CPUC Voids Mandatory Solar Time-Of-Use Rates

Residential and small business customers who receive financial incentives for installing solar energy systems will no longer be required to take electric service under time-of-use rates—a system that ironically could raise their utility bills. The California Public Utilities Commission decided June 7 to eliminate the time-of-use requirement it adopted in December as mandated by Senate Bill 1, the California Solar Initiative, because it penalized small customers with large daytime loads who could not supply all of their peak electricity demand with solar power. Those customers—who predominantly live in hot inland climates—ended up paying higher daytime peak rates for their remaining power needs, resulting in higher electricity bills than if they had not installed solar systems and paid a flat rate for electric service (Circuit, May 11, 2007). The California Legislature paved the way for the CPUC action by passing an urgency measure, AB 1714, which removed the mandatory time-of-use rates from SB 1. AB 1714, authored by Assemblymember Lloyd Levine (D-Van Nuys) and Senator Christine Kehoe (D-San Diego) authorized the CPUC to temporarily change the rate structure for solar systems installed in homes and small businesses since January 1, 2007. Governor Arnold Schwarzenegger signed the bill into law June 7 to take effect immediately. Removing the time-of-use service disincentive will lower the costs of solar energy, greatly expand the use of solar systems in homes and businesses across California, and reduce greenhouse gas emissions, according to Schwarzenegger. Time-of-use rates typically reward customers for shifting their electricity usage to off-peak times of the day when it is in low demand and cheaper to generate. SB 1 required the CPUC to design a new time-of-use tariff to create incentives for customers to install solar systems whose peak electricity production would coincide with peak demand periods. However, instead of designing a new tariff specifically for solar customers, the CPUC instead required all solar customers to use its existing time-of-use tariffs until it designed new tariffs in the electric utilities’ general rate cases. “The objective was to maximize solar production during peak times of demand,” said CPUC president Mike Peevey. “This requirement was well-intended, but it resulted in a perverse outcome. Customers who live in hot areas end up paying more for solar. In other words, the very customers we would like to see install solar—those with high usage—are penalized for doing so. They won’t be willing to make that investment with that perverse outcome of raising their rates.” The CPUC suspended the time-of-use service requirement for homes and small businesses until it adopts “more accommodating” time-of-use tariffs in the next round of electric utility general rate cases in 2009. Large commercial and industrial customers will not be impacted because they already were under time-of-use rates for electric service before SB 1 was enacted. The goal of the “Million Solar Roofs” program is to install 3,000 MW of new rooftop solar energy capacity by 2017, the equivalent of about five power plants. The program provides $2.8 billion to subsidize rooftop solar systems on homes and commercial buildings over a decade. In other action, the CPUC approved a settlement agreement between Pacific Gas & Electric, the Division of Ratepayer Advocates, The Utility Reform Network, and Aglet Consumers Alliance authorizing a hedging plan for the utility’s core natural gas supplies. The CPUC authorized PG&E to spend ratepayer funds to purchase financial hedging instruments for seven years beginning in the winter of 2007-2008 with the intention of providing stable natural gas rates and reducing price volatility for its customers. PG&E ratepayers will assume all risks and benefits of the hedging program. The annual cost of the program is estimated at less than $14 per customer. The settlement differs from previous PG&E hedging proposals in that the utility and the other settling parties will participate in a collaborative review to adopt an annual hedging purchasing plan. While the settlement terms will remain confidential, this “Core Hedging Advisory Group” will have full access to the financial details. PG&E will file its annual hedging plan with the CPUC following consultation with the advisory group. The commissioners unanimously approved the settlement agreement and expressed confidence that PG&E’s hedging policy would lead to prudent gas purchases and cost savings for all of its customers. “Financial incentives serve as an insurance policy,” said CPUC commissioner Timothy Simon. “I hope this will encourage financial diversity.”

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CPUC Voids Mandatory Solar Time-Of-Use Rates

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