BILL ANALYSIS AB 2307 Page 1 Date of Hearing: May 8, 2002 ASSEMBLY COMMITTEE ON APPROPRIATIONS Darrell Steinberg, Chair AB 2307 (Kehoe) - As Amended: April 23, 2002 Policy Committee: Utilities and Commerce Vote: 13-2 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill: 1)Extends by two years (until June 2005) the existing deadline by which distributed energy resources must commence operation in order to qualify for a waiver of electrical corporation standby fees through June 1, 2011. 2)Requires that, if the Public Utilities Commission (PUC) determines there are net costs that would otherwise be borne by ratepayers due to the waiver of standby charges, those costs will instead be borne by operators who install distributed generation pursuant to (1). FISCAL EFFECT Minor absorbable special fund costs to the PUC to determine whether there are net costs that should be borne by distributed generators. COMMENTS 1)Background . As part of 2001-02 First Extraordinary Session, the Legislature passed SB X1 28 (Sher), which established the standby fee waiver provisions until June 2011 for non-diesel fuel "distributed generation" (DG) that commences operation between May 2001 and June 2003 and has a capacity of 5 megawatts or less. DG can be used as backup power, to meet base or peak load needs, or to sell to adjacent sites in an "over-the-fence" transaction. Customers who operate a DG unit connected to the utility's distribution system normally AB 2307 Page 2 supplement on-site generation with power purchased from the public utility. Grid-connected DG customers pay a standby charge to the utility, based on the installed capacity of the DG unit, to reserve the capacity needed to serve that customer. In July 2001, the PUC adopted interim standby rate design policies for onsite generation facilities that are interconnected to, and operate in parallel with, the distribution system. Pursuant to SB X1 28, the commission is requiring the electrical corporations to establish new tariffs for DG customers by January 2003. 2)Purpose . According to the author, the 2003 deadline to install DG equipment and thereby take advantage of the standby fee waiver is too soon for businesses to make significant investments in DG systems, particularly in light of the fact that the DG industry is relatively new. This bill would provide an additional two years for entities to install DG and still receive the standby fee waiver. In order to address concerns regarding cost-shifting among ratepayers due to the fee waiver, the bill was amended in the policy committee to require any costs that would otherwise be shifted, as determined by the PUC, to instead be borne by the new DG customers. 3)Opposition . Both Pacific Gas and Electric and Southern California Edison are opposed to the bill. Opponents indicate that the recent amendment directing the PUC to ensure that costs are borne by those who install new DG does not remove their opposition to this bill. Opponents believe that the PUC's current rulemaking hearing already covers cost determinations for DG, and therefore believe that this bill adds nothing to that process. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081