Background
In D.06-01-024, the Commission established the California Solar Initiative (CSI) to fund rebates for installation of qualifying solar energy systems for customers of PG&E, SCE, San Diego Gas & Electric Company (SDG&E), and Southern California Gas Company (SoCalGas). As part of that order, the Commission stated its intent to include solar water heating in the CSI program to promote use of that technology and reduce demand for natural gas. The Commission noted mixed results from prior programs to offer incentives for solar water heating, noting the impact of incentives was mainly to increase the cost of the technology. The Commission further stated, "[S]olar water heating may already be cost effective and providing incentives under the circumstances may have the unintended effect of increasing the cost of solar water heaters." (D.06-01-024, p. 12.)
Given this history, D.06-01-024 allowed a pilot program to test incentives for solar water heaters. The Commission directed SDG&E to offer a contract to SDREO (now CCSE) to administer an eighteen month pilot program for solar water heater incentives offered to residential, commercial and industrial customers in SDG&E's territory, with rebate levels based on thermal output. (Id., pp. 13-14 and Conclusion of Law 4.) According to D.06-01-024, the details of the program would be set following Commission staff review of a program implementation plan, and the pilot could be funded following an Administrative Law Judge (ALJ) ruling approving the pilot implementation plan.
As part of the pilot concept discussed in D.06-01-024, the Commission specified a plan for evaluating the market impacts of the program, including comparison of solar water heater prices in regions with and without incentives. The Commission required an evaluation of impacts of the pilot on equipment prices, demand, and overall cost-effectiveness, which should begin at the end of the pilot's 12th month. The Commission stated it would consider extending the pilot program before its conclusion if preliminary evaluation results suggested positive results. (Id., p. 13.)
In D.06-12-033, the Commission modified CSI to conform to Senate Bill (SB) 1,1 wherein the Legislature established a budget and other program requirements for CSI. A critical change to CSI following passage of SB 1 was the exclusion of gas ratepayers from funding CSI. Based on this funding limitation, the Commission, in D.06-12-033, adopted the principle that only electric displacing technologies will be funded under CSI because only electric ratepayers are funding the CSI program. However, the Commission granted an exception for the solar water heating pilot in SDG&E territory, and limited the pilot's funding to $3 million.
In February 2007, the assigned Commissioner and ALJ in R.06-03-004 (the predecessor docket to the above-captioned rulemaking) issued a ruling approving the solar water heating pilot program, with a budget of $2,590,730, to be administered by SDREO.2 Among other things, the ruling directed SDREO to augment its plan for evaluation of the pilot with several specific directives. Further, the ruling dismissed requests to expand the pilot statewide, stating that "the full Commission may consider program expansion after it is able to review program evaluation results." (February 2007 Ruling, p. 13.) In accordance with the ruling, SDREO began the pilot program on July 2, 2007, and it is scheduled to end on December 31, 2008.
Later in 2007, the Legislature passed Assembly Bill (AB) 1470,3 which declares it is in the interest of California to promote solar water heating systems and other technologies that reduce demand for natural gas in homes and businesses, and it is the intent of the Legislature to build a mainstream market for solar water heating systems. The bill states the Commission shall establish a $250 million, ten year statewide program to promote installation of solar water heating systems if the Commission makes certain determinations following evaluation of the CCSE solar water heating pilot program. The bill adds Pub. Util. Code § 28634 which states, in pertinent part:
(a) The Commission shall evaluate the data from the Solar Water Heating Pilot Project conducted by [CCSE]. If, after a public hearing, the commission determines that a solar water heating program is cost effective for ratepayers and in the public interest, the commission shall do all of the following:
(1) Design and implement a program applicable to the service territories of a gas corporation, to achieve the goal of the Legislature to promote the installation of 200,000 solar water heating systems in homes and businesses throughout the state by 2017.
(2) The program shall be administered by gas corporations or third-party administrators, as determined by the commission, and subject to the supervision of the commission.
(3) The commission shall coordinate the program with the Energy Commission's New Solar Homes Partnership to achieve the goal of building zero-energy homes.
(b) (1) The commission shall fund the program through the use of a surcharge applied to gas customers based upon the amount of natural gas consumed. The surcharge shall be in addition to any other charges for natural gas sold or transported for consumption in this state.
(2) The commission shall impose the surcharge at a level that is necessary to meet the goal of installing 200,000 solar water heating systems, or the equivalent output of 200,000 solar water heating systems, on homes and businesses in California by 2017. Funding for the program established by this article shall not, for the collective service territories of all gas corporations, exceed two hundred fifty million dollars ($250,000,000) over the course of the 10-year program.
1 Chapter 132, Statutes of 2006.
2 See "Assigned Commissioner's and Administrative Law Judge's Ruling Approving Solar Water Heating Pilot Program," R.06-03-004, February 15, 2007 ("February 2007 Ruling").
3 Chapter 536, Statutes of 2007, also known as the "Solar Water Heating and Efficiency Act of 2007."
4 All statutory references are to the Public Utilities Code, unless otherwise noted.
