VIII. Time Variant Pricing

In D.06-08-028, the Commission did not require CSI program participants to take service through time-of-use (TOU) tariffs to receive incentives. In contrast, SB 1 adds Section 2851(a)(4) which states that:

Notwithstanding subdivision (g) of Section 2827, the commission shall require time-variant pricing for all ratepayers with a solar energy system. The commission shall develop a time-variant tariff that creates the maximum incentive for ratepayers to install solar energy systems so that the system's peak electricity production coincides with California's peak electricity demands and that assures that ratepayers receive due value for their contribution to the purchase of solar energy systems and customers with solar energy systems continue to have an incentive to use electricity efficiently. In developing the time-variant tariff, the commission may exclude customers participating in the tariff from the rate cap for residential customers for existing baseline quantities or usage by those customers of up to 130 percent of existing baseline quantities, as required by Section 80110 of the Water Code. Nothing in this paragraph authorizes the commission to require time-variant pricing for ratepayers without a solar energy system.

The ALJ ruling proposed that the Commission modify D.06-08-028 to require customers who apply for incentives starting January 1, 2007 to take service from the existing TOU tariff applicable to their situation. The ALJ ruling further proposed that solar energy systems that applied for and were approved to receive incentives prior to SB 1 taking effect on January 1, 2007, would not be required to retroactively sign up for service under a TOU tariff. Finally, any tariff design changes would be handled in each utility's general rate case.

Several parties agreed with the approach in the ALJ ruling, namely the Joint Solar Parties, PG&E and SCE. On the other hand, several parties, including ASPv, SDREO, and CARE, suggest the Commission should not implement the TOU requirements of SB 1 until it develops a new solar specific TOU tariff. ASPv and SDREO contend existing TOU tariffs do not provide the "maximum incentive" for solar investments as required by SB 1. ASPv and CARE urge the Commission to begin work on new solar TOU tariffs immediately, and not wait for future general rate cases. SDG&E notes it does not currently have a residential TOU rate that allows exclusions from baseline allowances and rate caps, as specified in SB 1. It suggests it could establish one by advice letter.

We find the approach in the ALJ ruling, which requires new CSI applicants as of January 1, 2007 to take service on applicable existing TOU tariffs, is reasonable and comports with the legislation. As SB 1 states, the purpose of the time variant pricing requirement is to create the maximum incentive for customers to install solar energy systems that coincide with California's peak electricity demand. Thus, we will only apply this requirement to new systems because it would have little impact on systems already installed.

Several parties request the Commission begin immediate work on solar specific TOU tariff refinements. We agree that refinements to the TOU tariffs to create the proper incentives for solar installations is a concept that deserves further exploration, but one that should be explored through an application rather than the advice letter process suggested by SDG&E. Thus, we agree with the proposal in the ALJ ruling that the Commission explore further TOU tariff enhancements or redesign in either the applicable utility's general rate case or other appropriate proceeding. Nevertheless, we note SDG&E's current TOU tariff, Schedule DR-TOU, contains a special condition which limits the tariff to the first 10,000 customers. SDG&E should file an advice letter to remove this limitation from the tariff.¹¹

Finally, PG&E asks for clarification whether customers who apply for incentives before the end of 2006 but do not receive approval prior to January 1, 2007, will be required to take service under the applicable TOU tariff. In general, we clarify that projects that apply for solar incentives in 2006 shall follow the 2006 SGIP rules, independent of what calendar year they receive a conditional reservation from program administrators. Projects that apply for solar incentives in 2007 shall follow the 2007 CSI program guidelines, including the TOU tariff requirements.

¹¹ In comments on the proposed decision, SDG&E suggests additional changes to its TOU tariff, such as exclusions from baseline allowances and rate caps. The changes SDG&E suggests should not be included in its advice letter filing to comply with this order, as they are more appropriately handled in a general rate case or other proceeding focused on time-of-use pricing issues.