$2 Billion Solar Rebates Program Broke

APRIL 6, 2011


California legislators are pushing a bill through the system for a bankrupt solar subsidy program, despite a $200 million shortfall. And while the large shortfall would make most subsidy beneficiaries go belly-up, California legislators seem willing to make sure the debts are paid — by utility ratepayers.

The definition of “bankrupt” is “unable to pay debts.” But with the California Public Utilities Commission approving rate hikes, it seems that the debts will indeed be paid — by utility ratepayers.

In the Senate Energy, Utilities and Communications committee, legislators entering the hearing room at the Capitol on Tuesday morning immediately sought out lobbyists before the hearing began. Quiet talks took place and information packets exchanged hands demonstrating prearranged agreements and harmony on the issues. The lobbyists were energy company lobbyists and supporters of green technology — two groups that haven’t always seen eye to eye, unless both are benefitting financially.

Several of the bills heard by the committee were about the recent PG&E gas line explosion in San Bruno last September, with proposals for additional industry regulations.

But the issue dominating the hearing centered around San Diego Democratic Sen. Christine Kehoe. She was armed with a bill, SB 585, sponsored by the Solar Alliance. It would extend the solar subsidies and incentives provided to commercial businesses, government entities and homeowners in the state seeking to add solar systems to buildings, property and homes.

The California Solar Initiative (CSI) is a $3.3 billion program paid for by utility ratepayers. It then provides the incentives for solar systems. Kehoe said that the CSI program has created 36,000 solar jobs in California.

However, the CSI program is suffering a shortfall — a very serious shortfall of $200 million.

Instead of abandoning the program because it is upside down, Kehoe is seeking to extend it, and have ratepayers foot the bill. “It’s essential to extend the program for ratepayers to fully realize the benefit,” said Kehoe.

Kehoe Solar Pork

The California Center For Sustainable Energy, a non-profit organization “dedicated to Greening Your World,” located in Kehoe’s district, is the administrator for San Diego Gas and Electric’s CSI program. “Our role as administrator of the program really puts us in touch with the marketplace,” said Andrew McAllister, the program director. “And San Diego is the most solar city in the nation.”

McAllister, who testified with Kehoe, said that is it vitally important that “California” becomes a brand name for solar. McAllister said the solar incentive program has gone to one-half public sector and one-half private sector. “The public sector side is very important,” said McAllister.

McAllister also explained that the incentives, from now on, will be smaller because the larger incentives already were swallowed up by the big utility companies.

McAllister talked about “assessing market transparency and market consistency as the program moves forward,” suggesting that there may have been a problem with this.

In July 2010, the CPUC announced “three years into the state’s 10-year solar program, California is already 42 percent of the way towards its general program goal in the territories of the investor owned utilities.” But also last summer, the CPUC admitted that there would be no funding to meet the goals of the non-residential solar installations because the uilities had been given all of the money allotted to them, and more, by the PUC.

The CPUC voted to shift $40 million from the administrative budget for CSI to the non-residential program.

And the CSI incentive program paid larger incentives to government entities “because they are not eligible for the federal tax grants and credits.


Representatives from the utility companies lined up to testify in support of Kehoe’s bill. But not everyone present was supportive.

“The residential ratepayer will take the brunt of the $200 million shortfall,” said Lenny Goldberg, representing the Utility Reform Network (TURN), which is made up of small ratepayers.  Goldberg said that residential ratepayers cover approximately 50 percent of the collections, and when the CPUC allocated incentives to the residential, non-residential and government/non-profit sectors, in was inequitable. TURN argued that that if revenues are going to be collected from ratepayers, the revenues should be in proportion to the incentives received.

Sen. Alex Padilla, D-Pacoima, told Kehoe that the committee is “forced to take a look at what was the cause of the overuse of funds,” and asked that, before going forward, “take a look at the root causes” of the shortfall.

Edward Randolph with the PUC said that last summer they suggested a reduction of the incentive rate the government receives, and a transfer of the $40 million.

“I like CSI, but my area is having a taxpayer revolt over it and the tier system,” Sen. Jean Fuller, R-Bakersfield, said. She urged the PUC to change the program so that ratepayers don’t take the brunt of the shortfall.

Padilla asked Kehoe to address the shortfall problem before the bill makes it to the floor of the Senate. Then each member of the committee voted to pass the bill.


Write a comment
  1. John Seiler
    John Seiler 6 April, 2011, 08:09

    Another scam dressed up as saving the environment. The following quotation from Katy’s article shows how the “system” really works — and why we shouldn’t trust these crooks in the Legislature with another $12 billion of our tax dollars through Gov. Brown’s tax increase:

    “In the Senate Energy, Utilities and Communications committee, legislators entering the hearing room at the Capitol on Tuesday morning immediately sought out lobbyists before the hearing began. Quiet talks took place and information packets exchanged hands demonstrating prearranged agreements and harmony on the issues. The lobbyists were energy company lobbyists and supporters of green technology — two groups that haven’t always seen eye to eye, unless both are benefitting financially.”

    Reply this comment
  2. larry 62
    larry 62 6 April, 2011, 11:14

    Does this mean that the solar surcharge portion of my SMUD bill will be increased? I don’t remember anyone asking me if I wanted to subsidize green technology, which by all indications can’t make it on it’s own merits.

    Reply this comment
  3. Mike J
    Mike J 6 April, 2011, 15:35

    This not only smells like a tax, acts like a tax, it is a TAX
    Not even close to a fee. Either way, if this passes, each and every person in Sacramento should be recalled for breaking the law. Remember that little proposition about defining fee and taxes.

    Reply this comment
  4. Steve
    Steve 6 April, 2011, 16:24

    It is a shame that Solar Panel efficiency is only at 15-20 %. Maybe they should have would have used a Billion of the 2 Billion dollars in rebates as a prize to the first company that could create solar panels with at least 40% efficiency.

    Reply this comment
  5. Skep41
    Skep41 6 April, 2011, 18:39

    Sometimes I feel like I’m an insane person. If the state’s huge and growing budget deficit and crumbling economy doesnt bother these people who should be the best informed and most knowledgeable in the state why should it upset me as much as it does that they’re sitting up there playing the same foolish games? One day soon interest rates will start to rise and all this saving-the-planet guff will be thrown overboard in the panic that follows. But these Wise Democrats seem pretty calm. I love that they receive ‘information packets’ from their little playmates. Information on the 3rd President and the 1st Postmaster General I suppose. I guess I’m just some self-important loony who isnt sophisticated enough to understand how this can continue much longer.

    Reply this comment
  6. PJ
    PJ 6 April, 2011, 19:01

    I just got notice from the Gas Company that we are being taxed again to support lower rates for some other deserving folks. Hmmm, nobody asked me if I wanted to pay other people’s gas bills!

    Reply this comment
  7. Ike
    Ike 7 April, 2011, 10:46

    The legislation SB 585 only currently effects PG&E and SDG&E and the trust funds the operate from the 2.85% Public Benefits Charge collected on every customers bills. That amount has been constant for some time. Money collected funds not only renewable energy but numerous energy efficiency programs that offer rebates. The solar portion of those funds is segregated for its purposes. The Bill allows interest accrued during the program to be allocated for rebates. The original legislation was vague on this matter and the PUC held legally they could not let interest be spent without legislative clarification which SB 585 does. Rebates are paid out over a 5 year period only for actual energy generated. These funds still have tens of millions of dollars in them but the utility’s suspended new applications to assure enough money was in reserve for future payments. The budget is higher than expectations due to much higher use by public agencies that originally anticipated. Public entities and non-profits receive higher rebates because they don’t pay taxes and cannot use the tax preferred status private companies do. But 3rd parties have financed most public systems taking the tax benefits allowed but still allowing the public entities to receive higher rebates. It was expected this higher rebate would comprise about 25% of funds but they have consumed almost 60%. Intense lobbying from cities and counties has been effective in preventing this higher rebate being lowered to the same as private companies. This one fix would have corrected the budgeting shortfall. While I support SB 585 as it does NOT increase fees currently collected, the rebate for public and non profit’s should be reduced to the same and private companies.

    Reply this comment
  8. Tom Kelly
    Tom Kelly 2 May, 2011, 11:18

    One correction to Ike’s otherwise thoughtful summary. When a 3rd party investor (PPA) provides the solar for a government entity or non-profit, the 3rd party is eligible only for the standard non-residential rebate, not the higher government and non-profit rate.

    Reply this comment

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