The Staff Proposal solicited comments on two metering suggestions to help the program overcome challenges that multifamily affordable housing development may face installing solar - a submetering proposal and a concept the Staff dubs "virtual net metering."
Staff proposes the Commission offer an exemption from submetering rules to allow building owners in master metered buildings to submeter tenants in order to facilitate the direct transfer of energy savings benefits to tenants.15 Staff suggests this exemption might increase tenant benefits from solar by allowing building owners to size solar systems to meet total building load on a single master meter, and pass energy savings directly to tenants through sub-metering.
CARE and Sunfund support the proposal for an exemption to allow submetering in master metered buildings. PG&E and SCE oppose submetering, commenting it could allow landlords to pass on the costs of submetering to their tenants. LISC/NPH claim the idea is not efficient because submetering requires extra project costs, and most building owners/developers will likely size solar solely for common areas rather than tenant load. PG&E claims that an exemption is not needed as it already exists, as explained by the Commission in D.05-05-026.
PG&E is correct that in D.05-05-026, the Commission clarified that existing master meter buildings, constructed prior to July 1, 1982, may convert to submetering. Thus, what staff proposes is already allowed.
8.2. Virtual Net Metering (VNM)
In a related proposal, Staff recommends the utilities provide "virtual net metering" to program participants. There are economic and technical challenges to installing one solar energy system in a multifamily housing complex where each tenant's unit has a separate meter. This is true for affordable housing, as well as any multitenant environment. The VNM concept is designed to overcome the challenge of allocating benefits from a single solar energy system to tenants in multifamily housing whose units are individually metered.
Under VNM, a single solar energy system sized to offset part or all of a building's total load can be installed for the entire complex, but electricity produced by the system can be credited to individually metered tenants and to common areas of the building.16 Essentially, the electricity produced by the system would be net-balanced against total building electricity consumption, as if the building had a single, or "virtual," master meter. Credits for solar energy system production would be allocated to all units (both tenant units and common areas) in a predetermined proportion. Staff recommends VNM credits could be allocated proportionally between tenant and common areas based on historical load data, and then allocated equally between tenants. The portion of the solar system that offsets common area load would receive Track 1A incentives, and the portion that offsets tenant load would receive Track 1B incentives.
The Staff's VNM proposal is similar to and derived from ideas first contained in an Advice Letter filed in 2007 by SDG&E. In Advice Letter 1895-E, filed May 7, 2007, SDG&E requested approval of a new Photovoltaic Purchase and Credit (PVPC) program.17 In its PVPC Advice Letter, SDG&E suggested a method to apply credits from a single PV generator to individual tenants and common areas of an affordable housing property. SDG&E would meter the PV generator output separate and apart from metering of individual tenant and common area consumption.
Comments on the Staff's VNM proposal were diverse. A WISH, CCSE, and Sunfund express support for the VNM proposal. SDG&E recommends that instead of the VNM proposal, the Commission reconsider SDG&E's PVPC Advice Letter, which it suggests has advantages over VNM because it allows the size of a tenant unit in square footage to determine bill credits. In addition, under SDG&E's proposal, credits would be granted according to the same rules that apply to net energy metering (NEM) programs and credits would be given at the applicable low-income assistance program rate. CCSE and Global Green echo support for the SDG&E's PVPC concept as "worthwhile" and "elegant."
In contrast, PG&E and SCE oppose Staff's VNM proposal due to alleged cost, legal and technical barriers to the proposal. They share concerns that VNM could be costly to implement both for utilities and landlords, and this could ultimately flow through to increased tenant costs. PG&E states that many affordable housing complexes have monthly rent payments set by the local Housing Authority, and rent is reduced by an allowance for utilities. Therefore, PG&E suggests that reducing the utility costs for tenants would not necessarily reduce the total rent payment for a tenant because a building owner could appeal to the Housing Authority for a reduction in the utilities allowance and an accompanying increase in monthly rent.18 Further, PG&E and SCE claim VNM may be prohibited by net energy metering statutes, namely § 2827(b)(2), while Brobeck contends § 780.5 prohibits VNM. SCE, Brobeck Solar, and CARE express concern that VNM will not encourage tenants to conserve energy.
We will adopt the Staff's VNM proposal, with some modifications, because it facilitates the flow of benefits to tenants from a solar energy system installed by a building owner on an affordable housing complex. The VNM concept allows the output of a single solar energy system to be shared with tenants in multifamily housing, without master metering hardware or site-specific infrastructure upgrades, which may be cost prohibitive. The VNM proposal is similar to and improves upon the PVPC program proposed by SDG&E in Advice Letter 1895-E, mainly by ensuring compliance with § 2827.
We will modify the Staff's VNM proposal by allowing the building owner to determine the percentage of output to allocate between common and tenant areas. Based on comments by PG&E, we will require this allocation to remain fixed for five years. This is similar to SDG&E's PVPC proposal, and allows the building owner to fully offset common area load. Secondly, we clarify that the portion of solar output allocated to individual tenants will be allocated between tenants based on the relative size of a tenant's unit, consistent with the manner in which affordable housing rents are established.
We disagree with the claims by PG&E and SCE that VNM may be prohibited by net energy metering statutes. Their claim focuses on § 2827(b)(2) and their interpretation that VNM would treat electricity produced at one location (the building's common area account) as if it were produced at other locations (the individual tenant's account). We conclude it is reasonable to allow a solar energy generating facility on a multifamily affordable housing property to offset usage by tenants through VNM. Section 2827(b)(2) defines an "eligible customer-generator" for purposes of net energy metering as a customer "who uses" a solar or a wind generating facility "that is located on the customer's owned, leased, or rented premises...and is intended primarily to offset part or all of the customer's own electrical requirements." In our view, the affordable housing tenant meets the definition of an eligible customer-generator because the tenant uses a solar generating facility on property she rents to offset her electricity usage.
We also disagree with the contention by Brobeck that § 780.5 prohibits VNM. The VNM tariff would not alter in any way the requirement in § 780.5 that newly constructed residential units install individual meters to measure energy consumption. Indeed, VNM can only work when tenants are individually metered. A VNM tariff would allow the utilities to monitor production of a single solar energy system in order to provide net energy metering benefits to tenants in multifamily affordable housing complexes. Under VNM, the utility would be required to meter solar system output separate and apart from metering of individual tenant and common area consumption.
In response to comments by PG&E and SCE that VNM could be costly to implement and ultimately raise costs for affordable housing tenants, we find the utilities' cost claims are vague and unsupported and their claims of increased costs to tenants are speculative. Most of the cost information was provided in comments to the proposed decision, which prevented thorough examination of the asserted costs. On the other hand, it is reasonable to assume there will be some costs, although the exact amount is unknown, for each utility to modify its billing system to accommodate VNM. Although the VNM tariff concept has similarities to current net energy metering programs, there are some distinctions that will require additional work by the utilities, particularly in allocating credits to the individual bills of multiple building tenants.
Therefore, we will allow the utilities to recover their reasonable costs for implementation of VNM, but we agree with CCSE and SDG&E that VNM implementation costs should be recovered from the administrative budget for the general market CSI program, and not limited to the MASH program budget. VNM is a concept that could have wide applicability, although we do not prejudge here whether we will implement it more broadly. Nevertheless, it is reasonable to use the larger pool of CSI funds to pay for developing this program in the event it is applied elsewhere.
In comments on the proposed decision, the utilities' cost estimates to implement VNM range from approximately $600,000 to just over $1,000,000. The Program Administrators are currently required to submit semi-annual administrative expense reports to Energy Division under the general market CSI program. We will require these reports to include expenditures for VNM implementation and we expect expenditures to be in line with these estimates. SDG&E is not a program administrator, but since it will implement VNM in its territory, it should also file an administrative expense report showing VNM implementation expenses. If Energy Division questions the reasonableness of VNM implementation expenditures, it may request the Assigned Commissioner or ALJ to initiate further proceedings to examine, and potentially disallow, any disputed expenditures.
In adopting the VNM proposal, we reject the arguments by two parties that we reconsider a Power Purchase Agreement (PPA)19 solution in lieu of Staff's VNM concept. First, PG&E requests reconsideration of the PPA structure contained in a Program Administrator filing of July 16, 2007 (the PA proposal), where the utility would agree to buy all of the power produced by a solar facility on multifamily affordable housing at the Market Price Referent (MPR), which is the price established by the Commission under the Renewable Portfolio Standards (RPS) program to estimate the long-term market price of electricity for use in evaluating bid products received during RPS power solicitations. 20 Second, Brobeck suggests a different PPA approach involving third-party ownership of solar energy systems on affordable housing, with output sold to the utility under a PPA. Brobeck contends this arrangement could generate additional funds that a system owner could use to fund energy efficiency improvements to directly benefit the tenants. Brobeck envisions these additional funds could be returned to tenants in the form of a debit card that tenants could use to purchase smaller scale energy efficiency improvements.
Joint Solar Parties support the proposal by Brobeck, stating that third party ownership should be allowed, consistent with the general market CSI program. Marin Environmental Housing Collaborative opposes third-party ownership arrangements, such as PPAs, in the MASH program, claiming that private investors behind PPAs should not be eligible for the higher level of funding under the MASH program.
We decline to adopt the PPA proposals suggested by the Program Administrators and Brobeck in lieu of VNM for the MASH program. The MASH program is intended to fund solar energy systems that offset building load, in keeping with Public Resources Code § 25782(a)(2).21 We find that net energy metering programs, such as VNM, are an appropriate mechanism to support this purpose. In contrast, the PPA approaches suggested by the Program Administrators and Brobeck focus on selling system output to the utility, rather than offsetting customer load through net energy metering. The PPA proposal involves purchase of system output at the MPR price, which is lower than net energy metering rates. Payments based on the MPR would not provide as much financial incentive to invest in solar as the VNM proposal. The Commission has already established tariffs and standard contracts through which solar facilities, including any located on affordable housing in the service territory of SCE and PG&E, can use a PPA to sell power at the MPR pursuant to § 399.20, although solar facilities using this arrangement are not eligible for CSI or distributed generation incentives.22 Finally, the Brobeck model proposes no limits on PV system size, which conflicts with CSI eligibility criteria.23
With regards to other types of PPA arrangements between customers and third party solar system owners, we will not preclude multifamily affordable housing property owners from installing solar through PPA arrangements with third parties, as long as those arrangements comply with all existing statutes governing the production and sale of electricity. We recognize that many innovative models, including third-party ownership, may facilitate the deployment of solar energy in affordable housing, thereby providing benefits to affordable housing tenants.
In conclusion, we will require PG&E, SCE, and SDG&E to each file an advice letter, within 120 days of this order, proposing a VNM tariff applicable to multifamily affordable housing properties that install a solar energy system through the MASH program. In reviewing the proposed tariffs, Energy Division should strive for consistency across the three utilities in their implementation of VNM. Each utility's VNM tariff must comply with § 2827 and at a minimum:
· Allow for the allocation of net energy metering benefits from a single solar energy system to all meters on an individually metered multifamily affordable housing property, without adversely impacting building tenants.
· Allow the building owner/manager to determine the percentage of solar energy credits allocated to common area meters versus individual tenant meters, and this allocation shall remain fixed for at least five years.24
· The annual solar energy credits allocated to the common area and to each of the tenant meters may not exceed the associated estimated load (in kilowatt hours) for the coming year.
· The percentage of solar energy credits (in kilowatt hours) allocated to individual tenant meters should be credited across all individual meters based on the relative size of the tenant's unit. Credits (in dollars) should be applied at the otherwise applicable rate for each meter.
· The building owner/manager shall be responsible for, and shall bear all costs associated with, installing a generator output meter capable of recording solar energy system output in fifteen minute increments, if required, to insure appropriate customer credits.
· Excess credits should be carried forward monthly according to standard NEM rules, as set forth in § 2827.
· The VNM tariff may not apply any additional charges or administration fees on tenants who benefit from the VNM tariff.
Although we direct a filing date for a VNM tariff by the utilities, we note that implementation of the MASH program is not tied to introduction of the VNM tariff. All other elements of the MASH program can begin implementation prior to approval of the VNM tariff.
The VNM tariff concept could be expanded to apply to any multitenant property that installs a solar energy system, such as a shopping mall or apartment complex. There is precedent for utilities linking multiple meters on a single property for purposes of sharing NEM credits, as the utilities currently aggregate meters on agricultural properties for biogas digester customer- generators under § 2827.9. Therefore, we will consider expanding VNM to all multitenant properties, not just affordable housing. We herein direct the ALJ to issue a ruling to take comment on the idea in this proceeding.
15 Section 780.5 states that the Commission shall require "every residential unit in an apartment house or similar multiunit residential structure, condominium, and mobilehome park for which a building permit has been obtained on or after July 1, 1982...to be individually metered for electrical and gas service." In other words, only residential units with building permits before July 1, 1982 are master metered.
16 VNM would only apply to buildings where tenants are individually metered utility customers.
17 Advice Letter 1895-E was withdrawn on August 9, 2007.
18 In comments on the proposed decision, LISC/NHA suggest property owners who receive MASH incentives could state they will not request utility allowance adjustments for five years. While affordable housing rents and utility allowances are outside this Commission's jurisdiction, we encourage creative proposals, such as the one suggested by LISC/NHA, to flow operating cost savings from solar to building occupants.
19 The PPA model described in the CSI Program Administrators' July 16, 2007 proposal, and by Brobeck in its March 26, 2008 comments, refers to an agreement whereby a utility agrees to purchase all of the electricity produced by a solar system installed on an affordable housing property. The PPA is between the utility and the system owner, which might be the property owner, or could be a third party. The term PPA is also commonly used to refer to a different arrangement whereby a third party owns and operates a solar system on a utility customer's property, and the utility customer agrees to purchase all of the power produced by that system. In the latter case, the agreement is between the utility customer and the third-party solar system owner.
20 The most recently adopted MPR relative to a 20-year contract for a baseload resource that begins operation in 2009 is $0.09696/kilowatt hour (nominal dollars). (See Resolution E-4118, October 4, 2007.)
21 Public Resources Code § 25782(a) states that eligibility criteria for solar energy systems receiving ratepayer funded incentives shall include the requirement that "the solar energy system is intended primarily to offset part or all of the consumer's own electricity demand."
22 See D.07-07-027 which established tariffs under § 399.20, pursuant to AB1969. The tariffs are commonly referred to as the Small Renewable Generator Tariffs.
23 See Public Resources Code § 25782(a)(2) stating systems are intended to offset part or all of the customer's own electricity demand.
24 For example, the owner could decide to split the solar energy credits between tenant and common areas in a 30/70 proportion, or 50/50.