BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 1214 - Firebaugh Hearing Date:
June 24, 2003 A
As Amended: June 18, 2003 FISCAL B
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DESCRIPTION
Current law requires electric corporations to buy the
electricity generated by customers using biogas digester-powered
generators. That electricity is sold back to the electric
corporation at the generation rate , which the electric
corporation charges its customers. This program is limited to 5
megawatts (Mw) of customer generation in each investor-owned
utility's (IOUs) territory and sunsets on January 1, 2006.
This bill requires electric corporations to buy electricity
generated by customers using fuel cell-powered generators. That
electricity is sold back to the electric corporation at the
retail rate which the electric corporation charges its
customers. This program is limited to 75 Mw of customer
generation in each territory IOU's with a maximum per project
limit of 1 Mw. This program sunsets on January 1, 2009.
BACKGROUND
Fuel cells are relatively new power generation devices which
convert renewable and non-renewable energy (e.g. hydrogen gas
and natural gas) into electricity through an electrochemical
reaction. Since there is no combustion, the process is nearly
pollution-free, though the carbon dioxide byproduct is a
greenhouse gas. The state of California has recognized the
potential of fuel cells to replace internal combustion engines
in automobiles through the creation of a public/private
partnership known as the California Fuel Cell Partnership.
The California Public Utilities Commission (CPUC) has
established a program to subsidize the cost of customer-owned
generation, including fuel cell generation. This program is
funded at $125 million a year for four years through electric
rates. Fuel cell generation is eligible for a subsidy of up to
$4.50/watt, with a limit of 50% of the installed cost.
Electricity produced by customer-owned fuel cells is also exempt
from all exit fees, including Department of Water Resources
(DWR) charges.
COMMENTS
1.Biogas Pilot . Last year, the Legislature passed, and the
Governor signed, AB 2228 (Negrete McCloud), Chapter 845,
Statutes of 2002, which created a pilot program for a limited
version of net metering for biogas facilities at dairies.
That program is significantly different from the program
proposed in this bill. The AB 2228 program provides customers
with credit for excess generation at the utility's generation
rate , not the full retail rate as this bill proposes. It is
limited to 15 Mw of capacity statewide (the program in this
bill caps the amount of power at 225 Mw statewide) and sunsets
on January 1, 2006.
Unlike fuel cells, the biogas plants are not eligible for the
CPUC's customer-owned generation subsidy. Furthermore, an
important rationale behind the AB 2228 pilot program is that
it (if successful) will productively utilize dairy waste that
otherwise would have fouled the local environment and water
supply. This measure simply adds an additional subsidy on top
of an existing subsidy to promote the use of customer-owned
generation.
2.Are Additional Subsidies Justified? This bill allows
customers who install fuel cell electric generation systems to
"net meter," which is a program that gives the customer credit
for any electricity they generate at the full retail rate the
utility charges.
Paying for power produced at the full retail rate subsidizes
net metered customers because it includes not just the cost of
electric generation, but also the cost of distribution and
utility overhead costs, which account for about half of the
price. Also, net metered customers benefit because the
utility is required to buy the electricity produced by the
customer, regardless of whether it needs it or wants it.
State law limits net metering subsidies to solar photovoltaic
panels and small wind generators, both renewable sources of
energy that produce little or no pollution. Fuel cells, which
already qualify for a subsidy of up to 50% of their installed
cost, aren't inherently renewable resources.
Furthermore, given California's high electric rates, the
author and committee may wish to consider whether it's
appropriate to create a new subsidy for fuel cell owners that
will be paid for by other ratepayers.
3.Subsidy Preference Based On Installation Location . This bill
establishes a preference for facilities located in communities
with significant exposure to air contaminants. As long as the
capacity of installed fuel cell projects is lower than the 75
Mw cap, this preference has no effect. Given the pace at
which subsidized renewable energy has been installed in
California (solar photovoltaic systems have been eligible for
net metering since the mid-1990's and there is less than 10 Mw
installed statewide), it will probably be quite some time
before this preference will ever be invoked.
4.California's Electricity Market . To say California's
electricity market is unsettled would be an understatement.
There are competing visions of what the market should look
like in the future. SB 888 (Dunn) expresses the intent of the
Legislature to reinstate the investor-owned utilities'
traditional obligation to serve their customers and directs
the California Public Utilities Commission to formulate a plan
regarding the re-establishment of a direct access purchase
program. AB 428 (Richman) re-establishes a direct access
program for certain customer classes. The author and
committee may wish to consider whether it's appropriate to
create a new customer self-generation incentive program before
the larger question of what California's energy market is
going to look like is answered.
5.Codified Findings . The Legislative findings in this bill are
codified, an approach that isn't conventional in most bills
that involve findings. The author and committee may wish to
consider making the findings uncodified.
Also, the second finding, beginning on Page 2, Line 13,
incorrectly asserts that this bill, which promotes customer
generation, furthers the intent of SB 5X (Sher), Chapter 7,
Statutes of the First Extraordinary Session of 2001, which was
an energy efficiency and conservation measure. The author and
committee may wish to consider removing this particular
finding.
ASSEMBLY VOTES
Assembly Floor (76-0)
Assembly Appropriations Committee (24-0)
Assembly Utilities and Commerce Committee
(13-0)
POSITIONS
Sponsor:
California Cast Metals Association
Support:
California Coalition of Fuel Cell Manufacturers
California Solar Energy Industries Association (if amended)
City of San Diego
Clean Power Campaign
East Bay Municipal Utility District
Environment California
FuelCell Energy
Sierra Club California
Oppose:
Pacific Gas and Electric Company (unless amended)
Southern California Edison Company
Randy Chinn
AB 1214 Analysis
Hearing Date: June 24, 2003