California Utilities Combat State’s Solar-Incentive Plan

California’s utilities industry is leading an effort to turn back a state program that has
led an increasing number of corporate customers to switch to solar power for some of their electricity
needs.

By JIM CARLTON
Staff Reporter of THE WALL STREET JOURNAL

Legislation passed last year opened the door for big corporate users to a solar-incentive program previously
enjoyed by mainly small residences. Companies such as Cypress Semiconductor Corp. jumped in. The chip
manufacturer spent $1.1 million outfitting its corporate headquarters in San Jose, Calif., with solar panels.
Estimated cost savings from not having to use traditional power at peak daytime rates: $300,000 a year.

But utilities contend it is unfair that solar customers, through the
incentive program, get to bypass fixed costs for such things as
distribution and transmission. Executives of the cash-strapped
utilities say they are trying to prevent nonsolar customers from
having to bear the costs of solar users not having to pay as
much into the general power system, because of what they call flaws in the California law.

Both sides are set to square off as a new bill, which would significantly reduce financial incentives to use
solar power, comes up for debate on the floor of the state Senate over the next few days. The bill was first
introduced in the Assembly to clear up some mundane procedural matters associated with last year’s
legislation, but quickly became a political football when it entered the Senate and the two sides began
tacking on amendments.

Proponents of alternative energy say the utilities, if successful, could stunt the growth of a small but rapidly
ascending solar industry. "This won’t kill the industry, but it will limit us tremendously," said Dan Shugar,
president of PowerLight Corp., a maker of solar-energy systems in Berkeley, Calif., whose revenue nearly
tripled to $28.3 million in 2001, thanks in large part to California.

"We think the rules are designed to get people to go to clean power, and we can’t understand why anybody
would change them," said T.J. Rogers, chief executive of Cypress Semiconductor.

Utilities are backing an amendment that would allow the bigger solar users — ones producing between 10
kilowatts and 1,000 kilowatts — to get financial credit only for the amount of solar power they used to
replace traditional power. A customer paying, say, 15 cents a kilowatt hour, would still get credit for the five
cents of traditional power not used but not the remaining 10 cents for distribution, transmission and other
costs to run the larger electrical system. The way the program works now is that electricity meters are set
to spin backwards while solar energy is being produced, giving a credit for everything.

Solar industry analysts say the advantages of the current program, known as "net metering," far outweigh
the disadvantages. "Since solar generation is still so small compared to the total, the financial impacts on
utilities so far is minimal," said Bill Golove, a researcher at the Lawrence Berkeley National Laboratory in
Berkeley, Calif. "But from a public policy point of view, net metering is hugely important and something we
ought to be supporting as a society to wean ourselves off fossil fuels."

Tommy Ross, a regional vice president for Southern California Edison, a Rosemead, Calif., unit of Edison
International, counters: "Not surprisingly, the ‘campaign’ that the solar industry has launched is intended to
advance their own interests, at the expense of nonparticipating customers."

Write to Jim Carlton at [email protected]

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