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CPUC Refines Solar Initiative Among Several 'Quiet' Actions

As part of a full year-end consent agenda, California regulators Thursday quietly passed a number of items that in the past have drawn a lot of discussion -- the leading one being technical changes to the massive 10-year California Solar Initiative (CSI) to bolster small, onsite distributed solar systems. At issue was cutting the program's overall budget from around $3 billion to less than $2.5 billion. The effort is supposed to produce "a million solar roofs" with photovoltaic (PV) systems and 3,000 MW of solar-produced electricity.

In other items not discussed that were approved en masse, the California Public Utilities Commission (CPUC) also dropped two long-standing investigations of potential manipulations of the California-Arizona border wholesale natural gas price in the midst of the 2000-2001 energy crisis. It also quietly approved a little more than $5 billion 2007 revenue requirement for the state Department of Water Resources (DWR) to continue to pay off the DWR's above-market power supply contracts from the crisis period five years ago.

The solar program changes were prompted in part by the passage of legislation for the solar push that the CPUC had already put in place among the state's major private-sector utilities (SB 1), which puts a cap of the total funds for the program at $2.16 billion. Incentives also will decline over the life of the program at roughly 7% annually, ending at zero, according to the CPUC's latest action (see Power Market Today, Dec. 11).

The decision concluded that renewable energy credits (RECs) are one of several factors that may affect the economics of solar and other renewable distributed generation systems. Thus, the CPUC's quiet move Thursday "may play an important role in driving the deployment of renewable distributed generation in California and achieving the goals of SB 1," the CPUC's spokesperson said.

Solar system owners of distributed generation systems now can maintain ownership of all the system's RECs regardless of whether the onsite system participates in the CSI program, a separate self-generation incentive program that has been operating for several years, or state-sanctioned net-metering programs.

In the gas price probe, Thursday's action by the regulators provides a final curtain for the string of investigations and lawsuits that helped define the last five years in the wake of California's 2000-2001 energy crisis. Two CPUC administrative law judges (ALJs) in early November released a proposed decision recommending regulators drop the two investigations of Sempra Energy and its major utilities regarding alleged California border wholesale natural gas price manipulations (see Daily/NGI, Nov. 27). To date, Sempra has settled almost all of the allegations in court and regulatory agreements.

The ALJs said the investigations should be dropped and the conditions for the utilities' current incentive rate-setting mechanisms should be removed (gas cost incentive mechanism, GCIM; and performance-based rates, PBR). "Closure and removal of the conditions on GCIM and PBR will satisfy the condition precedent in the Curtailment Action Settlement Agreement for receiving substantial consideration for SDG&E's ratepayers, including making available additional supplies of energy at commission-regulated rates that would not have been available otherwise, " the ALJ's wrote.

Earlier in the year, Sempra settled a multi-billion-dollar class action lawsuit that was in a jury trial proceeding. As part of that deal, the company will be paying out close to $400 million over the next eight years to various plaintiffs.

In approving the state DWR's 2007 revenue requirement at $5.009 billion, the CPUC authorized about a $129 million decrease that the state water agency submitted in late October as part of a recalculation of its estimated power contract costs next year. Since the early years of the contracts, the revenue requirement has been steadily declining.

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