Existing property tax law generally requires a county assessor to assess all property subject to general property taxation at its full value, but requires the State Board of Equalization to annually value and assess all of the taxable property within the state that is to be assessed by it pursuant to the California Constitution, which includes, among other things, property, except franchises, owned or used by companies transmitting or selling electricity and property owned or used by other public utilities, as authorized by the Legislature. Existing property tax law authorizes the board to use the principle of unit valuation in valuing properties of a state assessee that are operated as a unit in a primary function of the assessee, and provides for the allocation of property tax assessed value and revenues from the unitary and operating nonunitary property, as defined, of the state assessee among the various counties in which that property is located.

Existing property tax law requires the board to annually assess every electric generation facility with a generating capacity of 50 megawatts or more that is owned or operated by an electrical corporation, as defined. Existing property tax law provides an exception from this requirement for qualifying small power production facilities and qualifying cogeneration facilities, as defined by reference to specified federal law.

This bill would provide an additional exception for a facility producing power from other than a conventional power source that is an exempt wholesale generator, as defined by reference to specified federal law, thereby requiring that these facilities be assessed by county assessors. By requiring county assessors to assess certain facilities, this bill would impose a state-mandated local program.

Existing property tax law specifies that the above-described provisions relating to assessment of electric generation facilities by the board supersede any contrary regulation in existence as of the effective date of the existing provisions.

This bill would delete this specification.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Existing property tax law generally requires a county assessor to assess all property subject to general property taxation at its full value, but requires the State Board of Equalization to annually value and assess all of the taxable property within the state that is to be assessed by it pursuant to the California Constitution, which includes, among other things, property, except franchises, owned or used by companies transmitting or selling electricity and property owned or used by other public utilities, as authorized by the Legislature. Existing property tax law authorizes the board to use the principle of unit valuation in valuing properties of a state assessee that are operated as a unit in a primary function of the assessee, and provides for the allocation of property tax assessed value and revenues from the unitary and operating nonunitary property, as defined, of the state assessee among the various counties in which that property is located.

Existing property tax law requires the board to annually assess every electric generation facility with a generating capacity of 50 megawatts or more that is owned or operated by an electrical corporation, as defined. Existing property tax law provides an exception from this requirement for qualifying small power production facilities and qualifying cogeneration facilities, as defined by reference to specified federal law.

This bill would provide an additional exception for a facility producing power from other than a conventional power source that is an exempt wholesale generator, as defined by reference to specified federal law, thereby requiring that these facilities be assessed by county assessors. By requiring county assessors to assess certain facilities, this bill would impose a state-mandated local program.

Existing property tax law specifies that the above-described provisions relating to assessment of electric generation facilities by the board supersede any contrary regulation in existence as of the effective date of the existing provisions.

This bill would delete this specification.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

The Use Fuel Tax Law imposes a state excise tax at specified rates on the use of fuel, which includes any combustible gas or liquid of a kind used in an internal combustion engine for the generation of power to propel a motor vehicle on the highways, other than fuel subject to the Motor Vehicle Tax Law or the Diesel Fuel Tax Law.

This bill would make a nonsubstantive change to this provision specifying those rates.

Date of Hearing: July 19, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 639

Author:(Hertzberg) – As Amended Ver:March 23, 2017

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill provides that an exempt whole sale generator (EWG), as defined, that produces power from other than a conventional power source, is not required to be annually assessed by the Board of Equalization (BOE).

FISCAL EFFECT:

No fiscal impact. This bill codifies in statute current BOE practices regarding EWG facilities.

COMMENTS:

1. Background. The California Constitution requires the BOE to annually assess specified types of property, including property owned or used by companies transmitting or selling gas or electricity. BOE’s assessment jurisdiction is typically understood to be over conventional electric-generating facilities of 50 MW or more owned or used by electrical corporations that are public utilities. For “nonconventional” facilities (such as solar, wind, geothermal facilities), the BOE will typically assess them if they are owned by rate-regulated utilities, otherwise they will be assessed by county assessors.
2. County assessment and solar construction tax exclusion. Whether property, such as electricity generators, is assessed by BOE or by a county assessor can have significant tax implications for a taxpayer. This is because BOE values the property each year at fair market value while a complete county reassessment is limited to instances when there is new construction or change in ownership (as required under Proposition 13).

Moreover, the new construction property tax exclusion for solar energy systems does not apply to BOE-assessed properties. Proposition 7 of 1980 excludes the construction of active solar energy systems from property tax assessment until there is change in ownership. As a result, solar energy facilities that are not required to be assessed by BOE are granted additional property tax benefits.

1. EWGs. EWGs are determined by the Federal Energy Regulatory Commission (FERC) to be engaged directly, or indirectly through affiliates, and exclusively in the business of owning or operating all or part of one or more eligible facilities and selling electric energy at wholesale.
2. Purpose. According to the author, SB 639 will provide renewable energy developers and their investors with financial certainty to plan and build large renewable energy projects. BOE notes that it does not currently assess the types of facilities covered under this bill. As a result, this bill “locks in” BOE’s current approach to how such facilities are assessed.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: June 19, 2017

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Sebastian Ridley-Thomas, Chair

SBPCA Bill Id:SB 639

Author:(Hertzberg) – As Amended Ver:March 23, 2017

Majority vote. Fiscal committee.

SENATE VOTE: 38-0

SUBJECT: Property taxation: assessment: electric generation facilities

SUMMARY: Provides that an exempt wholesale generator (EWG), as defined, that produces power from other than a conventional power source, is not required to be annually assessed by the State Board of Equalization (BOE), so is thereby subject to local assessment. Specifically, this bill:

1. Includes a facility producing power from other than a conventional power source that is an EWG, as defined in the federal Public Utility Holding Company Act of 2005 (42 U.S.C. Section 16451(6)), as an "electric generation facility" not required to be annually assessed by the BOE.
2. Deletes an existing requirement that Revenue and Taxation Code (R&TC) Section 721.5 supersede any regulation in existence at the time of its enactment.
3. Specifies, if the Commission on State Mandates determines this bill contains costs mandated by the state, that reimbursement to local agencies and school districts will be provided.

EXISTING LAW:

1. Provides that all property is taxable unless explicitly exempted by the California Constitution or federal law. Ad valorem taxes on real property are limited to 1% of the full cash value of that property as set forth in the California Constitution, and are based on the property's assessed value as determined by the county assessor.
2. Excludes, pursuant to Article XIII A, Section 2(c) of the California Constitution, the construction or addition of active solar energy systems from property tax assessment. (R&TC Section 73.)
3. Requires the BOE to annually value and assess specified taxable property (such as property owned or used by companies transmitting or selling gas or electricity, property owned or used by regulated railway, telegraph, or telephone companies, and other infrastructure lying within two or more counties) within the state pursuant to Article XIII, Section 19 of the California Constitution. (R&TC Section 721.)
4. Requires the BOE to annually assess every "electric generation facility" with a generating capacity of 50 megawatts or more that is owned or operated by an electrical corporation, as defined. (R&TC Section 721.5(a)(1).)
5. Provides that an "electric generation facility" does not include a qualifying small power production facility or a qualifying cogeneration facility, as defined. (R&TC Section 721.5(a)(2).)
6. Defines an "electrical corporation" to include every corporation or person owning, controlling, operating, or managing any electric plant for compensation within California, except as specified. (Public Utilities Code (PUC) Section 218(a).)
7. Provides that an "electrical corporation" does not include a corporation or person employing cogeneration technology or producing power from other than a conventional power source for the generation of electricity solely for any one or more of the following purposes:
8. Its own use or the use of its tenants;
9. The use of or sale to not more than two other corporations or persons solely for use on the real property on which the electricity is generated or on real property immediately adjacent thereto, as specified; or,
10. Sale or transmission to an electrical corporation or state or local public agency, as specified. (PUC Section 218(b).)
11. Defines a "conventional power source" as power derived from nuclear energy or the operation of a hydropower facility greater than 30 megawatts or the combustion of fossil fuels, unless cogeneration technology, as defined, is used in the production of such power. (PUC Section 2805.)

FISCAL EFFECT: The BOE estimates no immediate revenue impact. To date, the BOE has not assessed electric generating facilities producing power from nonconventional power sources.

COMMENTS:

1. The author has provided the following statement in support of this bill:

This bill supports our state renewable energy goals by providing private renewable energy developers and their investors with the financial certainty to plan and build large renewable energy projects.

SB 639 supports a new class of customers for renewable generation that builds on the state's renewable energy procurement goals by clarifying their property tax treatment is distinct from that of utility generators.

1. First Solar, the sponsor of this bill, states the following in support:

SB 639 clarifies that Section 721.5 does not require BOE to assess a facility that is producing electricity from other than a conventional power source (i.e. a renewable generator) and selling that electricity exclusively at wholesale, even if that facility is selling the electricity to someone other than an electric utility or public agency such as an electric service provider. This simple measure helps update statute to reflect the realities of today's vibrant renewable energy market in California.

1. Committee Staff Comments:
2. Assessment of Electric Generation Facilities: The California Constitution requires the BOE to annually assess specified types of property, including property owned or used by companies transmitting or selling gas or electricity. According to the BOE, its longstanding position is that the BOE has assessment jurisdiction only over electric-generating facilities owned or used by electrical corporations that are public utilities (for example, investor-owned utilities such as Pacific Gas & Electric). Electric generation facilities that supply electricity to the general public are considered to have made a dedication of their property to the public and, thus, are considered a public utility.

After deregulation of the electric industry in 1996 [AB 1890 (Brulte), Chapter 854, Statutes of 1996] incentivized utilities to divest themselves of their major generation facilities, the BOE reexamined its assessment jurisdiction over certain companies owning generating facilities and selling electricity. In 1999, the BOE issued Property Tax Rule 905, which limited its assessment jurisdiction to electric generation facilities still owned by public utilities and transferred assessment jurisdiction of divested public utility generation facilities to county assessors. However, in 2001, the BOE modified Property Tax Rule 905 to reassert its assessment jurisdiction over electric generation facilities with a generating capacity of 50 megawatts or more, owned or operated by electric corporations beyond just public utilities.

AB 81 (Migden), Chapter 57, Statutes of 2002, later codified this modified rule, requiring the BOE to annually assess every electric generation facility, as specified, with a generating capacity of 50 megawatts or more that is owned or operated by an electrical corporation, as defined. Corporations producing power from other than a "conventional power source" (such as solar, wind, or geothermal) for the following limited purposes are not included in the definition of "electrical corporation": (i) its own use or the use of its tenants; (ii) the use of or sale to not more than two other corporations or persons solely for use on or immediately adjacent to the real property on which the electricity is generated, as specified; and, (iii) sale or transmission to an electrical corporation or state or local public agency. As such, implementation of current law requires the BOE to make assessment jurisdiction decisions regarding electric generation facilities on a case-by-case basis, including examination of whether the electric generation facility's owner meets the "electrical corporation" definition.

1. Differences between State and Local Assessment: Whether property is assessed by the BOE or county assessors can result in significant differences in valuation. Most notably, the BOE values the property of state assessees each year at fair market value, while the property of local assessees benefits from Proposition 13 protections capping value growth to 2% per year and limiting reassessment only upon new construction or a change in ownership. Additionally, property tax exclusions, such as the new construction exclusion for solar generation, do not apply to state assessees.

In 1980, voters approved Proposition 7 to exclude construction of active solar energy systems from property tax assessment until there is a transfer of the property resulting in a change in ownership. As a result, solar energy facilities that are not required to be assessed by the state, and are thus assessed at the local level, benefit from this property exclusion. However, any solar energy facilities to be assessed by the BOE would not benefit from the same exclusion. New construction of other "nonconventional" generating facilities, such as those producing wind or geothermal power, remain subject to property taxation regardless of whether the facility is assessed by the state or county.

1. What Does This Bill Do? This bill specifies that a facility producing power from a nonconventional power source that is an EWG is not an "electric generation facility" required to be assessed by the BOE. Thus, facilities producing power from a nonconventional power source that are EWGs would more clearly fall within the jurisdiction of the local county assessor. Local assessment would allow all nonconventional power facilities that are EWGs to benefit from Proposition 13 protections limiting reassessment, and would allow those that are specifically solar facilities to also qualify for the new construction property tax exclusion.
2. EWGs: The federal Public Utility Holding Company Act of 2005 defines an EWG as any person determined by the Federal Energy Regulatory Commission (FERC) to be engaged directly, or indirectly through one or more affiliates, and exclusively^[1] in the business of owning or operating, or both owning and operating, all or part of one or more eligible facilities and selling electric energy at wholesale. An entity wishing to establish its status as an EWG may either submit a notice of self-certification of EWG status or file a petition for a FERC declaratory order finding the entity to be an EWG. Becoming certified as an EWG is not mandatory, but EWGs and some holding companies with ownership interest in EWGs are exempt from specified federal regulations.
3. Bright Line Test: By adding EWG facilities to the list of facilities that are not required to be assessed by the BOE (thus allowing assessment by the county), this bill creates a bright line test to determine what entity has assessment jurisdiction over nonconventional power facilities with a generating capacity of 50 megawatts or more. Essentially, nonconventional power facilities with EWG status selling electricity at wholesale to any entity, such as a private electric service provider (not just to another electrical corporation or state or local agency), would become subject to local assessment even if they are owned or operated by a "electrical corporation." Nonconventional power facilities with a generating capacity of 50 megawatts or more that are not certified as exclusive wholesalers by FERC would remain under BOE assessment jurisdiction if owned or operated by an "electrical corporation."

Under existing law, assessment jurisdiction over a nonconventional power facility in part relies on whether it is owned or operated by an "electrical corporation," the definition of which is dependent on how its power is used or sold. Generally, nonconventional power facilities generating power for on-site or adjacent-site consumption, or for sale to another electrical corporation or state or local agency, are not considered to be owned or operated by an "electrical corporation" and thus are not required to be assessed by the BOE. As summarized by the BOE in its analysis of this bill, "[t]his new exception for nonconventional power generating facilities makes irrelevant to whom power is sold for purposes of the state-assessment mandate [under current law]."

1. Evolving Markets: To the extent that the renewable energy market in California has changed considerably over the last 15 years and will likely continue to evolve over the next 15 years, new classes of electric generation facilities may emerge and renew questions of whether state or local assessment jurisdiction is most appropriate. However, any future legislation updating the classes of electric generation facilities required to be annually assessed by the BOE (instead of allowing for assessment by the county) may result in higher property taxes for particular facilities because significant differences in valuation may occur depending on whether a property is assessed at the state or local level and thus could not occur without a two-thirds vote absent a sunset date. As such, the Committee may wish to consider whether adding a sunset date to this bill would promote greater future flexibility in reviewing the appropriate assessment jurisdiction for particular classes of electric generation facilities.

REGISTERED SUPPORT / OPPOSITION:

Support

First Solar (Sponsor)

Large-scale Solar Association

Opposition

None on file

Analysis Prepared by: Irene Ho / REV. & TAX. / (916) 319-2098

1. FERC has recognized that a literal reading of the exclusivity requirement is inconsistent with the reality of business and has approved a long list of incidental activities deemed to be consistent with the exclusivity requirement. This consistency arises from the fact that the activities do not constitute a separate line of business but rather are simply incidental to the business of wholesale generation and sales. ↑

 THIRD READING  

Bill No: SB 639

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/19/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT:

SOURCE: Author

DIGEST:

This bill clarifies that local assessment applies to specified renewable energy projects.

ANALYSIS:

Existing law:

1. Provides that all property is taxable at the same percentage of fair market value (California Constitution, Article XIII).
2. Creates the Board of Equalization (BOE) to equalize property tax rates and assessment practices among counties (California Constitution, Article XIII, Sections 17 and 18).
3. Directs BOE to value property owned by railways, companies selling gas and electricity, or telephone companies, and allows the Legislature to authorize BOE assessment of property owned or used as “public utilities.” (California Constitution, Article XIII, Section 19).
4. Provides that BOE assesses any electric generation facility with a generating capacity of 50 megawatts (MW) or more that is owned or operated by an electrical corporation, as defined in the Public Utilities Code (AB 81, Migden, Chapter 57, Statutes of 2002). However, any qualified small power production or qualifying cogeneration facility within the meaning of the Public Utility Regulatory Purposes of Act of 1978 remains locally assessed.

This bill:

1. States that for purposes of BOE determining whether state or local assessment should apply, that “electric generation facility” does not include a facility producing power from other than a conventional power source, as defined in the Public Utilities Code, that is also an exempt wholesale generator, as defined in the federal Public Utility Holding Company Act of 2005.
2. Strikes a provision stating that the section of existing law providing that it supersedes any regulation in existence at the time of its enactment.

Background

Historically, determining whether BOE or assessors should assess which facility was simple: BOE valued the property of vertically-integrated utilities obligated to serve the public, with local assessment for everyone else. Whether BOE or assessors value property can result in significant differences in valuation: first, BOE values the property of state assessees each year at fair market value, while locally-assessed property enjoy Proposition 13’s protections capping value growth to 2% per year, and limiting reassessment only upon new construction or change in ownership. Additionally, property tax exclusions, such as the new construction exclusion for solar generation, do not apply to state assessees, among other differences.

California deregulated public utilities in 1996 (AB 1890, Brulte, Chapter 854), directing formerly vertically-integrated utilities to sell its electricity generation facilities, leading BOE to consider regulations to shift assessment from county assessors to BOE any non-public utility firms that either acquire the divested electricity generation facilities, or build new ones. As a result, BOE adopted Rule 905 in 1999, which placed facilities with California Public Utilities Commission-issued certificates of public convenience and necessity under BOE assessment, which included both utility-owned generation as well as any new facilities constructed post-deregulation. Under the Rule, Assessors kept responsibility for determining the value of renewable facilities.

In 2001, BOE amended Rule 905 to expand its assessment jurisdiction, which was subsequently codified by the Legislature, and affirmed in Independent Energy Producers Association v. State Board of Equalization (2004) 125 Cal.App.4th 425. Under this change, BOE assesses any electric generation facility with a generating capacity of 50 MW or more that is owned or operated by an electrical corporation, as defined in the Public Utilities Code. BOE set the 50 MW threshold because generators of that size have an impact on the supply of electricity available to the public similar to traditional public utilities.

As a result, current law requires BOE to determine whether it should assess any electric generation facility with a capacity of 50 MW or more that meets the Public Utilities Code’s definition of electric corporation, which includes “every corporation or person owning, controlling, operating, or managing any electric plant for compensation within this state, except where electricity is generated on or distributed by the producer through private property solely for its own use or the use of its tenants and not for sale or transmission to others,” but carves out from this definition a corporation or person employing cogeneration technology or producing power from other than a conventional power source for the generation under specified circumstances. As a result, this definition does not neatly apply to larger-scale non-public renewable projects that are currently assessed locally, but can exceed 50 MW in capacity, and don’t meet AB 81’s definition for cogeneration. Additionally, BOE’s general guidance interprets current law to explicitly require local assessment only when generators from nonconventional sources sell to an electric corporation or a state or local agency. As such, treatment is unclear for firms that generate electricity for sale to electric service providers, who then sell electricity on a limited basis under direct access arrangements, municipal or investor-owned utilities, or community choice aggregators. SB 639 resolves this lack of clarity by excluding from state assessment large-scale renewable energy producers who are neither utilities traditionally assessed by BOE, nor fossil-fuel generators added under AB 81.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/2/17)

First Solar

Large Scale Solar Association

OPPOSITION: (Verified 5/2/17)

None received

ARGUMENTS IN SUPPORT: According to the author, “This bill supports our state renewable energy goals by providing private renewable energy developers and their investors with the financial certainty to plan and build large renewable energy projects. SB 639 supports a new class of customers for renewable generation that builds on the state’s renewable energy procurement goals by clarifying their property tax treatment is distinct from that of utility generators.”

Prepared by:

5/3/17 12:24:36

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Property taxation: assessment: electric generation facilities

Clarifies local assessment for specified renewable energy projects.

Background

While the Legislature first directed county assessors to tax property in 1849, assessors in different counties often applied different tax rates and methods of assessment. To remedy the lack of uniformity, the California Constitution of 1879 created the Board of Equalization (BOE) to equalize property tax rates and assessment practices among counties. In 1910, voters amended the Constitution to direct BOE to value property owned by railways, companies selling gas and electricity, or telephone companies, as these companies own property that crosses county lines. The Constitution additionally allows the Legislature to authorize BOE assessment of property owned or used as “public utilities.”

Historically, BOE only assessed companies that sell or distribute electricity that are public utilities, such as Pacific Gas & Electric or Southern California Edison. County assessors valued other kinds of electricity generation, regardless of the manner in which they generate electricity. Whether BOE or assessors value property can result in significant differences in valuation: first, BOE values the property of state assessees each year at fair market value, while locally-assessed property enjoy Proposition 13’s protections capping value growth to 2% per year, and limiting reassessment only upon new construction or change in ownership. Additionally, property tax exclusions, such as the new construction exclusion for solar generation, do not apply to state assessees, among other differences.

California deregulated public utilities in 1996 (AB 1890, Brulte), directing formerly vertically-integrated utilities to sell its electricity generation facilities, leading BOE to consider regulations to shift assessment from county assessors to BOE any non-public utility firms that either acquire the divested electricity generation facilities, or build new ones. As a result, BOE adopted Rule 905 in 1999, which placed facilities with California Public Utilities Commission-issued certificates of public convenience and necessity under BOE assessment, which included both utility-owned generation as well as any new facilities constructed post-deregulation. Under the Rule, Assessors kept responsibility for determining the value of renewable facilities.

In 2001, BOE amended Rule 905 to expand its assessment jurisdiction, which was subsequently codified by the Legislature (AB 81, Migden, 2002), and affirmed in Independent Energy Producers Association v. State Board of Equalization (2004) 125 Cal.App.4^th 425. Under this change, BOE assesses any electric generation facility with a generating capacity of 50 megawatts or more that is owned or operated by an electrical corporation, as defined in the Public Utilities Code. BOE set the 50 megawatt (MW) threshold because generators of that size have an impact on the supply of electricity available to the public similar to traditional public utilities. The amended BOE Rule and AB 81 did not shift to BOE assessment any qualified small power production or qualifying cogeneration facility within the meaning of the Public Utility Regulatory Purposes of Act of 1978 (PURPA).

As a result, current law requires BOE to determine whether it should assess any electric generation facility with a capacity of 50 MW or more that meets the Public Utilities Code’s definition of electric corporation, which includes “every corporation or person owning, controlling, operating, or managing any electric plant for compensation within this state, except where electricity is generated on or distributed by the producer through private property solely for its own use or the use of its tenants and not for sale or transmission to others,” but carves out from this definition a corporation or person employing cogeneration technology or producing power from other than a conventional power source for the generation under specified circumstances. As a result, this definition does not neatly apply to larger-scale non-public renewable projects that are currently assessed locally, but can exceed 50 MW in capacity, and don’t meet AB 81’s definition for cogeneration. First Solar wants to clarify current assessment practices to ensure that large-scale renewable energy continues to be subject to local assessment.

Proposed Law

Senate Bill 639 provides that for purposes of BOE determining whether state or local assessment should apply, that “electric generation facility” does not include a facility producing power from other than a conventional power source, as defined in the Public Utilities Code, that is also an exempt wholesale generator, as defined in the federal Public Utility Holding Company Act of 2005. The measure also strikes a provision stating that the section of existing law providing that it supersedes any regulation in existence at the time of its enactment.

State Revenue Impact

BOE states that because it has not assessed facilities generating electricity from renewable sources in the past, the measure has no revenue impact.

Comments

1. Purpose of the bill. According to the author, “This bill supports our state renewable energy goals by providing private renewable energy developers and their investors with the financial certainty to plan and build large renewable energy projects. SB 639 supports a new class of customers for renewable generation that builds on the state’s renewable energy procurement goals by clarifying their property tax treatment is distinct from that of utility generators.”

2. Consistent treatment. Historically, determining whether BOE or assessors should assess which facility was simple: BOE valued the property of vertically-integrated utilities obligated to serve the public, with local assessment for everyone else. However, energy deregulation required utilities to divest traditional, mostly fossil-fuel generation facilities, so non-utility energy wholesalers then either purchased formerly-owned utility generation property or built new facilities. As a result, BOE and the Legislature expanded state assessment to these facilities because they sold significant amounts of electricity to serve the general public. Even after this expansion, BOE never assessed non-utility renewable energy facilities because they’re private firms who don’t sell to the general public, and use other than conventional power sources, thereby defaulting to local assessment. As technology evolved, and demand for renewable energy grew, energy producers started constructing larger projects and selling power under alternative arrangements. However, AB 81’s 50 MW limit, reference to the definition of electric corporation, and carve out for PURPA facilities does not neatly apply to today’s large-scale solar projects and renewable energy market. Additionally, BOE’s general guidance interprets current law to explicitly require local assessment only when generators from nonconventional sources sell to an electric corporation or a state or local agency. As such, treatment is unclear for firms that generate electricity for sale to electric service providers (ESPs), who then sell electricity on a limited basis under direct access arrangements, municipal or investor-owned utilities, or community choice aggregators. SB 639 resolves this lack of clarity by assigning to local assessment large-scale renewable energy producers who are neither utilities traditionally assessed by BOE, nor fossil-fuel generators added under AB 81.

3. Mandate? The California Constitution requires the state to reimburse local governments for the costs of new or expanded state mandated local programs. Because SB 639 may impose a duty on local officials, Legislative Counsel says that the bill imposes a new state mandate. The measure requires the state to reimburse local agencies pursuant to existing statutory provisions if the Commission on State Mandates determines that the bill imposes a reimbursable mandate.

Support and Opposition

(4/17/17)

Support: First Solar

Opposition: Unknown.

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