IX. Gas Utilities' Involvement in CSI
When the Commission established the CSI in D.06-01-024, it stated that the program would be funded through 2016 by charges on gas and electric distribution rates. Table 1 of D.06-01-024 delineates the annual revenue requirements collected by PG&E, SCE, SDG&E, and SoCalGas for the CSI program. In D.06-01-028, the Commission allocated program goals and budgets across these same gas and electric utilities.
SB 1 adds Section 2851(d)(1) which states that:
The commission shall not impose any charge upon the consumption of natural gas, or upon natural gas ratepayers, to fund the California Solar Initiative.
Given the language in SB 1 prohibiting collections of program funds from natural gas ratepayers, the ALJ ruling proposed modifying D.06-01-024 and D.06-08-028 to revise the Commission's previously adopted revenue requirements, budget allocations, and MW goals for gas utilities.
Parties did not dispute this proposal and we adopt the changes proposed in the ALJ ruling to conform our earlier decision to the requirements of SB 1. Essentially, the Commission now updates the CSI budget to remove the revenue requirements derived from gas utilities. However, if there are no collections from gas customers, then solar incentives will not be available to gas utility customers. Customers of combined investor-owned utilities (IOUs) who take gas service only from the IOU are not eligible for IOU funded CSI incentives, but may apply to their municipal electric utility for incentives. This, in turn, means the Commission now revises each utility's MW goals for solar installations.12 Along the same lines, we remove SoCalGas as a program administrator since it will no longer collect funds for CSI from its ratepayers.
To enact these changes, this order modifies several tables previously adopted in D.06-01-024 and D.06-08-028. Specifically, Tables 1, 2 and 3 from D.06-01-024 are modified to revise the annual revenue requirements, CSI budgets, and administration and evaluation budgets to reflect collections and expenditures by electric utilities only.13 These revised tables are contained in Appendix A of this decision.
A second issue we must address, given SB 1's language limiting collections from gas customers, is whether it is appropriate to provide rebates to customers who install solar devices that displace natural gas usage. The ALJ ruling raised the question about the extent to which the Commission should provide incentives for solar technologies other than PV, and whether the Commission should exclude from the incentive program those "non-PV" solar technologies that displace natural gas usage. By excluding gas displacing solar technologies, the Commission would avoid electric ratepayers cross-subsidizing natural gas savings.
In response to this query, the utilities, CARE, and CFC urge the Commission to not provide CSI solar incentives to technologies that displace natural gas. SCE contends SB 1 defines a solar energy system as one that provides for the "collection and distribution of solar energy for the generation of electricity." (Section 25780(e).) Further, SCE claims it is not equitable to make electric ratepayers fund natural gas savings. If the Commission chooses to provide incentives to solar heating and air conditioning or water heating, it should be limited to devices that displace electricity. PG&E, SDG&E/SoCalGas, and CARE suggest the Commission could fund solar technologies that displace gas through other means, such as the existing SGIP, research, development and demonstration, or energy efficiency programs.
In contrast, several parties, namely ASPv, CCSF, the Joint Solar Parties, SDREO and the Coalition, urge the Commission to consider providing incentives to solar thermal technologies, including those that displace natural gas. ASPv and the Coalition maintain that both electric and gas customers benefit from a program that decreases overall demand for natural gas for production of electricity. They claim that since SB 1 authorizes up to $100.8 million for solar thermal and solar water heating, the Commission should encourage the development of all solar thermal technologies. SDREO contends that encouraging reductions in natural gas usage enhances the environmental goals of SB 1 and could help hedge natural gas price volatility.
The issue of whether to provide incentives to non-PV technologies has been an open question for some time. In D.06-01-024, the Commission stated its intent that all solar technologies should qualify for incentives, including solar PV, solar thermal, solar water heating, solar heating and air conditioning, and concentrating solar technologies. (D.06-01-024, pp. 13-14.) In that order, the Commission directed SDREO to draft and file a plan for a solar water heating pilot program in the SDG&E territory. At the same time, the Commission noted the need for further workshops and comments to obtain further information about the non-PV solar technologies before committing to provide incentives to them. (Id.)
In its April 2006 Staff Proposal, Staff recommended that the Commission provide incentives for several non-PV technologies and that those incentive levels should mirror the incentives provided to PV projects. However, Staff recommended that these incentive levels decline faster over the CSI program period than incentives for PV projects. In response to the April Staff Proposal, solar industry participants generally supported the concept of incentives to non-PV technologies, but asked the Commission to not attempt to predetermine a winning technology through unequal subsidies. Rather, the Commission should offer the same incentive to all solar technologies and "defer to the market" to determine the best solar technology. The utilities generally supported incentives to any non-PV technologies, but urge additional conditions and requirements to ensure incentives are justified and output is accurately metered. At the same time, the utilities urged regular review of all technologies and the need for continuing incentive support. The CFC contended CSI funds should not be diverted to non-PV technologies unless they are cost-effective, and suggested further pilots to determine cost effectiveness of new technologies before incentives are offered.
We find that given the SB 1's restrictions on collecting CSI funds from natural gas ratepayers, it would be inappropriate to use funds collected from electric ratepayers to subsidize natural gas savings. At the same time, SB 1 allows us to spend up to $100.8 million for incentives to solar thermal and solar water heating devices. Therefore, we will include solar thermal and solar water heating in our CSI incentive program, but only those solar thermal technologies that displace electric usage. SB 1 explicitly defines a "solar energy system" as a device that "has the primary purpose of providing for the collection and distribution of solar energy for the generation of electricity...." (Public Resources Code Section 24505.5(a)(3).) SB 1 states as a goal that CSI is an investment in peak electricity generation capacity. (Public Resources Code Section 25780 (b).) Further, in describing eligibility criteria, SB 1 requires that solar energy systems primarily offset part or all of the consumer's own electricity demand. (Public Resources Code Section 25782(a)(2).) Thus, SB 1's goals do not include natural gas displacement. We acknowledge the comments by numerous parties that there may be environmental benefits to natural gas savings, and indeed, we have noted this in our prior orders. Nevertheless, we find it inappropriate that electric ratepayers alone should bear the burden of contributing to the environmental and other benefits of natural gas conservation.
We will make one exception, that is, we will continue with the SDREO solar hot water heating pilot as set forth in D.06-01-024. SDREO has already submitted its plans for this pilot, and it is a very small expenditure of total CSI funds, namely less than $3 million.14 The pilot should provide useful information on the economics of solar hot water heating.
PG&E, SCE and SDG&E/SoCalGas urge us to fund incentives to natural gas displacing solar technologies through our existing SGIP. We will not do so at this time because, based on comments on the proposed decision, we are convinced there are too many unanswered questions surrounding the proper incentive level to offer to such technologies, and other details of administering incentives for these technologies. We note that under SGIP, there is an existing process for considering the addition of new technologies to receive SGIP incentives. Although we make no decision today on whether to fund gas displacing solar technologies through SGIP, we do not preclude the possibility for parties or program administrators to use the existing SGIP process to propose specific technologies and an appropriate incentive level for payment through SGIP.
Next, we must address whether incentives to non-PV technologies shall be equal to PV incentives, or decline at a faster rate as Staff had proposed in April 2006. We shall adopt the same incentive levels for non-PV technologies as paid to PV projects, with the same rate of incentive reduction as PV projects, at least for now. This means that electric displacing non-PV solar projects funded through CSI shall be paid either PBI or upfront EPBB incentives, depending on their size as set forth in the schedule in Section VI of this order. All other rules from D.06-08-028 apply to project applications involving non-PV technologies, such as size limitations, metering, and energy efficiency audits. We note that the use of certain non-PV technologies could raise unique estimation, metering and measurement issues if the technology displaces electricity but does not produce it. In comments on the Staff Proposal, parties suggested various approaches for addressing this issue, but the record lacks sufficient detail to direct a specific conversion approach for estimating or measuring electric displacement. We direct the CSI program administrators to assign or hire technical experts to address the technical details of estimating non-PV output for EPBB incentives and metering and measuring electric displacement for PBI payments. The program administrators should file CSI Handbook revisions relating to these non-PV estimation, metering, and measurement guidelines no later than April 1, 2007 or as otherwise directed by the assigned Commissioner or ALJ. The ALJ shall consult with the assigned Commissioner to review and approve these handbook revisions by ruling or Commission order, as deemed appropriate. Incentives for non-PV technologies will be available once the Commission's ruling or order accepting these revisions is issued.
We will avoid naming specific non-PV technologies that can apply for incentives. We see no need to limit participation to only technologies known at this time. As new solar non-PV technologies become viable, project proponents may apply for incentives as long as they meet other CSI eligibility criteria. Thus, there will be no percentage cap on participation of electric-displacing non-PV technologies, other than the $100.8 million limitation in SB 1 for solar thermal incentives. The program administrators shall each track incentive commitments for non-PV technologies (i.e., solar thermal), and administer funds up to each program administrator's pro-rata share of the $100.8 million limit, using the same proportional shares as specified in Table 2 of Appendix A to this order. Each program administrator should inform the ALJ in writing when it is within 10% of its pro-rata limit.
The Commission will reassess incentives for non-PV technologies in its periodic CSI review, as set forth in D.06-08-028. There, the Commission may evaluate the participation of non-PV technologies in CSI and the need for incentives based on industry economics and market conditions.
CCSF requests clarification whether the restrictions in SB 1 affect rebates for solar projects by gas customers where those projects have already been submitted and approved. As we stated in Section VIII above, projects that applied for incentives under 2006 program rules are not impacted by the changes discussed in this order. Those projects should be completed and receive the rebates under the rules prior to SB 1 going into effect on January 1, 2007.
12 Changes to the MW goals for each utility are discussed in detail in Section X below.
13 Changes to the budgets and revenue requirements for each utility are discussed in detail in Section X below.
14 SDREO filed a proposed pilot program on May 26, 2006. Comments on the proposal were filed in June and July 2006. The Commission is still reviewing the proposed plan and has not yet issued a ruling allowing the SDREO pilot to begin.
