Fee Proposal Could Harm California Solar Power

source: Peter Carvelli SolarAccess 2003.2.11

Action Item: Write to Governor Davis & CPUC Commissioner- send a fax or email

Solar energy activists in California are fighting a policy battle against a proposed fee that,
if adopted, will increase the cost of solar power for grid-tied utility customers.

Generally seen as a progressive state that sets the tone for legislation throughout the rest of the country, the
proposal has the state's solar power industry outraged and mobilized to see that solar users are protected.

In January, Administrative Law Judge, Charles Pulsifer issued an order that would impose a two to five cent
per kilowatt hour (kWh) departing load or exit fee on all distributed generation, including solar, wind and other
fossil fuel technologies such as diesel generators.

According to Washington, D.C.-based Solar Energy Industries Association (SEIA), the proposed fee is an
attempt by California's private utilities - Pacific Gas & Electric, Southern California Edison and San Diego Gas
& Electric - to reduce the debt the state incurred from buying power during the energy crisis of 2000.

Glenn Hamer, SEIA's executive director said he is outraged by the proposed fee.

"We're alarmed by the opinion of the administrative law judge," Hamer said. "The decision suggests that the
more clean energy you produce the more you get penalized for doing so - simply put it's a tax on solar
generation. It's an environmentally destructive decision."

The proposal would give utilities the right to install meters on privately owned solar energy and other power
systems to measure the output and impose the exit fee on the kWh generated. Off-grid systems would not be
effected.

In his order, Pulsifer stated, "Departing Load Customer Generation shall pay its share of Department of Water
Resources (DWR) ongoing power charges…such charge shall be set equal to the corresponding
cents/kilowatts surcharge component in effect on the date of departure as determined pursuant to the Direct
Access (DA) phase … proceedings."

The order does not immediately become law. According to Les Nelson, executive director of the California
Solar Energy Industries Association (CalSEIA), the order can be acted on in some way by the five person
California Public Utilities Commission, ignored completely or adopted verbatim.

"We've been intervening on this for a considerable period of time, (which) has led up to the proposed decision
issued last week that basically ignores everything that we said and imposes an exit fee," Nelson said.

Sam Vanderhoof, of California-based inverter manufacturer SMA America, Inc. said he is concerned about the
proposed fee, fearing it could "raise havoc" with a successful renewables program. He compared the situation
to the European market where his company ships nearly 6000 units monthly - the yearly US market demand.

"It's a mind set," Vanderhoof said. "It's the government backing, it's different. I see Europe embracing it
because they want to lessen their dependence on foreign oil."

The proposed fee would include any individual or business systems with meters - essentially any system that
generates electricity including cogeneration systems and diesel generators. Fees would be imposed based
on either the metered output of the system (CalSEIA is arguing that can't be done because of California's net
metering law) or with charges assessed based on capacity of the system, not actual output.

Photovoltaic generation, though, is unique and should be treated differently because of its environmental and
economic benefits, say its supporters.

"Our argument all along has been that PV is special and ought not to get departing load charges imparted on
it," CalSEIA's Nelson said. "We're doing everything we can to persuade the commission that PV should not
(face the fees) because the state is providing incentives to PV on one hand and would be taking the money
back on the other hand."

In fact, Pacific Gas & Electric (PG&E), one of three utilities pushing for the fees, (the others are Southern
California Edison and San Diego Gas & Electric) administers the payment of millions of dollars in PV, wind
and other Renewable Energy incentives in 2002 and already in 2003. According to Paul Moreno, a spokesman
for PG&E, the utility paid US$6.8 million toward PV projects in 2002, the first year it offered incentives, and
already US$1.2 million this year.

The "Self-Generation Incentive Program," designed primarily for business or large institutional customers,
provides a US$4.50 per watt incentive up to 50 percent of project cost on 30 kW to 1.5 MW PV, wind or fuel cell
systems. The program, created in March 2001 by the CPUC, ordered utilities to offer financial incentives to
their customers who install certain types of distributed generation facilities to meet all or a portion of their
energy needs. As part of this program, PG&E was authorized US$48 million a year in customer incentives.

David Rubin, director of Service Analysis, for PG&E said the ruling follows the utilities' belief that all customers
who installed distributed generation systems after the state began buying power on January 17, 2001, and
therefore benefited from that power purchase, has a responsibility to pay for future power contracts.

"The question now before the commission is, if a customer departs - not through conservation or normal
course of business, only through onsite generation, what is their fair share?" Rubin said. "They would then be
shifting that responsibility onto other customers."

Rubin described a complex system of exemptions that he said may apply to some owners of onsite solar
power and other DG systems, but admitted that solar users would in fact face new charges should the
commissioners accept the order.

For a relatively small, home PV system, the charge would amount to a fairly small increase in total system
cost. For example, a 2 kW system receiving five sun hours per day, has the potential to generate 10 kWh of
electricity. Under the proposed fees this would add a minimum of US$.20 to a maximum of US$.50 per day
(US$73 to $182.50 per year) to the operating costs of the system. (Large, commercial systems would face
considerably higher charges.)

Nelson called the total dollar amount that could potentially be collected from PV system owners
"inconsequential" compared to the total magnitude of the costs the utilities are attempting to recover. Even a
small charge on PV systems is too much, according to SEIA's Hamer.

"If it were one penny it would be outrageous," Hamer said. "It's the principle of taxing the people of California
who have decided to generate clean energy - it's an assault on common sense."