to cap net
metering.
PG&E and SCE support increasing the cap enough to keep the
net-metering program going through 2010 until the Legislature
can fully review the PUC's reports on the cost and benefits of
the CSI and net-metering, they do not support eliminating the
cap or increasing the cap to 5% until after the reports to the
Legislature are completed. They believe that the reports should
provide the Legislature with the needed information at asses the
value and possible future risks of net-metering.
TURN is also opposed to increasing the cap at this time, unless
the cap increase is coupled with other changes to the
net-metering program that TURN believes will help ensure that
the non-customer generator ratepayers receive some benefit from
the subsidy. Specifically, TURN would like to change current
rules that provide that the customer generator owns all of the
Renewable Energy Credits associated with that generation, even
for electricity that is sold to the utility.
REGISTERED SUPPORT / OPPOSITION :
Support
AEE Solar, Inc.
Applied Materials
Brightline Defense Project
California Building Industry Association (CBIA)
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California Retailers Association (CRA)
California Solar Energy Industry Association (CALSEIA)
Coalition for Clean Air
Conergy
Environment California
Evergreen Solar, Inc.
Global Green USA
Mainstream Energy Corporation
Pacific Gas and Electric (PG&E) (if amended)
Pacific Environment
Planning and Conservation League
REC Solar, Inc.
Sierra Club California
Solar Alliance
SolarCity
SPG Solar, Inc.
Union of Concerned Scientists
Opposition
Coalition of California Utility Workers (CUE) (unless amended)
State Association of Electrical Workers (unless amended)
The Utility Reform Network (TURN) (unless Amended)
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083