There was already a rebate program in place, but it was unsteady, because it required reauthorization of funds every year or two.  Then there was a bill called SB-1, which would have created a 10-year declining-schedule rebate program.  It had great public support, and the Governator was prepared to sign it.  But the IBEW (electrician's union) decided that it had to die (for reasons that are still unclear to me).  They arranged for the 11-hour insertion of a "poison pill" measure, requiring union labor on PV installations (union rate is about 3x the standard, non-union PV installer's rate, and significantly more than I make per hour as an engineer).  The bill would have killed the economics of solar, had it passed, so it died in the legislature.

But the popular support for solar was so strong that the Public Utilities Commission, essentially by fiat, created a 10 year rebate program on the SB-1 model and called it the California Solar Initiative.  This is something they would not have dared do, except that everyone wanted SB-1 to pass except for a few special interests.

(As an afterword, the bill was reintroduced in the next session, with the objectionable measure removed, and it passed cleanly.  This was necessary because the CSI was able to implement most, but not all, of SB-1's features, due to limits on the power of the PUC.)