BILL ANALYSIS
AB 2718
Page A
Date of Hearing: April 22, 2002
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
AB 2718 (Oropeza) - As Amended: April 18, 2002
SUBJECT : Oil producers.
SUMMARY : Extends incentives associated with programs to
increase energy conservation and to reduce demand to include
small distributed generation (DG) technologies that use waste or
"flare" gas. Specifically, this bill :
1)Deems fuel cells and microturbines operating on flared or
otherwise wasted gas eligible for Level I financial
incentives, established by the California Public Utilities
Commission (PUC) to reduce electricity demand and load during
peak demand periods.
2)Clarifies that, for the purpose of incentive eligibility,
"wasted gas" includes:
a) Gases generated as a byproduct of petroleum production
operations that would otherwise be stranded, or not used
because an acceptable disposal method is not available; or
b) Gas not utilized due to other constraints.
3)Defines "super clean distributed generation resources," for
purposes of energy conservation "demand-side" management
incentive eligibility, to include fuel cells and microturbines
operating on renewable energy.
EXISTING LAW :
1)Requires PUC, in consultation with the California Energy
Commission (CEC), to adopt initiatives to reduce demand for
electricity and reduce load during peak demand periods.
2)Includes differential financial incentives for renewable or
super clean DG resources among the energy conservation and
demand-side management programs administered by PUC.
3)Requires new and modified stationary sources of air pollution
to use Best Available Control Technology (BACT) and air
AB 2718
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pollution offsets to mitigate air emissions.
4)Requires stationary sources of air pollution to obtain a
permit, consisting of an authority to construct and a permit
to operate, subject to the requirements of the California
Environmental Quality Act (CEQA).
FISCAL EFFECT : Unknown.
COMMENTS :
Refinery flare gas
A burner that flares off surplus gas is part of the safety
system at oil refineries.
The flare operates intermittently, although its pilot is always
lit. When the amount of waste gas exceeds the requirements of
the refinery furnaces and boilers, the excess is flared. Some
refineries recover useful portions of the waste gas, such as
propane, by refrigeration, condensation and recovery for sale as
LPG. Much of it is flared off. According to the sponsors,
allowing oil producers to use gas-burning electric generators
onsite would make nearly 600 megawatts of electricity available
at any given time.
AB 970 (Ducheny)
Assembly Bill 970 (Ducheny)<1> established the Governor's Clean
Energy GREEN TEAM, and required the GREEN TEAM to undertake
various activities designed to expedite construction of new,
clean energy generation in the state to address the state's
energy needs. AB 970 also established expedited processes for
CEC siting of both temporary "peaking" and permanent thermal
power plants, and expanded energy conservation and demand-side
management programs administered by CEC and PUC.
The AB 970 program, carried out by PUC, allows DG installed on
the customer side of the meter eligible for incentives. A
subset of DG technologies is considered renewable and eligible
for differential incentives, including wind turbines,
photovoltaics and fuel cells.
The program offers Level I incentives of $4.50 per watt of
installed on-site renewable generation capacity, up to a maximum
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<1> Chap. 329, Stats. 2000
AB 2718
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of 50% of total installation costs. Non-renewable
self-generation (of any capacity) is also eligible under the
program, but with a lower incentive: $1.00 per watt of on-site
generation, up to 30% of total costs. This bill makes flare
gas-powered DG eligible for Level I incentives.
The law directs PUC to include the costs of the incentives in
the distribution revenue requirements of utilities regulated by
PUC, and PUC ordered costs to be recoverable by the utilities
after the end of the rate freeze.
Net metering amended out
The amendments to this bill eliminate a provision that would
have required electric service providers to accommodate net
energy metering of these flare gas-powered DG units.
REGISTERED SUPPORT / OPPOSITION :
Support
California Independent Petroleum Association (source)
Valley Energy Ltd.
Capstone Turbine Corp
PACE
Tidelands Oil Production Corp.
Opposition
California Solar Energies Association (to previous version)
Analysis Prepared by : Paul Donahue / U. & C. / (916) 319-2083