BILL ANALYSIS
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THIRD READING
Bill No: SB 107
Author: Bowen (D)
Amended: 5/5/03
Vote: 27 - Urgency
SENATE ENERGY, U. & C. COMMITTEE : 8-0, 4/22/03
AYES: Bowen, Morrow, Alarcon, Battin, Dunn, McClintock,
Murray, Sher
SENATE APPROPRIATIONS COMMITTEE : 11-0, 5/19/03
AYES: Alpert, Battin, Aanestad, Ashburn, Bowen, Escutia,
Karnette, Machado, Murray, Poochigian, Speier
SUBJECT : Independent System Operator: report: demand
management
SOURCE : Author
DIGEST : This bill extends and modifies the
Self-Generation Incentive Program, within the Public
Utilities Commission.
ANALYSIS : Existing law, AB 970 (Ducheny), Chapter 329,
Statutes of 2000, requires the Public Utilities Commission
(PUC) to offer differential incentives for renewable and
super clean distributed generation. The PUC established
the Self-Generation Incentive Program (SGIP) in 2001 for
this purpose.
Existing law, SB 1038 (Sher), Chapter 515, Statutes of
2002, authorizes the PUC, when setting rates or fees, to
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encourage installation of ultra-clean and low-emission
distributed generation, which is defined as generation
technologies which produce zero emissions or emissions that
meet or exceed 2007 State Air Resources Board (ARB)
emission limits.
This bill directs the AB 970 incentives to ultra-clean and
low-emission, rather than super clean, distributed
generation resources.
This bill requires the PUC, in establishing incentive
levels, to consider the amount and duration of existing
incentives, including exemption from standby tariffs,
exemption from State Department of Water Resources (DWR)
electricity procurement obligations, state and federal tax
credits, deductions, and exemptions.
This bill requires the PUC to submit a report to the
Legislature, by 1/1/06 on the costs, benefits,
environmental impacts of the incentive program.
This bill includes a 1/1/07 sunset on the SGIP program.
Existing law requires the Independent System Operator
(ISO), within six months of its approval by the Federal
Energy Regulatory Commission (i.e. in 1998), to issue a
report regarding reliability.
This bill repeals this obsolete requirement.
Background
Pursuant to the direction of AB 970 to offer incentives for
renewable and super clean distributed generation resources,
the PUC established the Self-Generation Incentive Program
(SGIP) in March 2001. 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. 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
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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).
"Super clean" is not defined in statute. SGIP doesn't
require projects to meet any exceptional emissions
standards.
For the six months July-December 2001, 129 applications had
been received by the utilities.
Last year, SB 1038 authorized the PUC to offer special rate
treatment to "ultra-clean and low-emission" distributed
generation in order to encourage early compliance with
emissions standards established by 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 DWR. Among other things,
the decision grants a complete exemption from any such
charges for distributed generation that's eligible for
financial incentives under 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.
This bill conforms the PUC's distributed generation
incentives with the Legislature's intent, reflected in SB
1038, to ensure only the cleanest, most environmentally
sound distributed generation resources are eligible for the
substantial combined ratepayer subsidies offered by the PUC
under SGIP and Decision 03-04-030.
Comments
"Super clean," the term used in AB 970, does not have any
statutory definition. Although "super clean" implies
cleaner than the typical, permitted distributed generation,
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the PUC has not required distributed generation to exceed
existing emissions standards to be eligible for incentives.
In contrast, "ultra-clean and low-emission" has a specific
statutory definition, meeting the stringent 2007 ARB
emissions standards, which approximate the emissions of an
advanced central station power plant, plus an efficiency
standard, and operating by December 31, 2005.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
Increased costs to the PUC are probably under $120,000 for
the report and program administration 2004-05 through
2006-07. Utilities' Reimbursement Account revenues are
derived from an annual fee imposed on utilities.
Therefore, any increased costs to the PUC should be
recovered through fee revenues.
NC:mel 5/21/03 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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