BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1015 - Morrow Hearing Date:
April 22, 2003 S
As Introduced: February 21, 2003 FISCAL B
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DESCRIPTION
Under existing law (SB 28X (Sher), Chapter 12, Statutes of
2001), distributed generation (DG) projects under five
megawatts, meeting established air pollution standards, and
installed by June 1, 2003 are eligible for a waiver of utility
standby charges until 2011.
This bill removes the installation deadline for these projects,
making any such project installed between 2004 and 2011 eligible
for a waiver of utility standby charges until 2011.
BACKGROUND
DG is typically considered to be a site-specific generation
resource which is owned by the customer and used to meet some or
all of that customer's energy needs, including electricity and,
in many applications, heating.
Examples of DG units range from a residential rooftop solar
array to a collection of large combustion turbines at a
commercial office building or industrial facility. DG can be
used for reliability back-up (standby or emergency generation),
to meet base load requirements, to meet peaking requirements, or
to meet all on-site requirements, and sell excess power to
adjacent sites ("over the fence" transactions).
For a customer with a DG unit that is connected to the utility
distribution system, on-site generation is complemented by power
purchased through, and delivered by, the utility. Depending on
the reliability, capacity and purpose of the DG unit, the
customer may, at various times, buy some or all of its power
from the utility, or even, in the case of solar or wind
projects, "sell" power back to the utility through a
net-metering arrangement.
Grid-connected DG customers pay a standby charge to the utility
to reserve the capacity needed to serve that customer. For DG
units meeting specified conditions, most importantly that they
be installed no later than June 1, 2003, SB 28X established a
waiver of standby charges of as long as 10 years (no standby
charges may be assessed before June 1, 2011). SB 28X also
established a shorter waiver for non-cogeneration DG units
installed by September 1, 2002 (until June 1, 2006). This bill
would extend eligibility for the waiver until 2011.
SB 28X further directed the California Public Utilities
Commission (CPUC) to establish new, cost-based standby charges
on or before January 1, 2003, so the new charges would be in
effect after the eligibility for SB 28X's interim standby charge
waiver expired. The CPUC has failed to meet this requirement
and another SB 28X requirement to produce a report by June 1,
2002 describing the method and process for establishing new
standby charges.
Instead, on April 17, the CPUC issued an order extending the
installation deadline contained in SB 28X from June 1, 2003 to
December 31, 2004 (or December 31, 2005 for projects meeting
exceptional "ultra-clean and low-emission" criteria) and further
deferred its standby charge rate design obligations.
COMMENTS
1)Standby charge history. There were two reasons for the 2003
cut-off established by this committee in SB 9X (Morrow) and
transferred to SB 28X (SB 9X originally contained a 2005
cut-off, but was amended to 2003 in this committee).
The first was to address the urgent need for additional
electric generation capacity. SB 9X was heard in committee on
March 15, 2001, at the height of the utilities' financial
crises, in the midst of rampant abuse of market power on the
part of generators and marketers, and prior to any substantive
action from the Federal Energy Regulatory Commission to
discipline the wholesale market. The waiver was justified on
the basis that it would bring needed generation quickly, so
eligibility was limited to reward a quick response. The
waiver was intended to diminish between 2001 and 2003, and
then expire.
The second reason for the 2003 cut-off was the waiver was
intended to be a stop-gap, pending the CPUC's adoption of new,
cost-based standby tariffs for DG customers. SB 28X
established a deadline of January 1, 2003 for the adoption of
these tariffs, so that they would be effective upon the
expiration of the waiver.
2)Who pays for the waiver? As long as a DG customer remains
connected to the utility distribution system, and the utility
remains obligated to serve that customer, the capacity to
serve that customer must be maintained. If a DG customer is
entirely self-sufficient and "off-grid," there is no standby
charge and there is no obligation to serve.
Like SB 28X, this bill prevents utilities from recovering the
cost of maintaining capacity for eligible DG customers in the
form of standby charges. The likely result is a proportional
increase in the distribution rates charged to customers
without eligible DG.
The author and the committee may wish to consider whether it's
appropriate to enact a long-term extension of this subsidy and
reverse SB 28X's intent that more equitable, cost-based
standby charges be established, in light of the recent actions
of the CPUC to (1) extend the waiver itself pending the
adoption of new standby charges and (2) exempt new DG
customers from the costs of Department of Water Resources
electricity contracts.
POSITIONS
Sponsor:
Senate Republican Caucus
Support:
California Manufacturers and Technology Association (if amended)
Oppose:
None on file
Lawrence Lingbloom
SB 1015 Analysis
Hearing Date: April 22, 2003