STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
July 24, 2006 Agenda ID #5846
Ratesetting
TO: PARTIES OF RECORD IN RULEMAKING 06-03-004
This is the draft decision of Administrative Law Judge (ALJ) Dorothy Duda. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.
When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.
Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure," accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages.
Comments must be filed with the Commission's Docket Office. Comments should be served on parties to this proceeding in accordance with Rules 2.3 and 2.3.1. Electronic copies of comments should be sent to ALJ Duda at dot@cpuc.ca.gov. All parties must serve hard copies on the ALJ and the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail or other expeditious methods of service. The current service list for this proceeding is available on the Commission's website, www.cpuc.ca.gov.
/s/ ANGELA K. MINKIN
Angela K. Minkin, Chief
Administrative Law Judge
ANG:sid
Attachment
ALJ/DOT/sid DRAFT Agenda ID #5846
Ratesetting
Decision DRAFT DECISION OF ALJ DUDA (Mailed 7/24/2006)
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 ADOPTING PERFORMANCE-BASED INCENTIVES, AN ADMINISTRATIVE STRUCTURE, AND OTHER PHASE ONE PROGRAM ELEMENTS FOR THE CALIFORNIA SOLAR INITIATIVE
TABLE OF CONTENTS
Title Page
OPINION ADOPTING PERFORMANCE-BASED INCENTIVES, AN ADMINISTRATIVE STRUCTURE, AND OTHER PHASE ONE PROGRAM ELEMENTS FOR THE CALIFORNIA SOLAR INITIATIVE 2
I. Summary 2
II. Background 7
III. Performance Based Incentives and Treatment
of Federal Tax Incentives 10
A. Incentive Levels and Interaction with Federal Tax Incentives 11
1. One Incentive Rate for Residential and Commercial Segments 16
2. Higher Rebate Level for Tax Exempt Entities 18
3. Conclusion 21
B. Performance-Based Incentives for Large Solar Projects 21
1. Size Threshold for PBI 24
2. Time-Differentiated Payments 26
3. Payment Period 27
4. Capacity Factor 28
5. Performance Cap 30
6. Funding Security 32
7. Discount Rate 32
8. Frequency of PBI Payments 33
9. Phase In of PBI Structure 34
10. Conclusion 36
C. Expected Performance Based Buydown (EPBB) Incentives
for Smaller Solar Projects 38
IV. Program Administration 49
V. Metering Requirements 62
A. Metering Quality and Accuracy 65
B. Communicating Solar Performance 70
1. Ensuring Solar Performance is Monitored in 2007 70
2. Independent Performance Monitoring 74
3. Access to Solar Performance Information 75
C. Further Work in CSI Handbook Process and CSI Program Forum 76
D. TOU Tariffs 77
VI. Incentive Adjustment Mechanism 78
A. Incentive Adjustment Mechanism Based Solely
on Volume of MWs 81
B. Incentive Levels May Vary by Utility Territory 84
C. Additional Incentive Adjustments 86
VII. Funding Levels 88
VIII. Energy Efficiency Requirements and Incentives for
Solar Technologies other than PV 100
IX. Comments on Draft Decision 100
X. Assignment of Proceeding 100
Findings of Fact 100
Conclusions of Law 104
ORDER 111
APPENDIX A - PBI Levelized Payment Explanation
OPINION ADOPTING PERFORMANCE-BASED INCENTIVES, AN ADMINISTRATIVE STRUCTURE, AND OTHER PHASE ONE PROGRAM ELEMENTS FOR THE CALIFORNIA SOLAR INITIATIVE
I. Summary
This decision adopts performance-based incentives (PBI) for payments to qualifying solar photo-voltaic (PV) technologies through the Commission's California Solar Initiative (CSI.) In addition, the decision adopts an administrative structure and other program design features for successful implementation of the CSI.
Beginning on January 1, 2007, the Commission will pay PBI for solar projects 100 kilowatts (kW) and larger, with payments based on kilowatt hours (kWh) of solar power produced over a five-year period. Solar projects receiving PBI incentives will be paid a flat per kWh payment, determined monthly and incorporating an 8% discount rate. The Commission will pay incentives to solar projects below 100 kW through an up-front incentive, known as an "Expected Performance Based Buydown" (EPBB), based on an estimate of the system's future performance. EPBB incentives combine the optimal performance benefits of PBI with the administrative simplicity of a one-time incentive paid at the time of project installation. This order adopts the following initial incentive rates for PBI and EPBB payments based on three customer designations--residential, commercial, and government/non-profit:
Table 1: Summary of Initial Adopted Incentive Rates for 2007
Sector |
EPBB Incentive (per watt) for projects below 100 kW |
PBI Payment (per kwh) for projects 100 kW and larger |
Residential |
$2.50 |
$0.391 |
Commercial |
2.50 |
0.39 |
Government/Non-Profit |
3.25 |
0.50 |
The Commission modifies the single CSI incentive rate of $2.80 per watt adopted in Decision (D.) 06-01-024 in favor of rates tailored to consider the tax effects seen by these three customer groupings. Residential and commercial customers are paid the same incentive rate, despite different tax effects, because they have different payback periods for their solar investments. Tax-exempt government and non-profit entities who do not receive federal tax credits shall receive a higher incentive rate, unless they choose to engage in third-party ownership and financing for their solar projects. In that case, they would receive the lower commercial rate.
These incentive levels will be automatically reduced over the duration of the CSI program in 10 steps based on the volume of megawatts (MWs) of solar installations. We find it is reasonable to link incentive reductions to achieved levels of solar demand. Therefore, as demand for solar rebates reaches the MW levels specified in this order, CSI incentive payments will automatically drop. This approach avoids the risk of incentives dropping prematurely, before the economics of the solar industry reflect growing demand, as would be the case with calendar year reductions. Additionally, the order finds: (1) solar incentive levels may vary by utility service area, depending on the pace of solar demand in each utility's territory; and (2) incentive levels may differ based on demand in the residential and non-residential customer sectors. Thus, the MW targets that trigger automatic incentive reductions are allocated across the utilities and customer segments, as follows:
Table 2
CSI MW Targets by Utility and Customer Class
|
|
PG&E (MW) |
SCE (MW) |
SDG&E (MW) |
So Cal Gas (MW) | ||||
Step |
MW in Step |
Res |
Non-Res |
Res |
Non-Res |
Res |
Non-Res |
Res |
Non-Res |
1 |
502 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
2 |
70 |
10 |
21 |
8 |
16 |
3 |
6 |
2 |
4 |
3 |
100 |
15 |
29 |
11 |
23 |
4 |
9 |
3 |
6 |
4 |
130 |
19 |
38 |
15 |
30 |
6 |
11 |
4 |
8 |
5 |
170 |
25 |
50 |
19 |
39 |
7 |
15 |
5 |
10 |
6 |
230 |
33 |
68 |
26 |
52 |
10 |
20 |
7 |
14 |
7 |
300 |
44 |
88 |
34 |
68 |
13 |
26 |
9 |
18 |
8 |
400 |
58 |
118 |
45 |
91 |
17 |
35 |
12 |
24 |
9 |
500 |
73 |
147 |
56 |
114 |
21 |
44 |
15 |
30 |
10 |
650 |
94 |
192 |
73 |
148 |
28 |
57 |
19 |
39 |
Totals |
1122 |
867 |
332 |
230 | |||||
Percent |
44% |
34% |
13% |
9% | |||||
Table 3
Incentive Levels by MW Step ($/watt)3
Step |
MW in Step |
Gov't/ Non-Profit |
Res |
Commercial |
1 |
504 |
$2.80 |
$2.80 |
$2.80 |
2 |
70 |
$3.25 |
$2.50 |
$2.50 |
3 |
100 |
$2.95 |
$2.20 |
$2.20 |
4 |
130 |
$2.65 |
$1.90 |
$1.90 |
5 |
170 |
$2.30 |
$1.55 |
$1.55 |
6 |
230 |
$1.85 |
$1.10 |
$1.10 |
7 |
300 |
$1.40 |
$0.65 |
$0.65 |
8 |
400 |
$1.10 |
$0.35 |
$0.35 |
9 |
500 |
$0.90 |
$0.25 |
$0.25 |
10 |
650 |
$0.70 |
$0.20 |
$0.20 |
In our initial CSI decision, we endeavored to preserve program simplicity by having a single statewide incentive that adjusted either on a calendar year basis or with demand level, whichever was sooner. However, the comments now persuade us to sacrifice some program simplicity in favor of a more complex program design that the solar industry, the utilities, and many commenting parties contend has a better chance of accomplishing the Commission's long-term solar goals. Therefore, we modify our initial CSI program design to allow incentives to respond to the level of demand for solar rebates, reserve program funds for residential customers, and allow the program in each utility territory to unfold at its own pace.
This order finds that to ensure program continuity, the administrators of the Commission's existing Self-Generation Incentive Program (SGIP), namely Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), Southern California Gas Company (SoCalGas) and the San Diego Regional Energy Office (SDREO), should administer all aspects of the CSI program in 2007. Nevertheless, the order finds there are still good reasons to consider non-utility, or independent, administration for the residential retrofit portion of CSI in the future. In Phase II of this proceeding, the Commission will consider statewide marketing and outreach for CSI and whether the Commission should direct one entity to handle statewide administration of residential retrofit solar programs.
Other notable features of this order include development of a statewide on-line application process and database, drafting of the initial CSI Program Handbook, and creation of a "CSI Program Forum" to provide a further process for stakeholder involvement in the on-going implementation of CSI.
With regard to metering of solar projects, this decision requires revenue grade solar production meters for all solar projects that receive CSI incentives because accurate measurement of solar output is of paramount importance to ensure optimum value for both solar owners and ratepayers. The decision sets minimum metering requirements, including a performance reporting capability. Further discussion of technical standards, communication protocols and other specific metering requirements will occur as part of the initial CSI Program Handbook or the on-going CSI Program Forum. Interested parties are encouraged to establish a metering and data committee of appropriate technical personnel from the solar, utility, and metering industries to participate in these discussions.
Incentives for non-PV solar projects and energy efficiency requirements will be addressed in a separate order, as soon as possible.
Finally, the order establishes a future review process where significant features of CSI may be reexamined by the Commission through a future rulemaking.
Staff of California Energy Commission (CEC) has worked collaboratively with Energy Division staff on all aspects of this proceeding and consulted with the Administrative Law Judge (ALJ) and the Assigned Commissioner on the issues resolved in this order.
1 Any size project may opt for PBI payments.
2 The first 50 MW are allocated under the 2006 Self-Generation Incentive Program (SGIP) and are not pro-rated by customer class or service territory. In 2006, most residential systems participated in the California Energy Commission's Emerging Renewables Program.
3 The basis for these step changes is discussed in Section VII.B.2.
4 The first 50 MW are disbursed under the 2006 SGIP at a uniform rate of $2.80 per watt.
