BILL NUMBER: SB 1	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 14, 2006
	PASSED THE ASSEMBLY  JUNE 29, 2006
	AMENDED IN ASSEMBLY  JUNE 29, 2006
	AMENDED IN ASSEMBLY  JUNE 8, 2006
	AMENDED IN ASSEMBLY  MAY 8, 2006
	AMENDED IN ASSEMBLY  APRIL 4, 2006
	AMENDED IN ASSEMBLY  SEPTEMBER 2, 2005
	AMENDED IN ASSEMBLY  AUGUST 31, 2005
	AMENDED IN ASSEMBLY  AUGUST 18, 2005
	AMENDED IN ASSEMBLY  JULY 12, 2005
	AMENDED IN ASSEMBLY  JULY 5, 2005
	AMENDED IN ASSEMBLY  JUNE 23, 2005
	AMENDED IN SENATE  MAY 31, 2005
	AMENDED IN SENATE  MAY 16, 2005
	AMENDED IN SENATE  APRIL 25, 2005
	AMENDED IN SENATE  FEBRUARY 28, 2005

INTRODUCED BY   Senator Murray
   (Principal coauthor: Assembly Member Levine)
   (Coauthors: Senators Alquist, Chesbro, Ducheny, and Kehoe)
   (Coauthors: Assembly Members Bermudez, Blakeslee, Chan, Cohn,
Garcia, Koretz, Laird, Leno, Lieber, Nation, Pavley, Saldana, Wolk,
and Yee)

                        DECEMBER 6, 2004

   An act to add Sections 25405.5 and 25405.6 to, and to add Chapter
8.8 (commencing with Section 25780) to Division 15 of, the Public
Resources Code, and to amend Section 2827 of, and to add Sections
387.5 and 2851 to, the Public Utilities Code, relating to solar
electricity.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1, Murray  Electricity: solar energy: net metering.
   (1) Existing law requires the State Energy Resources Conservation
and Development Commission (Energy Commission) to expand and
accelerate development of alternative sources of energy, including
solar resources. Existing law requires the Energy Commission to
develop and adopt regulations governing solar devices, as defined,
designed to encourage the development and use of solar energy and to
provide maximum information to the public concerning solar devices.
   This bill would require beginning January 1, 2011, a seller of
production homes, as defined, to offer the option of a solar energy
system, as defined, to all customers negotiating to purchase a new
production home constructed on land meeting certain criteria and to
disclose certain information. The bill would require the Energy
Commission to develop an offset program that allows a developer or
seller of production homes to forgo the offer requirement on a
project by installing solar energy systems generating specified
amounts of electricity on other projects. The bill would require, not
later than July 1, 2007, the Energy Commission to initiate a public
proceeding to study and make findings whether, and under what
conditions, solar energy systems should be required on new
residential and nonresidential buildings and to periodically update
the study thereafter.
   (2) Under existing law, the Public Utilities Commission (PUC) has
regulatory authority over public utilities, including electrical
corporations. Existing law required the PUC, on or before March 7,
2001, and in consultation with the Independent System Operator, to
take certain actions, including, in consultation with the Energy
Commission, adopting energy conservation demand-side management and
other initiatives in order to reduce demand for electricity and
reduce load during peak demand periods, including differential
incentives for renewable or super clean distributed generation
resources. Pursuant to this requirement, the PUC has developed a
self-generation incentive program to encourage customers of
electrical corporations to install distributed generation that
operates on renewable fuel or contributes to system reliability.
Existing law requires the PUC, in consultation with the Energy
Commission, to administer, until January 1, 2008, a self-generation
incentive program for distributed generation resources in the same
form that existed on January 1, 2004, subject to certain air
emissions and efficiency standards. In a PUC decision, the PUC
adopted the California Solar Initiative, which modified the
self-generation incentive program for distributed generation
resources and provides incentives to customer-side photovoltaics and
solar thermal electric projects under one megawatt.
   This bill would require the PUC, in implementing the California
Solar Initiative, to authorize the award of monetary incentives for
up to the first megawatt of alternating current generated by an
eligible solar energy system, that meets the eligibility criteria
established by the Energy Commission. The bill would authorize the
commission, prior to the establishment of eligibility criteria by the
Energy Commission, to determine the eligibility of a solar energy
system, as defined, to receive monetary incentives. The bill would
require that awards of monetary incentives decline at a rate of an
average of at least 7% for each year following implementation, and be
zero by December 31, 2016. The bill would require the PUC, by
January 1, 2008, to adopt a performance-based incentive program, as
specified. The bill would require that the PUC, by January 1, 2008,
and in consultation with the Energy Commission, require reasonable
and cost-effective energy efficiency improvements in existing
buildings as a condition of providing incentives for eligible solar
energy systems. The bill would require the commission to require
time-variant pricing for all ratepayers with a solar energy system.
The bill would prohibit costs of the program from being recovered
from certain customers and would require the commission to ensure
that the total cost over the duration of the program does not exceed
$3,350,800,000, consisting of 3 specified program components. The
bill would authorize the PUC to award monetary incentives for solar
thermal and solar water heating devices, in a total amount up to
$100,800,000. The bill would prohibit the PUC from allocating more
than $50,000,000 for certain research, development, and
demonstration. The bill would require that by June 30, 2009, and by
June 30 of every year thereafter, the PUC submit to the Legislature
an assessment of the success of the California Solar Initiative
program, that includes specified information.
   This bill would require the Energy Commission, by January 1, 2008,
and in consultation with the PUC, local publicly owned electric
utilities, and interested members of the public, to establish and
thereafter revise eligibility criteria for solar energy systems and
to establish conditions for ratepayer funded incentives that are
applicable to the California Solar Initiative. The bill would require
the Energy Commission to adopt guidelines for solar energy systems
receiving ratepayer funded incentives at a publicly noticed meeting.
The bill would, upon establishment of eligibility criteria by the
Energy Commission, prohibit ratepayer funded incentives from being
made for a solar energy system that does not meet the eligibility
criteria. The bill would require the Energy Commission to make
certain information available to the public, to provide assistance to
builders and contractors, and to conduct random audits of solar
energy systems to evaluate their operational performance.
   This bill would require all local publicly owned electric
utilities, as defined, that sell electricity at retail, on or before
January 1, 2008, to adopt, implement, and finance a solar initiative
program, as prescribed, for the purpose of investing in, and
encouraging the increased installation of, residential and commercial
solar energy systems. The bill would require a local publicly owned
electric utility to make certain program information available to its
customers, to the Legislature, and to the Energy Commission on an
annual basis beginning June 1, 2008. By imposing additional duties
upon local publicly owned electric utilities, the bill would thereby
impose a state-mandated local program.
   (3) Existing law requires all electric service providers, as
defined, to develop a standard contract or tariff providing for net
energy metering, and to make this contract available to eligible
customer generators, upon request.  Existing law requires all
electric service providers, upon request, to make available to
eligible customer generators contracts for net energy metering on a
first-come-first-served basis until the time that the total rated
generating capacity used by eligible customer generators exceeds 0.5%
of the electric service provider's aggregate customer peak demand.
   This bill would require the PUC to order electric service
providers to expand the availability of net energy metering so that
it is offered on a first-come-first-served basis until the time that
the total rated generating capacity used by all eligible
customer-generators exceeds 2.5% of the electric service provider's
aggregate customer peak demand. The bill would require the PUC, by
January 1, 2010, in consultation with the Energy Commission, to
submit a report to the Governor and Legislature on the costs and
benefits of net energy metering, wind energy co-metering, and
co-energy metering to participating customers and nonparticipating
customers and with options to replace the economic costs of different
forms of net metering with a mechanism that more equitably balances
the interests of participating and nonparticipating customers.
   (4) Existing law, the Contractors' State License Law, provides for
the licensure and regulation of contractors by the Contractors'
State License Board.
   This bill would require the board to review and, if needed, revise
its licensing classifications and examinations to ensure that
contractors authorized to perform work on solar energy systems, as
specified, have the requisite qualifications to perform the work.
   (5) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for specified reasons.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  (a) The Legislature finds and declares that the Public
Utilities Commission (PUC) adopted the California Solar Initiative in
Decision 06-01-024.
   (b) Nothing in this act shall be construed to codify PUC Decision
06-01-024.
  SEC. 2.  Section 25405.5 is added to the Public Resources Code, to
read:
   25405.5.  (a) As used in this section, the following terms have
the following meanings:
   (1) "kW" means kilowatts or 1,000 watts, as measured from the
alternating current side of the solar energy system inverter
consistent with Section 223 of Title 15 of the United States Code.
   (2) "Production home" means a single-family residence constructed
as part of a development of at least 50 homes per project that is
intended or offered for sale.
   (3) "Solar energy system" means a solar energy device that has the
primary purpose of providing for the collection and distribution of
solar energy for the generation of electricity, that produces at
least one kW, and not more than five megawatts, alternating current
rated peak electricity, and that meets or exceeds the eligibility
criteria established pursuant to Section 25782.
   (b) A seller of production homes shall offer a solar energy system
option to all customers that enter into negotiations to purchase a
new production home constructed on land for which an application for
a tentative subdivision map has been deemed complete on or after
January 1, 2011, and disclose the following:
   (1) The total installed cost of the solar energy system option.
   (2) The estimated cost savings associated with the solar energy
system option, as determined by the commission pursuant to Chapter
8.8 (commencing with Section 25780) of Division 15.
   (c) The State Energy Resources Conservation and Development
Commission shall develop an offset program that allows a developer or
seller of production homes to forgo the offer requirement of this
section on a project, by installing solar energy systems generating
specified amounts of electricity on other projects, including, but
not limited to, low-income housing, multifamily, commercial,
industrial, and institutional developments. The amount of electricity
required to be generated from solar energy systems used as an offset
pursuant to this subdivision shall be equal to the amount of
electricity generated by solar energy systems installed on a
similarly sized project within that climate zone, assuming 20 percent
of the prospective buyers would have installed solar energy systems.

   (d) The requirements of this section shall not operate as a
substitute for the implementation of existing energy efficiency
measures, and the requirements of this section shall not result in
lower energy savings or lower energy efficiency levels than would
otherwise be achieved by the full implementation of energy savings
and energy efficiency standards established pursuant to Section
25402.
  SEC. 3.  Section 25405.6 is added to the Public Resources Code, to
read:
   25405.6.  Not later than July 1, 2007, the commission shall
initiate a public proceeding to study and make findings whether, and
under what conditions, solar energy systems should be required on new
residential and new nonresidential buildings, including the
establishment of numerical targets. As part of the study, the
commission may determine that a solar energy system should not be
required for any building unless the commission determines, based
upon consideration of all costs associated with the system, that the
system is cost effective when amortized over the economic life of the
structure. When determining the cost-effectiveness of the solar
energy system, the commission shall consider the availability of
governmental rebates, tax deductions, net-metering, and other
quantifiable factors, if the commission can determine the
availability of these financial incentives if a solar energy system
is made mandatory and not elective. The commission shall periodically
update the study and incorporate any revision that the commission
determines is necessary, including revisions that reflect changes in
the financial incentives originally considered by the commission when
determining cost-effectiveness of the solar energy system. For
purposes of this section, "solar energy system" means a photovoltaic
solar collector or other photovoltaic solar energy device that has a
primary purpose of providing for the collection and distribution of
solar energy for the generation of electricity. This section is
intended to be for study purposes only and does not authorize the
commission to develop and adopt any requirement for solar energy
systems on either residential or nonresidential buildings.
  SEC. 4.  Chapter 8.8 (commencing with Section 25780) is added to
Division 15 of the Public Resources Code, to read:
      CHAPTER 8.8.  California Solar Initiative

   25780.  The Legislature finds and declares both of the following:

   (a) It is the goal of the state to install solar energy systems
with a generation capacity equivalent of 3,000 megawatts, to
establish a self-sufficient solar industry in which solar energy
systems are a viable mainstream option for both homes and businesses
in 10 years, and to place solar energy systems on 50 percent of new
homes in 13 years.
   (b) A solar initiative should be a cost-effective investment by
ratepayers in peak electricity generation capacity where ratepayers
recoup the cost of their investment through lower rates as a result
of avoiding purchases of electricity at peak rates, with additional
system reliability and pollution reduction benefits.
   25781.  As used in this chapter, the following terms have the
following meanings:
   (a) "California Solar Initiative" means the program providing
ratepayer funded incentives for eligible solar energy systems adopted
by the Public Utilities Commission in Decision 06-01-024.
   (b) "kW" means kilowatts or 1,000 watts, as measured from the
alternating current side of the solar energy system inverter
consistent with Section 223 of Title 15 of the United States Code.
   (c) "kWh" means kilowatthours, as measured by the number of
kilowatts generated in an hour.
   (d) "MW" means megawatts or 1,000,000 watts.
   (e) "Solar energy system" means a solar energy device that has the
primary purpose of providing for the collection and distribution of
solar energy for the generation of electricity, that produces at
least one kW, and not more than five MW, alternating current rated
peak electricity, and that meets or exceeds the eligibility criteria
established pursuant to Section 25782.
   25782.  (a) The commission shall, by January 1, 2008, in
consultation with the Public Utilities Commission, local publicly
owned electric utilities, and interested members of the public,
establish eligibility criteria for solar energy systems receiving
ratepayer funded incentives that include all of the following:
   (1) Design, installation, and electrical output standards or
incentives.
   (2) The solar energy system is intended primarily to offset part
or all of the consumer's own electricity demand.
   (3) All components in the solar energy system are new and unused,
and have not previously been placed in service in any other location
or for any other application.
   (4) The solar energy system has a warranty of not less than 10
years to protect against defects and undue degradation of electrical
generation output.
   (5) The solar energy system is located on the same premises of the
end-use consumer where the consumer's own electricity demand is
located.
   (6) The solar energy system is connected to the electrical
corporation's electrical distribution system within the state.
   (7) The solar energy system has meters or other devices in place
to monitor and measure the system's performance and the quantity of
electricity generated by the system.
   (8) The solar energy system is installed in conformance with the
manufacturer's specifications and in compliance with all applicable
electrical and building code standards.
   (b) The commission shall establish conditions on ratepayer funded
incentives that require all of the following:
   (1) Appropriate siting and high quality installation of the solar
energy system by developing installation guidelines that maximize the
performance of the system and prevent qualified systems from being
inefficiently or inappropriately installed. The conditions
established by the commission shall not impact housing designs or
densities presently authorized by a city, county, or city and county.
The goal of this paragraph is to achieve efficient installation of
solar energy systems to promote the greatest energy production per
ratepayer dollar.
   (2) Optimal solar energy system performance during periods of peak
electricity demand.
   (3) Appropriate energy efficiency improvements in the new or
existing home or commercial structure where the solar energy system
is installed.
   (c) The commission shall set rating standards for equipment,
components, and systems to assure reasonable performance and shall
develop standards that provide for compliance with the minimum
ratings.
   (d) Upon establishment of eligibility criteria pursuant to
subdivision (a), no ratepayer funded incentives shall be made for a
solar energy system that does not meet the eligibility criteria.
   25783.  The commission shall do all the following:
   (a) Publish educational materials designed to demonstrate how
builders may incorporate solar energy systems during construction as
well as energy efficiency measures that best complement solar energy
systems.
   (b) Develop and publish the estimated annual electrical generation
and savings for solar energy systems. The estimates shall vary by
climate zone, type of system, size, lifecycle costs, electricity
prices, and other factors the commission determines to be relevant to
a consumer when making a purchasing decision.
   (c) Provide assistance to builders and contractors. The assistance
may include technical workshops, training, educational materials,
and related research.
   (d) The commission shall annually conduct random audits of solar
energy systems to evaluate their operational performance.
   (e) The commission, in consultation with the Public Utilities
Commission, shall evaluate the costs and benefits of having an
increased number of operational solar energy systems as a part of the
electrical system with respect to their impact upon the
distribution, transmission, and supply of electricity, using the best
available load profiling and distribution operations data from the
Public Utilities Commission, local publicly owned electric utilities,
and electrical corporations, and performance audits of installed
solar energy systems.
   25784.  The commission shall adopt guidelines for solar energy
systems receiving ratepayer funded incentives at a publicly noticed
meeting offering all interested parties an opportunity to comment.
Not less than 30 days' public notice shall be given of the meeting
required by this section, before the commission initially adopts
guidelines.  Substantive changes to the guidelines shall not be
adopted without at least 10 days' written notice to the public.
Notwithstanding any other provision of law, any guidelines adopted
pursuant to this chapter shall be exempt from the requirements of
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code.
  SEC. 5.  Section 387.5 is added to the Public Utilities Code, to
read:
   387.5.  (a) In order to further the state goal of encouraging the
installation of 3,000 megawatts of photovoltaic solar energy in
California within 10 years, the governing body of a local publicly
owned electric utility, as defined in subdivision (d) of Section
9604, that sells electricity at retail, shall adopt, implement, and
finance a solar initiative program, funded in accordance with
subdivision (b), for the purpose of investing in, and encouraging the
increased installation of, residential and commercial solar energy
systems.
   (b) On or before January 1, 2008, a local publicly owned electric
utility shall offer monetary incentives for the installation of solar
energy systems of at least two dollars and eighty cents ($2.80) per
installed watt, or for the electricity produced by the solar energy
system, measured in kilowatthours, as determined by the governing
board of a local publicly owned electric utility, for photovoltaic
solar energy systems. The incentive level shall decline each year
thereafter at a rate of no less than an average of 7 percent per
year.
   (c) A local publicly owned electric utility shall initiate a
public proceeding to fund a solar energy program to adequately
support the goal of installing 3,000 megawatts of photovoltaic solar
energy in California. The proceeding shall determine what additional
funding, if any, is necessary to provide the incentives pursuant to
subdivision (b).  The public proceeding shall be completed and the
comprehensive solar energy program established by January 1, 2008.
   (d) The solar energy program of a local publicly owned electric
utility shall be consistent with all of the following:
   (1) That a solar energy system receiving monetary incentives
comply with the eligibility criteria, design, installation, and
electrical output standards or incentives established by the State
Energy Resources Conservation and Development Commission pursuant to
Section 25782 of the Public Resources Code.
   (2) That solar energy systems receiving monetary incentives are
intended primarily to offset part or all of the consumer's own
electricity demand.
   (3) That all components in the solar energy system are new and
unused, and have not previously been placed in service in any other
location or for any other application.
   (4) That the solar energy system has a warranty of not less than
10 years to protect against defects and undue degradation of
electrical generation output.
   (5) That the solar energy system be located on the same premises
of the end-use consumer where the consumer's own electricity demand
is located.
   (6) That the solar energy system be connected to the electric
utility's electrical distribution system within the state.
   (7) That the solar energy system has meters or other devices in
place to monitor and measure the system's performance and the
quantity of electricity generated by the system.
   (8) That the solar energy system be installed in conformance with
the manufacturer's specifications and in compliance with all
applicable electrical and building code standards.
   (e) A local publicly owned electric utility shall, on an annual
basis beginning June 1, 2008, make available to its customers, to the
Legislature, and to the State Energy Resources Conservation and
Development Commission, information relating to the utility's solar
initiative program established pursuant to this section, including,
but not limited to, the number of photovoltaic solar watts installed,
the total number of photovoltaic systems installed, the total number
of applicants, the amount of incentives awarded, and the
contribution toward the program goals.
   (f) In establishing the program required by this section, no
moneys shall be diverted from any existing programs for low-income
ratepayers, or from cost-effective energy efficiency or demand
response programs.
   (g) The statewide expenditures for solar programs adopted,
implemented, and financed by local publicly owned electric utilities
shall be seven hundred eighty-four million dollars ($784,000,000).
The expenditure level for each local publicly owned electric utility
shall be based on that utility's percentage of the total statewide
load served by all local publicly owned electric utilities.
Expenditures by a local publicly owned electric utility may be less
than the utility's cap amount, provided that funding is adequate to
provide the incentives required by subdivisions (a) and (b).
  SEC. 6.  Section 2827 of the Public Utilities Code is amended to
read:
   2827.  (a) The Legislature finds and declares that a program to
provide net energy metering for eligible customer-generators is one
way to encourage substantial private investment in renewable energy
resources, stimulate in-state economic growth, reduce demand for
electricity during peak consumption periods, help stabilize
California's energy supply infrastructure, enhance the continued
diversification of California's energy resource mix, and reduce
interconnection and administrative costs for electricity suppliers.
   (b) As used in this section, the following definitions apply:
   (1) "Electric service provider" means an electrical corporation,
as defined in Section 218, a local publicly owned electric utility,
as defined in Section 9604, or an electrical cooperative, as defined
in Section 2776, or any other entity that offers electrical service.
This section shall not apply to a local publicly owned electric
utility, as defined in Section 9604 of the Public Utilities Code,
that serves more than 750,000 customers and that also conveys water
to its customers.
   (2) "Eligible customer-generator" means a residential, small
commercial customer as defined in subdivision (h) of Section 331,
commercial, industrial, or agricultural customer of an electric
service provider, who uses a solar or a wind turbine electrical
generating facility, or a hybrid system of both, with a capacity of
not more than one megawatt that is located on the customer's owned,
leased, or rented premises, is interconnected and operates in
parallel with the electric grid, and is intended primarily to offset
part or all of the customer's own electrical requirements.
   (3) "Net energy metering" means measuring the difference between
the electricity supplied through the electric grid and the
electricity generated by an eligible customer-generator and fed back
to the electric grid over a 12-month period as described in
subdivision (h). Net energy metering shall be accomplished using a
single meter capable of registering the flow of electricity in two
directions. An additional meter or meters to monitor the flow of
electricity in each direction may be installed with the consent of
the customer-generator, at the expense of the electric service
provider, and the additional metering shall be used only to provide
the information necessary to accurately bill or credit the
customer-generator pursuant to subdivision (h), or to collect solar
or wind electric generating system performance information for
research purposes. If the existing electrical meter of an eligible
customer-generator is not capable of measuring the flow of
electricity in two directions, the customer-generator shall be
responsible for all expenses involved in purchasing and installing a
meter that is able to measure electricity flow in two directions. If
an additional meter or meters are installed, the net energy metering
calculation shall yield a result identical to that of a single meter.
An eligible customer-generator who already owns an existing solar or
wind turbine electrical generating facility, or a hybrid system of
both, is eligible to receive net energy metering service in
accordance with this section.
   (4) "Wind energy co-metering" means any wind energy project
greater than 50 kilowatts, but not exceeding one megawatt, where the
difference between the electricity supplied through the electric grid
and the electricity generated by an eligible customer-generator and
fed back to the electric grid over a 12-month period is as described
in subdivision (h). Wind energy co-metering shall be accomplished
pursuant to Section 2827.8.
   (5) "Co-energy metering" means a program that is the same in all
other respects as a net energy metering program, except that the
local publicly owned electric utility, as defined in Section 9604,
has elected to apply a generation-to-generation energy and
time-of-use credit formula as provided in subdivision (i).
   (6) "Ratemaking authority" means, for an electrical corporation as
defined in Section 218, or an electrical cooperative as defined in
Section 2776, the commission, and for a local publicly owned electric
utility as defined in Section 9604, the local elected body
responsible for regulating the rates of the local publicly owned
utility.
   (c) (1) Every electric service provider shall develop a standard
contract or tariff providing for net energy metering, and shall make
this contract available to eligible customer-generators, upon
request, on a first-come-first-served basis until the time that the
total rated generating capacity used by eligible customer-generators
exceeds 2.5 percent of the electric service provider's aggregate
customer peak demand.
   (2) On an annual basis, beginning in 2003, every electric service
provider shall make available to the ratemaking authority information
on the total rated generating capacity used by eligible
customer-generators that are customers of that provider in the
provider's service area. For those electric service providers who are
operating pursuant to Section 394, they shall make available to the
ratemaking authority the information required by this paragraph for
each eligible customer-generator that is their customer for each
service area of an electric corporation, local publicly owned
electric utility, or electrical cooperative, in which the customer
has net energy metering. The ratemaking authority shall develop a
process for making the information required by this paragraph
available to energy service providers, and for using that information
to determine when, pursuant to paragraph (3), a service provider is
not obligated to provide net energy metering to additional
customer-generators in its service area.
   (3) Notwithstanding paragraph (1), an electric service provider is
not obligated to provide net energy metering to additional
customer-generators in its service area when the combined total peak
demand of all customer-generators served by all the electric service
providers in that service area furnishing net energy metering to
eligible customer-generators exceeds 2.5 percent of the aggregate
customer peak demand of those electric service providers.
   (4) By January 1, 2010, the commission, in consultation with the
State Energy Resources Conservation and Development Commission, shall
submit a report to the Governor and the Legislature on the costs and
benefits of net energy metering, wind energy co-metering, and
co-energy metering to participating customers and nonparticipating
customers and with options to replace the economic costs and benefits
of net energy metering, wind energy co-metering, and co-energy
metering with a mechanism that more equitably balances the interests
of participating and nonparticipating customers, and that
incorporates the findings of the report on economic and environmental
costs and benefits of net metering required by subdivision (n).
   (d) Electric service providers shall make all necessary forms and
contracts for net metering service available for download from the
Internet.
   (e) (1) Every electric service provider shall ensure that requests
for establishment of net energy metering are processed in a time
period not exceeding that for similarly situated customers requesting
new electric service, but not to exceed 30 working days from the
date the electric service provider receives a completed application
form for net metering service, including a signed interconnection
agreement from an eligible customer-generator and the electric
inspection clearance from the governmental authority having
jurisdiction. If an electric service provider is unable to process
the request within the allowable timeframe, the electric service
provider shall notify both the customer-generator and the ratemaking
authority of the reason for its inability to process the request and
the expected completion date.
   (2) Electric service providers shall ensure that requests for an
interconnection agreement from an eligible customer-generator are
processed in a time period not to exceed 30 working days from the
date the electric service provider receives a completed application
form from the eligible customer-generator for an interconnection
agreement.  If an electric service provider is unable to process the
request within the allowable timeframe, the electric service provider
shall notify the customer-generator and the ratemaking authority of
the reason for its inability to process the request and the expected
completion date.
   (f) (1) If a customer participates in direct transactions pursuant
to paragraph (1) of subdivision (b) of Section 365 with an electric
supplier that does not provide distribution service for the direct
transactions, the service provider that provides distribution service
for an eligible customer-generator is not obligated to provide net
energy metering to the customer.
   (2) If a customer participates in direct transactions pursuant to
paragraph (1) of subdivision (b) of Section 365 with an electric
supplier, and the customer is an eligible customer-generator, the
service provider that provides distribution service for the direct
transactions may recover from the customer's electric service
provider the incremental costs of metering and billing service
related to net energy metering in an amount set by the ratemaking
authority.
   (g) Except for the time-variant kilowatthour pricing portion of
any tariff adopted by the commission pursuant to paragraph (4) of
subdivision (a) of Section 2851, each net energy metering contract or
tariff shall be identical, with respect to rate structure, all
retail rate components, and any monthly charges, to the contract or
tariff to which the same customer would be assigned if the customer
did not use an eligible solar or wind electrical generating facility,
except that eligible customer-generators shall not be assessed
standby charges on the electrical generating capacity or the
kilowatthour production of an eligible solar or wind electrical
generating facility. The charges for all retail rate components for
eligible customer-generators shall be based exclusively on the
customer-generator's net kilowatthour consumption over a 12-month
period, without regard to the customer-generator's choice of electric
service provider. Any new or additional demand charge, standby
charge, customer charge, minimum monthly charge, interconnection
charge, or any other charge that would increase an eligible
customer-generator's costs beyond those of other customers who are
not customer-generators in the rate class to which the eligible
customer-generator would otherwise be assigned if the customer did
not own, lease, rent, or otherwise operate an
                    eligible solar or wind electrical generating
facility are contrary to the intent of this section, and shall not
form a part of net energy metering contracts or tariffs.
   (h) For eligible residential and small commercial
customer-generators, the net energy metering calculation shall be
made by measuring the difference between the electricity supplied to
the eligible customer-generator and the electricity generated by the
eligible customer-generator and fed back to the electric grid over a
12-month period. The following rules shall apply to the annualized
net metering calculation:
   (1) The eligible residential or small commercial
customer-generator shall, at the end of each 12-month period
following the date of final interconnection of the eligible
customer-generator's system with an electric service provider, and at
each anniversary date thereafter, be billed for electricity used
during that period. The electric service provider shall determine if
the eligible residential or small commercial customer-generator was a
net consumer or a net producer of electricity during that period.
   (2) At the end of each 12-month period, where the electricity
supplied during the period by the electric service provider exceeds
the electricity generated by the eligible residential or small
commercial customer-generator during that same period, the eligible
residential or small commercial customer-generator is a net
electricity consumer and the electric service provider shall be owed
compensation for the eligible customer-generator's net kilowatthour
consumption over that same period. The compensation owed for the
eligible residential or small commercial customer-generator's
consumption shall be calculated as follows:
   (A) For all eligible customer-generators taking service under
tariffs employing "baseline" and "over baseline" rates, any net
monthly consumption of electricity shall be calculated according to
the terms of the contract or tariff to which the same customer would
be assigned to or be eligible for if the customer was not an eligible
customer-generator. If those same customer-generators are net
generators over a billing period, the net kilowatthours generated
shall be valued at the same price per kilowatthour as the electric
service provider would charge for the baseline quantity of
electricity during that billing period, and if the number of
kilowatthours generated exceeds the baseline quantity, the excess
shall be valued at the same price per kilowatthour as the electric
service provider would charge for electricity over the baseline
quantity during that billing period.
   (B) For all eligible customer-generators taking service under
tariffs employing "time of use" rates, any net monthly consumption of
electricity shall be calculated according to the terms of the
contract or tariff to which the same customer would be assigned to or
be eligible for if the customer was not an eligible
customer-generator. When those same customer-generators are net
generators during any discrete time of use period, the net
kilowatthours produced shall be valued at the same price per
kilowatthour as the electric service provider would charge for retail
kilowatthour sales during that same time of use period. If the
eligible customer-generator's time of use electrical meter is unable
to measure the flow of electricity in two directions, paragraph (3)
of subdivision (b) shall apply.
   (C) For all residential and small commercial customer-generators
and for each billing period, the net balance of moneys owed to the
electric service provider for net consumption of electricity or
credits owed to the customer-generator for net generation of
electricity shall be carried forward as a monetary value until the
end of each 12-month period. For all commercial, industrial, and
agricultural customer-generators the net balance of moneys owed shall
be paid in accordance with the electric service provider's normal
billing cycle, except that if the commercial, industrial, or
agricultural customer-generator is a net electricity producer over a
normal billing cycle, any excess kilowatthours generated during the
billing cycle shall be carried over to the following billing period
as a monetary value, calculated according to the procedures set forth
in this section, and appear as a credit on the customer-generator's
account, until the end of the annual period when paragraph (3) shall
apply.
   (3) At the end of each 12-month period, where the electricity
generated by the eligible customer-generator during the 12-month
period exceeds the electricity supplied by the electric service
provider during that same period, the eligible customer-generator is
a net electricity producer and the electric service provider shall
retain any excess kilowatthours generated during the prior 12-month
period. The eligible customer-generator shall not be owed any
compensation for those excess kilowatthours unless the electric
service provider enters into a purchase agreement with the eligible
customer-generator for those excess kilowatthours.
   (4) The electric service provider shall provide every eligible
residential or small commercial customer-generator with net
electricity consumption information with each regular bill. That
information shall include the current monetary balance owed the
electric service provider for net electricity consumed since the last
12-month period ended.  Notwithstanding this subdivision, an
electric service provider shall permit that customer to pay monthly
for net energy consumed.
   (5) If an eligible residential or small commercial
customer-generator terminates the customer relationship with the
electric service provider, the electric service provider shall
reconcile the eligible customer-generator's consumption and
production of electricity during any part of a 12-month period
following the last reconciliation, according to the requirements set
forth in this subdivision, except that those requirements shall apply
only to the months since the most recent 12-month bill.
   (6) If an electric service provider providing net metering to a
residential or small commercial customer-generator ceases providing
that electrical service to that customer during any 12-month period,
and the customer-generator enters into a new net metering contract or
tariff with a new electric service provider, the 12-month period,
with respect to that new electric service provider, shall commence on
the date on which the new electric service provider first supplies
electric service to the customer-generator.
   (i) Notwithstanding any other provisions of this section, the
following provisions shall apply to an eligible customer-generator
with a capacity of more than 10 kilowatts, but not exceeding one
megawatt, that receives electrical service from a local publicly
owned electric utility, as defined in Section 9604, that has elected
to utilize a co-energy metering program unless the electric service
provider chooses to provide service for eligible customer-generators
with a capacity of more than 10 kilowatts in accordance with
subdivisions (g) and (h):
   (1) The eligible customer-generator shall be required to utilize a
meter, or multiple meters, capable of separately measuring
electricity flow in both directions. All meters shall provide
"time-of-use" measurements of electricity flow, and the customer
shall take service on a time-of-use rate schedule. If the existing
meter of the eligible customer-generator is not a time-of-use meter
or is not capable of measuring total flow of energy in both
directions, the eligible customer-generator shall be responsible for
all expenses involved in purchasing and installing a meter that is
both time-of-use and able to measure total electricity flow in both
directions. This subdivision shall not restrict the ability of an
eligible customer-generator to utilize any economic incentives
provided by a government agency or the electric service provider to
reduce its costs for purchasing and installing a time-of-use meter.
   (2) The consumption of electricity from the electric service
provider shall result in a cost to the eligible customer-generator to
be priced in accordance with the standard rate charged to the
eligible customer-generator in accordance with the rate structure to
which the customer would be assigned if the customer did not use an
eligible solar or wind electrical generating facility. The generation
of electricity provided to the electric service provider shall
result in a credit to the eligible customer-generator and shall be
priced in accordance with the generation component, established under
the applicable structure to which the customer would be assigned if
the customer did not use an eligible solar or wind electrical
generating facility.
   (3) All costs and credits shall be shown on the eligible
customer-generator's bill for each billing period. In any months in
which the eligible customer-generator has been a net consumer of
electricity calculated on the basis of value determined pursuant to
paragraph (2), the customer-generator shall owe to the electric
service provider the balance of electricity costs and credits during
that billing period. In any billing period in which the eligible
customer-generator has been a net producer of electricity calculated
on the basis of value determined pursuant to paragraph (2), the
electric service provider shall owe to the eligible
customer-generator the balance of electricity costs and credits
during that billing period. Any net credit to the eligible
customer-generator of electricity costs may be carried forward to
subsequent billing periods, provided that an electric service
provider may choose to carry the credit over as a kilowatthour credit
consistent with the provisions of any applicable tariff, including
any differences attributable to the time of generation of the
electricity. At the end of each 12-month period, the electric service
provider may reduce any net credit due to the eligible
customer-generator to zero.
   (j) A solar or wind turbine electrical generating system, or a
hybrid system of both, used by an eligible customer-generator shall
meet all applicable safety and performance standards established by
the National Electrical Code, the Institute of Electrical and
Electronics Engineers, and accredited testing laboratories such as
Underwriters Laboratories and, where applicable, rules of the Public
Utilities Commission regarding safety and reliability. A
customer-generator whose solar or wind turbine electrical generating
system, or a hybrid system of both, meets those standards and rules
shall not be required to install additional controls, perform or pay
for additional tests, or purchase additional liability insurance.
   (k) If the commission determines that there are cost or revenue
obligations for an electric corporation, as defined in Section 218,
that may not be recovered from customer-generators acting pursuant to
this section, those obligations shall remain within the customer
class from which any shortfall occurred and may not be shifted to any
other customer class. Net-metering and co-metering customers shall
not be exempt from the public benefits charge. In its report to the
Legislature, the commission shall examine different methods to ensure
that the public benefits charge remains a nonbypassable charge.
   (l) A net metering customer shall reimburse the Department of
Water Resources for all charges that would otherwise be imposed on
the customer by the commission to recover bond-related costs pursuant
to an agreement between the commission and the Department of Water
Resources pursuant to Section 80110 of the Water Code, as well as the
costs of the department equal to the share of the department's
estimated net unavoidable power purchase contract costs attributable
to the customer. The commission shall incorporate the determination
into an existing proceeding before the commission, and shall ensure
that the charges are nonbypassable. Until the commission has made a
determination regarding the nonbypassable charges, net metering shall
continue under the same rules, procedures, terms, and conditions as
were applicable on December 31, 2002.
   (m) In implementing the requirements of subdivisions (k) and (l),
a customer-generator shall not be required to replace its existing
meter except as set forth in paragraph (3) of subdivision (b), nor
shall the electric service provider require additional measurement of
usage beyond that which is necessary for customers in the same rate
class as the eligible customer-generator.
   (n) On or before January 1, 2005, the commission shall submit a
report to the Governor and the Legislature that assesses the economic
and environmental costs and benefits of net metering to
customer-generators, ratepayers, and utilities, including any
beneficial and adverse effects on public benefit programs and special
purpose surcharges. The report shall be prepared by an independent
party under contract with the commission.
   (o) It is the intent of the Legislature that the Treasurer
incorporate net energy metering and co-energy metering projects
undertaken pursuant to this section as sustainable building methods
or distributive energy technologies for purposes of evaluating
low-income housing projects.
  SEC. 7.  Section 2851 is added to Chapter 9 of Part 2 of Division 1
of the Public Utilities Code, to read:
   2851.  (a) In implementing the California Solar Initiative, the
commission shall do all of the following:
   (1) The commission shall authorize the award of monetary
incentives for up to the first megawatt of alternating current
generated by solar energy systems that meet the eligibility criteria
established by the State Energy Resources Conservation and
Development Commission pursuant to Chapter 8.8 (commencing with
Section 25780) of Division 15 of the Public Resources Code. The
commission shall determine the eligibility of a solar energy system,
as defined in Section 25781 of the Public Resources Code, to receive
monetary incentives until the time the State Energy Resources
Conservation and Development Commission establishes eligibility
criteria pursuant to Section 25782. Monetary incentives shall not be
awarded for solar energy systems that do not meet the eligibility
criteria. The incentive level authorized by the commission shall
decline each year following implementation of the California Solar
Initiative, at a rate of no less than an average of 7 percent per
year, and shall be zero as of December 31, 2016. The commission shall
adopt and publish a schedule of declining incentive levels no less
than 30 days in advance of the first decline in incentive levels. The
commission may develop incentives based upon the output of
electricity from the system, provided those incentives are consistent
with the declining incentive levels of this paragraph and the
incentives apply to only the first megawatt of electricity generated
by the system.
   (2) The commission shall adopt a performance-based incentive
program so that by January 1, 2008, 100 percent of incentives for
solar energy systems of 100 kilowatts or greater and at least 50
percent of incentives for solar energy systems of 30 kilowatts or
greater are earned based on the actual electrical output of the solar
energy systems. The commission shall encourage, and may require,
performance-based incentives for solar energy systems of less than 30
kilowatts. Performance-based incentives shall decline at a rate of
no less than an average of 7 percent per year. In developing the
performance-based incentives, the commission may:
   (A) Apply performance-based incentives only to customer classes
designated by the commission.
   (B) Design the performance-based incentives so that customers may
receive a higher level of incentives than under incentives based on
installed electrical capacity.
   (C) Develop financing options that help offset the installation
costs of the solar energy system, provided that this financing is
ultimately repaid in full by the consumer or through the application
of the performance-based rebates.
   (3) By January 1, 2008, the commission, in consultation with the
State Energy Resources Conservation and Development Commission, shall
require reasonable and cost-effective energy efficiency improvements
in existing buildings as a condition of providing incentives for
eligible solar energy systems, with appropriate exemptions or
limitations to accommodate the limited financial resources of
low-income residential housing.
   (4) Notwithstanding subdivision (g) of Section 2827, the
commission shall require time-variant pricing for all ratepayers with
a solar energy system. The commission shall develop a time-variant
tariff that creates the maximum incentive for ratepayers to install
solar energy systems so that the system's peak electricity production
coincides with California's peak electricity demands and that
assures that ratepayers receive due value for their contribution to
the purchase of solar energy systems and customers with solar energy
systems continue to have an incentive to use electricity efficiently.
In developing the time-variant tariff, the commission may exclude
customers participating in the tariff from the rate cap for
residential customers for existing baseline quantities or usage by
those customers of up to 130 percent of existing baseline quantities,
as required by Section 80110 of the Water Code. Nothing in this
paragraph authorizes the commission to require time-variant pricing
for ratepayers without a solar energy system.
   (b) Notwithstanding subdivision (a), in implementing the
California Solar Initiative, the commission may authorize the award
of monetary incentives for solar thermal and solar water heating
devices, in a total amount up to one hundred million eight hundred
thousand dollars ($100,800,000).
   (c) (1) In implementing the California Solar Initiative, the
commission shall not allocate more than fifty million dollars
($50,000,000) to research, development, and demonstration that
explores solar technologies and other distributed generation
technologies that employ or could employ solar energy for generation
or storage of electricity or to offset natural gas usage. Any program
that allocates additional moneys to research, development, and
demonstration shall be developed in collaboration with the Energy
Commission to ensure there is no duplication of efforts, and adopted
by the commission through a rulemaking or other appropriate public
proceeding. Any grant awarded by the commission for research,
development, and demonstration shall be approved by the full
commission at a public meeting. This subdivision does not prohibit
the commission from continuing to allocate moneys to research,
development, and demonstration pursuant to the self-generation
incentive program for distributed generation resources originally
established pursuant to Chapter 329 of the Statutes of 2000, as
modified pursuant to Section 379.6.
   (2) The Legislature finds and declares that a program that
provides a stable source of monetary incentives for eligible solar
energy systems will encourage private investment sufficient to make
solar technologies cost effective.
   (3) On or before June 30, 2009, and by June 30th of every year
thereafter, the commission shall submit to the Legislature an
assessment of the success of the California Solar Initiative program.
That assessment shall include the number of residential and
commercial sites that have installed solar thermal devices for which
an award was made pursuant to subdivision (b) and the dollar value of
the award, the number of residential and commercial sites that have
installed solar energy systems, the electrical generating capacity of
the installed solar energy systems, the cost of the program, total
electrical system benefits, including the effect on electrical
service rates, environmental benefits, how the program affects the
operation and reliability of the electrical grid, how the program has
affected peak demand for electricity, the progress made toward
reaching the goals of the program, whether the program is on schedule
to meet the program goals, and recommendations for improving the
program to meet its goals. If the commission allocates additional
moneys to research, development, and demonstration that explores
solar technologies and other distributed generation technologies
pursuant to paragraph (1), the commission shall include in the
assessment submitted to the Legislature, a description of the
program, a summary of each award made or project funded pursuant to
the program, including the intended purposes to be achieved by the
particular award or project, and the results of each award or
project.
   (d) (1) The commission shall not impose any charge upon the
consumption of natural gas, or upon natural gas ratepayers, to fund
the California Solar Initiative.
   (2) Notwithstanding any other provision of law, any charge imposed
to fund the program adopted and implemented pursuant to this section
shall be imposed upon all customers not participating in the
California Alternate Rates for Energy (CARE) or family electric rate
assistance (FERA) programs as provided in paragraph (2), including
those residential customers subject to the rate cap required by
Section 80110 of the Water Code for existing baseline quantities or
usage up to 130 percent of existing baseline quantities of
electricity.
   (3) The costs of the program adopted and implemented pursuant to
this section may not be recovered from customers participating in the
California Alternate Rates for Energy or CARE program established
pursuant to Section 739.1, except to the extent that program costs
are recovered out of the nonbypassable system benefits charge
authorized pursuant to Section 399.8.
   (e) In implementing the California Solar Initiative, the
commission shall ensure that the total cost over the duration of the
program does not exceed three billion three hundred fifty million
eight hundred thousand dollars ($3,350,800,000). The financial
components of the California Solar Initiative shall consist of the
following:
   (1) Programs under the supervision of the commission funded by
charges collected from customers of San Diego Gas and Electric
Company, Southern California Edison Company, and Pacific Gas and
Electric Company. The total cost over the duration of these programs
shall not exceed two billion one hundred sixty-six million eight
hundred thousand dollars ($2,166,800,000) and includes moneys
collected directly into a tracking account for support of the
California Solar Initiative and moneys collected into other accounts
that are used to further the goals of the California Solar
Initiative.
   (2) Programs adopted, implemented, and financed in the amount of
seven hundred eighty-four million dollars ($784,000,000), by charges
collected by local publicly owned electric utilities pursuant to
Section 387.5. Nothing in this subdivision shall give the commission
power and jurisdiction with respect to a local publicly owned
electric utility or its customers.
   (3) Programs for the installation of solar energy systems on new
construction, administered by the State Energy Resources Conservation
and Development Commission pursuant to Chapter 8.6 (commencing with
Section 25740) of Division 15 of the Public Resources Code, and
funded by nonbypassable charges in the amount of four hundred million
dollars ($400,000,000), collected from customers of San Diego Gas
and Electric Company, Southern California Edison Company, and Pacific
Gas and Electric Company pursuant to Article 15 (commencing with
Section 399).
  SEC. 8.  The Contractors' State License Board shall review and, if
needed, revise its licensing classifications and examinations to
ensure that contractors authorized to perform work on solar energy
systems subject to Chapter 8.8 (commencing with Section 25780) of
Division 15 of the Public Resources Code, have the requisite
qualifications to perform the work.
  SEC. 9.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because a
local agency or school district has the authority to levy service
charges, fees, or assessments sufficient to pay for the program or
level of service mandated by this act, within the meaning of Section
17556 of the Government Code.