BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2718
                                                                  Page  1

          Date of Hearing:  May 1, 2001

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                              Darrell Steinberg, Chair

                   AB 2718 (Oropeza) - As Amended:  April 18, 2002 

          Policy Committee:                              Utilities and  
          Commerce     Vote:                            15-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:               

           SUMMARY  

          This bill extends financial incentives associated with  
          installation of small distributed generation (DG) technologies  
          to include fuel cells and microturbines operating on waste or  
          "flared" gas.

           FISCAL EFFECT  

          Minor absorbable special fund costs for the Public Utilities  
          Commission (PUC) to extend the incentive program.

           COMMENTS  

           1)Background  .  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 liquid  
            petroleum gas (LPG).  Much of it is flared off, however.  

           2)Purpose  . As part of Chapter 329, Statutes of 2000 (AB 970,  
            Ducheny), DG installed on the customer side of the meter is  
            eligible for certain incentives.  A subset of DG technologies,  
            including wind turbines, photovoltaics and fuel cells, is  
            considered renewable and eligible for differential incentives  
            pursuant to a PUC decision implementing the program in March  
            2001.

            The program offers Level I incentives of $4.50 per watt of  








                                                                  AB 2718
                                                                  Page  2

            installed on-site renewable generation capacity under one  
            megawatt, but up to a maximum of 50% of total installation  
            costs.   Non-renewable self-generation (of any capacity) is  
            also eligible under the program, but with a lower incentive of  
            $1.00 per watt of on-site generation up to 30% of total costs.  
             This bill makes flare gas-powered DG eligible for the Level I  
            incentives.  According to the sponsors-the California  
            Independent Petroleum Association-encouraging oil producers to  
            use gas-burning electric generators onsite would make nearly  
            600 megawatts of electricity available at any given time.

           Analysis Prepared by  :  Chuck Nicol / APPR. / (916) 319-2081