BILL ANALYSIS
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THIRD READING
Bill No: AB 1684
Author: Leno (D)
Amended: 7/19/04 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 8-1, 6/22/04
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, Murray, Sher,
Vasconcellos
NOES: McClintock
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 79-0, 1/29/04 - See last page for vote
SUBJECT : Distributed generation resources
SOURCE : Planning and Conservation League
DIGEST : This bill permits certain combustion
technologies that use non-renewable fuel to be eligible for
an incentive under the State Public Utilities Commissions
Self Generation Incentive Program if they meet a specified
air emissions standard and provide a net air emissions
benefit. The standard that these technologies need to meet
becomes more stringent effective January 1, 2007.
ANALYSIS : Previous law required the State Public
Utilities Commission (PUC) to offer differential incentives
for renewable and super clean distributed generation (AB
970 [Ducheny], Chapter 329, Statutes of 2000). Pursuant to
AB 970, the PUC established the Self-Generation Incentive
CONTINUED
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Program (SGIP) in March 2001.
Existing law, AB 1685 (Leno), Chapter 894, Statutes of
2003, repealed the above provision, requires the PUC to
administer the SGIP until 2008, and prescribes eligibility
for gas-fired distributed generation as follows:
1.In 2005 and 2006, projects must meet an oxides of
nitrogen (NOx) emissions rate of 0.14 pounds per
megawatthour.
2.In 2007, projects must meet a NOx emissions rate of 0.07
pounds per megawatthour and have a minimum efficiency of
60 percent.
This bill extends SGIP eligibility to projects which do not
meet the emissions standards above, if the project operates
solely on natural gas that is not eligible for delivery to
the utility pipeline system (waste gas), and the project
provides a net air emissions benefit.
Background
Pursuant to AB 970's direction to offer incentives for
renewable and super clean distributed generation resources,
the PUC established the SGIP in March 2001. The current
SGIP offers $125 million of financial assistance per year
through 2004 for installation of photo-voltaics, fuel
cells, and certain gas-fired resources up to one megawatt
in size. The SGIP offers incentives of $4.50 per watt of
installed on-site renewable generation capacity, up to a
maximum of 50 percent of total installation costs (Level
1). Certain non-renewable self-generation is also eligible
under the category of "super clean," but with lower
incentives. Fuel cells using non-renewable fuel and waste
heat recovery are eligible for $2.50 per watt, up to 40
percent of total costs (Level 2). Internal combustion
engines and micro-turbines using waste heat recovery (i.e.
co-generation) are eligible for $1.00 per watt, up to 30
percent of total costs (Level 3).
SB 1038 (Sher), Chapter 515, Statutes of 2002, authorized
the PUC to offer special rate treatment to "ultra-clean and
low-emission" distributed generation in order to encourage
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early compliance with emissions standards established by
the State Air Resources Board (ARB) pursuant to SB 1298
(Bowen), Chapter 741, Statutes of 2000. SB 1038 defined
"ultra-clean and low-emission" as distributed generation
meeting 2007 ARB emission limits, plus an efficiency
standard, and commencing operation by December 31, 2005.
In March 2003, the PUC issued Decision 03-04-030, which
defined distributed generation customers' responsibility
for unrecovered electricity procurement costs incurred by
the investor-owned utilities and the State Department of
Water Resources. Among other things, the decision grants a
complete exemption from any such charges for distributed
generation that's eligible for financial incentives under
the SGIP, and only requires projects to meet existing
emissions standards. The same decision grants a lesser
exemption for self-generation that meets the more stringent
"ultra-clean and low-emission" criteria.
Last year, AB 1685 required the PUC to continue the SGIP
until 2008 "in the same form as it exists," except
eligibility standards for gas-fired distributed generation
were raised. AB 1685 established a two-stage emissions
standard which, in 2005 and 2006, requires projects to
exceed current emissions standards to be eligible for SGIP
rebates. In 2007, projects must meet the emission standard
slated for implementation by the ARB in 2007.
Comments
SGIP Eligibility Also Triggers Exemption From "Exit Fees."
For gas-fired projects, the economic benefits of SGIP
eligibility primarily lie in avoiding utility and DWR costs
under the 2003 PUC decision. The incentive payment itself
is worth less than the ability to avoid these costs. The
PUC granted a complete exemption from these charges for
distributed generation that's eligible for financial
incentives under the SGIP, which had no standards for
emissions from gas-fired projects at the time. Later, AB
1685 raised the bar on eligibility for the SGIP and, by
extension, narrowed eligibility for the exit fee exemption.
This bill now expands eligibility for both to include
projects using waste gas.
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Related Legislation
AB 2006 (Nunez), 2003-04 Session . Requires electrical
corporations to prepare a long-term resource plan which,
among other things, must "provide for the continuation of
the (SGIP)?for ultra-clean and low-emission distributed
generation, as defined in Section 353.2." (In Senate Rules
Committee)
AB 2593 (Calderon), 2003-04 Session . Authorizes the PUC to
suspend collection of funds from ratepayers to support SGIP
incentives if it determines sufficient funds are available
to meet the reasonable anticipated demand for incentives
for that year. (On Senate Third Reading)
SB 107 (Bowen), 2003-04 Session . Requires the PUC to
replace the SGIP with an incentive program for renewable
and ultra-clean distributed generation resources, requires
a performance report to the Legislature in 2006, and
sunsets in 2007. (Failed passage in Assembly Utilities and
Commerce Committee)
AB 2718 (Oropeza), 2001-02 Session . Made fuel cells and
micro-turbines operating on waste gas eligible for an
incentive under the SGIP of $2.50 per watt if the customer
demonstrated operation of the system produced a net air
quality benefit. AB 2718 made incentives subject to refund
to the extent the fuel cell or micro-turbine didn't operate
on wasted gas. (Defeated in the Senate Energy, Utilities
and Communications Committee)
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/6/04)
Planning and Conservation League (source)
Clean Power Campaign
Sierra Club California
California Solar Energy Industries Association
ASSEMBLY FLOOR :
AYES: Aghazarian, Bates, Benoit, Berg, Bermudez, Bogh,
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Calderon, Campbell, Canciamilla, Chan, Chavez, Chu,
Cogdill, Cohn, Corbett, Correa, Cox, Daucher, Diaz,
Dutra, Dutton, Dymally, Firebaugh, Frommer, Garcia,
Goldberg, Hancock, Harman, Haynes, Jerome Horton, Shirley
Horton, Houston, Jackson, Keene, Kehoe, Koretz, La Malfa,
La Suer, Laird, Leno, Leslie, Levine, Lieber, Liu,
Longville, Lowenthal, Maddox, Maldonado, Matthews, Maze,
McCarthy, Montanez, Mountjoy, Mullin, Nakanishi, Nakano,
Nation, Negrete McLeod, Nunez, Oropeza, Pacheco, Parra,
Pavley, Plescia, Reyes, Richman, Ridley-Thomas, Runner,
Salinas, Samuelian, Simitian, Spitzer, Steinberg,
Strickland, Vargas, Wiggins, Wolk, Wyland, Yee
NO VOTE RECORDED: Wesson
NC:cm 8/6/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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