Amended in Senate August 18, 2016

Amended in Assembly April 14, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 1637

Introduced by begin delete Committee on Budget (Assembly Members Ting (Chair), Travis Allen, Bigelow, Bloom, Bonta, Campos, Chávez, Chiu, Cooper, Gordon, Grove, Harper, Holden, Irwin, Kim, Lackey, McCarty, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Rodriguez, Thurmond, Wilk, and Williams) end delete begin insert Assembly Member Low end insert

begin insert

(Coauthors: Assembly Members Gatto, Gordon, Irwin, and Mullin)

end insert

January 7, 2016

An act begin delete relating to the Budget Act of 2016. end delete begin insert to amend Sections 379.6 and 2827.10 of the Public Utilities Code, relating to energy. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 1637, as amended, begin delete Committee on Budget end delete   begin insert Low end insert . begin delete Budget Act of 2016. end delete begin insert Energy: greenhouse gas reduction. end insert

begin insert

(1) Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities. Existing law requires the PUC to require the administration, until January 1, 2021, of a self-generation incentive program for distributed generation resources and energy storage technologies. Existing law authorizes the PUC, in consultation with the State Energy Resources Conservation and Development Commission, to authorize the annual collection of not more than the amount authorized for the program in the 2008 calendar year.

end insert begin insert

This bill would increase the maximum annual collection the PUC may authorize for the program to double the amount authorized for the program in the 2008 calendar year.

end insert begin insert

(2) Existing law requires an electrical corporation to file with the PUC a standard tariff providing for net energy meeting for eligible fuel cell customer-generators and make the tariff available, on a first-come-first-served basis, until the total cumulative rated generating capacity of the eligible fuel cell electrical generating facilities receiving service pursuant to the tariff reaches a level equal to the electrical corporation’s proportionate share of a statewide limitation of 500 megawatts cumulative rated generation capacity served (program cap). Existing law requires the eligible fuel cell customer-generator to meet certain requirements, including requirements that the customer-generator uses: (A) a fuel cell electrical generation facility with a capacity of not more than one megawatt and (B) technology the PUC has determined will achieve certain reductions in emissions of greenhouse gases. Existing law provides that fuel cell electrical generation facilities are not eligible for the tariff unless the facilities commence operation prior to January 1, 2017.

end insert begin insert

This bill would increase the program cap by authorizing 500 megawatts in addition to the total installed capacity as of January 1, 2017. The bill would increase to 5 megawatts the maximum amount of generation capacity for a fuel cell electrical generation facility in the program. The bill would require, by March 31, 2017, the State Air Resources Board, in consultation with the Energy Commission, to establish a schedule of annual greenhouse gas emissions reduction standards, as specified, for fuel cell electrical generation resources and would require the PUC to determine if the technology used by the eligible fuel cell customer-generator will achieve those standards. The bill would require the fuel cell electrical generation resource to comply with emission standards adopted by the State Air Resources Board under the distributed generation certification program.

end insert begin insert

This bill would provide that fuel cell electrical generation facilities are not eligible for the tariff unless the facilities commence operation on or before December 31, 2021.

end insert begin delete

This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2016.

end delete

Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

end insert

begin insert Section 379.6 of the end insert begin insert Public Utilities Code end insert begin insert is
amended to read: end insert

379.6.  

(a) (1) It is the intent of the Legislature that the
self-generation incentive program increase deployment of
distributed generation and energy storage systems to facilitate the
integration of those resources into the electrical grid, improve
efficiency and reliability of the distribution and transmission
system, and reduce emissions of greenhouse gases, peak demand,
and ratepayer costs. It is the further intent of the Legislature that
the commission, in future proceedings, provide for an equitable
distribution of the costs and benefits of the program.

(2) The commission, in consultation with the Energy
Commission, may authorize the annual collection of not more than
begin insert double end insert the amount authorized for the self-generation incentive
program in the 2008 calendar year, through December 31, 2019.
The commission shall require the administration of the program
for distributed energy resources originally established pursuant to
Chapter 329 of the Statutes of 2000 until January 1, 2021. On
January 1, 2021, the commission shall provide repayment of all
unallocated funds collected pursuant to this section to reduce
ratepayer costs.

(3) The commission shall administer solar technologies
separately, pursuant to the California Solar Initiative adopted by
the commission in Decisions 05-12-044 and 06-01-024, as modified
by Article 1 (commencing with Section 2851) of Chapter 9 of Part
2 of Division 1 of this code and Chapter 8.8 (commencing with
Section 25780) of Division 15 of the Public Resources Code.

(b) (1) Eligibility for incentives under the self-generation
incentive program shall be limited to distributed energy resources
that the commission, in consultation with the State Air Resources
Board, determines will achieve reductions in emissions of
greenhouse gases pursuant to the California Global Warming
Solutions Act of 2006 (Division 25.5 (commencing with Section
38500) of the Health and Safety Code).

(2) On or before July 1, 2015, the commission shall update the
factor for avoided greenhouse gas emissions based on the most
recent data available to the State Air Resources Board for
greenhouse gas emissions from electricity sales in the
self-generation incentive program administrators’ service areas as
well as current estimates of greenhouse gas emissions over the
useful life of the distributed energy resource, including
consideration of the effects of the California Renewables Portfolio
Standard.

(c) Eligibility for the funding of any combustion-operated
distributed generation projects using fossil fuel is subject to all of
the following conditions:

(1) An oxides of nitrogen (NO_x) emissions rate standard of 0.07
pounds per megawatthour and a minimum efficiency of 60 percent,
or any other NO_x emissions rate and minimum efficiency standard
adopted by the State Air Resources Board. A minimum efficiency
of 60 percent shall be measured as useful energy output divided
by fuel input. The efficiency determination shall be based on 100
percent load.

(2) Combined heat and power units that meet the 60-percent
efficiency standard may take a credit to meet the applicable NO_x
emissions standard of 0.07 pounds per megawatthour. Credit shall
be at the rate of one megawatthour for each 3,400,000 British
thermal units (Btus) of heat recovered.

(3) The customer receiving incentives shall adequately maintain
and service the combined heat and power units so that during
operation the system continues to meet or exceed the efficiency
and emissions standards established pursuant to paragraphs (1)
and (2).

(4) Notwithstanding paragraph (1), a project that does not meet
the applicable NO_x emissions standard is eligible if it meets both
of the following requirements:

(A) The project operates solely on waste gas. The commission
shall require a customer that applies for an incentive pursuant to
this paragraph to provide an affidavit or other form of proof that
specifies that the project shall be operated solely on waste gas.
Incentives awarded pursuant to this paragraph shall be subject to
refund and shall be refunded by the recipient to the extent the
project does not operate on waste gas. As used in this paragraph,
“waste gas” means natural gas that is generated as a byproduct of
petroleum production operations and is not eligible for delivery
to the utility pipeline system.

(B) The air quality management district or air pollution control
district, in issuing a permit to operate the project, determines that
operation of the project will produce an onsite net air emissions
benefit compared to permitted onsite emissions if the project does
not operate. The commission shall require the customer to secure
the permit prior to receiving incentives.

(d) In determining the eligibility for the self-generation incentive
program, minimum system efficiency shall be determined either
by calculating electrical and process heat efficiency as set forth in
Section 216.6, or by calculating overall electrical efficiency.

(e) Eligibility for incentives under the program shall be limited
to distributed energy resource technologies that the commission
determines meet all of the following requirements:

(1) The distributed energy resource technology shifts onsite
energy use to off-peak time periods or reduces demand from the
grid by offsetting some or all of the customer’s onsite energy load,
including, but not limited to, peak electric load.

(2) The distributed energy resource technology is commercially
available.

(3) The distributed energy resource technology safely utilizes
the existing transmission and distribution system.

(4) The distributed energy resource technology improves air
quality by reducing criteria air pollutants.

(f) Recipients of the self-generation incentive program funds
shall provide relevant data to the commission and the State Air
Resources Board, upon request, and shall be subject to onsite
inspection to verify equipment operation and performance,
including capacity, thermal output, and usage to verify criteria air
pollutant and greenhouse gas emissions performance.

(g) In administering the self-generation incentive program, the
commission shall determine a capacity factor for each distributed
generation system energy resource technology in the program.

(h) (1) In administering the self-generation incentive program,
the commission may adjust the amount of rebates and evaluate
other public policy interests, including, but not limited to,
ratepayers, energy efficiency, peak load reduction, load
management, and environmental interests.

(2) The commission shall consider the relative amount and the
cost of greenhouse gas emissions reductions, peak demand
reductions, system reliability benefits, and other measurable factors
when allocating program funds between eligible technologies.

(i) The commission shall ensure that distributed generation
resources are made available in the program for all ratepayers.

(j) In administering the self-generation incentive program, the
commission shall provide an additional incentive of 20 percent
from existing program funds for the installation of eligible
distributed generation resources manufactured in California.

(k) The costs of the program adopted and implemented pursuant
to this section shall not be recovered from customers participating
in the California Alternate Rates for Energy (CARE) program.

(l) The commission shall evaluate the overall success and impact
of the self-generation incentive program based on the following
performance measures:

(1) The amount of reductions of emissions of greenhouse gases.

(2) The amount of reductions of emissions of criteria air
pollutants measured in terms of avoided emissions and reductions
of criteria air pollutants represented by emissions credits secured
for project approval.

(3) The amount of energy reductions measured in energy value.

(4) The amount of reductions of customer peak demand.

(5) The ratio of the electricity generated by distributed energy
resource generation projects receiving incentives from the program
to the electricity capable of being produced by those projects,
commonly known as a capacity factor.

(6) The value to the electrical transmission and distribution
system measured in avoided costs of transmission and distribution
upgrades and replacement.

(7) The ability to improve onsite electricity reliability as
compared to onsite electricity reliability before the self-generation
incentive program technology was placed in service.

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begin insert SEC. 2. end insert   

end insert

begin insert Section 2827.10 of the end insert begin insert Public Utilities Code end insert begin insert is amended
to read: end insert

2827.10.  

(a) As used in this section, the following terms have
the following meanings:

(1) “Electrical corporation” means an electrical corporation, as
defined in Section 218.

(2) “Eligible fuel cell electrical generating facility” means a
facility that includes the following:

(A) Integrated powerplant systems containing a stack, tubular
array, or other functionally similar configuration used to
electrochemically convert fuel to electricity.

(B) An inverter and fuel processing system where necessary.

(C) Other plant equipment, including heat recovery equipment,
necessary to support the plant’s operation or its energy conversion.

(3) (A) “Eligible fuel cell customer-generator” means a
customer of an electrical corporation that meets all the following
criteria:

(i) Uses a fuel cell electrical generating facility with a begin insert generating end insert
capacity of not more than begin delete one megawatt end delete begin insert five megawatts end insert that is
located on or adjacent to the customer’s owned, leased, or rented
premises, is interconnected and operates in parallel with the
electrical grid while the grid is operational or in a grid independent
mode when the grid is nonoperational, and is sized to offset part
or all of the eligible fuel cell customer-generator’s own electrical
requirements.

(ii) Is the recipient of local, state, or federal funds, or who
self-finances projects designed to encourage the development of
eligible fuel cell electrical generating facilities.

(iii) Uses technology the commission has determined will
achieve reductions in emissions of greenhouse gases pursuant to
subdivision begin delete (b), and meets the emission requirements for eligibility
for funding set forth in subdivision (c), of Section 379.6. end delete begin insert (b). end insert

begin insert

(B) Complies with the emissions standards adopted by the State
Air Resources Board pursuant to the distributed generation
certification program requirements of Section 94203 of Title 17
of the California Code of Regulations, or any successor regulation.

end insert begin delete

(B)

end delete

begin insert (C) end insert  For purposes of this paragraph, a person or entity is a
customer of the electrical corporation if the customer is physically
located within the service territory of the electrical corporation
and receives bundled service, distribution service, or transmission
service from the electrical corporation.

(4) “Net energy metering” means measuring the difference
between the electricity supplied through the electrical grid and the
difference between the electricity generated by an eligible fuel cell
electrical generating facility and fed back to the electrical grid over
a 12-month period as described in subdivision (e). Net energy
metering shall be accomplished using a time-of-use meter capable
of registering the flow of electricity in two directions. If the existing
electrical meter of an eligible fuel cell customer-generator is not
capable of measuring the flow of electricity in two directions, the
eligible fuel cell customer-generator shall be responsible for all
expenses involved in purchasing and installing a meter that is able
to measure electricity flow in two directions. If an additional meter
or meters are installed, the net energy metering calculation shall
yield a result identical to that of a time-of-use meter.

begin insert

(b) (1) Not later than March 31, 2017, the State Air Resources
Board, in consultation with the Energy Commission, shall establish
a schedule of annual greenhouse gas emissions reduction standards
for a fuel cell electrical generation resource for purposes of clause
(iii) of subparagraph (A) of paragraph (3) of subdivision (a) and
shall update the schedule every three years with applicable
standards for each intervening year.

end insert begin insert

(2) The greenhouse gas emissions reduction standards shall
ensure that each fuel cell electrical generation resource, for
purposes of clause (iii) of subparagraph (A) of paragraph (3) of
subdivision (a), reduces greenhouse gas emissions compared to
the electrical grid resources, including renewable resources, that
the fuel cell electrical generation resource displaces, accounting
for both procurement and operation of the electrical grid.

end insert begin delete

(b)

end delete

begin insert (c) end insert  (1) Every electrical corporation, not later than March 1,
2004, shall file with the commission a standard tariff providing
for net energy metering for eligible fuel cell customer-generators,
consistent with this section. Subject to the limitation in subdivision
begin delete (f), end delete begin insert (g), end insert every electrical corporation shall make this tariff available
to eligible fuel cell customer-generators upon request, on a
first-come-first-served basis, until the total cumulative rated
generating capacity of the eligible fuel cell electrical generating
facilities receiving service pursuant to the begin delete tariff end delete begin insert tariff, in addition
to the installed capacity as of January 1, 2017, end insert reaches a level
equal to its proportionate share of a statewide limitation of 500
megawatts cumulative rated generation capacity served under this
section. The proportionate share shall be calculated based on the
ratio of the electrical corporation’s peak demand compared to the
total statewide peak demand.

(2) To continue the growth of the market for onsite electrical
generation using fuel cells, the commission may review and
incrementally raise the limitation established in paragraph (1) on
the total cumulative rated generating capacity of the eligible fuel
cell electrical generating facilities receiving service pursuant to
the tariff in paragraph (1).

begin delete

(c)

end delete

begin insert (d) end insert  In determining the eligibility for the cumulative rated
generating capacity within an electrical corporation’s service
territory, preference shall be given to facilities that, at the time of
installation, are located in a community with significant exposure
to air contaminants or localized air contaminants, or both,
including, but not limited to, communities of minority populations
or low-income populations, or both, based on the ambient air
quality standards established pursuant to Division 26 (commencing
with Section 39000) of the Health and Safety Code.

begin delete

(d)

end delete

begin insert (e) end insert  (1) Each net energy metering contract or tariff shall be
identical, with respect to rate structure, all retail rate components,
and any monthly charges, to the contract or tariff to which the
customer would be assigned if the customer was not an eligible
fuel cell customer-generator. Any new or additional demand
charge, standby charge, customer charge, minimum monthly
charge, interconnection charge, or other charge that would increase
an eligible fuel cell customer-generator’s costs beyond those of
other customers in the rate class to which the eligible fuel cell
customer-generator would otherwise be assigned are contrary to
the intent of the Legislature in enacting this section, and shall not
form a part of net energy metering tariffs.

(2) The commission shall authorize an electrical corporation to
charge a fuel cell customer-generator a fee based on the cost to
the utility associated with providing interconnection inspection
services for that fuel cell customer-generator.

begin delete

(e)

end delete

begin insert (f) end insert  The net metering calculation shall be made by measuring
the difference between the electricity supplied to the eligible fuel
cell customer-generator and the electricity generated by the eligible
fuel cell customer-generator and fed back to the electrical grid
over a 12-month period. The following rules shall apply to the
annualized metering calculation:

(1) The eligible fuel cell customer-generator shall, at the end
of each 12-month period following the date of final interconnection
of the eligible fuel cell electrical generating facility with an
electrical corporation, and at each anniversary date thereafter, be
billed for electricity used during that period. The electrical
corporation shall determine if the eligible fuel cell
customer-generator was a net consumer or a net producer of
electricity during that period. For purposes of determining if the
eligible fuel cell customer-generator was a net consumer or a net
producer of electricity during that period, the electrical corporation
shall aggregate the electrical load of the meters located on the
property where the eligible fuel cell electrical generating facility
is located and on all property adjacent or contiguous to the property
on which the facility is located, if those properties are solely
owned, leased, or rented by the eligible fuel cell
customer-generator. Each aggregated account shall be billed and
measured according to a time-of-use rate schedule.

(2) At the end of each 12-month period, where the electricity
supplied during the period by the electrical corporation exceeds
the electricity generated by the eligible fuel cell customer-generator
during that same period, the eligible fuel cell customer-generator
is a net electricity consumer and the electrical corporation shall
be owed compensation for the eligible fuel cell
customer-generator’s net kilowatthour consumption over that same
period. The compensation owed for the eligible fuel cell
customer-generator’s consumption shall be calculated as follows:

(A) The generation charges for any net monthly consumption
of electricity shall be calculated according to the terms of the tariff
to which the same customer would be assigned to or be eligible
for if the customer was not an eligible fuel cell customer-generator.
When the eligible fuel cell customer-generator is a net generator
during any discrete time-of-use period, the net kilowatthours
produced shall be valued at the same price per kilowatthour as the
electrical corporation would charge for retail kilowatthour sales
for generation, exclusive of any surcharges, during that same
time-of-use period. If the eligible fuel cell customer-generator’s
time-of-use electrical meter is unable to measure the flow of
electricity in two directions, paragraph (4) of subdivision (a) shall
apply. All other charges, other than generation charges, shall be
calculated in accordance with the eligible fuel cell
customer-generator’s applicable tariff and based on the total
kilowatthours delivered by the electrical corporation to the eligible
fuel cell customer-generator. To the extent that charges for
transmission and distribution services are recovered through
demand charges in any particular month, no standby reservation
charges shall apply in that monthly billing cycle.

(B) The net balance of moneys owed shall be paid in accordance
with the electrical corporation’s normal billing cycle.

(3) At the end of each 12-month period, where the electricity
generated by the eligible fuel cell customer-generator during the
12-month period exceeds the electricity supplied by the electrical
corporation during that same period, the eligible fuel cell
customer-generator is a net electricity producer and the electrical
corporation shall retain any excess kilowatthours generated during
the prior 12-month period. The eligible fuel cell customer-generator
shall not be owed any compensation for those excess kilowatthours.

(4) If an eligible fuel cell customer-generator terminates service
with the electrical corporation, the electrical corporation shall
reconcile the eligible fuel cell customer-generator’s consumption
and production of electricity during any 12-month period.

begin delete

(f)

end delete

begin insert (g) end insert  A fuel cell electrical generating facility shall not be eligible
for the tariff unless it commences operation begin delete prior to January 1,
2017, end delete begin insert on or before December 31, 2021, end insert unless a later enacted
statute, that is chaptered begin delete before January 1, 2017, end delete begin insert on or before
December 31, 2021, end insert extends this eligibility commencement date.
The tariff shall remain in effect for an eligible fuel cell electrical
generating facility that commences operation pursuant to the tariff
begin delete prior to January 1, 2017. end delete begin insert on or before December 31, 2021. end insert A fuel
cell customer-generator shall be eligible for the tariff established
pursuant to this section only for the operating life of the eligible
fuel cell electrical generating facility.

begin delete

SECTION 1.  

It is the intent of the Legislature to enact statutory
changes relating to the 2016 Budget Act.

end delete

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CORRECTIONS:

Heading--Line 7.

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