Details for: SDGE Protest of CSE AL 118-E.pdf

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Clay Faber - Director
CA & Federal Regulatory
8330 Century Park Ct
San Diego, CA 92123

October 8, 2020
ED Tariff Unit
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, California 94102

San Diego Gas & Electric Protest of Center for Sustainable Energy Advice
Letter 118-E: Proposed Changes to the Solar on Multifamily Affordable
Housing (SOMAH) Program Handbook to Implement on Optional Two-Payment
Incentive Structure that may be Selected in Preference to the Existing Single
Incentive Payment Structure

Pursuant to the California Public Utilities Commission’s (Commission) General Order (GO) 96B, Rule 7.4, San Diego Gas & Electric (SDG&E) hereby protests the Center for Sustainable
Energy (CSE) Advice Letter 118-E (AL 118-E).
SDG&E appreciates that CSE is wanting to ensure the Solar On Multi-Family Affordable
Housing (SOMAH) is as successful as possible and is looking at how to improve the program
now that the first phase of program evaluation has been completed by the independent
evaluator. CSE filed Advice Letter AL 118-E to propose a revision to the SOMAH program
incentive structure and to update the SOMAH Handbook in order to capture that change if
approved. SDG&E does not object to the changes but proposes necessary modifications to
further reduce the financial risk to the program that the PA acknowledges exists.
CSE describes purported challenges that the program is facing due to the coronavirus
pandemic and seeks the incentive structure changes in order to overcome financial challenges
and support smaller and more diverse solar developers participating and installing the solar
systems incented in this program.1 The requested change to the SOMAH program by CSE at
this time appears simple enough; going from a single total incentive payment being paid once a
project is operational and interconnected to the grid (also known as receiving a permission to
operate permit, or PTO) to that of receiving instead two incentive payments.2 As proposed, the
first payment would be invoiced by CSE to the utility when the solar installation is “complete”
and for an amount equal to 60% of the total incentive. The second and final incentive payment,
as CSE proposes, would be the remainder of the incentive to be paid at interconnection, roughly


Center for Sustainable Energy, Advice Letter 118-E, at page 2.
Ibid, at page 1.


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Public Utilities Commission October 8, 2020 40%.3 For reference, SDG&E notes that solar systems for large multi-family complexes can be quite large, and we would anticipate that a total incentive for one project in this program could be as high as $1.5 million or more. SDG&E does not see why two incentive payments could not be utilized and that doing so might provide the needed assistance. SDG&E does not object to the splitting of incentives in concept and believes the ability for two payments to be made to the applicant in SOMAH should be approved with some simple modifications to reduce the potential financial risk and to achieve the goals of the proposed changes. SDG&E understands the purported hurdles from contractors and property owners who may not have access to capital, as reported by the independent evaluator of the SOMAH program4 and in the public workshop.5 CSE describes that the proposed new optional incentive process is to provide financial benefits while mitigating risk as much as possible, including the possibility that a first incentive payment could be made to an applicant, with the system never being interconnected; thereby putting the program’s incentive funds at some risk. As described on page 6 of CSE’s AL, the process by which an applicant in the program would now request and be approved to receive the first progress payment is to attest to the completion of the project’s installation and provide geo-tagged photographs.6 However, the stage at which the first payment is to be made, at “completion” by the installer, is not clearly defined in the AL. SDG&E requests that CSE add language to the SOMAH Handbook to clearly define “complete” as being “electrically complete” so that there is no question about what is required. For example, the wording does not indicate that the system is operational or installed without further corrections to be made, although CSE’s discussion of this would indicate that was the intent. The Handbook could easily be altered so as to include language that adds the detail needed, such as the “Equipment listed on the Program application matches the system installed equipment; all design factors including, orientation and shading of the equipment, matches the Program application; and the system is operational.” Adding such language is in line with what CSE’s is proposing; i.e., that the system’s installation is finished. Further, the Handbook already requires that the PA inspect each system to be electrically complete and verify the above requirements are met.7 SDG&E requests that CSE’s proposal be further modified so that CSE conducts the physical inspection on each system for the first payment to be made, rather than the second. If the solar developer or customer has to supply photographs and attest to the completion of the installation, as CSE has proposed, SDG&E does not see why the inspection the PA would normally undertake anyway should not be done at this same point in time to confirm. Doing the inspection at this time would replace the final PA’s inspection on projects requesting the two-payment system, rather than add another inspection; therefore, the PA’s costs would not be raised. Requiring this modification to CSE’s proposal is also in line with that CSE is proposing; i.e., to confirm the system is indeed complete. As CSE states in its AL, at footnote 4 on page 4, the total can vary slightly at the end of the project, it might not always be a straight 40% to be paid at PTO. The second payment would be whatever is remaining to be paid of the total incentive. 4 Solar on Multi-Family Affordable Homes (SOMAH) Evaluation Phase I; August 4, 2020, as presented to the California Public Utilities Commission Energy Division, by Itron, at 4-17 (Section 4, page 17). 5 CSE, AL at page 2. 6 This is usually a simple process, supported by a phone application that uses a phone’s location to add a longitudinal and latitudinal identifier to the photo that is taken. Although SDG&E notes that any photograph can be altered, or “photoshopped” to have such information edited in. 7 SOMAH redlined Handbook, at page 32. 3 2
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Public Utilities Commission October 8, 2020 This would also be on par with what is done currently for large energy efficiency projects, for example, as in SDG&E’s Savings By Design program. In that program, even now during the current pandemic, physical site inspections are done by engineers before payments are made because of the size of the incentive which are comparable amounts to SOMAH incentives. Such physical inspections by qualified electrical engineers would confirm that correct installation has taken place before such large payments are made. Requiring only an attestation and photographs from a solar developer or customer is not enough of a confirmation, and is requiring less than what SDG&E requires for other programs. SDG&E believes the above modifications of CSE’s proposal are necessary because CSE acknowledges in the AL that there is the possibility of systems not interconnecting to the grid (or obtaining their permit to operate) even after the first payment is made. On page 6 of the AL, CSE discusses its proposal for remedy should an applicant receive the first payment, but not receive PTO, and how CSE will recover the first payment for which the applicant no longer qualifies. While there is a loose discussion outlined in the SOMAH program handbook for a “clawback”8, which is also cited in the AL as the solution, that section of the handbook does not suggest any way for the PA to enforce the return of incentives and no solution path was proposed in the AL. It is possible that the process of asking for repayment of the first payment may not always be successful. CSE itself states, again page 6 of the AL: “Moreover, if the Payee fails to return the progress payment when requested, the Payee will be immediately disqualified from participating in the SOMAH Program.” This aspect is not ideal to SDG&E, as CSE appears to be only stating that the solar company simply can no longer participate in SOMAH. But the AL does not describe how the ratepayers are to be reimbursed for the lost GHG funds to be made available to other customers in SOMAH. CSE does not propose or assure us it will pursue legal remedies against such a solar developer under tort law, for example. Given even the small risk, everything ought to be done upfront in order to reduce any chance of that to ever be needed. Without that ability, there really is little recourse. CSE has offered only to acknowledge that the solar developer wrongfully took a payment, which could be an amount as high as $800,000 or more, did not complete the work, and bar them from doing it again. CSE believes, as described in the AL, that the risk is extremely low of a solar developer not finishing the process and interconnecting. However, just one loss of a single large payment denies solar to other eligible buildings and other qualified low-income tenants. D.17-12-022 requires that an initial evaluation of SOMAH will be done in 2020 and that annual funding will be available to the Energy Division for ongoing evaluation to support the annual report that is made the legislature in order to continually improve the program.9 SDG&E requests that the two-payment incentive structure, if approved, be evaluated in the next evaluation to determine if the goals of such a structure were met, including supporting the proliferation of smaller solar companies’ participation in the program. If not, this change in incentive payments should be limited in time and/or eliminated, modified further, or perhaps even capped so that the two-payment structure is reserved specifically for smaller companies in order to support the goals as described by CSE. CSE AL, at page 6, and SOMAH Handbook, Section 4, 9 D.17-12-022, Ordering Paragraph 13. 8 3
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Public Utilities Commission October 8, 2020 Further, CSE’s AL states that their proposal addresses IOU concerns raised in discussions prior to filing about the risk related to the IOUs’ California Air Resources Board (CARB) reporting. 10 Each IOU is required to report to CARB annually what greenhouse gas (GHG) funds it received, how the funds were spent or remained unspent in authorized balancing accounts and forecast what the GHG benefits will be linked to the spending of those funds. The report is a state regulatory body’s official process for holding entities responsible for the GHG funds they receive in the cap and trade credit auctions. SDG&E raised questions to CSE about how to mitigate the risk that comes with paying incentives in advance of PV systems being interconnected to the grid. CSE’s split incentive payment proposal can be incorporated into the CARB report forecast as CSE describes in the AL and SDG&E appreciates and agrees with CSE’s statement at page 4 of the AL that states “The SOMAH PA will work with the SOMAH-participating IOUs to provide any information needed to facilitate this reporting.” To formalize this ability, SDG&E thus also requests that the PA’s contract be required to be modified to include the obligation to provide any and all data necessary to complete such CARB reports. In CSE’s discussion of CARB overall, SDG&E believes that the greater risk of losing funds to unfinished projects was not addressed adequately but can easily be mitigated further and to the extent possible if SDG&E’s proposed simple modifications to the proposal above are approved. Lastly, upon approval of CSE’s proposal with modifications contained herein, all changes should be updated in the program handbook as appropriate and added in an addendum in the statement of work and contract between CSE as the PA and SCE as the contracting utility. CONCLUSION SDG&E supports the change proposed by CSE but does implore the Commission to approve the proposal with the modifications described above in order to reduce the financial risk inherent in paying solar contractors before interconnection. These are minimal changes, namely the changing of the timing of an inspection by the PA which is already required, and necessary given that the Commission has clearly recognized that solar consumer protections are needed and has ordered the IOUs to take extraordinary steps to try to protect those same consumers.11 Sincerely, ________________________ CLAY FABER Director – CA & Federal Regulatory cc: Edward Randolph – Energy Division Director Sephra Ninow – CSE Director CSE AL 118-E, at pages 3-4. D. 18-09-044, as well as the subsequent Draft Resolution (DR) UEB-400 that proposes a Citation Program to Enforce Compliance with the Net Energy Metering Solar Consumer Protections Adopted in the NEM Decisions. 10 11 4
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