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About The Author:

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions.

He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive
Suite 301
Concord, NH 03301
(603) 225-9716









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STATELINE by Robert Olson


October 1999
California Energy Commission Proposes Changes In Renewables Credits
by Robert Olson  --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 11/99)

On September 23, 1999, the California Energy Commission (CEC) held a public workshop on changes its staff proposed relating to customer credits for the use of renewable energy. Currently, electricity providers who participate in the Customer Credit program of the CEC’s Renewable Technology Program receive — and pass on to customers — a 1.5 per KWh credit for the use of certain forms of renewable energy. This credit, in place since April, 1998, was designed to stimulate demand for renewable energy in the market. A limited amount of funds were allocated to cover this credit over the period 1998 through 2001. However, growth in demand for renewable energy has led to the expectation that the fund will begin operating at a deficit in February 2000. To avoid payments exceeding fund allocations on a month-to-month basis, the CEC staff has proposed that the current fixed rate credit be replaced with a variable customer credit beginning November 1999. The staff also addressed caps on customer credits and proposed changes to reporting requirements and the time frame within which eligible energy must be supplied.

The funds for the customer credit program are allocated annually. The funding levels are $16.2 million for 1999, $21.6 million for 2000, and $27 million in 2001. The monthly allocation is simply the annual allocation divided by 12. Prior to May 1999, the constant 1.5 per KWh customer credit created a surplus in the monthly allocation. Since May 1999, however, growth in demand for renewable energy in the program has resulted in the CEC disbursing funds in excess of the monthly allocation, using the rolled over funds from prior months to subsidize the disbursements. Based on data submitted by providers applying for rebates of the customer credits given, the CEC determined that the rolled over surplus funds will be exhausted in February 2000. In making this determination, the CEC discounted the growth in early months and weighted historical data from more recent months’ data. The CEC only predicted growth based on historical data, and not on other influences such as the economy, consumer education campaigns pertaining to renewable energy, or the lifting of a cap on current customer credits.

Under the CEC staff’s proposal, the constant 1.5 per KWh customer credit would be changed to a variable credit, capped at 1.5 per kWh. The CEC staff proposes that the variable credit begin in November 1999. To avoid an estimated fifty percent drop in the credit, however, the CEC staff proposes that the funds rolled over from prior months be extended over a six-month period. Furthermore, the CEC staff proposal calculates the variable credit during the month in which the credit is paid, resulting in the need to address the time discrepancy between load consumption and application to the CEC for a rebate. Energy providers may "bank" the difference between credits actually given to customers and the eligible renewable energy bought by the energy provider that month multiplied by the credit, meaning excess customer credits paid for which there is not yet matching eligible energy supplied can be applied to a later month. Similarly, excess eligible energy supplied can be "banked" to be applied against customer credits paid in a later month.

The proposed monthly variable credit is calculated by using the "maximum KWh information" from each provider. The maximum KWh information is the greater of two figures: the credits actually given to customers or the amount of credit applicable to the eligible energy purchased by the provider each month. The "maximum KWh information" for all providers is aggregated, which estimates the total number of KWh eligible for funding each month. The aggregate is then divided by the allocated funding for that month, resulting in the credit for that month. This credit is used to calculate rebates and payments on banked credit for that month.

The CEC staff proposal also addresses caps on customer credits. Currently, there is a cap on the credit paid to non-residential and larger commercial customers of $1,000 per customer. Under California law, if the customer credit remains at 1.5 per KWh through 1999, the cap is then removed. Although the staff has predicted a surge in demand absent the cap, it has requested public comment regarding removal of the cap as opposed to maintenance of the cap. The staff proposes maintenance of the program’s $15 million ceiling on credits to non-residential/non-small commercial customers over the life of the program. The staff additionally proposes that providers be responsible for monitoring the funds disbursed to this customer class and informing their customers about the cap.

Currently, energy providers obtain refunds of rebates given by providing to the CEC a Monthly Performance Report (MPR), or invoice, between 40 days and six months following a month during which service was provided. Under the CEC staff’s proposal, the MPR would be due no later than 40 days following the monthly performance period.

Besides abbreviating the time within which to report to and invoice the CEC, the CEC staff’s proposal also addresses the timing of the matching of load delivered to the eligible energy supplied. The current requirement is that the eligible energy must have been supplied within the two months prior to the submission of the MPR. The staff proposes that all energy supplied and claimed under the program must be generated during the same calendar year that the eligible load is consumed. According to the CEC, this matching of supply and load also fosters consistency between the Renewables Program and the disclosure requirements for retail access.

Public comment on the CEC staff proposal was due on October 1, 1999. The next step is for specific text changes to the Guidebook for the Renewable Technology Program to be recommended by the CEC’s Renewables Program Committee. Following public comment on those recommendations, the CEC will consider approval of the proposed changes at a public meeting.

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301 | (603) 225-9716

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