LEGISLATIVE SUBCOMMITTEE RECOMMENDATION: SUPPORT WITH TECHNICAL AMENDMENTS
SUMMARY OF BILL:
· This bill would exempt an owner of solar generation from the regulatory provisions governing "electrical corporations" under certain circumstances.
· The bill appears to make it easier [or explicitly legal] for "third party" owners of solar generation to own and operate a solar system and sell electricity to residential utility customers. This model of equipment leasing or Power Purchase Agreements (PPAs) is already common among commercial facilities, and is gaining popularity in the residential sector.
· The bill provides that master-metered customers charge sub-metered users a rate not to exceed the otherwise applicable utility rate or the rate charged by the solar generator, whichever is lower.
· The bill also requires that third party owners of solar generation provide certain disclosures to residential utility customers that buy or lease the solar generation.
· This bill would create new law [Article 3, Sections 2868 and 2869 of Chapter 9 of the Public Utilities Code (PU Code)] and amend existing law [PU Code Sections 218 and 739.5].
SUMMARY OF SUPPORTING ARGUMENTS FOR RECOMMENDATION:
While the Energy Division supports the general direction of the bill to allow PPAs to support the expansion of the use of solar statewide and to insert consumer protection elements into those contracts, we feel that other aspects of the bill, which endorse and expand the reach of PPAs are potentially problematic. This bill requires additional legal analysis to ensure that it does not merely complicate the statute in order to achieve what the law appears to already allow: third party ownership of solar generation.
There are a few main concerns with this bill, as written:
· It expands the potential market for third party owners of solar generation by allowing them to sell power to "an association of a common interest development," which may contradict the current legislative suspension of direct access.
· The disclosure requirements in this bill only apply to third party transactions with residential customers. Commercial customers potentially face the same risks in PPAs as residential customers, and it would seem appropriate to apply some sort of disclosure requirements across the board. Also, the disclosure requirements do not contain any regulatory enforcement mechanisms. According to the author, the only way to challenge a PPA provider that does not adequately disclose information in contract would be through litigation.
· This bill only addresses solar generation. It would be appropriate to address all distributed generation technologies that are able to use the PPA model and/or are eligible for ratepayer funded incentives and/or net energy metering tariffs.
· This bill appears to not exempt PPAs from the definition of "Electric Service Provider" (PU Code 218.3).
SUMMARY OF SUGGESTED AMENDMENTS:
· Remove the provision that an owner of solar generation be able to sell power to "an association of a common interest development." [PU Code Section 2868 (d)(3)]
· Expand the disclosure requirement to include commercial customers. Amend proposed PU Code Section 2869 (a) to read:
o An independent solar energy producer contracting for the sale of electricity or the lease of a generation system, to any entity a person, an association of a common interest development, for use on any property a residence shall include a disclosure to the buyer or lessee that, at a minimum, includes all of the following
· Expand bill to cover non-solar technologies.
· Modify the bill to exempt PPAs from the definition of both "Electrical Corporation" and "Electric Service Provider (PU Code 218.3). Otherwise, the "Independent Solar Energy Producers" would fall under the definition of an "Electric Service Provider" which is not allowed under the Direct Access suspension.
DIVISION ANALYSIS (Energy Division):
· Exempts solar PPAs from the definition of an "electric corporation"
· This bill would exempt an owner of solar generation from the regulatory provisions governing electric corporations if the solar generation:
o Is for its own use or the use of its tenants.
o Is for the use of, or sale to, not more than two other corporations or persons per generation system solely for use on the real property on which the electricity is generated, or on real property immediately adjacent thereto.
o Is for the use of, or sale to, an association of a common interest development solely for the use by, or sale to, its members or their tenants, and solely for use on the real property on which the electricity is generated, or on real property immediately adjacent thereto.
o Is for sale or transmission to an electrical corporation or a local or state agency.
· Current statute (PU Code Section 218) already provides an exemption from the definition of an electric corporation for generation "from other than a conventional power source" that meets any of the first, second or fourth bullet points. This bill makes two meaningful changes:
o It calls out solar generation specifically and clarifies that the sale to not more than two other corporations or persons applies per generation system. This effectively endorses the PPA model, since PPAs often own multiple solar generation systems at multiple sites and sell the electricity to the host at each site. We currently understand that most PPAs avoid this concern by legally setting up as separate "special purpose vehicles" - and therefore there is never more than one system owned by a given entity.
o It also includes a new provision for the sale to "an association of a common interest development." A common interest development, as defined, is limited to a community apartment project, a condominium project, a planned development, or a stock cooperative. This provision has been included to try to allow condo associations to site a solar project on common property (e.g. the roof of the commonly owned poolhouse); however, it is unclear why this provision is so critical. It may contradict the current legislative suspension of direct access if the solar generation were to use this provision to sell electricity to more than two parties in "an association of a common interest development."
· Establishes a price cap for sub-metered tenants in master-metered properties. The bill provides that master-metered customers charge sub-metered users a rate not to exceed the otherwise applicable utility rate or the rate charged by the solar generator, whichever is lower. Currently, master-metered customers charge sub-metered users a direct pass through price equal to the otherwise applicable utility rate. This bill intends to ensure that master-metered customers pass all savings associated with solar power from a third party owned system directly to sub-metered users. It furthermore protects sub-metered users from ever having to pay a price for solar generation that exceeds the utility rate. The California Public Utilities Commission (CPUC) existing policy does not allow sub metering, except with a few limited exceptions. This provision of the law would not have much effect unless and until the CPUC made exemptions for sub-metering for solar systems.
· Provides disclosure requirements for residential PPAs
This bill would require PPA providers to disclose certain information in all contracts with residential parties. A notice of these contracts would have to be recorded against the property title to the property where the solar generation is installed. The following disclosure information would be required:
o A good faith estimate of the kilowatthours to be delivered by the generation system.
o A plain language explanation of the terms under which the pricing will be calculated over the life of the contract and a good faith estimate of the price per kilowatthour.
o A plain language explanation of operation and maintenance responsibilities of the contract parties.
o A plain language explanation of the disposition of the generation system at the end of the term of the contract.
PROGRAM BACKGROUND:
· PPA model: Third party (PPA) ownership of solar generation is increasingly popular in California. PPAs enable building owners to enjoy the benefits of solar generation through reduced energy costs without incurring the risks of owning and maintaining solar systems themselves. PPA providers typically purchase and install solar on a building roof and sell the electricity produced by that system to the building owner at a fixed price, usually at or below the utility rate, for up to 20 years. Currently PPA providers appear to be operating within existing law because they are set up as "special purpose vehicles" that sell "only to one customer" which is outside the existing definition of an electrical corporation.1 Since current statute limits the sale of electricity by a non-electrical corporation to "not more than two other corporations or persons," PPA providers have tended to sign these contracts with single, owner-occupied buildings.
· Through March 31, 2008, forty four percent of the MWs in the California Solar Initiative appear to be third party owned systems, most of which are using some form of PPA model. According to the April 2008 Energy Division Staff Progress Report on the CSI, 355 out of 9,817 total California Solar Initiative projects, which account for 109 MW out of 249 MW, appear to be third-party-owned PPA systems2. Eighty three percent of these projects, and the vast majority of the MWs, are from non-residential systems.
· There are some concerns about the PPA model as it has been currently practiced. The CSI program and the CPUC do not have access to PPA contracts, as they are covered by business to business contract law and not regulated by the CPUC. As such, there is nothing in the current statute to prevent an unscrupulous PPA provider from installing solar on an uninformed customer's roof and selling them the power at above market rates. In fact, there has been recent press about buyers of PPAs that realized "higher bills after installing solar"; these cases were likely due to the customer not understanding the full financial ramifications of a signing a PPA while also maintaining utility service for some portion of the electrical service. There is nothing in law or CSI program rules that prohibits a provider from selling a customer power from a solar system - that combined with the remaining electricity bill - leaves the customer worse off than before the system.3 This concern would be reduced, though not eliminated completely, if PPAs were required to provide disclosures to residential customers as this bill proposes. The CPUC could require disclosure as part of the CSI program, with or without this proposed change in law.
· This bill would put certain obligations on PPA sellers but it does not require a role for the CPUC in enforcing that obligation. The CPUC could incorporate the spirit of this law in the CSI program rules, if it deemed necessary to do so. If the law passed, the CPUC could go beyond the minimum disclosure requirements as set forth in this law.
LEGISLATIVE HISTORY:
None.
FISCAL IMPACT:
None. This bill would not require any additional staffing needs at the CPUC.
STATUS:
The bill was currently on the Assembly Floor Consent Calendar.
SUPPORT/OPPOSITION:
Support: Solar Alliance (Sponsor)
Open Energy
Opposition: None on file.
STAFF CONTACTS:
Erin Grizard, Legislative Liaison eeg@cpuc.ca.gov
Office of Governmental Affairs (916) 445-1430
Date: May 20, 2008
BILL LANGUAGE:
BILL NUMBER: AB 2863 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 8, 2008
AMENDED IN ASSEMBLY APRIL 8, 2008
AMENDED IN ASSEMBLY MARCH 25, 2008
INTRODUCED BY Assembly Member Leno
FEBRUARY 22, 2008
An act to amend Section 218 of Sections
218 and 739.5 of, and to add Article 3 (commencing with Section 2868)
to Chapter 9 of Part 2 of Division 1 of, the Public Utilities
Code, relating to public utilities
electricity .
LEGISLATIVE COUNSEL'S DIGEST
AB 2863, as amended, Leno. Public utilities: electrical
corporations. Independent solar energy producers:
master-meter customers.
Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including electrical corporations.
An electrical corporation is defined as including every corporation
or person owning, controlling, operating, or managing any electric
plant for compensation within this state, except where electricity is
generated on or distributed by the producer through private property
solely for its own use or the use of its tenants and not for sale or
transmission to others. Existing law requires that, when gas or
electric service is provided by a master-meter customer to users who
are tenants of a mobilehome park, apartment building, or similar
residential complex, the master-meter customer charge each user at
the same rate which would be applicable if the user were receiving
gas or electricity directly from the gas or electric company.
Existing law creates further requirements for master-meter
customers and for the corporations which provide service to them.
This bill would require the master-meter customer to charge each
user a rate not to exceed the rate that would be applicable if the
user were receiving gas or electricity, or both, directly from the
gas or electrical corporation.
This bill would additionally create an exception from the
definition of an "electrical corporation," if a corporation
or person employs one or more photovoltaic generation systems for the
generation of electricity for its own use or the use of its tenants,
the use of, or sale to, not more than 2 other corporations or
persons per generation system solely for use on the real property on
which the electricity is generated in which case the sale price of
the electricity shall not exceed the applicable tariff approved by
the commission for the electrical corporation, or approved by the
governing board of the local publicly owned electric utility, serving
the real property, the use of, or sale to, an association of a
common interest development solely for use by, or sale to, its
members or their tenants, in which case, the sale price of the
electricity shall not exceed the applicable tariff approved by the
commission for the electrical corporation, or approved by the
governing board of the local publicly owned electric utility, serving
the real property, or sale or transmission to an electrical
corporation or state or local public agency
corporation" for an independent solar energy producer, as
defined and meeting the requirements described below,
employing one or more photovoltaic generation systems for the
generation of electricity .
This bill would require an independent solar energy producer
contracting for the sale of electricity or the lease of a generation
system to a person or common interest development association for use
in a residence to make certain disclosures to the buyer or lessee
and to record a document that contains notice of the contract, as
provided. The bill would require a master-meter customer of an
electric utility who purchases electricity or leases a generation
system from an independent solar energy producer, and who provides
electric service to users who are tenants of a mobilehome park,
apartment building, or similar residential complex, to charge each
user of the electric service that is under a submetered system a rate
for the solar generated electricity not to exceed the rate charged
by the independent solar energy producer or the electric utility's
rate for an equivalent amount of electricity, whichever is lower.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 218 of the Public Utilities Code is amended to
read:
218. (a) "Electrical corporation" includes every corporation or
person owning, controlling, operating, or managing any electric plant
for compensation within this state, except where electricity is
generated on or distributed by the producer through private property
solely for its own use or the use of its tenants and not for sale or
transmission to others.
(b) "Electrical corporation" does not include a corporation or
person employing cogeneration technology or producing power from
other than a conventional power source for the generation of
electricity solely for any one or more of the following purposes:
(1) Its own use or the use of its tenants.
(2) The use of or sale to not more than two other corporations or
persons solely for use on the real property on which the electricity
is generated or on real property immediately adjacent thereto, unless
there is an intervening public street constituting the boundary
between the real property on which the electricity is generated and
the immediately adjacent property and one or more of the following
applies:
(A) The real property on which the electricity is generated and
the immediately adjacent real property is not under common ownership
or control, or that common ownership or control was gained solely for
purposes of sale of the electricity so generated and not for other
business purposes.
(B) The useful thermal output of the facility generating the
electricity is not used on the immediately adjacent property for
petroleum production or refining.
(C) The electricity furnished to the immediately adjacent property
is not utilized by a subsidiary or affiliate of the corporation or
person generating the electricity.
(3) Sale or transmission to an electrical corporation or state or
local public agency, but not for sale or transmission to others,
unless the corporation or person is otherwise an electrical
corporation.
(c) "Electrical corporation" does not include a corporation or
person employing landfill gas technology for the generation of
electricity for any one or more of the following purposes:
(1) Its own use or the use of not more than two of its tenants
located on the real property on which the electricity is generated.
(2) The use of or sale to not more than two other corporations or
persons solely for use on the real property on which the
electricity is generated.
(3) Sale or transmission to an electrical corporation or state or
local public agency.
(d) "Electrical corporation" does not include a corporation or
person employing digester gas technology for the generation of
electricity for any one or more of the following purposes:
(1) Its own use or the use of not more than two of its tenants
located on the real property on which the electricity is generated.
(2) The use of or sale to not more than two other corporations or
persons solely for use on the real property on which the electricity
is generated.
(3) Sale or transmission to an electrical corporation or state or
local public agency, if the sale or transmission of the electricity
service to a retail customer is provided through the transmission
system of the existing local publicly owned electric utility or
electrical corporation of that retail customer.
(e) "Electrical corporation" does not include a
corporation or person employing one or more photovoltaic generation
systems for the generation of electricity for any one or more of the
following purposes:
(1) Its own use or the use of its tenants.
(2) The use of, or sale to, not more than two other corporations
or persons per generation system solely for use on the real property
on which the electricity is generated, in which case, the sale price
of the electricity shall not exceed the applicable tariff approved by
the commission for the electrical corporation, or approved by the
governing board of the local publicly owned electric utility, serving
the real property.
(3) The use of, or sale to, an association of a common interest
development, as defined in subdivision (c) of Section 1351 of the
Civil Code, solely for use by, or sale to, its members or their
tenants, in which case, the sale price of the electricity shall not
exceed the applicable tariff approved by the commission for the
electrical corporation, or approved by the governing board of the
local publicly owned electric utility, serving the real property.
(4) Sale or
transmission to an electrical corporation or state or local public
agency. an independent solar energy pr
oducer employing one or more photovoltaic generation systems for the
generation of electricity pursuant to Article 3 (commencing with
Section 2868) of Chapter 9 of Part 2.
(f) The amendments made to this section at the 1987 portion of the
1987-88 Regular Session of the Legislature do not apply to any
corporation or person employing cogeneration technology or producing
power from other than a conventional power source for the generation
of electricity that physically produced electricity prior to January
1, 1989, and furnished that electricity to immediately adjacent real
property for use thereon prior to January 1, 1989.
SEC. 2. Section 739.5 of the Public
Utilities Code is amended to read:
739.5. (a) The commission shall require that, whenever gas or
electric service, or both, is provided by a master-meter customer to
users who are tenants of a mobilehome park, apartment building, or
similar residential complex, the master-meter customer shall charge
each user of the service at the same a rate
not to exceed the rate which that
would be applicable if the user were receiving gas or electricity,
or both, directly from the gas or electrical corporation. The
commission shall require the corporation furnishing service to the
master-meter customer to establish uniform rates for master-meter
service at a level which that will
provide a sufficient differential to cover the reasonable average
costs to master-meter customers of providing submeter service, except
that these costs shall not exceed the average cost that the
corporation would have incurred in providing comparable services
directly to the users of the service.
(b) Every master-meter customer of a gas or electrical corporation
subject to subdivision (a) who, on or after January 1, 1978,
receives any rebate from the corporation shall distribute to, or
credit to the account of, each current user served by the
master-meter customer that portion of the rebate which the amount of
gas or electricity, or both, consumed by the user during the last
billing period bears to the total amount furnished by the corporation
to the master-meter customer during that period.
(c) An electrical or gas corporation furnishing service to a
master-meter customer shall furnish to each user of the service
within a submetered system every public safety customer service
which that it provides beyond the meter
to its other residential customers. The corporation shall furnish a
list of those services to the master-meter customer who shall post
the list in a conspicuous place accessible to all users. Every
corporation shall provide these public safety customer services to
each user of electrical or gas service under a submetered system
without additional charge unless the corporation has included the
average cost of these services in the rate differential provided to
the master-meter customer on January 1, 1984, in which case the
commission shall deduct the average cost of providing these public
safety customer services when approving rate differentials for
master-meter customers.
(d) Every master-meter customer is responsible for maintenance and
repair of its submeter facilities beyond the master-meter, and
nothing in this section requires an electrical or gas corporation to
make repairs to or perform maintenance on the submeter system.
(e) Every master-meter customer shall provide an itemized billing
of charges for electricity or gas, or both, to each individual user
generally in accordance with the form and content of bills of the
corporation to its residential customers, including, but not limited
to, the opening and closing readings for the meter, and the
identification of all rates and quantities attributable to each block
in the applicable rate structure. The master-meter customer shall
also post, in a conspicuous place, the applicable prevailing
residential gas or electrical rate schedule, as published by the
corporation.
(f) The commission shall require that every electrical and gas
corporation shall notify each master-meter customer of its
responsibilities to its users under this section.
(g) The commission shall accept and respond to complaints
concerning the requirements of this section through the consumer
affairs branch, in addition to any other staff that the commission
deems necessary to assist the complainant. In responding to the
complaint, the commission shall consider the role that the office of
the county sealer in the complainant's county of residence may have
in helping to resolve the complaint and, where appropriate,
coordinate with that office.
SEC. 3. Article 3 (commencing with Section 2868)
is added to Chapter 9 of Part 2 of Division 1 of the
Public Utilities Code , to read:
Article 3. Independent Solar Energy Producers
2868. The following definitions shall apply for purposes of this
article:
(a) "Association of a common interest development" means a
nonprofit corporation or unincorporated association created for the
purpose of managing a common interest development as defined in
subdivision (c) of Section 1351 of the Civil Code.
(b) "Electric utility" means an electrical corporation as defined
in Section 218, a local publicly owned electric utility as defined in
Section 9604, or an electrical cooperative as defined in Section
2776.
(c) "Generation system" means any configuration of photovoltaic
generation that has a single interconnection with the electric
utility transmission or distribution network.
(d) "Independent solar energy producer" means a corporation or
person employing one or more photovoltaic generation systems for the
generation of electricity for any one or more of the following
purposes:
(1) Its own use or the use of its tenants.
(2) The use of, or sale to, not more than two other corporations
or persons per generation system solely for use on the real property
on which the electricity is generated, or on real property
immediately adjacent thereto.
(3) The use of, or sale to, an association of a common interest
development solely for use by, or sale to, its members or their
tenants, and solely for use on the real property on which the
electricity is generated, or on real property immediately adjacent
thereto.
(4) Sale or transmission to an electrical corporation or a local
or state agency.
(e) "Real property" means a single parcel of land.
2869. (a) An independent solar energy producer contracting for
the sale of electricity or the lease of a generation system, to a
person, or an association of a common interest development, for use
in a residence shall include a disclosure to the buyer or lessee
that, at a minimum, includes all of the following:
(1) A good faith estimate of the kilowatthours to be delivered by
the generation system.
(2) A plain language explanation of the terms under which the
pricing will be calculated over the life of the contract and a good
faith estimate of the price per kilowatthour.
(3) A plain language explanation of operation and maintenance
responsibilities of the contract parties.
(4) A plain language explanation of the disposition of the
generation system at the end of the term of the contract.
(b) An independent solar energy producer contracting for the sale
of electricity or the lease of a generation system, to a person, or
an association of a common interest development, for use in a
residence shall record a notice of that contract against the title to
the real property on which the electricity is generated, and against
the title to any adjacent real property on which the electricity
will be used, in the office of the county recorder for the county in
which the real property is located. The notice shall include the
name, address, and telephone number of the independent solar energy
producer, identify whether the contract is a contract for the sale of
electricity or the lease of a generation system, and provide the
dates on which the contract commences and terminates.
(c) A master-meter customer of an electric utility who purchases
electricity or leases a generation system from an independent solar
energy producer, and who provides electric service to users who are
tenants of a mobilehome park, apartment building, or similar
residential complex, shall do both of the following:
(1) Charge each user of the electric service that is under a
submetered system a rate for the solar generated electricity not to
exceed the rate charged by the independent solar energy producer or
the electric utility's rate for an equivalent amount of electricity,
whichever is lower.
(2) Comply with the provisions of Section 739.5 or 12821.5, and
any rules set forth by an electric utility for master-meter
customers.
1 PU Code 218 currently provides for the PPA model to exist, expressly because they are not covered by the definition of an electrical corporation which "does not include a corporation ... producing power ... for the use of or sale to not more than two other corporations ..." (PU Code 218)
2 Third party ownership is not tracked in the CSI database, but there is a reasonable proxy of this based on looking at projects that have a "Host Customer" that is different from the "System Owner." This data is based on that assumption.
3 See "Bill Rose After Panels Installed", April 16, 2008, San Diego Union Tribune, available at: http://www.signonsandiego.com/uniontrib/20080416/news_1n16solar.html
