STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

November 15, 2005 Agenda ID #5104

Quasi-Legislative

TO: PARTIES OF RECORD IN RULEMAKING 04-03-017

This supercedes the draft decision mailed and filed on November 15, 2005 of Administrative Law Judge (ALJ) Malcolm. 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/PUBLISHED/RULES PRAC PROC/44887.htm. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN BY PHILIP S. WEISMEHL

Angela K. Minkin, Chief

Administrative Law Judge

ANG:jva

Attachment

ALJ/KLM/jva DRAFT Agenda ID #5104

Quasi-Legislative

Decision DRAFT DECISION OF ALJ MALCOLM

(SUPERCEDE PRIOR VERSION) (Mailed 11/15/2005)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Regarding Policies, Procedures and Incentives for Distributed Generation and Distributed Energy Resources.

Rulemaking 04-03-017 (Filed March 16, 2004)

INTERIM ORDER ADOPTING POLICIES AND
FUNDING FOR THE CALIFORNIA SOLAR INITIATIVE

This order increases funding by $300 million for solar photovoltaic technologies that are currently part of the Self-Generation Incentive Program (SGIP). This stop gap funding, together with reduced rebate levels as described in this order assures program continuity through 2006. We intend to quickly adopt a subsequent long-term program to provide incentives for the installation of solar energy technologies in California over the next ten years. The program, which we call the "California Solar Initiative" (CSI) would respond to a policy proclamation by the Governor favoring solar development and strong interest by the State Legislature in an expanded solar incentives program in California.

The California Public Utilities Commission (Commission) and the California Energy Commission (CEC) have consistently expressed support for solar, other renewable resources and clean distributed generation as environmentally sound technologies for assuring the reliability of the state's electricity system. In recognition of the benefits of solar technologies as a viable energy resource alternative to traditional energy technologies, this order expands the state's existing solar program by increasing its budget by $300 million for 2006. We also herein revise the incentive payment to $2.80/watt, as explained below. We direct the program administrators to apply the revised rebate level to the waiting list, and to refund application fees to projects which elect to withdraw from the list.

I. Procedural Background

As part of this Commission's ongoing exploration of ways to promote renewable technologies in this proceeding, the Commission issued two rulings earlier this year soliciting ideas for program design, funding levels and sources, and an implementation schedule. After receiving the comments, the Commission directed Commission and CEC staff to "draft a joint report to the Commission on all related issues that will take into account the parties' comments." The staff report, issued in June 2005, addressed key issues related to implementing what the staff has called the California Solar Initiative (CSI). In summary, the report proposes to consolidate existing and anticipated residential and commercial solar incentives into one program by June 2006. Eligible technologies would include photovoltaic (PV) and concentrated solar power up to 1 megawatt (MW), and solar water heaters. The report proposes that initially, Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and Southern California Gas Company (SoCalGas), and the San Diego Regional Energy Office (SDREO) would administer the CSI. The program would be funded through 2016 using gas and electric distribution rates. Tariff and metering requirements would be coordinated with the Commission's demand response and distributed generation proceedings.

The Assigned Commissioner and Administrative Law Judge (ALJ) subsequently issued a ruling soliciting comments on the staff's report and stated their intent to work together to propose a decision for the full Commission's consideration. We received comments from PG&E, SCE, SoCalGas, SDREO, ORA, Energy Innovations, Inc., PV Now, Vote Solar, Americans for Solar Power (ASPv), California Large Energy Consumes Association (CLECA), California Manufacturers & Technology Association (CMTA), Southern California Generation Coalition, Environment California, S.O.L.I.D.US, Inc., California Solar Energy Industries Association (CAL SEIA). The CEC has worked collaboratively in this proceeding on all of its aspects, co-authored the staff report on CSI, and consulted with the ALJ and the Assigned Commissioner on the issues resolved in this order.

Although the Commission received comments on the CEC/PUC staff solar report in late July, the Commission delayed action on this matter while the California Legislature considered Senate Bill (SB) 1, which would have established a state program for increased funding for solar technology incentives over ten years. This bill did not pass.