DOT/hl2 3/21/2006

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)

ADMINISTRATIVE LAW JUDGE'S RULING REDUCING SOLAR PHOTOVOLTAIC INCENTIVE PAYMENTS

This ruling provides parties notice of the automatic reduction of incentive payments for solar photovoltaic (PV) projects from $2.80/watt to $2.50/watt, per the procedure set forth in Decision (D.) 06-01-024.

Background

The Commission currently oversees the Self-Generation Incentive Program (SGIP) which, among other things, provides incentive payments to customers who install solar PV technologies. In D.05-012-044, the Commission increased its solar incentive budget from $42 million to $342 million for the SGIP in 2006. The decision set solar rebates at $2.80/watt for qualifying new solar projects. Shortly thereafter, the Commission issued D.06-01-024, which created the California Solar Initiative (CSI) with a total budget for solar incentives and programs of $2.8 billion over 11 years. The $342 million budget for SGIP in 2006 is part of the $2.8 billion budgeted for CSI over 11 years.

In establishing the CSI, the Commission noted the difficult task of setting incentive levels high enough to motivate solar investments and yet not so high that ratepayers are subsidizing projects that would be built with lower incentives. (D.06-01-024, mimeo, p. 24.) The Joint Staff Proposal attached to
D.06-01-024 contains a schedule for automatic reductions of incentive payments on an annual basis or when program participation reaches specific megawatt (MW) levels. (See D.06-01-024, Appendix A, p. 15, Table 5: Triggers for Reductions in Rebate Levels.) A critical goal of the automatic reduction in incentive payment levels based on triggers is to ensure optimal funding availability over the duration of the CSI program. In D.06-01-024, the Commission adopted the Staff Proposal, which includes the automatic trigger mechanism. The decision also discusses a procedure for the Administrative Law Judge (ALJ) assigned in Rulemaking (R.) 04-03-017, or a successor docket,¹ to make additional reductions to incentive payment levels if warranted by market conditions. (Id., p. 25.)

¹ On March 2, 2006, the Commission closed its Distributed Generation Rulemaking (R.04-03-017) and opened this successor docket on CSI and Distributed Generation.