7. Low-Income Program Modifications
7.1. SASH Design Factor34
In D.07-11-045, the Commission required that in order to qualify for SASH program incentives, an installation must meet a minimum performance requirement. The adopted minimum requirement was set equal to 0.95 of the design factor35 used to calculate EPBB incentives for the general market CSI program. (D.07-11-045 at 21.) The intent of this minimum performance standard was to provide better assurance of high performing installations for low-income homeowners.
As a result of this minimum performance requirement, the SASH Program Administrator (Grid Alternatives) has reported to Energy Division that many eligible customers have been unable to qualify for SASH incentives. According to Grid Alternatives, 18% of SASH applications from April 2009 to January 2010 failed to meet the minimum performance requirement. Staff suggests this data indicate the SASH minimum performance requirement may be too stringent and that if it were relaxed, a larger number of projects would be eligible for SASH incentives. Thus, the Staff Proposal recommends the Commission change the minimum design factor requirement for SASH systems from 0.95 to 0.85.
Grid Alternatives supports the recommendation in the Staff Proposal. SCE opposes it, but suggests that if the minimum performance standard is lowered, the incentive mechanism should reflect a performance efficiency factor consistent with the general market CSI and MASH program
Discussion. We will make the change proposed by staff, and lower the design factor requirement for the SASH Program to 0.85 to enable more systems to qualify. We find this change reasonable because a design factor of 0.85, although lower than the initial 0.95 design factor, still ensures a high level of performance from the installed facilities.
7.2. SASH Inspections36
In D.08-11-005, the Commission required that 100% of the systems installed under the SASH Program be inspected by a third-party inspector. The Commission adopted this proposal out of concern for a "conflict of interest" that may occur if the incentives are assigned to the PA since the administrator also serves as a solar system installer for the projects. In the CSI general market program, only one in seven systems are currently inspected, although staff has proposed reconsideration of this inspection level.
Staff recommends that only one in seven SASH systems be inspected, consistent with the current general market CSI program. A sampling protocol would be developed by the inspector and approved by the Commission's Energy Division. An inspector, independent from the SASH Program Administrator, would randomly select the projects for inspection using the sampling protocol. Grid Alternatives and SCE support the recommendations in the Staff Proposal.
Discussion. We will modify our previous mandate in D.08-11-005 that 100% of SASH projects be inspected. Since the start of the SASH program, installed projects routinely pass inspection. Plus, the SASH program has financial safeguards through program reporting and auditing to ensure the integrity of the program is maintained. This mitigates our concerns over any conflict of interest derived from Grid Alternatives dual role as PA and system installer. We agree with staff that random inspection of a sample of projects by a third party, not chosen by the PA, is now sufficient. To further minimize any conflict of interest, the third party inspector should report inspection results directly to the relevant utility and the Energy Division, as well as Grid Alternatives. A lower inspection requirement should reduce SASH administrative costs and potentially allow installation of more SASH projects.
Therefore, we will require SCE, as administrator of the SASH program administration contract with Grid Alternatives, to work with Grid Alternatives to develop an inspection sampling protocol for SASH and submit it by advice letter within 60 days of this decision. The protocol should involve random inspection of one in seven systems by a third party inspector not affiliated with Grid Alternatives, the SASH PA. Furthermore, we clarify that if inspection guidelines for the general market program are modified, SASH inspection levels should conform to those inspection modifications.
7.3. Increasing the Budget for MASH Track 1 Incentives37
As established in D.08-10-036, the MASH program provides two types of incentives. Track 1 incentives provide fixed, upfront capacity-based incentives for solar PV systems that offset common area and tenant loads. Incentives are either $3.30 per watt for systems that offset common area load (known as Track 1A), or $4.00 per watt for systems that offset tenant load (Track 1B). Track 2 incentives are determined through an application and competitive grant process for systems that provide quantifiable "direct tenant benefits" (i.e. any operating costs savings from solar that are shared with their tenants).
Track 1 incentives are sold out in all three utility territories and each PA has a waiting list. With regard to Track 2, the PAs have received many applications, but few projects have been found to provide compelling benefits. Therefore, less than half of the Track 2 incentives have been awarded and $11.9 million remains in the Track 2 budget as of December 31, 2010.
The Staff Proposal suggests eliminating Track 2 incentives so that remaining Track 2 funds, or $11.9 million, can be reallocated to Track 1 and used to fund further installations from the waiting list. This would install additional capacity of solar PV at a lower cost per watt than Track 2. At the same time, staff proposes reducing Track 1 incentives from their current levels to $2.30 per watt for Track 1A and $2.80 per watt for Track 1B. These new incentive levels would apply to any reservations confirmed after the adoption of these new lower rates.
In addition, the staff suggests the Commission reallocate some SASH program funding to the MASH program, but staff does not suggest a specific dollar amount.
PG&E, Everyday Energy, Grid Alternatives, and CCSE support eliminating MASH Track 2 incentives as suggested in the Staff Proposal. PG&E states that Track 2 has had little success in its service area and few applications have demonstrated significant benefit to low income tenants. Everyday Energy notes that the popularity of Track 1 suggests the higher incentives under Track 2 are unnecessary. CCSE suggests that the 20/80 percentage split between Track 1A and Track 1B be eliminated. Helio opposes the proposal to eliminate Track 2.
PG&E and CCSE support the proposal to reduce Track 1 incentive rates, with PG&E suggesting a lower Track 1A rate than proposed by staff in order to fund more projects. PG&E notes that a recent study by Navigant suggests that incentives of $1.90 per watt are reasonable given that MASH systems are often owned by third parties who are able to take advantage of federal tax incentives in addition to MASH incentives. (PG&E, 7/5/11 at 14.) Everyday Energy opposes incentive reductions, claiming that market speculation caused the program to sell-out quickly. Instead, it recommends an application fee for projects greater than 10 kW, shorter completion deadlines, and the requirement to submit a signed contract to counteract speculation and ensure commitment from applicants.
With regard to the proposal to reallocate SASH funds to MASH, CCSE, Everyday Energy and Helio support the idea, while CALSEIA and Grid Alternatives oppose it.
Discussion. We will adopt the recommendation in the Staff Proposal to shift all remaining funds from Track 2 to Track 1. The strong demand for Track 1 incentives indicates that the higher Track 2 incentives are not necessary. We will also accept the staff recommendation to lower MASH Track 1 incentives. We agree with PG&E that Track 1A can survive with an incentive lower than proposed by staff, given the continuing cost declines for solar installations that our CSI database shows. The new Track 1 MASH incentives shall be $1.90 per watt for Track 1A and $2.80 per watt for Track 1B. The new incentive levels apply to any reservations confirmed after the date of this decision. In addition, we will also remove the 20/80 percentage split between Track 1A and Track 1B that we specified in D.08-10-036. The PAs may now spend their Track 1 funds on either Track 1A or 1B without limitation.
We accept the suggestion of Everyday Energy that an application fee will help ensure commitment by applicants to the MASH program. We direct the PAs to add a MASH application fee that mirrors the current CSI general market program application fee structure which is as follows:
Table 6: Application Fee Structure
System Size Range |
Application Fee |
10 kW to < 50 kW |
$1,250 |
50 to < 100 kW |
$2,500 |
100 to < 250 kW |
$5,000 |
250 to < 500 kW |
$10,000 |
500 to 1000 kW |
$20,000 |
The application fee should be refundable upon the successful installation of the solar energy system, or forfeited if applications drop out after they have been confirmed.
We decline to shift any SASH funds to MASH at this time, but will continue to monitor this closely. We agree with Grid Alternatives that a fund transfer may be premature and we will await the outcome of pending evaluations of the MASH and SASH programs before shifting funds. Moreover, we direct our Energy Division to obtain information on the number of households that may qualify for MASH and SASH. Once the MASH and SASH evaluations are complete and information on eligible households is available, Energy Division may propose to the ALJ and assigned Commissioner that funds be transferred from SASH to MASH. The ALJ and assigned Commissioner may issue a ruling seeking comment on that proposal and may transfer funds between SASH and MASH, after appropriate notice and opportunity for comment by the parties to this proceeding.
7.4. Two Year Occupancy for MASH Program38
The CSI MASH program requires that projects be occupied for two years prior to applying for incentives from the MASH program. The Commission adopted this requirement in D.08-10-036 because at that time, MASH incentives were intended for retrofitting existing affordable housing and were higher than the CEC's NSHP incentives for new construction.39 The Commission wanted to avoid a situation where new construction projects purposefully avoided the lower incentives in the NSHP program in order to receive higher incentives through the MASH program.
The Staff Proposal recommends the Commission now eliminate the two-year occupancy requirement, contending the requirement has caused confusion since the launch of the MASH program. The Staff Proposal further recommends the Commission maintain the otherwise applicable rule that a project cannot receive both NSHP and CSI incentives. According to the Staff Proposal, the CEC's NSHP Guidebook was modified recently to allow projects that have been occupied for less than two years to qualify for the NSHP program to "close the gap" between the NSHP affordable housing program and the CSI MASH program.
SCE and PG&E support the Staff Proposal, but they both question whether this modification allows new construction projects to apply for MASH incentives. Helio and CCSE also support the Staff Proposal on this topic.
Discussion. Given recent changes to both the MASH Program and NSHP, the two year occupancy requirement that we adopted in D.08-10-036 is no longer needed. This decision lowers MASH incentives below NSHP levels, and NSHP allows projects occupied less than two years to apply for incentives through that program. We will remove the two-year occupancy requirement for the MASH program, but we maintain the requirement that projects cannot receive incentives from both NSHP and MASH.
34 See Staff Proposal Section 6.3.
35 The design factor is a reflection of a proposed system's tilt, orientation, shading, equipment efficiency, and other factors compared to an optimally-installed system.
36 See Staff Proposal Section 6.4.
37 See Staff Proposal Section 6.6.
38 See Staff Proposal Section 6.7.
39 Current NSHP Affordable Housing incentives are $3.50 per watt for residential unit systems and $3.30 per watt for common area systems.
