Important Disclaimer CPUC and State Legislature Provide Relief to CSI Incentive Recipients and Solar Installers June 13, 2007 Last week, the California Public Utilities Commission (CPUC) and the California legislature took separate actions to suspend a requirement that California Solar Initiative (CSI) incentive recipients—residential and commercial—take service under existing time-of-use (TOU) rates in order to receive CSI incentive payments. Since January 1, 2007, CSI incentive recipients have been required to take service under existing TOU rate schedules. In its June 7th business meeting, the CPUC approved a proposal that suspends the TOU requirement until the CPUC designs new TOU rates that better accommodate the operational characteristics of CSI incentive recipients. Not to be outdone, Governor Arnold Schwarzenegger signed a bill the same day that accomplishes the same goal. AB 1714 was rushed through the California State Assembly so that it would be ready for the governor's signature before the CPUC took up the issue. The governor signed AB 1714 on the morning of June 7, the same day that the CPUC approved its proposal. Under both AB 1714 and the CPUC decision, new CSI applicants may remain on flat-rate schedules and existing CSI recipients may choose either to return to flat-rate schedules or remain on TOU rates. Once the CPUC approves new TOU rate schedules, which the CPUC hopes to adopt at some point in 2008, applicants who apply for CSI incentives will be required to take service under the new TOU rates. TOU rates are a requirement of SB1, the California legislation that established the CSI program. Solar installers who rely on CSI incentive payments to make solar installations cost-effective have claimed that the TOU rate requirement diminished the financial incentive available to building owners and occupiers who install on-site solar systems, particularly in areas of California with high daytime temperatures. According to these installers, customers who invested in on-site solar systems expecting lower utility bills have in some cases been shocked to see their bills actually increase. This is because the optimum sizing for on-site solar generally is capped at the size necessary to meet a customer's annual electricity consumption, not the customer's peak load. Therefore, during periods of peak demand, many CSI recipients are net users of electricity, not net generators. As a consequence, they must purchase energy in order to satisfy their on-site demand. Under the TOU requirement, the energy purchased was often at the highest rates possible. In tandem, the CPUC decision and the legislative action should come as welcome relief to on-site solar installers who complained of diminished sales after the TOU requirement was imposed. For more information, please contact Peter Mostow or Kevin Fox in the Energy & Clean Technology practice of Wilson Sonsini Goodrich & Rosati. |