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STATE OF CALIFORNIA

Public Utilities Commission

San Francisco

M e m o r a n d u m

Date:

May 1, 2009

   

To:

The Commission

(Meeting of May 7, 2009)

     

From:

Pamela Loomis, Director

Office of Governmental Affairs (OGA) - Sacramento

   

Subject:

AB 920 (Huffman) Huffman. Solar and wind distributed

generation.

As introduced February 26, 2009

 

LEGISLATIVE SUBCOMMITTEE RECOMMENDATION: OPPOSE UNLESS AMENDED

SUMMARY OF BILL:

AB 920 expands the current net-metering programs for wind and solar to allow the net-metered customers to sell any excess electricity they produce over the course of a year to their electric utility.

SUMMARY OF SUPPORTING ARGUMENTS FOR RECOMMENDATION:

This bill fundamentally changes the intent of the net energy metering (NEM) statute from a program that facilitates onsite electricity generation and consumption to a program that supports onsite customer generators to be paid as wholesale power producers. This bill would provide payment for "Net Surplus Compensation", at a price set by the Commission, for excess generation from onsite customer facilities. The Commission's onsite generation policies and programs have been designed for the past decade to support customers' using onsite generation to offset their load, but not to sell to the utility.

The bill seeks to provide the Commission with flexibility in establishing the valuation for the net surplus generation, but does so in a way that may inadvertently have unintended consequences and limit our flexibility to continue a viable program in the future. The Commission is committed to working with the author on amendments to gain flexibility and avoid future problems.

SUMMARY OF SUGGESTED AMENDMENTS:

DIVISION ANALYSIS (Energy Division):

· AB 920 amends Public Utilities (PU) Code 2827, the statute governing Net Energy Metering (NEM), to require electric utilities to provide compensation for the value of net surplus electricity provided to the grid over a twelve-month period, or a credit in kilowatt-hours (kWh) against future consumption. The bill:

· Requires that the Commission establish by January 1, 2011, a valuation for "net surplus generation" in a ratemaking proceeding.

· Requires the utilities to make available to the Commission information on an annual basis about the net surplus electricity purchased by the electric utility.

· Provides that for any net surplus generation purchased by the utility, the renewable energy credits associated with that electricity, will belong to the utility and be eligible to count towards the Renewable Portfolio Standard (RPS).

· Requires the utility to provide information to the customer monthly on their net electricity consumption (as is currently the case) and net surplus electricity generation.

· Establishes definitions for:

· Redefines "electricity distribution utility or cooperative" term used throughout the code section to be "electric utility".

Onsite customer generators already receive significant support from ratepayers to facilitate their use of onsite generation and do not need another opportunity to receive payment from the utility. Support already provided to these customers includes (1) upfront rebates from the California Solar Initiative (CSI) or Self Generation Incentive Program (SGIP), (2) exemption from interconnection study fees and system upgrade charges, as well as (3) an ongoing benefit from the NEM program that allows customers to receive bill credits at the full retail rate (includes generation, as well as transmission and distribution charges) even though the customer is only feeding generation back into the grid. After receiving significant support to become onsite generators, it is inappropriate to provide customer generators an additional benefit such as payment for "Net Surplus Compensation".

This issue should be revisited after the completion of the Commission's report on the costs and benefits of NEM, required by PU Code 2827 (c)(4), due to the legislature January 1, 2010. In requesting that report, the legislature acknowledges that there is some existing cost-shifting between solar and non-solar customers as a result of NEM. Since this bill would add another benefit to solar customers, it should not be done before a comprehensive cost-benefit review of the NEM program.

Table 1: PG&E NEM customers with Net Surplus Generation vs. Net Bill Credits

Year

2001

2002

2003

2004

2005

2006

2007

2008

  TOTAL

Net Surplus Electricity Generators

9.6%

8.2%

7.3%

7.2%

7.1%

6.3%

8.5%

8.7%

7.9%

Net Bill Credits

31.1%

23.3%

20.2%

21.3%

23.0%

20.9%

23.1%

25.2%

23.3%

Source: Data Request to PG&E, March 2009.

As noted in Table 1 above, there are 9 percent of PG&E customers with net surplus electricity, and 25 percent with bill credits. All customers with bill credits would like to be "paid" by PG&E for their electricity, but only the smaller group - those with net excess production -- would be helped by this bill. Furthermore, the 9 percent would likely not be paid the amount they currently see as their bill credit because the bill requires the Commission to establish a different rate for "net surplus generation" than for the monthly surplus generation (which currently receives the full retail rate).

AB 920 requires the Commission to establish a rate for payment of any net surplus compensation which will create a system where the same generation is valued at two different rates. The Commission needs to consider: (a) value of the electricity itself and (b) the value of the renewable attributes of the electricity. The bill errs in assuming that customers who are net surplus generators are not already compensated for their generation, which they currently are on a monthly basis.

AB 920 limits the Commission to establish the valuation for the net surplus generation in a way that ensures that the valuation does not result in cost-shifting between solar customers and bundled service customers. While this principle sounds appropriate, it will be difficult to ensure because NEM already results in cost-shifting between solar and bundled service customers.

AB 920's definitions of "net surplus customer-generator" and "net surplus electricity" confound bill credits (in terms of dollars) and excess generation (in terms of kWh).

AB 920 appears to be a legislative fix to a problem for customers that installed systems at sizes greater than economically optimal, or who have changed their load profile due to conservation or other changes in load. AB 920 would invite future installations to be sized in excess of what is economically in the best interest of customers or the electricity distribution grid. The CSI solar program and net energy metering are both designed to have customers size their solar systems no larger than their total electrical load. Although AB 920 would provide some compensation for excess energy, it is unlikely that a net surplus compensation rate, as proposed, would provide sufficient incentive for solar customers to achieve a reasonable payback for that portion of solar systems that greatly exceed on-site load.

Furthermore, the availability of full retail NEM for solar and wind customer generators is currently limited by the installed capacity of customer generation on this tariff in a given utility territory. Once the installed capacity of customer generation on full retail NEM reaches 2.5% of peak load demand in a utility territory, a utility is no longer required to offer the rate. If some customer generators oversize their systems, other customer generators would not have room under the NEM cap to install what would have been economically sized solar or wind systems.

AB 920 does not acknowledge that the CPUC has a separate, existing CPUC program to procure from customer generators with capacity in excess of their load. The CPUC has a feed-in tariff for wholesale generators that pays customer generators for excess production. The feed-in tariff program does not provide an upfront, capital subsidy for wholesale generators (e.g. generators may not participate in the CSI or SGIP programs), but it does provide a payment for any excess kilowatthours. If customers have a facility that is well suited to "over-sizing" of a solar array, they should consider a straight-up wholesale, or feed-in tariff approach. Customers participating in the feed-in tariff can use some of the generation to offset their own load, which essentially allows customer's to avoid electricity purchases at the full retail rate.

AB 920 is consistent with existing Commission policy regarding renewable energy credits (RECs). It states that RECs associated with electricity procured by the utility are eligible to count towards the Renewable Portfolio Standard (RPS). Onsite generation supported under CSI and SGIP does not count towards the utility procurement targets because it is technically never "procured" by the utility. However, if this bill was enacted, and the utility purchased the net surplus generation, then it would make sense for the utility to be eligible to count it towards the Renewable Portfolio Standard requirements.

PROGRAM BACKGROUND:

Current Renewable Energy Rebate and Procurement Programs

There are two different policy and program paths that support renewable energy under the direction of the Commission: onsite customer-side of the meter generation and wholesale, utility-side of the meter generation. The two paths are supported by different policies and programs, where AB 920 seeks to blend policies from the two different areas.

(1) Onsite Customer-Side of the Meter Generation: The California Solar Initiative and the Self Generation Program are both programs aimed at facilitating onsite customer-side-of-the-meter generation. Both programs are designed to support onsite generation that meets onsite load (demand). These two programs contain provisions that the generator cannot be sized larger than onsite load. The programs provide an upfront payment (in the form of a rebate or incentive), but then they set up the customer to be eligible for two other related benefits: simplified interconnection and NEM. A customer that goes through CSI or SGIP is eligible for a simplified and free interconnection process, which means that they are exempt from costly system impact studies and fees associated with paying for any distribution system upgrades. A customer that goes through CSI and SGIP is also eligible for NEM, which provides an ongoing significant financial benefit, especially full retail NEM for solar. CSI and SGIP - and the related interconnection and NEM policies -- are not designed to support or subsidize wholesale power producers.

(2) Utility-side of the Meter Generation - A second path to support distributed renewables generation under the Commission's oversight are the Commission's policies and programs for wholesale generation, including the feed-in tariff program under the Renewable Portfolio Standard program. The feed-in tariff is a procurement program, and it is designed to facilitate procurement of renewable energy, often from small distributed generation facilities. These generation facilities may be located at a customer site, but they have generation capabilities that exceed onsite demand. The feed-in tariff program is a form of utility procurement for wholesale generation. The price or payment for the procurement is determined by the terms of the contract, but projects are ineligible for subsidies or incentives offered under the CSI and SGIP program.

Current Net Energy Metering (NEM) Program

Under existing NEM program rules, a utility measures the difference between the electricity supplied to a customer and the electricity generated by a customer generator and supplied to the grid. The "net difference" is billed to the customer, and so NEM is often described as letting a customer's meter 'run backwards and forward'.

LEGISLATIVE HISTORY:

Net Energy Metering statute (PU Code section 2827) was established by Senate Bill (SB) 656 (Alquist, 1995, co-author: Assembly Member Takasugi).  NEM has been substantially altered several times including major revisions from SB 1 (Murray, 2006).

AB 1920 (Huffman, 2008) proposed similar changes to the Public Resources Code and the Public Utilities Code. AB 1920 would have also provided compensation for excess electricity generation by NEM customer generators and allowed over-sizing of systems, would have required a new ratemaking proceeding, and would have created complications around the NEM cap by only assigning a portion of each facility's rated capacity towards the 2.5%. CPUC opposed AB 1920 for many of the same reasons presented here.

SB 7 (Wiggins, 2009) requires that the CPUC establish a rate for net surplus generation that is "not less than" the existing market price referent. SB 7 also eliminates the "sized to load" requirement of the CSI program.

STATUS:

To be scheduled in Assembly Committee on Appropriations.

SUPPORT/OPPOSITION:

Support: American Federation of State, County and Municipal Employees

(AFSCME)

Environment California

Planning and Conservation League

Sierra Club California

The Utility Reform Network (TURN) (if amended)

Opposition: California Association of Small and Multi-jurisdictional

Utilities (CASMU) (unless amended)

Pacific Gas & Electric (PG&E)

STAFF CONTACTS:

Alicia Priego, Legislative Liaison, OGA (916) 322-8858 arp@cpuc.ca.gov

Date: May 1, 2009

BILL LANGUAGE:

BILL NUMBER: AB 920 INTRODUCED

INTRODUCED BY Assembly Member Huffman

(Coauthors: Assembly Members Lieu and Portantino)

(Coauthors: Senators Hancock and Lowenthal)

FEBRUARY 26, 2009

An act to amend Section 2827 of the Public Utilities Code,

relating to energy.

AB 920, as introduced, Huffman. Solar and wind distributed

generation.

The existing Public Utilities Act imposes various duties and

responsibilities on the Public Utilities Commission with respect to

the purchase of electricity and requires the commission to review and

adopt a procurement plan and a renewable energy procurement plan for

each electrical corporation pursuant to the California Renewables

Portfolio Standard Program. The program requires that a retail seller

of electricity, including electrical corporations, community choice

aggregators, and electric service providers, but not including local

publicly owned electric utilities, purchase a specified minimum

percentage of electricity generated by eligible renewable energy

resources, as defined, in any given year as a specified percentage of

total kilowatthours sold to retail end-use customers each calendar

year. Under existing law the governing board of a local publicly

owned electric utility is responsible for implementing and enforcing

a renewables portfolio standard that recognizes the intent of the

Legislature to encourage renewable resources, while taking into

consideration the effect of the standard on rates, reliability, and

financial resources and the goal of environmental improvement.

Existing law relative to private energy producers requires every

electric distribution utility or cooperative, as defined, upon

request, to make available to an eligible customer-generator, as

defined, a standard contract or tariff for net energy metering on a

first-come-first-served basis until the time that the total rated

generating capacity used by eligible customer-generators exceeds a

specified amount. Existing law provides that where the electricity

generated by the eligible customer-generator exceeds the electricity

supplied by the electric distribution utility or cooperative during a

12-month period, the eligible customer-generator is a net

electricity producer and the electric distribution utility or

cooperative retains any excess kilowatthours generated and the

customer-generator is not owed compensation for those excess

kilowatthours unless the electric distribution utility or cooperative

enters into a purchase agreement with the eligible

customer-generator for those excess kilowatthours.

This bill would replace the definition of "electric distribution

utility or cooperative" in existing law relative to private energy

producers with a definition of "electric utility." The bill would

require the ratemaking authority, as defined, for the electric

utility to adopt, by January 1, 2011, a net surplus electricity

compensation valuation to compensate a net surplus

customer-generator, as defined, for the value of net surplus

electricity, as defined, generated by an eligible customer-generator

and delivered to the grid that is in excess of the amount of

electricity that is delivered from the grid to the eligible

customer-generator. The bill would require the electric utility to

offer a standard contract or tariff to eligible customer-generators

that includes compensation for the value of net surplus electricity.

The bill would require the electric utility, upon an affirmative

election by the eligible customer-generator to receive service

pursuant to this contract or tariff, to either: (1) provide net

surplus electricity compensation for any net surplus electricity

generated in the 12-month period, or (2) allow the eligible

customer-generator to apply the net surplus electricity as a credit

for kilowatthours subsequently supplied by the electric utility to

the surplus customer-generator. The bill would, for an electric

utility that is an electrical corporation or electrical cooperative,

authorize the commission to adopt requirements for providing notice

and the manner by which eligible customer-generators may elect to

receive net surplus electricity compensation. The bill would provide

that upon adoption of the net surplus electricity compensation rate

and the eligible customer-generator electing to receive net surplus

electricity compensation, any renewable energy credit, as defined,

for net surplus electricity belongs to the electric utility

purchasing the electricity and that net surplus electricity counts

toward the electric utility's renewables portfolio standard

purchasing requirements.

Under existing law, a violation of any order, decision, rule,

direction, demand, or requirement of the commission is a crime.

Because this bill would require action by the commission to

implement certain of its requirements that expand the existing

obligations of electrical corporations, a violation of these

provisions would impose a state-mandated local program by expanding

the definition of a crime.

The California Constitution requires the state to reimburse local

agencies and school districts for certain costs mandated by the

state. Statutory provisions establish procedures for making that

reimbursement.

This bill would provide that no reimbursement is required by this

act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes.

State-mandated local program: yes.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 2827 of the Public Utilities Code is amended to

read:

2827. (a) The Legislature finds and declares that a program to

provide net energy metering combined with net surplus

compensation , co-energy metering, and wind energy co-metering

for eligible customer-generators is one way to encourage substantial

private investment in renewable energy resources, stimulate in-state

economic growth, reduce demand for electricity during peak

consumption periods, help stabilize California's energy supply

infrastructure, enhance the continued diversification of California's

energy resource mix, and reduce interconnection

and administrative costs for electricity suppliers ,

and encourage conservation and efficiency .

(b) As used in this section, the following terms have the

following meanings:

(1) "Co-energy metering" means a program that is the same in all

other respects as a net energy metering program, except that the

local publicly owned electric utility has elected to apply a

generation-to-generation energy and time-of-use credit formula as

provided in subdivision (i).

(2) "Electrical cooperative" means an electrical cooperative as

defined in Section 2776.

(3) "Electric distribution utility or cooperative"

utility" means an electrical corporation, a

local publicly owned electric utility, or an electrical cooperative,

or any other entity, except an electric service provider, that offers

electrical service. This section shall not apply to a local publicly

owned electric utility that serves more than 750,000 customers and

that also conveys water to its customers.

(4) "Eligible customer-generator" means a residential, small

commercial customer as defined in subdivision (h) of Section 331,

commercial, industrial, or agricultural customer of an

electricity distribution utility or cooperative

electric utility , who uses a solar or a wind turbine

electrical generating facility, or a hybrid system of both, with a

capacity of not more than one megawatt that is located on the

customer's owned, leased, or rented premises, and is

interconnected and operates in parallel with the electric grid, and

is intended primarily to offset part or all of the customer's own

electrical requirements.

(5) "Net energy metering" means measuring the difference between

the electricity supplied through the electric grid and the

electricity generated by an eligible customer-generator and fed back

to the electric grid over a 12-month period as described in

subdivision subdivisions (c) and (h).

An eligible customer-generator who already owns an existing solar or

wind turbine electrical generating facility, or a hybrid system of

both, is eligible to receive net energy metering service in

accordance with this section.

(6) "Net surplus customer-generator" means an eligible

customer-generator that generates more electricity during a 12-month

period than is supplied by the electric utility to the eligible

customer-generator during the same 12-month period.

(7) "Net surplus electricity" means all electricity generated by

an eligible customer-generator measured in kilowatthours over a

12-month period that exceeds the amount of electricity consumed by

that eligible customer-generator.

(8) "Net surplus electricity compensation" means a per

kilowatthour rate offered by the electric utility to the net surplus

customer-generator for net surplus electricity that is set by the

ratemaking authority pursuant to subdivision (h).

(6)

(9) "Ratemaking authority" means, for an electrical

corporation , or electrical

cooperative, or electric service provider, the

commission, and for a local publicly owned electric utility, the

local elected body responsible for setting the rates of the local

publicly owned utility.

(7)

(10) "Wind energy co-metering" means any wind energy

project greater than 50 kilowatts, but not exceeding one megawatt,

where the difference between the electricity supplied through the

electric grid and the electricity generated by an eligible

customer-generator and fed back to the electric grid over a 12-month

period is as described in subdivision (h). Wind energy co-metering

shall be accomplished pursuant to Section 2827.8.

(c) (1) Every electricity distribution utility or

cooperative electric utility shall develop a

standard contract or tariff providing for net energy metering, and

shall make this standard contract or tariff available to eligible

customer-generators, upon request, on a first-come-first-served basis

until the time that the total rated generating capacity used by

eligible customer-generators exceeds 2.5 percent of the

electricity distribution utility or cooperative's

electric utility's aggregate customer peak demand. Net energy

metering shall be accomplished using a single meter capable of

registering the flow of electricity in two directions. An additional

meter or meters to monitor the flow of electricity in each direction

may be installed with the consent of the eligible

customer-generator, at the expense of the electricity

distribution utility or cooperative electric utility

, and the additional metering shall be used only to provide the

information necessary to accurately bill or credit the eligible

customer-generator pursuant to subdivision (h), or to collect

solar or wind electric generating system performance information for

research purposes. If the existing electrical meter of an eligible

customer-generator is not capable of measuring the flow of

electricity in two directions, the eligible

customer-generator shall be responsible for all expenses involved in

purchasing and installing a meter that is able to measure electricity

flow in two directions. If an additional meter or meters are

installed, the net energy metering calculation shall yield a result

identical to that of a single meter. An eligible

customer-generator that is receiving service other than through the

standard contract or tariff may elect to receive service through the

standard contract or tariff until the electric utility reaches the

generation limit set forth in this paragraph. Once the generation

limit is reached, only eligible customer-generators that had

previously elected to receive service pursuant to the standard

contract or tariff have a right to continue to receive

service pursuant to the standard contract or tariff. Eligibility for

net energy metering does not limit an eligible customer-generator's

eligibility for any other rebate, incentive, or credit provided by

the electric utility, or pursuant to any governmental program,

including rebates and incentives provided pursuant to the California

Solar Initiative.

(2) (A) On an annual basis, beginning in 2003, every

electricity distribution utility or cooperative

electric utility shall make available to the ratemaking

authority information on the total rated generating capacity used by

eligible customer-generators that are customers of that provider in

the provider's service area and the net surplus electricity

purchased by the electric utility pursuant to this section .

(B) An electric service provider operating pursuant to Section 394

shall make available to the ratemaking authority the information

required by this paragraph for each eligible customer-generator that

is their customer for each service area of an electric corporation,

local publicly owned electric utility, or electrical cooperative, in

which the customer eligible

customer-generator has net energy metering.

(C) The ratemaking authority shall develop a process for making

the information required by this paragraph available to

electricity distribution utilities and cooperatives

electric utilities , and for using that information to

determine when, pursuant to paragraphs (1) and (3), an

electricity distribution utility or cooperative

electric utility is not obligated to provide net energy

metering to additional eligible customer-generators in its

service area.

(3) An electricity distribution utility or cooperative

electric utility is not obligated to provide net

energy metering to additional eligible

customer-generators in its service area when the combined total peak

demand of all electricity used by eligible

customer-generators served by all the electricity

distribution utilities or cooperatives electric

utilities in that service area furnishing net energy metering

to eligible customer-generators exceeds 2.5 percent of the aggregate

customer peak demand of those electricity distribution

utilities or cooperatives electric utilities .

(4) By January 1, 2010, the commission, in consultation with the

Energy Commission, shall submit a report to the Governor and the

Legislature on the costs and benefits of net energy metering, wind

energy co-metering, and co-energy metering to participating customers

and nonparticipating customers and with options to replace the

economic costs and benefits of net energy metering, wind energy

co-metering, and co-energy metering with a mechanism that more

equitably balances the interests of participating and

nonparticipating customers, and that incorporates the findings of the

report on economic and environmental costs and benefits of net

metering required by subdivision (n).

(d) Every electricity distribution utility or cooperative

electric utility shall make all necessary forms

and contracts for net energy metering and net surplus

electricity compensation service available for download from

the Internet.

(e) (1) Every electricity distribution utility or

cooperative electric utility shall ensure that

requests for establishment of net energy metering and net

surplus electricity compensation are processed in a time period

not exceeding that for similarly situated customers requesting new

electric service, but not to exceed 30 working days from the date it

receives a completed application form for net energy metering service

or net surplus electricity compensation , including a

signed interconnection agreement from an eligible customer-generator

and the electric inspection clearance from the governmental authority

having jurisdiction.

(2) Every electricity distribution utility or cooperative

electric utility shall ensure that requests for

an interconnection agreement from an eligible customer-generator are

processed in a time period not to exceed 30 working days from the

date it receives a completed application form from the eligible

customer-generator for an interconnection agreement.

(3) If an electricity distribution utility or cooperative

electric utility is unable to process a request

within the allowable timeframe pursuant to paragraph (1) or (2), it

shall notify the eligible customer-generator and the ratemaking

authority of the reason for its inability to process the request and

the expected completion date.

(f) (1) If a customer participates in direct transactions pursuant

to paragraph (1) of subdivision (b) of Section 365 with an electric

service provider that does not provide distribution service for the

direct transactions, the electricity distribution utility or

cooperative electric utility that provides

distribution service for an the

eligible customer-generator is not obligated to provide net energy

metering or net surplus electricity compensation to the

customer.

(2) If a customer participates in direct transactions pursuant to

paragraph (1) of subdivision (b) of Section 365 with an electric

service provider, and the customer is an eligible customer-generator,

the electricity distribution utility or cooperative

electric utility that provides distribution

service for the direct transactions may recover from the customer's

electric service provider the incremental costs of metering and

billing service related to net energy metering and net surplus

electricity compensation in an amount set by the ratemaking

authority.

(g) Except for the time-variant kilowatthour pricing portion of

any tariff adopted by the commission pursuant to paragraph (4) of

subdivision (a) of Section 2851, each net energy metering contract or

tariff shall be identical, with respect to rate structure, all

retail rate components, and any monthly charges, to the contract or

tariff to which the same customer would be assigned if the customer

did not use an eligible solar or wind electrical generating facility,

except that eligible customer-generators shall not be assessed

standby charges on the electrical generating capacity or the

kilowatthour production of an eligible solar or wind electrical

generating facility. The charges for all retail rate components for

eligible customer-generators shall be based exclusively on the

customer-generator's net kilowatthour consumption over a 12-month

period, without regard to the eligible customer-generator'

s choice as to from whom it purchases electricity that is

not self-generated. Any new or additional demand charge, standby

charge, customer charge, minimum monthly charge, interconnection

charge, or any other charge that would increase an eligible

customer-generator's costs beyond those of other customers who are

not eligible customer-generators in the rate class to which the

eligible customer-generator would otherwise be assigned if the

customer did not own, lease, rent, or otherwise operate an eligible

solar or wind electrical generating facility are contrary to the

intent of this section, and shall not form a part of net energy

metering contracts or tariffs.

(h) For eligible residential and small commercial

customer-generators, the net energy metering calculation

shall be made by measuring the difference between the electricity

supplied to the eligible customer-generator and the electricity

generated by the eligible customer-generator and fed back to the

electric grid over a 12-month period. The following rules shall apply

to the annualized net metering calculation:

(1) The eligible residential or small commercial

customer-generator shall, at the end of each 12-month period

following the date of final interconnection of the eligible

customer-generator's system with an electricity distribution

utility or cooperative electric utility , and

at each anniversary date thereafter, be billed for electricity used

during that 12-month period. The electricity distribution

utility or cooperative electric utility shall

determine if the eligible residential or small commercial

customer-generator was a net consumer or a net producer of

electricity surplus customer-generator during

that period.

(2) At the end of each 12-month period, where the electricity

supplied during the period by the electricity distribution

utility or cooperative electric utility exceeds

the electricity generated by the eligible residential or small

commercial customer-generator during that same period, the eligible

residential or small commercial customer-generator is a net

electricity consumer and the electricity distribution

utility or cooperative electric utility shall be

owed compensation for the eligible customer-generator's net

kilowatthour consumption over that 12-month period. The compensation

owed for the eligible residential or small commercial

customer-generator's consumption shall be calculated as follows:

(A) For all eligible customer-generators taking service under

contracts or tariffs employing "baseline" and "over baseline" rates

or charges , any net monthly consumption of

electricity shall be calculated according to the terms of the

contract or tariff to which the same customer would be assigned to,

or be eligible for, if the customer was not an eligible

customer-generator. If those same customer-generators are net

generators over a billing period, the net kilowatthours generated

shall be valued at the same price per kilowatthour as the

electricity distribution utility or cooperative

electric utility would charge for the baseline quantity of

electricity during that billing period, and if the number of

kilowatthours generated exceeds the baseline quantity, the excess

shall be valued at the same price per kilowatthour as the

electricity distribution utility or cooperative

electric utility would charge for electricity over the baseline

quantity during that billing period.

(B) For all eligible customer-generators taking service under

contracts or tariffs employing "time-of-use"

time-of-use rates or charges , any net

monthly consumption of electricity shall be calculated according to

the terms of the contract or tariff to which the same customer would

be assigned to , or be eligible for, if the

customer was not an eligible customer-generator. When those same

customer-generators are net generators during any discrete

time-of-use period, the net kilowatthours produced shall be valued at

the same price per kilowatthour as the electricity

distribution utility or cooperative electric utility

would charge for retail kilowatthour sales during that same

"time-of-use" time-of-use period. If

the eligible customer-generator's "time-of-use"

time-of-use electrical meter is unable to measure the flow

of electricity in two directions, subparagraph (A) of

paragraph (1) of subdivision (c) shall apply.

(C) For all eligible residential and small commercial

customer-generators and for each billing period, the net balance of

moneys owed to the electricity distribution utility or

cooperative electric utility for net consumption

of electricity or credits owed to the eligible customer-generator

for net generation of electricity shall be carried forward as a

monetary value until the end of each 12-month period. For all

eligible commercial, industrial, and agricultural

customer-generators, the net balance of moneys owed shall be paid in

accordance with the electricity distribution utility or

cooperative's electric utility's normal billing

cycle, except that if the eligible commercial, industrial, or

agricultural customer-generator is a net electricity producer over a

normal billing cycle, any excess kilowatthours generated during the

billing cycle shall be carried over to the following billing period

as a monetary value, calculated according to the procedures set forth

in this section, and appear as a credit on the eligible

commercial, industrial, or agricultural customer-generator's

account, until the end of the annual period when paragraph (3) shall

apply.

(3) At the end of each 12-month period, where the electricity

generated by the eligible customer-generator during the 12-month

period exceeds the electricity supplied by the electricity

distribution utility or cooperative electric utility

during that same period, the eligible customer-generator is a

net electricity producer and the electricity distribution

utility or cooperative surplus customer-generator and

the electric utility shall, upon an affirmative election

by the eligible customer-generator, either (A) provide net surplus

electricity compensation for any net surplus electricity generated

during the prior 12-month period, or (B) allow the eligible

customer-generator to apply the net surplus electricity as a credit

for kilowatthours subsequently supplied by the electric utility to

the surplus customer-generator. For an eligible customer-generator

that does not affirmatively elect to receive service pursuant to net

surplus electricity compensation, the electric utility shall

retain any excess kilowatthours generated during the prior 12-month

period. The eligible customer-generator not affirmatively

electing to receive service pursuant to net surplus electricity

compensation shall not be owed any compensation for

those excess kilowatthours the net surplus electricity

unless the electricity distribution utility or

cooperative electric utility enters into a

purchase agreement with the eligible customer-generator for those

excess kilowatthours. Every electric utility shall, by January

31, 2010, provide notice to eligible customer-generators that they

are eligible to receive net surplus electricity compensation for net

surplus electricity, that they must elect to receive net surplus

electricity compensation, and that the 12-month period commences when

the electric utility receives the eligible customer-generator's

election. The commission may, for an electric utility that

is an electrical corporation or electrical cooperative, adopt

requirements for providing notice and the manner by which eligible

customer-generators may elect to receive net surplus electricity

compensation.

(4) (A) The ratemaking authority shall, by January 1, 2011,

establish a net surplus electricity compensation valuation to

compensate the net surplus customer-generator for the value of net

surplus electricity generated by the net surplus customer-generator.

The commission shall establish the valuation in a ratemaking

proceeding. The ratemaking authority for a local publicly owned

electric utility shall establish the valuation in a public

proceeding. The net surplus electricity compensation valuation shall

be established so as to provide the net surplus customer-generator

just and reasonable compensation for the value of net surplus

electricity, while leaving other ratepayers unaffected. The

ratemaking authority shall determine whether the compensation will

include, where appropriate justification exists, either or both of

the following components:

(i) The value of the electricity itself.

(ii) The value of the renewable attributes of the electricity.

(B) In establishing the rate pursuant to subparagraph (A), the

ratemaking authority shall ensure that the rate does not result in a

shifting of costs between solar customer-generators and other bundled

service customers.

(5) (A) Upon adoption of the net surplus electricity compensation

rate by the ratemaking authority, any renewable energy credit, as

defined in Section 399.12, for net surplus electricity purchased by

the electric utility shall belong to the electric utility. Any

renewable energy credit associated with electricity generated by the

eligible customer-generator that is utilized by the eligible

customer-generator shall remain the property of the eligible

customer-generator.

(B) Upon adoption of the net surplus electricity compensation rate

by the ratemaking authority, the net surplus electricity purchased

by the electric utility shall count toward the electric utility's

renewables portfolio standard annual procurement targets for the

purposes of paragraph (1) of subdivision (b) of Section 399.15, or

for a local publicly owned electric utility, the renewables portfolio

standard annual procurement targets established pursuant to Section

387.

(4)

(6) The electricity distribution utility or

cooperative electric utility shall provide every

eligible residential or small commercial customer-generator with net

electricity consumption and net surplus electricity generation

information with each regular bill. That information shall

include the current monetary balance owed the electricity

distribution utility or cooperative electric utility

for net electricity consumed, or the current amount of

excess electricity produced net surplus electricity

generated , since the last 12-month period ended.

Notwithstanding this subdivision, an electricity

distribution utility or cooperative electric utility

shall permit that customer to pay monthly for net energy

consumed.

(5)

(7) If an eligible residential or small commercial

customer-generator terminates the customer relationship with the

electricity distribution utility or cooperative

electric utility , the electricity distribution

utility or cooperative electric utility shall

reconcile the eligible customer-generator's consumption and

production of electricity during any part of a 12-month period

following the last reconciliation, according to the requirements set

forth in this subdivision, except that those requirements shall apply

only to the months since the most recent 12-month bill.

(6)

(8) If an electric service provider or

electricity distribution utility or cooperative

electric utility providing net energy metering to a residential

or small commercial customer-generator ceases providing that

electric service to that customer during any 12-month period, and the

customer-generator enters into a new net energy metering contract or

tariff with a new electric service provider or electricity

distribution utility or cooperative electric utility

, the 12-month period, with respect to that new electric

service provider or electricity distribution utility or

cooperative electric utility , shall commence on

the date on which the new electric service provider or

electricity distribution utility or cooperative

electric utility first supplies electric service to the

customer-generator.

(i) Notwithstanding any other provisions of this section, the

following provisions shall apply to an eligible customer-generator

with a capacity of more than 10 kilowatts, but not exceeding one

megawatt, that receives electric service from a local publicly owned

electric utility that has elected to utilize a co-energy metering

program unless the local publicly owned electric utility chooses to

provide service for eligible customer-generators with a capacity of

more than 10 kilowatts in accordance with subdivisions (g) and (h):

(1) The eligible customer-generator shall be required to utilize a

meter, or multiple meters, capable of separately measuring

electricity flow in both directions. All meters shall provide

"time-of-use" time-of-use measurements

of electricity flow, and the customer shall take service

on a time-of-use rate

schedule. If the existing meter of the eligible customer-generator is

not a time-of-use meter or is not capable of measuring total flow of

energy in both directions, the eligible customer-generator shall be

responsible for all expenses involved in purchasing and installing a

meter that is both time-of-use and able to measure total electricity

flow in both directions. This subdivision shall not restrict the

ability of an eligible customer-generator to utilize any economic

incentives provided by a government agency or an electricity

distribution utility or cooperative electric utility

to reduce its costs for purchasing and installing a time-of-use

meter.

(2) The consumption of electricity from the local publicly owned

electric utility shall result in a cost to the eligible

customer-generator to be priced in accordance with the standard rate

charged to the eligible customer-generator in accordance with the

rate structure to which the customer would be assigned if the

customer did not use an eligible solar or wind electrical generating

facility. The generation of electricity provided to the local

publicly owned electric utility shall result in a credit to the

eligible customer-generator and shall be priced in accordance with

the generation component, established under the applicable structure

to which the customer would be assigned if the customer did not use

an eligible solar or wind electrical generating facility.

(3) All costs and credits shall be shown on the eligible

customer-generator's bill for each billing period. In any months in

which the eligible customer-generator has been a net consumer of

electricity calculated on the basis of value determined pursuant to

paragraph (2), the customer-generator shall owe to the local publicly

owned electric utility the balance of electricity costs and credits

during that billing period. In any billing period in which the

eligible customer-generator has been a net producer of electricity

calculated on the basis of value determined pursuant to paragraph

(2), the local publicly owned electric utility shall owe to the

eligible customer-generator the balance of electricity costs and

credits during that billing period. Any net credit to the eligible

customer-generator of electricity costs may be carried forward to

subsequent billing periods, provided that a local publicly owned

electric utility may choose to carry the credit over as a

kilowatthour credit consistent with the provisions of any applicable

contract or tariff, including any differences attributable to the

time of generation of the electricity. At the end of each 12-month

period, the local publicly owned electric utility may reduce any net

credit due to the eligible customer-generator to zero.

(j) A solar or wind turbine electrical generating system, or a

hybrid system of both, used by an eligible customer-generator shall

meet all applicable safety and performance standards established by

the National Electrical Code, the Institute of Electrical and

Electronics Engineers, and accredited testing laboratories, including

Underwriters Laboratories and, where applicable, rules of the

commission regarding safety and reliability. A customer-generator

whose solar or wind turbine electrical generating system, or a hybrid

system of both, meets those standards and rules shall not be

required to install additional controls, perform or pay for

additional tests, or purchase additional liability insurance.

(k) If the commission determines that there are cost or revenue

obligations for an electric corporation, as defined in Section 218,

that may not be recovered from customer-generators acting pursuant to

this section, those obligations shall remain within the customer

class from which any shortfall occurred and may not be shifted to any

other customer class. Net energy metering and co-energy metering

customers shall not be exempt from the public goods charges imposed

pursuant to Article 7 (commencing with Section 381), Article 8

(commencing with Section 385), or Article 15 (commencing with Section

399) of Chapter 2.3 of Part 1. In its report to the Legislature, the

commission shall examine different methods to ensure that the public

goods charges remain nonbypassable.

() A net energy metering, co-energy metering, or wind energy

co-metering customer shall reimburse the Department of Water

Resources for all charges that would otherwise be imposed on the

customer by the commission to recover bond-related costs pursuant to

an agreement between the commission and the Department of Water

Resources pursuant to Section 80110 of the Water Code, as well as the

costs of the department equal to the share of the department's

estimated net unavoidable power purchase contract costs attributable

to the customer. The commission shall incorporate the determination

into an existing proceeding before the commission, and shall ensure

that the charges are nonbypassable. Until the commission has made a

determination regarding the nonbypassable charges, net energy

metering, co-energy metering, and wind energy co-metering shall

continue under the same rules, procedures, terms, and conditions as

were applicable on December 31, 2002.

(m) In implementing the requirements of subdivisions (k) and (),

a an eligible customer-generator shall

not be required to replace its existing meter except as set forth in

subparagraph (A) of paragraph (1) of subdivision

(c), nor shall the electricity distribution utility or

cooperative electric utility require additional

measurement of usage beyond that which is necessary for customers in

the same rate class as the eligible customer-generator.

(n) It is the intent of the Legislature that the Treasurer

incorporate net energy metering, including net surplus

electricity compensation , co-energy metering, and

wind energy co-metering projects undertaken pursuant to this section

as sustainable building methods or distributive energy technologies

for purposes of evaluating low-income housing projects.

SEC. 2. No reimbursement is required by this act pursuant to

Section 6 of Article XIII B of the California Constitution because

the only costs that may be incurred by a local agency or school

district will be incurred because this act creates a new crime or

infraction, eliminates a crime or infraction, or changes the penalty

for a crime or infraction, within the meaning of Section 17556 of the

Government Code, or changes the definition of a crime within the

meaning of Section 6 of Article XIII B of the California

Constitution.

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