7. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Dorothy J. Duda is the assigned ALJ in this proceeding.

Findings of Fact

1. SB 656, which added § 2827 to the Pub. Util. Code, established the NEM program and provided that each utility was not obligated to offer NEM to new customers once the rated generating capacity of NEM generation reached 0.1 percent of the "utility's peak demand forecast for 1996."

2. Section 2827(a) enumerates several goals for the NEM Program, including encouraging substantial private investment in renewable energy resources and stimulating in-state economic growth.

3. AB 1755 modified § 2827 in several respects. Among other changes, AB 1755 revised the description of the NEM cap calculation from 0.1 percent of each utility's "peak demand" to 0.1 percent of each ESP's "aggregate customer peak demand."

4. Section 2827 does not define whether "aggregate customer peak demand" refers to coincident peak demand or the aggregation of individual customers' non-coincident peak demands.

5. The Pub. Util. Code includes multiple instances of "peak demand" in reference to coincident peak demand at either the utility or statewide level. However, the phrase "aggregate customer peak demand" only appears in § 2827.

6. Data on individual customer peak demand is not available for all customers, but it will be available for the vast majority of customers once the deployment of smart meters has been completed. Deployment of smart meters is currently scheduled to be completed by the end of 2012.

7. In 2010, the Commission issued the NEM Cost-Effectiveness Evaluation consultant report to the Legislature, which estimated the total costs and benefits of NEM. That report found that the net cost of NEM to non-participants would equal approximately $137 million per year once the CSI goals were reached.

8. The 2010 NEM Cost-Effectiveness Evaluation did not account for all cost associated with NEM, such as interconnection costs and the cost of providing standby service.

9. The Commission lacks updated empirical information about the extent and impact of cross-subsidies of the NEM program on non-participating ratepayers.

Conclusions of Law

1. In enacting AB 1755, the Legislature intended a substantive change in the NEM cap calculation when it revised the term "peak demand" to "aggregate customer peak demand."

2. Because the phrase "peak demand" is used to refer to coincident peak demand in multiple occurrences in the Pub. Util. Code, the words "aggregate customer" would be superfluous if the Legislature had intended "aggregate customer peak demand" to mean coincident peak demand.

3. Use of the phrase "aggregate customer peak demand" in § 2827 of the Pub. Util. Code to mean coincident peak demand when the phrase "peak demand" is used elsewhere in the Pub. Util. Code for that purpose would constitute the use of inconsistent and confusing terminology by the Legislature.

4. The Legislature did not intend "aggregate customer peak demand" to mean coincident peak demand.

5. While the statutory text leans in favor of using non-coincident peak demand as the denominator in the formula used to calculate the NEM program cap, it is conceded that the statute is ambiguous, and in this circumstance it is the Commission's responsibility to resolve the ambiguity by rendering an authoritative interpretation of the statute.

6. It is reasonable to interpret "aggregate customer peak demand" as meaning the aggregation of individual customer peak demands, i.e., customers' non-coincident peak demands.

7. SCE, SDG&E, and PG&E should use the aggregation of customers' non-coincident peak demands to calculate their caps on NEM participation as set forth in § 2827(c)(1).

8. In order to provide the Commission with better and more current information, the Energy Division should oversee the preparation of an updated NEM cost-effectiveness report to be completed no later than October 1, 2013. The report should quantify the costs and benefits of NEM to participants and non-participants and should further disaggregate the results by utility, customer class, and household income groups within the residential class. The study should also seek to gather and present data on the income distribution of residential NEM participants. In order to assess the costs and benefits at various levels of NEM implementation, the above analyses should be conducted using multiple NEM penetration scenarios, including at minimum, the capacity needed to reach the solar PV goals of the CSI program and the estimated NEM capacity under the 5 percent cap as defined in this decision. The results of such a study can then be used by the Commission to set future policy for the NEM program, with full awareness of the economic impacts of any policy choices on all classes of ratepayers.

9. In order to ensure our policy appropriately reflects the findings from the updated NEM cost-effectiveness study, the utilities should suspend the NEM program for new customer-generators at the end of calendar year 2014, pending the issuance of new rules in a rulemaking proceeding to be undertaken in the wake of the study. This temporary suspension of the NEM program for new customers, effective January 1, 2015, will remain in effect until such new rules are issued. If new rules are issued by December 31, 2014, then no suspension of the program need occur.

10. Notwithstanding the preceding conclusion of law, no utility should be relieved of its obligation to offer full-retail NEM to renewable customer-sited generation until it has reached its CSI program target for solar PV capacity.

ORDER

IT IS ORDERED that:

1. Southern California Edison Company, San Diego Gas & Electric Company, and Pacific Gas and Electric Company shall calculate their respective caps on participation in the net energy metering program as five percent of aggregate customer peak demand, which is defined as the highest sum of all customers' non-coincident peak demands that occurs in any calendar year.

2. Within 45 days of the effective date of this decision, the Energy Division shall convene a public workshop with Southern California Edison Company, San Diego Gas & Electric Company, and Pacific Gas and Electric Company, noticed to all parties in this proceeding, to discuss methods for estimating the individual peak demands of the customers for which the utilities lack demand data and establishing a consistent methodology for calculating non-coincident aggregate customer peak demand. Within 60 days of the effective date of this decision, Energy Division should provide the Administrative Law Judge and assigned Commissioner a recommendation on a methodology for calculating non-coincident aggregate customer peak demand.

3. Within 90 days of the effective date of this decision, the assigned Commissioner, in consultation with the Administrative Law Judge and Energy Division, shall issue a ruling with instructions to Southern California Edison Company, San Diego Gas & Electric Company, and Pacific Gas and Electric Company on the methodology they must use to calculate non-coincident aggregate customer peak demand.

4. Within 120 days of the effective date of this decision, Southern California Edison Company, San Diego Gas & Electric Company, and Pacific Gas and Electric Company shall file Tier 2 advice letters with revised net energy metering tariffs that conform to Ordering Paragraph 1 and the instructions that will be issued by the assigned Commissioner in Ordering Paragraph 3 on the methodology for calculating non-coincident aggregate customer peak demand.

5. The Energy Division shall oversee the preparation of an updated Net Energy Metering (NEM) cost-effectiveness report to be completed no later than October 1, 2013. The report shall quantify the costs and benefits of NEM to participants and non-participants and shall further disaggregate the results by utility, customer class, and household income groups within the residential class. The study should also seek to gather and present data on the income distribution of residential NEM participants. In order to assess the costs and benefits at various levels of NEM implementation, the above analyses shall be conducted using multiple NEM penetration scenarios, including at minimum, the capacity needed to reach the solar photovoltaic capacity goals of the California Solar Initiative and the estimated net energy metering capacity under the five percent cap as defined in Ordering Paragraph 1 of this decision.

6. Unless the Commission issues new policy rules for the Net Energy Metering (NEM) Program by January 1, 2015, Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas and Electric Company shall suspend the NEM program for new customer-generators effective January 1, 2015. During the period of suspension, the utilities shall not offer net energy metering service to new customer-generators. The suspension will remain in effect until such rules are adopted.

7. Notwithstanding the preceding Ordering Paragraph, no utility shall be relieved of its obligation to offer net energy metering to renewable customer-sited generation until it has reached its target for solar photovoltaic capacity under the California Solar Initiative.

8. The assigned Commissioner or Administrative Law Judge may modify the compliance dates set forth in this order for good cause and as needed to ensure effective implementation of this decision.

9. Rulemaking 10-05-004 remains open.

This order is effective today.

Dated May 24, 2012, San Francisco, California.

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