IV. Eligibility Criteria

SB 1 mandates that by January 1, 2008, the CEC shall consult with the Commission, local publicly owned electric utilities, and the public to establish certain eligibility criteria for solar energy systems that will receive ratepayer funded incentives. (Public Resources Code Section 25782.) Until those criteria are established, SB 1 requires the Commission to determine which solar energy systems are eligible for incentives. (Public Utilities Code Section 2851(a)(1).)

These sections of SB 1, when taken together, require CEC-established eligibility criteria by January 1, 2008, but require the Commission to implement the CSI program using the Commission's own eligibility criteria, until such time as CEC criteria are in place. The ALJ ruling proposed the Commission should continue its progress toward implementation of the CSI program on January 1, 2007, including CSI Handbook Development and program administration functions, using the eligibility criteria and guidance set forth in D.06-08-028, in advance of the CEC eligibility criteria required by SB 1.

Most parties agreed with this proposal. One party, the CFC, disagreed with this approach, stating that SB 1 requires the CEC to implement the CSI after January 1, 2008. According to CFC, the Commission can continue with its SGIP until the CEC begins its own CSI program in 2008. In addition, CFC contends the Commission can fund solar incentives through SGIP only after cost-effectiveness findings under Public Utilities Code Section 399.6 and subject to the budget limits in Public Utilities Code Section 399.8(d).⁶ The Joint Solar Parties respond that the budget limitations in Public Utilities Code Section 399.8(d) are not applicable because SB 1 sets detailed solar budgets.

We agree with the ALJ's proposal to continue CSI implementation toward a January 1, 2007 start date. As the CEC adopts eligibility criteria, in consultation with the Commission, the Commission can adapt the CSI program as needed to match any new criteria.

We disagree with CFC's interpretation that SB 1 prohibits the Commission proceeding with CSI in advance of CEC eligibility criteria. Section 2851(a)(1) of SB 1 explicitly requires the Commission to determine which systems are eligible for solar incentives in advance of CEC-adopted criteria. CFC's interpretation ignores the explicit language of Public Utilities Code Section 2851(a)(1), which states that this Commission "shall determine the eligibility of a solar energy system, as defined in Section 25781 of the Public Resources Code, to receive monetary incentives until the time the [CEC] establishes eligibility criteria pursuant to Section 25782." (Emphasis added.) The CFC's interpretation of these sections ignores the plain language of Section 2851(a)(1), requiring this Commission to determine the eligibility of solar energy systems prior to the time when the CEC establishes eligibility criteria. CFC's reading of these sections would give the language in Section 2851(a)(1) no effect, thereby rendering that language mere surplusage. Under CFC's interpretation, only the language referring to eligibility criteria established by the CEC under Section 25782 would have any effect. On the other hand, our decision allows for both Sections 25872(a) and 2851(a)(1) to have effect: namely, that this Commission is responsible for determining the eligibility of solar energy systems for monetary incentives until the CEC establishes eligibility criteria pursuant to Section 25872.

Furthermore, we disagree with CFC's interpretation that in 2007 the Commission can only provide incentives to solar through the SGIP. SB 1, effective January 1, 2007, states that "In implementing the California Solar Initiative the commission shall ... authorize the award of monetary incentives ..." (Section 2851(a)(1), emphasis added.) This language indicates that the program being implemented by the Commission under SB 1 is the CSI program and not SGIP.⁷ As already noted, in awarding monetary incentives under Section 2851(a)(1), this Commission is required to determine the eligibility of solar energy systems until the CEC establishes eligibility criteria for such incentives.

In addition, SB 1 does not direct the Commission to make cost-effectiveness findings before providing any solar incentives. While SB 1 states that "a solar initiative should be a cost-effective investment by ratepayers in peak electricity generation,"⁸ this statement is a program goal and is not a requirement that cost-effectiveness findings must precede incentives.⁹ As indicated in the April 25, 2006 Scoping Memo in this proceeding, the Commission intends to address a methodology for measuring the costs and benefits of distributed generation systems, including solar, in Phase II of this proceeding.

CFC is also incorrect in its argument that the CSI is subject to budgetary or policy constraints found in Public Utilities Code Sections 399.6¹⁰ or 399.8 and related legislation. These sections govern funding unrelated to this Commission's implementation or administration of the CSI program, as they relate to Public Goods Charge moneys that are either the responsibility of the CEC or that are used by this Commission for energy efficiency, not solar, purposes. Therefore, requirements that may appear in such sections are inapplicable to the Commission's implementation or administration of the CSI.

⁶ CFC has raised similar issues in an application for rehearing of D.06-08-028. That application is pending before the Commission and we do not address it here.

⁷ While CFC notes that "nothing in [SB 1] shall be construed to codify PUC Decision 06-01-024..." (Section 1.b), SB 1 also states that the "California Solar Initiative" is "the program providing ratepayer funded incentives for eligible solar energy systems adopted by the Public Utilities Commission in Decision 06-01-024." (Public Resources Code Section 25781(a).)

⁸ Public Resources Code Section 25780(b). This language appears in a section on legislative findings and declarations.

⁹ Although CFC argues that the term "should" indicates a mandatory condition, it concedes that the term "should" also expresses expectation or probability.

¹⁰ Senate Bill 1250 repealed Public Utilities Code Section 399.6, effective September 27, 2006. (Sen. Bill No. 1250 (2005 - 2006 Reg. Sess.) § 30.)