The California Public Utilities Commission (CPUC or Commission) is weighing party comments on implementation of Assembly Bill (AB) 2143.  Enacted last year, AB 2143 will take effect on January 1, 2024.  This bill extends existing prevailing wage requirements for public works to the construction of any renewable electrical generation facility, and any associated battery storage, after December 31, 2023, if that project interconnects under the net energy metering (NEM) tariffs or net billing tariffs (NBTs).  The bill includes exceptions for:  (1) a residential facility that will have a maximum generating capacity of 15 kilowatts of electricity or that will be installed on a single-family home; (2) a project that is already a public work under existing law; and (3) a facility that serves only a modular home, a modular home community, or multiunit housing that has two or fewer stories.

In its NEM rulemaking proceeding (R.20-08-020), the assigned administrative law judge issued a ruling on April 3, 2023 (Ruling), seeking comments on the implementation of AB 2143.  The Ruling includes a detailed list of issues and questions for party comment, including:  (1) the triggering point for application of the law and how to approach projects that are under contract, but still in progress towards completion, by January 1, 2024 (when the law takes effect); (2) what role, if any, the investor-owned utilities (IOUs) and community choice aggregators (CCAs) should have in enforcing compliance with AB 2143 and the associated penalties; (3) what role, if any, IOUs and CCAs should have in educating and informing contractors and/or impacted customers about eligibility, wage requirements, and/or penalties; (4) alignment of the NEM tariffs and NBTs with the new wage requirements and penalties; and (5) compliance with the payroll requirement and associated confidentiality issues and coordination between the CPUC, the California Department of Industrial Relations (DIR), contractors, and utilities.

Opening and reply comments in response to the Ruling were submitted on April 24 and May 4, respectively, and a Commission decision resolving the issues is expected later this fall.

Major Issues and Party Positions

Trigger Point

Under AB 2143, application of the new Section 769.2 prevailing wage requirement is triggered when “[a] contractor…enters into a contract to perform work on a renewable electrical generation facility or associated battery storage described in [Section 769.2](a).”  Parties commented on how to apply this trigger, particularly for projects under contract prior to the January 1, 2024, effective date, but still in the process of construction and/or interconnection.   A majority of the parties suggested that the trigger for determining application of Section 769.2 should be the date of submission of the interconnection agreement for a particular renewable energy project.  Prevailing wage requirements would thus apply to eligible projects that submit a NEM or NBT interconnection agreement on or after January 1, 2024.

Small Business Utility Advocates (SBUA) offered an alternative proposal—that the Commission should broadly exempt projects started before the effective date of the law.   Specifically, projects that secured financing commitments and owners that entered into contracts with developers before January 1, 2024, would be exempted under SBUA’s proposal.  

In contrast, Coalition of California Utility Employees (CCUE) stated that the requirements should apply to all construction occurring on and after January 1, 2024, regardless of whether the contracts or interconnection agreements were entered into beforehand.  CCUE recommended that the CPUC require IOUs to notify developers with interconnection applications approved prior to January 1, 2024, that, commencing January 1, 2024, the prevailing wage requirements must be met, and developers and contractors must attest to compliance.

Penalties and Enforcement

Parties also offered a variety of proposals concerning an AB 2143 provision that would render a facility ineligible to receive service under the NEM tariffs/NBTs if the contractor willfully violated this section in the construction of that facility.  SEIA, GRID Alternatives, CALSSA, and the Joint Utilities shared the concern that this provision penalizes the customer for the actions of the contractor and urged enforcement oversight to penalize only the developer or contractor.   The Joint Utilities proposed that the Commission maintain a “Prohibited Contractor List” to identify contractors that have been found to willfully violate the prevailing wage law, and to prohibit those contractors from participating in the NEM/NBT programs for an indeterminate period of time. 

Contractor and Customer Education

The parties also suggested a variety of methods for educating customers and contractors on the new requirements of AB 2143.  While some parties argued that utilities bore an obligation to educate both NEM/NBT customers and contractors of the new requirements, the utilities expressed reluctance to take on a corresponding obligation to educate contractors of their professional or legal obligations.  To increase awareness of the requirements, CALSSA and CCUE recommended that, in addition to the tariffs implicated by AB 2143, the related interconnection agreements should also include language regarding the prevailing wage requirements and an attestation for compliance.  However, the Joint Utilities pointed out that there are numerous interconnection forms designed for a variety of project types, and prevailing wage language may or may not be applicable and would increase administrative burden.  The Joint Utilities also opposed customer attestations regarding payment of prevailing wages as problematic, since the customers are not paying, and have no knowledge of or control over, the wages paid to a contractor’s employees.

Key Takeaways and Next Steps

Implementation of these new prevailing wage requirements will have significant cost and timing implications for renewable energy projects—both for customers and developers.  Of particular concern are construction contracts executed prior to the adoption of AB 2143 that could potentially be subject to the new prevailing wage requirements based upon the timing of that construction.  The extent to which these projects are caught up on the new prevailing wage requirements will depend on how the Commission implements the effective date for the new legislation. 

The Commission is currently scheduled to issue a proposed decision on AB 2143 implementation by September 7, 2023.  Under Commission procedure, parties will have the opportunity comment on the proposed decision before the Commission votes out a final decision.