2. Background

In early 2006, the Commission, in collaboration with the California Energy Commission, established the California Solar Initiative (CSI), a $2.5 billion incentive program to promote solar development through 2016, to be funded from the distribution rates of gas and electric ratepayers. (See Decision (D.) 06-01-024.) At that time, the Commission stated its intent to consider incentives for solar water heating (SWH) as part of the CSI program, and directed San Diego Gas & Electric Company (SDG&E) to contract with California Center for Sustainable Energy (CCSE) (formerly the San Diego Regional Energy Office) to administer a pilot program for SWH incentives in the SDG&E territory. (Id. at 13.)

Subsequently, with the passage of Senate Bill (SB) 1 in August of 2006, funds for CSI were limited to $2.16 billion and could no longer be collected from gas ratepayers. At the same time, SB 1 included a provision allowing $100.8 million of total CSI funds to be used for incentives for solar thermal technologies, such as solar water heating. (See Pub. Util. Code § 2851(b).)1 With CSI funding now limited to collections from electric ratepayers, the Commission concluded in D.06-12-033 that although CSI would include as part of its total budget $100.8 million for incentives to solar thermal technologies, CSI should only pay incentives to solar thermal technologies that displace electric usage. (D.06-12-033, Conclusion of Law 19 at 38.) The SWH pilot in the SDG&E territory, budgeted at $3 million, was allowed to proceed to provide useful information on SWH incentives in general. (Id., Conclusion of Law 20.)

In February 2007, the Commission approved the SWH pilot budget of $2.59 million and the pilot began operation in the SDG&E territory on July 2, 2007, with a scheduled end date of December 31, 2008.2 In D.08-06-029, the Commission made minor modifications to the pilot and allowed it to run until December 31, 2009 or until the budget is exhausted, whichever occurs first.

In late 2007, the Governor signed Assembly Bill (AB) 1470, authorizing the creation of a $250 million incentive program to promote the installation of 200,000 SWH systems in homes and businesses that displace the use of natural gas by 2017. The statute requires the Commission to evaluate data from the SWH pilot and determine whether an SWH program is "cost effective for ratepayers and in the public interest" before designing and implementing an incentive program for gas customers. (Section 2863(a).)

1 All statutory references are to the Public Utilities Code, unless otherwise noted.

2 See "Assigned Commissioner[s] and Administrative Law Judge's Ruling Approving Solar Water Heating Pilot Program," Rulemaking (R.) 06-03-004, February 15, 2007.

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