BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 2718 - Oropeza Hearing Date: August
6, 2002 A
As Amended: August 5, 2002 FISCAL B
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DESCRIPTION
Existing law (AB 970 (Ducheny), Chapter 329, Statutes of 2000) requires
the California Public Utilities Commission (CPUC) to offer differential
incentives for renewable and super clean distributed generation
resources and requires the CPUC to recover the costs of the program
through distribution rates.
This bill makes fuel cells and micro-turbines operating on wasted gas
eligible for an incentive of $2.50 per watt if the customer
demonstrates that operation of the system will produce a net air
quality benefit. Incentives awarded are subject to refund to the
extent the fuel cell or micro-turbine does not operate on wasted gas.
BACKGROUND
Pursuant to AB 970, the CPUC established the Self-Generation Incentive
Program (SGIP) in March 2001, which offers $125 million per year
through 2004 of financial assistance for installation of
photo-voltaics, fuel cells, and certain micro-turbines up to one
megawatt. The SGIP offers incentives of $4.50 per watt of installed
on-site renewable generation capacity, up to a maximum of 50% of total
installation costs (Level 1). Certain non-renewable self-generation is
also eligible under the program, but with lower incentives. Fuel cells
using non-renewable fuel (including wasted gas) and waste heat recovery
are eligible for $2.50 per watt, up to 40% of total costs (Level 2).
Micro-turbines using waste heat recovery (i.e. co-generation) are
eligible for $1.00 per watt, up to 30% of total costs (Level 3).
This bill makes fuel cells and micro-turbines operating on wasted gas
(i.e., not salable to gas utilities) eligible for incentives under the
Level 3 category, except the bill increases the incentive from $1.00
per watt to $2.50 per watt. The waste heat recovery (co-generation)
requirement of the existing program would not apply. In addition, the
bill requires the customer's interconnection agreement with the utility
to specify that the unit will be operated solely on waste gas, and
makes the incentive subject to refund to ensure that units don't switch
fuel after receiving the incentive payment.
COMMENTS
1.Another potential ratepayer subsidy. Customers departing utility
service since the energy crisis bear some responsibility for a share
of procurement costs and obligations incurred by their utility and
the Department of Water Resources (DWR) to serve them that have not
yet been recovered via customer rates. Recoverable procurement costs
attributable to departing customers will be shifted to remaining
utility customers if they are not recovered from the departing
customers.
The question of departing customers' responsibility for outstanding
procurement costs and obligations incurred on their behalf is being
addressed currently at the CPUC, as well as in a number of pending
bills - SB 1519 (Bowen), SB 1755 (Soto) AB 80 (Havice) and AB 117
(Migden). Each of these measures makes reimbursing DWR for power
costs incurred on their behalf a condition of the benefit they offer
(in the case of those bills, the benefit is allowing customers to
leave utility service.).
This bill establishes a ratepayer-funded incentive for additional
customers to leave utility service, but does not address the
departing customers' obligation for unrecovered procurement costs.
The author and the committee may wish to consider whether, like the
bills referenced above, this bill should explicitly address the
departing customers' obligation for unrecovered procurement costs.
2.Reconsideration. This bill was heard by this committee on June 25,
and failed on a 4-2 vote. It is now set for reconsideration on a
vote-only basis.
The August 5 version of the bill reflects amendments agreed to during
the June 25 hearing, which include (1) requiring a demonstration that
the operation of projects funded will produce a net air quality
benefit, (2) making the incentive payments subject to refund, and (3)
other technical amendments.
The bill does not address the cost recovery issue described in
Comment 1.
PRIOR VOTES
Senate Energy, Utilities and Communications Committee (4-2)
(Failed)
Assembly Floor (72-0)
Assembly Appropriations Committee (23-0)
Assembly Utilities and Commerce Committee (15-0)
POSITIONS
Sponsor:
California Independent Petroleum Association
Support:
American Lung Association of California
Berry Petroleum Company
California Chamber of Commerce
California Manufacturers and Technology Association
California Oil Producers Electricity Cooperative
Paper, Allied-Industrial, Chemical and Energy Workers Union
Powerlight
South Coast Air Quality Management District
Tidelands Oil Production Company
Valley Energy Ltd.
Oppose:
None on file
Lawrence Lingbloom
AB 2718 Analysis
Hearing Date: August 6, 2002