ALJ/DOT/sid Mailed 7/21/2006

Decision 06-07-028 July 20, 2006

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Regarding Policies, Procedures and Rules for the California Solar Initiative, the Self-Generation Incentive Program and Other Distributed Generation Issues.

Rulemaking 06-03-004 (Filed March 2, 2006)

OPINION MODIFYING DECISION 06-01-024 TO

INCREASE SYSTEM SIZE ELIGIBILITY

This decision modifies Decision (D.) 06-01-024 regarding the maximum size of solar projects eligible to receive incentives through the Commission's Self Generation Incentive Program (SGIP) and the California Solar Initiative (CSI). The Commission makes this modification in advance of other Phase I issues in this rulemaking because it has learned the size limit adopted in D.06-01-024 is negatively impacting the solar photovoltaic (PV) market by unnecessarily constraining how SGIP project applicants size their systems.

Background

For several years, the Commission's SGIP has provided incentive payments to customers who install distributed generation (DG) systems, including solar facilities.¹ Originally, the Commission provided incentive payments to solar facilities, as long as the systems were sized no larger than 200% of peak demand.

In D.06-01-024, the Commission reduced the size of solar facilities eligible to receive incentives through the SGIP and CSI. The Commission had witnessed an over-subscription for solar incentives in some utility service areas relative to available funds and was concerned with preserving program funding for more participants. In addition, the Commission wanted to avoid paying incentives to over-sized systems. Thus, it reasoned it was not prudent to pay incentives for capacity exceeding the on-site peak load. Capacity above peak load requirements might result in surplus power that would go unused and would not be eligible to receive net energy metering credits. Therefore, in D.06-01-024, the Commission reduced eligible system size for solar facilities to 100% of historic peak load, beginning with SGIP applications submitted after the date of the order, January 12, 2006. (D.06-01-024, p. 15.)

Following the change in system size eligibility requirements, Energy Division staff learned in February and March 2006 that the new limit of 100% of peak load had the unintended consequence of penalizing some 2006 SGIP solar project applicants by reducing net energy metering credits on an annual basis. Utility net metering programs allow renewable DG systems producing excess electricity at any point during the day to deliver this electricity to the local utility. In essence, the customer's utility meter spins backward gaining a credit for the customer at the retail power rate. This credit is applied to the customer's energy bill creating an additional incentive for customers to invest in renewable DG.

¹ The Commission pays incentives to eligible DG systems through the SGIP in 2006. Eligible DG systems include solar photovoltaic, wind turbines, fuel cells, and renewable and non-renewable micro-turbines, internal combustion engines, and gas turbines. Starting in 2007, the Commission will pay incentives to solar projects through the CSI, while payments to DG projects other than solar will continue through the SGIP.