BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 796
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          AB 796 (Muratsuchi)
          As Amended  August 26, 2013
          2/3 vote.  Urgency
          |ASSEMBLY:  |     |(May 23, 2013)  |SENATE: |38-0 |(September 6,  |
          |           |     |                |        |     |2013)          |
                                    (vote not relevant)
           Original Committee Reference:    U. & C.  

           SUMMARY  :  Requires the California Energy Commission (CEC) to  
          consider the effects of sea level rise on the proposed site and  
          related facility during the certification process.

           The Senate amendments  delete the Assembly version of this bill,  
          and instead extend eligibility for cogeneration natural gas  
          rates to fuel cells that become operational before January 1,  

           EXISTING LAW  extends eligibility for a specified natural gas  
          rate to qualified fuel cells generation facilities that become  
          operational before January 1, 2014.  (Public Utilities Code  

           FISCAL EFFECT  :  Unknown

           COMMENTS  :

           1)Background  .  Current law requires that gas corporations  
            provide a rate for natural gas purchases for customers who  
            operate a fuel cell for on-site electricity generation if that  
            fuel cell meets certain criteria related to greenhouse gas and  
            pollution emissions.  The rate is the same rate that merchant  
            natural gas generation facilities and cogeneration facilities  

           2)Should fuel cells receive this rate  ?  The Legislature mandated  
            (AB 1110 (Fuentes), Chapter 508, Statutes of 2009) that  
            certain fuel cell models be eligible for natural gas at rates  
            available to cogeneration and electrical generation  
            facilities.  The original argument to allow fuel cells to  
            qualify for this gas rate was based on the reasoning that fuel  


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            cells are an efficient method of electrical production, but  
            certain models do not qualify as cogeneration technologies,  
            also known as combined-heat-and-power (CHP).  The original  
            intent for the statute was to balance the market for all  
            models and manufacturers of fuel cells by granting them all  
            the same rates for natural gas.

            Specifically, utility customers that purchase CHP fuel cell  
            models receive the benefit of this gas rate, but these same  
            rates were not offered to customers with non-CHP fuel cells.   
            By qualifying the non-CHP fuel cells for the same rate, the  
            playing field was leveled.  

           3)Fuel cell emissions  . This bill primarily impacts stationary  
            fuel cell technologies that generate power for large  
            institutions or facilities and use natural gas for fuel. In  
            comparison to natural gas plants, fuel cells generate lower  
            amounts of criteria pollutants including nitrogen oxide (NOx),  
            sulfur oxide (SOx), and particulate matter.  However, all fuel  
            cells that run on natural gas continue to produce CO2  
            emissions at levels similar to a natural gas plant. The  
            benefits from an emissions standpoint of non-CHP fuel cells  
            are the de minimis NOx, SOx, and particulate matter emissions,  
            not the carbon dioxide (CO2) emissions. 

            An analysis from the National Fuel Cell Research Center  
            (NFCRC) at University of California, Irvine found that fuel  
            cells produce 980-1080 pounds (lbs) CO2 per megawatt-hour  
            (MWh).  The fuel cell emission rate can be compared to that of  
            the average natural gas-fired generator in California, which  
            produces 960-980 lbs CO2/MWh, according to the NFCRC analysis.  

           4)Is there a cost-shift  ?  Pacific Gas and Electric (PG&E)  
            estimates that approximately $4.7 million per year is shifted  
            to other ratepayers as a result of providing this rate to fuel  
            cell facilities.

            In addition to this discount on natural gas purchases, fuel  
            cell facilities are eligible for net metering credits as a  
            result of their electricity generation.  A report on the costs  
            and benefits of net energy metering is due by October 1, 2013,  
            from the Public Utilities Commission.

           5)Additional support for fuel cells  .  In addition to the natural  


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            gas rate and the net metering credits, fuel cells customers  
            are also exempted from responsibility to contribute to  
            "nonbypassable charges."  Nonbypassable charges include  
            contributions to support discounts for low income customers  
            and incentives for customers who make certain energy  
            efficiency expenditures or acquire fuel cells or renewable  
            energy facilities. 

            Fuel cells customers are eligible for a ratepayer funded  
            incentive called the Self Generation Incentive Program.  One  
            fuel cell manufacturer has benefitted from approximately 
            $250 million in incentives through this program since 2009.

           Analysis Prepared by  :    Susan Kateley / U. & C. / (916)  

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