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HomeMy WebLinkAboutAgenda Report - April 6, 2016 C-12CITY OF LODI COUNCIL COMMUNICATION AGENDA ITEM G.12 TM AGENDA TITLE: Receive Report Regarding Communication Pertaining to Assembly Bill 2339 (Irwin) – Net Energy Metering MEETING DATE: April 6, 2016 PREPARED BY: City Clerk RECOMMENDED ACTION: Receive report regarding communication pertaining to Assembly Bill 2339 (Irwin) – Net Energy Metering. BACKGROUND INFORMATION: The City received a request for communication from the Northern California Power Agency regarding AB 2339 (Irwin). There was a need to send a letter of opposition immediately in light of a pending hearing. AB 2339 would require municipally -owned electric utilities to increase their net energy metering (NEM) cap without consideration of the impacts to non -NEM customers and the utilities. The expansion of the NEM program through AB 2339, however, is neither fair nor sustainable. Most notably, NEM provides generous incentives to NEM customers by providing them with the full retail rate for the electricity they generate on site. This compensation, which is more than the actual value of the generation, allows an NEM customer to avoid the utility's transmission and distribution costs, even though the customer relies on these assets to remove over -generation and to receive the utility's energy supply when the NEM system is not generating (e.g., at night when the sun is not shining on solar panels). As such, these costs are shifted to non -NEM customers, many of whom are low-income, elderly, or live in multi -family buildings. AB 2339 also creates additional administrative burdens and costs for municipally -owned electric utilities as they will be forced to determine the utility's "non -coincident peak" (i.e., the sum of all individual customer peak demands) which—even if allowed to estimate—is complicated, expensive to calculate, and subject to different interpretations. Other than to comply with this bill, there is no other purpose for a municipality to determine its non -coincident peak. The attached letter, signed by the Mayor, was sent out on March 22, 2016. The text of the bill is also attached. This report is provided for informational purposes only, pursuant to policy. FISCAL IMPACT: Not applicable. FUNDING AVAILABLE: Not applicable. J iter M. rraiolo y Clerk APPROVED: ,�1v►�'1 Stephen Schwabauer, i Manager N:\Administration\CLERK1CounciiLCOUNCOM1+osition AB2339.doc CITY COUNCIL MARK CHANDLER, Mayor DOUG KUEHNE, Mayor Pro Tempore BOB JOHNSON JOANNE MOUNCE ALAN NAKANISHI CITY OF LODI The Honorable Mike Gatto California State Assembly State Capitol, Room 5136 Sacramento, CA 95814 CITY HALL, 221 WEST PINE STREET P.O. BOX 3006 LODI, CALIFORNIA 95241-1910 (209) 333-6702 / FAX (209) 333-6807 www.ladi.gov citvclerk[a.lodi.00v March 22, 2016 RE: AB 2339 (Irwin) Net Energy Metering Notice of OPPOSITION Unless Amended STEPHEN SCHWABAUER City Manager JENNIFER M. FERRAIOLO City Clerk JANICE D. MAGDICH City Attorney Dear Assemblymember Gatto: Lodi Electric Utility (LEU) opposes AB 2339 (Irwin) unless amended. This bill would require municipally -owned electric utilities to increase their net energy metering (NEM) cap without consideration of the impacts to non -NEM customers and the utilities. LEU has a long history of supporting programs and projects that fairly and sustainably promote renewable energy. For example, Lodi invested in renewable energy prior to mandated Renewable Portfolio Standard (RPS) requirements by investing in geothermal and hydroelectric generation. In addition, LEU has been providing our customers with numerous energy efficiency and customer -owned solar incentives that are significantly more generous than most. The expansion of the NEM program through AB 2339, however, is neither fair nor sustainable. Most notably, NEM provides generous incentives to NEM customers by providing them with the full retail rate for the electricity they generate on site. This compensation, which is more than the actual value of the generation, allows an NEM customer to avoid the utility's transmission and distribution costs, even though the customer relies on these assets to remove over -generation and to receive the utility's energy supply when the NEM system is not generating (e.g., at night when the sun is not shining on solar panels). As such, these costs are shifted to non -NEM customers, many of whom are low-income, elderly, or live in multi -family buildings. In addition to the public policy concerns with this cost shift, there are also legal concerns due to Proposition 26. This proposition created a Constitutional amendment restricting charges imposed by local governments when the charges are for a specific government service or product that is not directly provided to the payor or is provided to those not charged. As the cost shift grows with the NEM program—as would be the case with AB 2339—the non -NEM customer will pay more for services and products that the municipal owned electric utilities' provides to the NEM customer. Local governments should not be put in a position where they risk violating the California Constitution. AB 2339 also creates additional administrative burdens and costs for municipally -owned electric utilities as they will be forced to determine the utility's "non -coincident peak" (i.e., AB 2339 (Irwin) Net Energy Metering — Notice of OPPOSITION Unless Amended Page Two the sum of all individual customer peak demands) which—even if allowed to estimate— is complicated, expensive to calculate, and subject to different interpretations. Other than to comply with this bill, there is no other purpose for a municipality to determine its non - coincident peak. And while investor-owned utilities (IOUs) have been calculating their NEM cap using non -coincident peak, this will no longer be the case starting next year pursuant to AB 327 (Perea, 2013). AB 327 required the ratemaking authority for the IOUs to establish an NEM successor program that, according to the final Senate Floor analysis, "is based on the electrical system costs and benefits received by nonparticipating customers and prevents a cost shift to non -NEM customers." To create uniformity in state policy, as well as parity, the ratemaking body for each municipally -owned electric utility should also be allowed to create an NEM successor program that is based on the electrical system costs and benefits, and that prevents a cost shift. Under existing law, a municipally -owned electric utility has the flexibility to adopt this type of NEM successor program once it hits its current NEM cap. Alternatively, the Northern California Power Agency (NCPA) (of which LEU is a member) has offered amendments to the author and committee that creates a process to determine a successor program that is comparable to the AB 327 process. These amendments, if adopted, would allow the local governing board of a municipally -owned electric utility to design an NEM successor program that enables renewable distributed generation to grow fairly and sustainably in the community. The City of Lodi Electric Utility welcomes the opportunity to discuss our issues and NCPA's amendments with you further, but given our general concerns with the specific proposal in the bill, we must oppose AB 2339 at this time. Sincerely, Mark Chandler Mayor, City of Lodi MC/pmf cc: Senator Cathleen Galgiani, Fax: (916) 651-4905 Assemblymember Jim Cooper, Fax: (916) 319-2109 Stephen Qualls, Regional Public Affairs Manager, squallsfccacities.orq Meg Desmond, League of California Cities, mdesmond@cacities.orq Heather Hamp, Assembly Utilities and Commerce Committee, heather.harrip t7asm.ca.gov Mario De Bernardo, State Government Relations & External Affairs Manager, Mario.debernardo(cncpacom The people of the State of California do enact as follows: SECTION 1. The Legislature finds and declares the following: (a) There are over 40 local publicly owned electric utilities in California, which vary widely in size, customer diversity, infrastructure, and location. These utilities range from the largest city in the state, to some of the smallest farming towns in northern California. They include other public entities, such as ports and irrigation districts. Some operate in sunny, dry climates in inland areas, while others in foggy, wet climates by the coast and in the Bay Area. Many have little load diversity in their customer base. (b) One of the main features of local publicly owned electric utilities is that they are managed by governing boards made up of local public officials who are accountable to the people they serve. These governing boards are tasked with designing electric utility programs that meet state goals and the specific needs of their individual communities. (c) Achieving California's ambitious greenhouse gas emission reduction and renewable energy goals will require, among other things, the deployment of local renewable energy generation (e.g., wind, community solar, and rooftop solar). How local publicly owned electric utilities can effectively and efficiently develop local renewable energy generation will depend on the needs and characteristics of each individual community. (d) The state's net energy metering (NEM) program was established 20 years ago to provide financial incentives for rooftop solar. NEM includes a billing mechanism that requires a utility to compensate a rooftop solar customer at the full retail rate for electricity generated by the customer's solar panels. One of the downsides to this program is that it allows a rooftop solar customer to avoid the utility's transmission and distribution costs, even though the customer relies on these assets to remove their over - generation and receive the utility's energy supply when, for example, the sun is not shining. This leads to a revenue shortfall for the utility, which is recouped through a cost -shift to non -solar customers, including low-income and lifeline (senior citizens and permanently disabled) customers, those who live in rental or multi -family housing, and those who cannot afford to install rooftop solar. (e) In an attempt to prevent this cost -shift, the state adopted AB 327 (Chapter 611, Statutes of 2013), which requires the ratemaking authority for the three largest electric corporations to establish a NEM successor program that, according to the final Senate Floor analysis, "is based on the electrical system costs and benefits received by nonparticipating customers and prevents a cost shift to non -NEM customers." AB 327 did not require ratemaking authorities of local publicly owned electric utilities to develop NEM successor programs. (f) To ensure local renewable energy is able to grow sustainably and fairly in the communities served by local publicly owned electric utilities, it is the intent of the Legislature to require each ratemaking authority for these utilities to develop a locally tailored NEM successor program that considers factors comparable to those created by the Legislature in AB 327, with some necessary modifications. These modification are based on issues unique to local governments (such as Proposition 26) and policy priorities of the state (such as supporting low income and disadvantaged communities; implementing SB 350's goal of doubling energy efficiency savings by 2030; and promoting investments consistent with the state's loading order, which prioritizes energy efficiency and demand response, followed by renewable and distributed generation resources.) Sec. 2. Section 2827.2 is added to the Public Utilities Code to read: 2827.2. (a) Notwithstanding any other law, the ratemaking authority for a local publicly owned electric utility shall develop a standard contract or tariff, which may include net energy metering or an alternative, for eligible customer -generators with a renewable electrical generation facility that is a customer of its utility no later than July 1, 20201. IA local publieiy owned electric utility that has reached the net energy metering program limit of subparagraph (A) of paragraph (4) of subdivision (c) of Section 2827 prior to July 1, 2020, shall develop and offer the standard contract or tariff to eligible customer -generators twelve months after reaching the limit. the ratemaking authority slay revise the standard contract or tariff as appropriate to achieve the objectives of this section. In developing the standard contract or tariff, the ratemaking authority shall do all of the following, 1subject to any limitations imposed by Article XIII C of the California Constitutior4: (1) Ensure that the standard contract or tariff made available to eligible customer -generators helps ensure that renewable distributed generation is able to grow sustainably, including for low income and disadvantaged communities, jFor the purpose of this paragraph, the ratemaking authority may consider the role of community solar, virtual net energy metering, and other renewable distributed generation systems and programs when determining how, and the extent to which, the standard contract or tariff can help ensure that renewable distributed generation is able to grow sustainably. j(2) Ensure that the standard contract or tariff is developed in consideration of the following state policies: (A) By 2030, double the energy efficiency savings in electricity final end uses of retail customers through energy efficiency and conservation. (B) Promote investments consistent with the state's loading order, which prioritizes energy efficiency and demand response, followed by renewable energy and distributed generation resources. _ (3) Establish terms of service and billing rules for eligible customer -generators. (4) Ensure that the standard contract or tariff made available to eligible customer -generators is based on the costs and benefits of the renewable electrical generation facility as determined and approved by the ratemaking authority. (5) Ensure that the total benefits of the standard contract or tariff to all customers and the electrical system are approximately equal to the total costs. (6) Allow projects greater than one megawatt that do not have significant impact on the distribution grid to be built to the size of the onsite load if the projects with a capacity of more than one megawatt are subject to reasonable interconnection charges established by the local publicly owned electric utility and applicable state and federal requirements. (7) Establish a transition period during which eligible customer -generators taking service under a net energy metering tariff or contract prior to Jul 1, 2020, or until the local publicly owned electric utility reaches its net energy metering program limit pursuant to subdivision (c) of Section 2827, whichever is earlier, shall be eligible to continue service under the previously applicable net energy metering tariff. (8) The ratemaking authority shall determine which rates, tariffs, and fixed charges are applicable to customer generators only during a publicly noticed meeting. (b) When a ratemaking authority establishes the standard contract or tariff pursuant to this section all new eligible customer -generators shall be subject to that standard contract or tariff, and any rules, terms, and rates developed pursuant to subdivision (a). There shall be no limitation on the amount of generating capacity or number of new eligible customer -generators entitled to receive service pursuant to the standard contract or tariff after July 1, 2020 unless the ratemaking authority for a local publicly owned electric utility determines a limitation is necessary to ensure grid reliability or prevent disproportionate rate impacts. An eligible customer -generator that has received service under a net energy metering standard contract or tariff pursuant to Section 2827 that is no longer eligible to receive service shall be eligible to receive service pursuant to the standard contract or tariff developed by the ratemaking authority pursuant to this section. (c)A local publicly owned electric utility that has adopted a standard contract or tariff prior to January 1, 2017 as a result of reaching or approaching the net Comment [MDB1]: July 1, 2020 was picked because the PUC Is expected to act again in 2019. The 2019 PUC action might help inform POUs as they develop the successor program. Comment [M DB2]: If a POU hits the current cap prior to 2020, it must develop a successor program within six months of hitting the cap. Comment [MDB3]: This is a reference to Proposition 26. The bill should expressly recognize that a POU has the flexibility to develop an NEM successor program that does not trigger a ballot measure or a lawsuh. Comment [MDB4]: This Is a more express way of saying that we should be looking at the broader goal of promoting renewable distributed generation when developing the tariff. For example, if a community wants to be aggressive In installing other forms of renewable DG (e.g., community solar), then it may not be as important to have a generous tariff for behind the meter generation. Comment [MDB5]: The bill should recognize the role and priority of energy efficiency. energy metering program limit of subparagraph (A) of paragraph (4) of subdivision (c) of Section 2827, may continue to offer that standard contract or tariff.] 1(d) This section does not apply to a local publicly owned utility that had no greater than 17,000 megawatt hours in residential retail sales in 2014 unless the ratemaking authority of the local publicly owned utility elects to Implement this section..I_ ( Comment (HDB6]: This grandfathers successor ' programs developed by the and ofthlsyear. Comment [MDB7]: The NEM program Is designed for residential rooftop solar. There Is a small fraction of POUs that either have no or very little residential retail sales. it would be a greater administrative burden for these utilities to develop a successor program versus staying under the existing NEM program with the 5% coincident peak cap. As such, this language would keep them under the status quo with the option of developing a successor program. FACSIMILE COVER SHEET CITY CLERK'S OFFICE 221 WEST PINE STREET - P.O. BOX 3006 LODI, CALIFORNIA 95241-1910 PHONE (209) 333-6702 FAX (209) 333-6807 citvcirk@ladi. ov or pfarris{ lodi.g : DATE: March 22, 2016 FROM: Pamela M. Farris Deputy City Clerk TO: Assemblymember Mike Gatto, 916-319-2143 Senator Cathleen Galgiani, 916-651-4905 Assemblymember Jim Cooper, 916-319-2109 COMMENTS: Attached please find the Notice of Opposition for AB 2339 (Irwin) — Net Energy Metering THIS TRANSMITTAL CONTAINS 3 PAGE(S), INCLUDING THIS COVER SHEET. forms\aafaxjen.doc CITY COUNCIL MARK CHANDLER, Mayor DOUG KUEHNE, Mayor Pro Tempore BOB JOHNSON JOANNE MOUNCE ALAN NAKANISHI CITY OF LODI The Honorable Mike Gatto California State Assembly State Capitol, Room 5136 Sacramento, CA 95814 CITY HALL, 221 WEST PINE STREET P.O. BOX 3006 LODI, CALIFORNIA 95241-1910 (209) 333-6702 / FAX (209) 333-6807 www.lodi.gov citvclerk{a lodi.gov March 22, 2016 RE: AB 2339 (Irwin) Net Energy Metering Notice of OPPOSITION Unless Amended STEPHEN SCHWABAUER City Manager JENNIFER M. FERRAIOLO City Clerk JANICE D. MAGDICH City Attorney Dear Assemblymember Gatto: Lodi Electric Utility (LEU) opposes AB 2339 (Irwin) unless amended. This bill would require municipally -owned electric utilities to increase their net energy metering (NEM) cap without consideration of the impacts to non -NEM customers and the utilities. LEU has a long history of supporting programs and projects that fairly and sustainably promote renewable energy. For example, Lodi invested in renewable energy prior to mandated Renewable Portfolio Standard (RPS) requirements by investing in geothermal and hydroelectric generation. In addition, LEU has been providing our customers with numerous energy efficiency and customer -owned solar incentives that are significantly more generous than most. The expansion of the NEM program through AB 2339, however, is neither fair nor sustainable. Most notably, NEM provides generous incentives to NEM customers by providing them with the full retail rate for the electricity they generate on site. This compensation, which is more than the actual value of the generation, allows an NEM customer to avoid the utility's transmission and distribution costs, even though the customer relies on these assets to remove over -generation and to receive the utility's energy supply when the NEM system is not generating (e.g., at night when the sun is not shining on solar panels). As such, these costs are shifted to non -NEM customers, many of whom are low-income, elderly, or live in multi -family buildings. In addition to the public policy concerns with this cost shift, there are also legal concerns due to Proposition 26. This proposition created a Constitutional amendment restricting charges imposed by local governments when the charges are for a specific government service or product that is not directly provided to the payor or is provided to those not charged. As the cost shift grows with the NEM program—as would be the case with AB 2339—the non -NEM customer will pay more for services and products that the municipal owned electric utilities' provides to the NEM customer. Local governments should not be put in a position where they risk violating the California Constitution. AB 2339 also creates additional administrative burdens and costs for municipally -owned electric utilities as they will be forced to determine the utility's "non -coincident peak" (i.e., AB 2339 (Irwin) Net Energy Metering — Notice of OPPOSITION Unless Amended Page Two the sum of all individual customer peak demands) which—even if allowed to estimate— is complicated, expensive to calculate, and subject to different interpretations. Other than to comply with this bill, there is no other purpose for a municipality to determine its non - coincident peak. And while investor-owned utilities (IOUs) have been calculating their NEM cap using non -coincident peak, this will no longer be the case starting next year pursuant to AB 327 (Perea, 2013). AB 327 required the ratemaking authority for the IOUs to establish an NEM successor program that, according to the final Senate Floor analysis, "is based on the electrical system costs and benefits received by nonparticipating customers and prevents a cost shift to non -NEM customers." To create uniformity in state policy, as well as parity, the ratemaking body for each municipally -owned electric utility should also be allowed to create an NEM successor program that is based on the electrical system costs and benefits, and that prevents a cost shift. Under existing law, a municipally -owned electric utility has the flexibility to adopt this type of NEM successor program once it hits its current NEM cap. Alternatively, the Northern California Power Agency (NCPA) (of which LEU is a member) has offered amendments to the author and committee that creates a process to determine a successor program that is comparable to the AB 327 process. These amendments, if adopted, would allow the local governing board of a municipally -owned electric utility to design an NEM successor program that enables renewable distributed generation to grow fairly and sustainably in the community. The City of Lodi Electric Utility welcomes the opportunity to discuss our issues and NCPA's amendments with you further, but given our general concerns with the specific proposal in the bill, we must oppose AB 2339 at this time. Sincerely, . euk_16.1..-- Mark Chandler Mayor, City of Lodi MC/pmf cc: Senator Cathleen Galgiani, Fax: (916) 651-4905 Assemblymember Jim Cooper, Fax: (916) 319-2109 Stephen Qualls, Regional Public Affairs Manager, sguallsftcacities.orq Meg Desmond, League of California Cities, mdesmondCa7cacities.orq Heather Hamp, Assembly Utilities and Commerce Committee, heather.hamp©asm.ca.gov Mario De Bernardo, State Government Relations & External Affairs Manager, MariOdebernardonncpa.com