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<title>California Energy Commission Proposes Changes in Renewables Credits</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">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.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<td width="68%" valign="top"><img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" WIDTH="375" HEIGHT="75"><p> </p>
<p><b><u><br>
October 1999<br>
</u>
</b><font size="6"><b>California Energy Commission Proposes Changes In
Renewables Credits</b></font><b><font face="Arial"><big><big><big><br>
</big></big></big></font>
</b><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
11/99</em>)</font></p>
<font FACE="Palatino" SIZE="1"><p ALIGN="JUSTIFY"></font><font face="Arial">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.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">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.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">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. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">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.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">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.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">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. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">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.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Public comment on the CEC staff proposal was due on
October 1, 1999. The next step is for specific text changes to the <u>Guidebook for the
Renewable Technology Program</u> 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.</font></p>
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<blockquote>
<p align="left"><font face="Arial">
<small>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:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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