By JIM MILLER
SACRAMENTO - The state Senate approved a bill Thursday to fix a flaw in the state's solar roof law that has smothered interest in the technology in the Inland area and desert.

Last year's "Million Solar Roof" law championed by Gov. Schwarzenegger was meant to encourage people to install energy-saving solar panels by offering financial incentives.

But a regulation that took effect Jan. 1 to help carry out the law has had the reverse effect. It requires participants in the program to pay more costly electricity rates when they need extra power.

Officials said the rule punishes the hottest parts of Southern California Edison's service area.

In some cases, the "time of use" charges on summer days would exceed what a person would pay without the solar panels.

Installers, meanwhile, reported a steep decline in orders since the rule took effect Jan. 1.

Robert Philippsen, a consultant with Gone Solar in Palm Springs, said business in the Coachella Valley has declined so much that he had to lay off three people.

"This is where solar should be. We have the highest demand here," Philippsen said.

Thursday's bill emerged following negotiations among Schwarzenegger, lawmakers representing the Coachella Valley, and utility officials.

The Assembly could consider the measure as early as next week.

The California Public Utilities Commission, which oversees the solar roof program, is scheduled to meet June 7.

"We wanted to give the PUC the opportunity to look at the issue and make whatever adjustments . . . that are needed, maybe in time for the summer heat wave," state Sen. Christine Kehoe, D-San Diego, who carried the bill in the Senate, said after Thursday's 31-3 vote.

State Sen. Jim Battin, R-La Quinta, said the bill is a crucial repair to last year's solar roof initiative.

The program offers more than $3 billion in tax incentives and rebates to people who install solar panels.

"A lot of times in the Legislature we pass laws that have huge unintended consequences. This was a classic example of it," said Battin, whose district includes the Coachella Valley. "It will encourage more people to use solar energy, but there really is no incentive to do it now because why would you do it if it was going to cost you more money?"

State Sen. Dennis Hollingsworth, R-Murrieta, voted against Thursday's bill. He said he objects to the bill's provision granting credits to property owners who paid the higher rates -- money Hollingsworth said would come indirectly from other ratepayers.

"You already have tremendous governmental subsidies for the solar panels in the first place," said Hollingsworth, who also opposed the Million Solar Roof legislation last summer. "But then asking the rest of the utility customers to subsidize these bills is something I can't support."

It's unknown how many people would be eligible for the credits. Some unofficial estimates put the number at less than a couple dozen.

Pat Conlon, Palm Desert's director of energy management, said he knows of no city residents who could be eligible for the credits.

The proposed law's main benefit, Conlon said, is that it would make the solar panels financially attractive for the city, other desert agencies, and residents.

For example, he said, the city's YMCA likely will install a $100,000 solar system if the rule change goes through.