Amended in Assembly April 24, 2014

Amended in Assembly April 21, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1624

Introduced by Assembly Member Gordon

February 10, 2014

An act to amend Section 379.6 of the Public Utilities Code, relating to electricity.

LEGISLATIVE COUNSEL’S DIGEST

AB 1624, as amended, Gordon. Self-generation incentive program.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations, as defined. Existing law, adopted during the energy crisis of 2000-01, required the Public Utilities Commission, in consultation with the Independent System Operator and the State Energy Resources Conservation and Development Commission, to adopt initiatives, on or before March 7, 2001, to reduce demand for electricity and reduce load during peak demand periods, including differential incentives for renewable or super clean distributed generation resources. Pursuant to this requirement, the commission adopted Decision 01-03-073, dated March 27, 2001, that established program incentives for demand-responsiveness and self-generation that were modified in later decisions.

Existing law authorizes the Public Utilities Commission, 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 self-generation incentive program in the 2008 calendar year, through December 31, 2014. Existing law requires the Public Utilities Commission to require electrical corporations to administer the program for distributed energy resources originally established pursuant to the above-described law until January 1, 2016, and to separately administer solar technologies pursuant to the California Solar Initiative. Existing law requires the Public Utilities Commission to provide repayment of all unallocated funds collected for the self-generation incentive program on January 1, 2016, to reduce ratepayer costs.

begin insert

Existing law authorizes the Public Utilities Commission to allocate up to 15% of revenues received by an electrical corporation as a result of the direct allocation of greenhouse gas allowances to electrical distribution utilities for clean energy and energy efficiency projects that are administered by the electrical corporation and are not otherwise funded by other funding source.

end insert

This bill begin delete would authorize the Public Utilities Commission, 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 self-generation incentive program in the 2008 calendar year, through December 31, 2020, and end delete would require the Public Utilities Commission to require electrical corporations to administer the program for distributed energy resources originally established pursuant to the above-described begin delete former end delete law through and including December 31, 2021. The bill would require the Public Utilities Commission to begin delete provide repayment of all unallocated funds collected for the self-generation incentive program on January 1, 2022, to reduce ratepayer costs. end delete begin insert allocate $83 million from the above-described greenhouse gas allowance revenues for the self-generation incentive program. end insert The bill would require the Public Utilities Commission to evaluate the self-generation incentive program’s overall success and impact based on specified performance measures and to evaluate the self-generation incentive program’s progress toward reducing barriers to the adoption of distributed energy resources and the self-generation incentive program’s effectiveness in providing certain capabilities generally related to grid reliability. begin insert The bill would require the commission, beginning March 1, 2017, and every year thereafter for as long as the program is providing incentives, to review the level of incentives and the costs of the technologies that are receiving incentives to ensure that the program is more likely to fund those technologies that will improve the technologies’ ability to reduce greenhouse gas emission reduction costs and produce electricity at a time and in a manner that reduces the peak demand for electricity. end insert

Existing law limits eligibility for incentives under the self-generation incentive program to distributed energy resources that the Public Utilities 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.

This bill would further limit eligibility for incentives under the self-generation incentive program to distributed energy resource technologies that the Public Utilities Commission determines meet specified additional requirements. The bill would require the commission to determine a capacity factor for each distributed generation system in the program and to define a capacity factor for energy storage systems in the program as the ratio of the total hours the energy storage system is used for charging and discharging throughout the year, as specified, to the total number of hours in the year.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the program that is extended under the provisions of this bill is within the act and a decision or order of the commission implements the program requirements, a violation of these provisions would impose a state-mandated local program by expanding the definition of a crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

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

SECTION 1.  

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

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)  begin insert (A) end insert begin insert   end insert The commission, in consultation with the Energy
Commission, may authorize the annual collection of not more than
the amount authorized for the self-generation incentive program
in the 2008 calendar year, through December 31, begin delete 2020. The end delete begin insert 2014. end insert

begin insert (B) end insert begin insert   end insert begin insert The end insert commission shall require the administration of the
program for distributed energy resources originally established
pursuant to Chapter 329 of the Statutes of 2000 through and
including December 31, 2021. begin delete On January 1, 2022, the commission
shall provide repayment of all unallocated funds collected pursuant
to this section to reduce ratepayer costs. end delete

begin insert

(C) Beginning January 1, 2015, and each year thereafter until
December 31, 2021, the commission shall allocate up to
eighty-three million dollars ($83,000,000) from the funds allocated
for clean energy programs pursuant to subdivision (c) of Section
748.5 for the self-generation incentive program.

end insert begin insert

(D) Beginning January 1, 2015, the commission shall authorize
the expenditure of unallocated funds collected pursuant to
subparagraph (A) before authorizing the expenditure of funds
allocated pursuant to subparagraph (C).

end insert begin insert

(E) On January 1, 2022, all unallocated funds allocated
pursuant to subparagraph (C) shall be subject to expenditure for
the purposes of subdivision (c) of Section 748.5.

end insert

(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) Eligibility for incentives under the 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).

(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 3.4 million 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) In addition to the eligibility requirements specified in
subdivisions (b), (c), and (d), 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 is capable of
reducing demand from the grid by offsetting some or all of the
customer’s onsite energy load, including, but not limited to, peak
electric demand.

(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 reduces
emissions of greenhouse gases.

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

(f) In administering the self-generation incentive program, the
commission shall do both of the following:

(1) Determine a capacity factor for each distributed generation
system in the program.

(2) Define a capacity factor for energy storage systems in the
program as the ratio of the total hours the energy storage system
is used for charging and discharging throughout the year, including
the hours when the energy storage system is available for capacity
applications even if not actively charging or discharging, to the
total number of hours in the year.

(g) 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.

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

(i) (1) 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 from a California supplier.

(2) “California supplier” as used in this subdivision means any
sole proprietorship, partnership, joint venture, corporation, or other
business entity that manufactures eligible distributed generation
resources in California and that meets either of the following
criteria:

(A) The owners or policymaking officers are domiciled in
California and the permanent principal office, or place of business
from which the supplier’s trade is directed or managed, is located
in California.

(B) A business or corporation, including those owned by, or
under common control of, a corporation, that meets all of the
following criteria continuously during the five years prior to
providing eligible distributed generation resources to a
self-generation incentive program recipient:

(i) Owns and operates a manufacturing facility located in
California that builds or manufactures eligible distributed
generation resources.

(ii) Is licensed by the state to conduct business within the state.

(iii) Employs California residents for work within the state.

(3) For purposes of qualifying as a California supplier, a
distribution or sales management office or facility does not qualify
as a manufacturing facility.

(j) 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.

(k) (1) The commission shall evaluate the overall success and
impact of the self-generation incentive program based on the
following performance measures:

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

(B) 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.

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

(D) The amount of reductions of aggregate noncoincident
customer peak demand.

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

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

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

(2) In addition to evaluating the program based on the
performance measures specified in paragraph (1), the commission
shall also evaluate begin delete both of the following: end delete begin insert the program’s
effectiveness in providing frequency regulation, voltage support,
demand reduction, peak shaving, ramp rate control, and other
wholesale ancillary and grid reliability services. end insert

begin delete

(A) The program’s progress toward reducing barriers to the
adoption of distributed energy resources, including, but not limited
to, interconnection costs and the length of time to complete
interconnection.

(B) The program’s effectiveness in providing frequency
regulation, voltage support, demand reduction, peak shaving, ramp
rate control, and other wholesale ancillary and grid reliability
services.

end delete begin insert

(l) To ensure that the self-generation incentive program is more
likely to fund those technologies that will improve in their ability
to reduce greenhouse gas emission reduction costs and produce
electricity at a time and in a manner that reduces the peak demand
for electricity, beginning in March 1, 2017, and each year
thereafter, as long as the SGIP program is providing incentives,
the commission shall review the level of incentives and the cost of
the technologies that are receiving incentives and (1) allow
incentive eligibility for new technologies or (2) remove incentive
eligibility or reduce incentives for technologies that have received
incentives but have not reduced greenhouse gas emission reduction
costs or provided a ratepayer benefit.

end insert

SEC. 2.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.