BILL ANALYSIS Ó
AB 1979
Page 1
Date of Hearing: April 20, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
AB 1979
(Bigelow) - As Amended April 11, 2016
SUBJECT: Renewable feed-in tariff: hydroelectric facilities
SUMMARY: Revises the requirement that an electric generation
facility have an effective capacity of not more than three
megawatts (MW) to also authorize a hydroelectric facility with a
nameplate generating capacity of up to five MW. Specifically,
this bill
1)Increases the current limit on eligibility for entering into a
standard contract from three MW to five MW if:
a) It delivers no more than three MW to the grid in an
hour.
b) It complies with the electrical corporation's Electric
Rule 21 tariff or other distribution access tariff.
c) Payment is made, as specified, and no payment is made
for any generation in excess of three megawatts in any
hour.
AB 1979
Page 2
EXISTING LAW:
1)Requires all investor owned utilities (IOUs) and publicly
owned utilities (POUs) that serve more than 75,000 retail
customers, to develop a standard contract or tariff (aka
feed-in-tariff or FIT) available for renewable energy
facilities up to three MW. Statewide participation is capped
at 750 MWs. (Public Utilities Code Sections 399.20 and 387.8)
2)Directs the electrical corporations to develop standard
contract terms and conditions that reflect the operational
characteristics of the projects, and to provide a streamlined
contracting process. (Public Utilities Code Section 399.20)
3)Counts renewable energy generation FIT contracts to qualify
for credit toward and IOUs Renewable Portfolio Standard (RPS)
goals and resource adequacy requirements. (Public Utilities
Code Section 399.20)
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement: "The Feed-In Tariff program was
established to incentivize small renewable power generation.
The Feed-In Tariff program has proven to be underutilized,
especially with regards to baseload power like small hydro.
There are only about 14 small hydropower facilities throughout
California that have a nameplate value between 3-5MW, are
certified renewable, and that might otherwise be eligible for
the renewable Feed-In Tariff. By narrowly expanding
eligibility for the Feed-In Tariff program, some of these
facilities will be able to participate as long as they commit
to generating less than 3 MW. This provides an essential
AB 1979
Page 3
lifeline for some of these small hydropower companies."
2)Background: Feed-In Tariffs (FITs) are a popular means of
rapidly growing the market for renewable energy almost
everywhere in the world. A FIT is a contract that provides a
guaranteed fixed payment for the energy produced using a
standard contract. AB 1969 (Yee), Chapter 731, Statutes of
2006, established California's first FIT program authorizing
the purchase of up to 480 MW of renewable generating capacity
from renewable facilities smaller than 1.5 MW. The AB 1969
FIT program set the price paid to small generators at a price
comparable to the price of electricity generated using natural
gas plus the value of some environmental attributes.
In 2009, SB 32 (Negrete-McLeod), Chapter 328, allowed FIT
contracts for small renewable generation facilities (less than
3 MW) because the structure of RPS solicitations generally
excluded smaller projects, smaller facilities could be located
within communities close to where the electricity would be
used, and could be connected to the utilities local electric
distribution system (rather than the statewide electric
transmission system).
The California Public Utilities Commission (CPUC) established
SB 32's price for electricity contracts based on three FIT
product types: baseload, peaking as-available, and
non-peaking as-available. The CPUC also adopted a two-month
price adjustment mechanism that may increase or decrease the
price for each product type every two months based on the
market response, and allows each accepted project to be paid a
time-of-delivery adjustment based on the generator's actual
energy delivery profile and the individual utility's
time-of-delivery factors.
The CPUC allocates a certain number of MW to each IOU as part
of the program. The CPUC requires that each IOU offer the
standard contract to eligible generators until its cap it
reached. The CPUC further delineates that each IOU maintain a
AB 1979
Page 4
separate application queue, with separate payment rates, for
each of the following three categories of: peaking
as-available (e.g., solar), non-peaking as-available (e.g.,
wind), and baseload (e.g., small hydro).
3)Interconnection Rule 21: The CPUC requires the IOUs to
implement a rule for how generation facilities connect to the
electric distribution system to ensure that the electric
distribution system can be operated safely and reliably, with
no adverse effects to electricity consumers or utility
workers. This rule is known as "Rule 21." The maximum size
of a generation facility that can interconnect under Rule 21
without triggering additional study for safety and reliability
is when the aggregate Generating Facility capacity on the Line
Section is less than 15% of Line Section peak load for all
line sections bounded by automatic sectionalizing devices.
Distribution lines generally have a capacity of 20 MW. SB 32
set the maximum size of the generating facility at three MW,
which is 15% of the distribution line capacity and consistent
with Rule 21 maximum allowable size without triggering
additional study.
4)An existing hydroelectric facility: Public Utilities Code
Section 399.20(b)(1) limits eligibility to projects with "an
effective capacity of not more than three megawatts." The
CPUC, in Decision 12-05-035, stated that this capacity shall
be determined by the "nameplate" - the metal plate attached to
a generator by the manufacturer listing model number and other
details. If a hydroelectric generator has a nameplate of over
three MW it is prohibited from participating in the FIT even
if generator will never actually run above the three MW
threshold.
The Utica Water and Power Authority (UWPA) owns and operates a
small hydroelectric generator with a nameplate rating of 3.6
MW. The facility was originally built by Pacific Gas and
Electric (PG&E) at a time when PG&E had more water available
for generation. Due to permanent reductions of UWPA's water
AB 1979
Page 5
supplies, made worse by drought, the facility rarely runs
above 2.5 MW and can easily limit generation to three MW.
Despite this, the facility is ineligible to participate in
this important program aimed at promoting these exact types of
small renewable generators simply because of the number
printed on the nameplate. UWPA serves predominately
disadvantaged communities and the agency has been hit hard by
the drought. The additional revenue from the renewable FIT
will ensure reliable water supply and continued generation of
the exact type of renewable energy that the state sought to
incentivize with the RPS and the renewable FIT.
The universe of other hydroelectric facilities that may be
similarly situation is unknown. Without such information it is
not clear if there is only one such project or if this will
dramatically increase the number hydroelectric projects that
might be developed in order to meet this threshold.
The author may wish to consider an amendment that would limit
the applicability to a single hydroelectric facility that is
not under a long term contract prior to January 1, 2017 and
that is RPS eligible.
5)Related Legislation:
AB 1923 (Wood) 2016: Similarly expands the 3MW limit for
biomass facilities. Pending in the Assembly Appropriations
Committee.
6)Suggested Amendments:
SECTION 1. Section 399.20 of the Public Utilities Code is
amended to read:
AB 1979
Page 6
399.20. (a) It is the policy of this state and the intent of
the Legislature to encourage electrical generation from
eligible renewable energy resources.
(b) As used in this section, "electric generation facility"
means an electric generation facility located within the
service territory of, and developed to sell electricity to, an
electrical corporation that meets all of the following
criteria:
(1) Has an effective capacity of not more than three megawatts
or is a hydroelectric facility with a nameplate generating
capacity of up to five megawatts if the hydroelectric facility
meets the following conditions:
(A) It delivers no more than three megawatts to the grid in an
hour at any time .
(B) It complies with the electrical corporation's Electric
Rule 21 tariff or other distribution access tariff.
(C) Payment is made pursuant to paragraph (1) of subdivision
(d) and no payment is made for any generatio n deliveries in
excess of three megawatts in any hour.
(D) Is an existing hydroelectric facility not under a long
term contract as of January 1, 2017 and eligible under PUC
Section 399.12(e)
(2) Is interconnected and operates in parallel with the
electrical transmission and distribution grid.
(3) Is strategically located and interconnected to the
electrical transmission and distribution grid in a manner that
optimizes the deliverability of electricity generated at the
facility to load centers.
(4) Is an eligible renewable energy resource.
(c) Every electrical corporation shall file with the
commission a standard tariff for electricity purchased from an
electric generation facility. The commission may modify or
adjust the requirements of this section for any electrical
corporation with less than 100,000 service connections, as
individual circumstances merit.
(d) (1) The tariff shall provide for payment for every
kilowatthour of electricity purchased from an electric
generation facility for a period of 10, 15, or 20 years, as
AB 1979
Page 7
authorized by the commission. The payment shall be the market
price determined by the commission pursuant to paragraph (2)
and shall include all current and anticipated environmental
compliance costs, including, but not limited to, mitigation of
emissions of greenhouse gases and air pollution offsets
associated with the operation of new generating facilities in
the local air pollution control or air quality management
district where the electric generation facility is located.
(2) The commission shall establish a methodology to determine
the market price of electricity for terms corresponding to the
length of contracts with an electric generation facility, in
consideration of the following:
(A) The long-term market price of electricity for fixed price
contracts, determined pursuant to an electrical corporation's
general procurement activities as authorized by the
commission.
(B) The long-term ownership, operating, and fixed-price fuel
costs associated with fixed-price electricity from new
generating facilities.
(C) The value of different electricity products including
baseload, peaking, and as-available electricity.
(3) The commission may adjust the payment rate to reflect the
value of every kilowatthour of electricity generated on a
time-of-delivery basis.
(4) The commission shall ensure, with respect to rates and
charges, that ratepayers that do not receive service pursuant
to the tariff are indifferent to whether a ratepayer with an
electric generation facility receives service pursuant to the
tariff.
(e) An electrical corporation shall provide expedited
interconnection procedures to an electric generation facility
located on a distribution circuit that generates electricity
at a time and in a manner so as to offset the peak demand on
the distribution circuit, if the electrical corporation
determines that the electric generation facility will not
adversely affect the distribution grid. The commission shall
consider and may establish a value for an electric generation
facility located on a distribution circuit that generates
electricity at a time and in a manner so as to offset the peak
AB 1979
Page 8
demand on the distribution circuit.
(f) (1) An electrical corporation shall make the tariff
available to the owner or operator of an electric generation
facility within the service territory of the electrical
corporation, upon request, on a first-come-first-served basis,
until the electrical corporation meets its proportionate share
of a statewide cap of 750 megawatts cumulative rated
generation capacity served under this section and Section
387.6. 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) By June 1, 2013, the commission shall, in addition to the
750 megawatts identified in paragraph (1), direct the
electrical corporations to collectively procure at least 250
megawatts of cumulative rated generating capacity from
developers of bioenergy projects that commence operation on or
after June 1, 2013. The commission shall, for each electrical
corporation, allocate shares of the additional 250 megawatts
based on the ratio of each electrical corporation's peak
demand compared to the total statewide peak demand. In
implementing this paragraph, the commission shall do all of
the following:
(A) Allocate the 250 megawatts identified in this paragraph
among the electrical corporations based on the following
categories:
(i) For biogas from wastewater treatment, municipal organic
waste diversion, food processing, and codigestion, 110
megawatts.
(ii) For dairy and other agricultural bioenergy, 90 megawatts.
(iii) For bioenergy using byproducts of sustainable forest
management, 50 megawatts. Allocations under this category
shall be determined based on the proportion of bioenergy that
sustainable forest management providers derive from
sustainable forest management in fire threat treatment areas,
as designated by the Department of Forestry and Fire
Protection.
(B) Direct the electrical corporations to develop standard
contract terms and conditions that reflect the operational
characteristics of the projects, and to provide a streamlined
AB 1979
Page 9
contracting process.
(C) Coordinate, to the maximum extent feasible, any incentive
or subsidy programs for bioenergy with the agencies listed in
subparagraph (A) of paragraph (3) in order to provide maximum
benefits to ratepayers and to ensure that incentives are used
to reduce contract prices.
(D) The commission shall encourage gas and electrical
corporations to develop and offer programs and services to
facilitate development of in-state biogas for a broad range of
purposes.
(3) (A) The commission, in consultation with the State Energy
Resources Conservation and Development Commission, the State
Air Resources Board, the Department of Forestry and Fire
Protection, the Department of Food and Agriculture, and the
Department of Resources Recycling and Recovery, may review the
allocations of the 250 additional megawatts identified in
paragraph (2) to determine if those allocations are
appropriate.
(B) If the commission finds that the allocations of the 250
additional megawatts identified in paragraph (2) are not
appropriate, the commission may reallocate the 250 megawatts
among the categories established in subparagraph (A) of
paragraph (2).
(4) For the purposes of this subdivision, "bioenergy" means
biogas and biomass.
(g) The electrical corporation may make the terms of the
tariff available to owners and operators of an electric
generation facility in the form of a standard contract subject
to commission approval.
(h) Every kilowatthour of electricity purchased from an
electric generation facility shall count toward meeting the
electrical corporation's renewables portfolio standard annual
procurement targets for purposes of paragraph (1) of
subdivision (b) of Section 399.15.
(i) The physical generating capacity of an electric generation
facility shall count toward the electrical corporation's
resource adequacy requirement for purposes of Section 380.
(j) (1) The commission shall establish performance standards
for any electric generation facility that has a capacity
AB 1979
Page 10
greater than one megawatt to ensure that those facilities are
constructed, operated, and maintained to generate the expected
annual net production of electricity and do not impact system
reliability.
(2) The commission may reduce the three megawatt capacity
limitation of paragraph (1) of subdivision (b), but not the
limitation for a hydroelectric facility allowed pursuant to
(b)(1)(D), if the commission finds that a reduced capacity
limitation is necessary to maintain system reliability within
that electrical corporation's service territory.
(k) (1) Any owner or operator of an electric generation
facility that received ratepayer-funded incentives in
accordance with Section 379.6 of this code, or with Section
25782 of the Public Resources Code, and participated in a net
metering program pursuant to Sections 2827, 2827.9, and
2827.10 of this code prior to January 1, 2010, shall be
eligible for a tariff or standard contract filed by an
electrical corporation pursuant to this section.
(2) In establishing the tariffs or standard contracts pursuant
to this section, the commission shall consider
ratepayer-funded incentive payments previously received by the
generation facility pursuant to Section 379.6 of this code or
Section 25782 of the Public Resources Code. The commission
shall require reimbursement of any funds received from these
incentive programs to an electric generation facility, in
order for that facility to be eligible for a tariff or
standard contract filed by an electrical corporation pursuant
to this section, unless the commission determines ratepayers
have received sufficient value from the incentives provided to
the facility based on how long the project has been in
operation and the amount of renewable electricity previously
generated by the facility.
(3) A customer that receives service under a tariff or
contract approved by the commission pursuant to this section
is not eligible to participate in any net metering program.
(l) An owner or operator of an electric generation facility
electing to receive service under a tariff or contract
AB 1979
Page 11
approved by the commission shall continue to receive service
under the tariff or contract until either of the following
occurs:
(1) The owner or operator of an electric generation facility
no longer meets the eligibility requirements for receiving
service pursuant to the tariff or contract.
(2) The period of service established by the commission
pursuant to subdivision (d) is completed.
(m) Within 10 days of receipt of a request for a tariff
pursuant to this section from an owner or operator of an
electric generation facility, the electrical corporation that
receives the request shall post a copy of the request on its
Internet Web site. The information posted on the Internet Web
site shall include the name of the city in which the facility
is located, but information that is proprietary and
confidential, including, but not limited to, address
information beyond the name of the city in which the facility
is located, shall be redacted.
(n) An electrical corporation may deny a tariff request
pursuant to this section if the electrical corporation makes
any of the following findings:
(1) The electric generation facility does not meet the
requirements of this section.
(2) The transmission or distribution grid that would serve as
the point of interconnection is inadequate.
(3) The electric generation facility does not meet all
applicable state and local laws and building standards and
utility interconnection requirements.
(4) The aggregate of all electric generating facilities on a
distribution circuit would adversely impact utility operation
and load restoration efforts of the distribution system.
(o) Upon receiving a notice of denial from an electrical
corporation, the owner or operator of the electric generation
facility denied a tariff pursuant to this section shall have
the right to appeal that decision to the commission.
(p) In order to ensure the safety and reliability of electric
generation facilities, the owner of an electric generation
facility receiving a tariff pursuant to this section shall
provide an inspection and maintenance report to the electrical
AB 1979
Page 12
corporation at least once every other year. The inspection and
maintenance report shall be prepared at the owner's or
operator's expense by a California-licensed contractor who is
not the owner or operator of the electric generation facility.
A California-licensed electrician shall perform the inspection
of the electrical portion of the generation facility.
(q) The contract between the electric generation facility
receiving the tariff and the electrical corporation shall
contain provisions that ensure that construction of the
electric generating facility complies with all applicable
state and local laws and building standards, and utility
interconnection requirements.
(r) (1) All construction and installation of facilities of the
electrical corporation, including at the point of the output
meter or at the transmission or distribution grid, shall be
performed only by that electrical corporation.
(2) All interconnection facilities installed on the electrical
corporation's side of the transfer point for electricity
between the electrical corporation and the electrical
conductors of the electric generation facility shall be owned,
operated, and maintained only by the electrical corporation.
The ownership, installation, operation, reading, and testing
of revenue metering equipment for electric generating
facilities shall only be performed by the electrical
corporation.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file.
AB 1979
Page 13
Opposition
None on file.
Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083