Sacramento, CA – AB 1106 would require the California Public Utilities Commission (CPUC) to develop a Feed-in Tariff (FIT) for eligible renewable electric generation that is less than 20 MWs in size.

Assemblymember Felipe Fuentes introduced AB 1106 on February 27, 2009. It was read the first time March 2, 2009. On March 26, 2009, the legislation was referred to the Committee on Utilities and Commerce and Committee on Natural Resources. On April 21, 2009, AB 1106 was passed (Ayes 10, Noes 4) and re-referred to the Committee on Natural Resources.

On April 27, 2009, the Assembly Committee on Natural Resources voted to pass AB 1106 (Ayes 6, Noes 3); however, the bill was re-referred to the Committee on Appropriations.

Ayes included: Nancy Skinner (D-Oakland), Julia Brownley (D-Woodland Hills), Wesley Chesbro (D-Humboldt), Kevin de Leon (D-Los Angeles), Jerry Hill (D-San Mateo) and Jared Huffman (D-San Rafael).

Noes included: Danny Gilmore (R-Hanford), Steve Knight (R-Palmdale) and Dan Logue (D-Chico).

Background: Currently, renewable energy generation less than 20 MWs cannot participate in either the California Solar Initiative (CSI) incentive program or the RPS solicitation program. AB 1106 will allow the broadest private sector to participate and bring renewables online quickly.

AB 1106 will require Investor Owned Utilities (IOUs) to purchase all electricity produced by eligible renewable generation that is less than 20 MWs in size and is located on property owned by the customer and pay the customer a price determined by the CPUC. This bill will also mandate that each kWh generated from the electric generation facility shall count toward the IOUs RPS responsibilities.

The CPUC, in consultation with the California Energy Committee (CEC), will be expected to develop FITs for eligible renewable energy resources larger than 20 MWs.

AB 1106 does not apply to Publicly Owned Utilities (POUs).

Consistent with the CEC recommendation, the features that REAP believes need to be reflected in a comprehensive FIT are as follows:

A comprehensive FIT should apply to investor-owned utilities and publicly-owned utilities.

The annual FIT cap should be set at 2% of total load for each utility, which will allow the FIT to assure that the 33% RPS mandate is satisfied by 2020. This also assures that small utilities have only small requirements under the FIT program.

Cost-based pricing: In order to be effective, the FIT must provide a return on investment that will attract developers of all the RPS-eligible technologies.

Technology-differentiated pricing: the costs of each technology can vary significantly, so pricing should not overpay or underpay developers.

Must-take contracts: if the pre-determined criteria are met, utilities must purchase the renewable energy offered by FIT facilities.

Renewable Energy Certificates (RECs) are bundled and will belong to the utility that purchases the energy, allowing the utility to count FIT purchases toward RPS requirements.

FIT pricing should be set such that ratepayers are not overly burdened. Pricing should be established by considering typical project installations that are at least 500 kilowatts in size for each eligible technology.

Contracts should be twenty years in duration, with potentially other durations offered as an option to FIT facility owners.

If significant distribution line upgrades are required, FIT facility developers may either scale-down the project or pay the upgrade expenses.

CAISO performance assurance mechanisms should be used: FIT facilities are paid for each unit of energy that is delivered to the grid. As such, all FIT facility owners are highly motivated to maximize the performance of their facilities and no performance assurances beyond CAISO’s, and natural market forces, should be required.

The FIT program must be available to all parties, including utilities (with a disallowance for utility cost recovery of capital expenditures, which would constitute “double dipping”).