D0605025 Appendix B
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ALJ/DOT/hl2 Mailed 5/30/2006

Decision 06-05-025 May 25, 2006

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Regarding Policies, Procedures and Rules for the California Solar Initiative, the Self-Generation Incentive Program and Other Distributed Generation Issues.

Rulemaking 06-03-004

(Filed March 2, 2006)

ORDER AFFIRMING ALJ'S RULING REDUCING SOLAR PV INCENTIVES

This decision affirms the Administrative Law Judge's (ALJ) ruling of April 24, 2006, which reduces solar photovoltaic (PV) incentives from $2.80/watt to $2.50/watt. The ruling is attached to this decision as Appendix A.

In Decision (D.) 06-01-024, the Commission created the California Solar Initiative program, budgeting approximately $2.8 billion for solar incentives and programs over an 11-year period, from 2006 to 2016. In order to preserve program funds for the entire 11-year program, the Commission adopted an automatic "trigger" mechanism to reduce the incentives paid on a calendar year basis, or when program participation reached specific megawatt (MW) levels.

A ruling of March 21, 2006 in this proceeding provided parties notice that applications for solar incentives under the Self-Generation Incentive Program (SGIP) in 2006 had exceeded the first 50 MW "trigger" for automatic incentive reductions. Based on information indicating applications surpassed 90 MW, the ruling directed SGIP administrators to reduce solar PV incentive payments from $2.80/watt to $2.50/watt for all program applications exceeding the 50 MW threshold. The ruling allowed parties to comment within seven days if they had objections to the implementation of the automatic trigger mechanism.

Comments to the March 21, 2006 ruling were submitted by several parties, generally supporting the reduction in solar incentives, but disagreeing with certain elements of the reduction's implementation.

In response to the comments received, the ALJ determined that a second ruling was necessary to respond to the confusion and uncertainty over how to implement the automatic trigger reduction. A second ruling was issued on April 24, 2006 confirming the March 21, 2006 ruling and clarifying certain details in order to implement the automatic trigger reduction. This decision modifies the ALJ's ruling of April 24, 2006, on two issues and otherwise, affirms it as written. The modifications to the ALJ's ruling are made in response to comments by the utilities and San Diego Regional Energy Office (SDREO) that acts as program administrators (PAs) for solar incentive payments and PV Now, a national solar industry advocacy group comprised of manufacturers in the solar PV industry.

First, we clarify that incentive payments will be reduced to $2.50/watt when conditional reservations reach 50 MW, based on the statewide level of conditional reservations and not the proportional allocation used in the ALJ ruling. In both of the ALJ's rulings on the trigger reduction, the ALJ was acting on the best information available to implement the mechanism for an automatic reduction of incentive payments, as the Commission had adopted in D.06-01-024. The information available to the ALJ indicated that program administrators were flooded with applications which surpassed the 50 MW level and implied that reservation letters had been issued to applicants in excess of the 50 MW level. The ALJ ruling of April 24, 2006, allowed the PAs to apportion the first 50 MW of conditional reservations based on their proportion of CSI program funds. According to the ruling, later trigger reductions in incentive payments would not be apportioned in this manner, but instead would be based on a statewide assessment of conditional reservation levels. The apportionment for the first 50 MW in the ALJ ruling was predicated on the assumption that the PAs had already issued conditional reservations above the 50 MW threshold.

In comments on this decision, the PAs now report that conditional reservations fall below the 50 MW cap.1 Therefore, there is no longer a need to apportion the 50 MW as the ALJ had directed in her ruling. The PAs should coordinate with each other on a daily basis to determine when conditional reservations reach the 50 MW. This means that the PAs may still accept applications and offer conditional reservations at $2.80/watt, but the incentive will automatically drop to $2.50/watt once the PAs have issued conditional reservations that collectively total 50 MW on a statewide basis. The burden is on the PAs to coordinate and communicate with each other, daily if necessary, and not issue conditional reservations beyond the 50 MW. If the PAs inadvertently issue conditional reservations beyond the 50 MW cap articulated in D.06-01-024, they will have to explain to applicants why their reservation must be altered to the new lower incentive level.

In addition, the PAs should undertake sufficient communication with active solar incentive applicants to ensure they are aware of an impending reduction of the incentive level. Once the PAs determine that conditional reservations have met the 50 MW cap, they should notify the ALJ in writing and the ALJ will issue a ruling officially notifying all parties that the incentive reduction to $2.50/watt has occurred.

Second, the ALJ ruling directed the PAs to post application and reservation information on each of their public websites and update the information weekly. Given the need for close monitoring of the conditional reservation status to determine when reservations reach the 50 MW cap, we direct the PAs to update the public website daily, rather than weekly, when reservations are within 20% of the trigger point. In comments on the decision, each of the PAs provided a table with their reporting information, and despite the ALJ's request for the PAs to coordinate their information, each table portrayed a different statewide level of conditional reservations. Only SDREO and SDG&E/SoCalGas reported the same information. We are concerned that the reporting of conditional reservations is not consistent across PAs. We urge the PAs to achieve consistent information across their website postings as soon as possible. Further, we direct the PAs to coordinate and post their conditional reservations on a daily basis, to avoid the data discrepancies we see in their comments. In addition, we direct the PAs to use the reporting format set forth in Appendix B of this decision.

Comments on Draft Decision

The draft decision of ALJ Dorothy Duda was mailed in accordance with 311(g)(1) of the Public Utilities Code and Rule 77.7 of the Rules of Practice and Procedure. Comments and/or replies were filed by Pacific Gas and Electric Company (PG&E), PV Now, Southern California Edison Company (SCE), jointly by San Diego Gas & Electric Company and Southern California Gas Company (SDG&E/SoCalGas), and the San Diego Regional Energy Office (SDREO).

Generally, the comments ask for further clarification on how to implement the 50 MW trigger reduction in solar incentive payments. The decision has been modified in response to comments and provides the clarification requested by parties in their comments.

1 The PAs indicate that conditional reservations range from 28 to 31.5 MW. We are surprised that these numbers do not agree, and address this further in this order. We note all sources indicate reservations below 50 MW.

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