State Bill Revamps Solar Initiative

Jun 12 - The San Diego Union-Tribune

Depending on your perspective, the state Legislature is on the brink of either bolstering or diluting the historic solar initiative enacted in January by the California Public Utilities Commission.

The PUC attracted worldwide attention by proposing to spend $3.2 billion over the next decade to subsidize the installation of 1 million solar rooftop systems across the state. The subsidy funding would be raised by surcharges on utility bills.

The expectation is that the systems will generate up to 3,000 megawatts of electricity -- the equivalent of about six modern power plants -- precisely when California needs it most: on hot, sunny days. What's more, the solar-generated electricity would reduce the need to run conventional power plants, most of which burn natural gas or coal and contribute to pollution and global warming.

Building on similar initiatives in Germany and Japan, supporters of the California program argued that the state's program could be the final boost needed to lift photovoltaic technology from niche to mainstream.

But now the Legislature is considering a solar initiative of its own. After failing to pass a solar bill last year, the Legislature is moving forward on Senate Bill 1, which is expected to be voted on in the next two weeks and which would make an array of changes to the PUC plan.

The Legislature is weighing in for some technical reasons -- changes needed to continue the sale of power from newly installed rooftop systems to local utilities -- as well as for more substantive policy changes some legislators want.

SB 1, for example, would scuttle the PUC plan to divert about $150 billion from the subsidy fund for rooftop installations to pay for research and development of photovoltaic technology.

The bill would also extend the solar initiative to municipal utilities. The "munis" provide about 27 percent of the state's electricity but fall outside the jurisdiction of the PUC, so they were not covered by the commission's plan.

While supporters of SB 1 say they want to see the broadest possible application of the program, critics complain that SB 1 proposes no additional funding for this expansion.

Bernadette Del Chiaro, an advocate with Environment California, a nonprofit research and policy center, says the reduction in subsidies for customers of San Diego Gas & Electric and other investor-owned utilities would be about $800 million.

She said the target of 1 million roofs was set for these utilities and expanding it to munis should have been accompanied by greater funding. And she argues that SB 1 doesn't require that municipal utilities implement effective programs but merely sets a goal for them to do so.

"Not that we won't ask them to do it, but the chances of the municipal utilities setting up an iron-clad solar program are low," Del Chiaro said.

But advocates of SB 1 say a million roofs is a substantial target no matter which utility customers ultimately install them. Assemblyman Lloyd Levine, D-Sherman Oaks, a co-author of the bill, added that the subsidy figure was arbitrary to begin with.

"Nobody ever provided a justification for the $3.2 billion figure anyway," Levine said.

"It was just industry (advocating the higher subsidy level), and they are making a living manufacturing the equipment, so I understand it. This bill was never intended to be a giveaway of money to the industry or a blank check to the industry. It is intended to make solar energy comparably cost-effective with other forms of energy."

PUC President Michael Peevey, who opposes SB 1, is also critical of the way it extends open solar subsidies to municipal customers.

"If they want to add the munis, it should be additive and not reduce the amount the PUC would allocate to the investor-owned utilities," he said.

Peevey also criticized SB 1's provision that would eliminate the PUC plan to set aside 5 percent of the solar subsidies for research and development, or about $150 million over the 10-year program. Supporters of SB 1 say the research and development can be done by other state agencies.

All told, the PUC president said, "This bill is anti-environmental. I am deeply disturbed and hope the environmental community as well as the solar industry will rally against it."

Solar advocates like Del Chiaro emphasize there are aspects of SB 1 they do support, including putting into state law a requirement that subsidies for photovoltaic systems decline to zero over the next decade. The advocate says this will ensure that the equipment industry delivers on its promise to cut costs to the point that solar systems are competitive without subsidies.

Del Chiaro also supports a provision of the bill that provides payments to owners of larger photovoltaic systems only for the electricity they produce, rather than paying them for the capacity of their systems.

That provides guarantees that the public is getting real electricity generation from the systems, she said.

The solar advocate said she also supports a provision of the bill that would have the Contractors State License Board review the qualifications of installers of rooftop photovoltaic systems.

But that provision is a flash point for some Republicans in the Legislature.

"These amendments are just a creative attempt by Democrats to disallow nonunionized contractors from being eligible to participate," said Morgan Crinklaw, press secretary to Republican Assembly Leader George Plescia of San Diego.

Levine counters that some oversight of installer qualification is essential.

"We don't want the wind to lift these systems and have their panels go airborne or have them weigh down and jeopardize the integrity of the roof," Levine said.

Levine added that legislation is also needed to lift the cap on net metering, which allows the owners of rooftop photovoltaic systems to offset the cost of power they buy from local utilities with the power they generate from their roofs.

In many cases, customers can reduce their electricity costs to nearly zero through this offset.

But the proliferation of rooftop solar systems has pushed the volume of such offsets to a statutory limit. So a hike in the limit was needed to continue the incentive of net metering.

Yet another issue raised by SB 1 is a provision that would allow utility customers to be charged rates higher than those allowed by a cap that has been in place since the power crisis.

During the crisis, the Legislature capped rates for customers who use 130 percent or less of so-called baseline allowances of electricity, under the assumption that these customers shouldn't pay further rate hikes as a result of the crisis.

But SB 1 allows the surcharge needed to finance the solar initiative, expected to be about $1 monthly, to be imposed on top of this cap. That troubles consumer advocates.

Matt Freedman, an attorney with The Utility Reform Network in San Francisco, said utilities have long sought to break the rate cap and see the solar surcharge as their chance.

"They are trying to get this rate cap protection removed by linking it to a very popular program," Freedman said.

Supporters of the bill, however, noted that the surcharge won't be imposed on low-income ratepayers and say the bill is a one-time exception to the cap.

Levine is confident the bill is on track for passage and is optimistic it will be supported by Gov. Arnold Schwarzenegger.

"And I've had a conversation with the governor's office indicating that he would sign it."

Bill Mailer, a spokesman for the governor, said his staff was reviewing the legislation. Mailer also said Schwarzenegger was pleased that the PUC was implementing its solar program.

"Generally, a measure that improves existing solar programs consistent with his vision to bring 3,000 megawatts of solar power to California by 2018 would be supported by the governor," Mailer said.

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