Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt, by rule or order, (1) standards for biomethane that specify the concentrations of constituents of concern that are reasonably necessary to protect public health and ensure pipeline integrity and safety, as specified, and (2) requirements for monitoring, testing, reporting, and recordkeeping relative to those constituents of concern. Existing law requires the commission to require gas corporation tariffs to condition access to common carrier pipelines on the applicable customer meeting those standards and requirements. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and requires that these policies and programs facilitate the development of a variety of sources of in-state biomethane. The commission has adopted two decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects pursuant to which a qualifying project is entitled to a one-time payment of 50% of the interconnection costs incurred by the biomethane producer, up to a total payment of $1,500,000. Total cost of the monetary incentive program for biomethane projects is limited to $40,000,000 over the 5-year life of the program.

This bill would require the commission to modify the monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1,500,000 to $3,000,000. The bill would require the commission to increase the total available incentive limitation for a dairy cluster biomethane project to $5,000,000 and would authorize the use of incentive payments subject to this limitation for interconnection costs and costs incurred for gathering lines for transport of biogas to a centralized processing facility for the project. The bill would require the commission to extend the program, as modified, until December 31, 2021. Before the exhaustion of the funds available pursuant to the monetary incentive program, and before the expiration of the program, the bill would require the commission to consider options to promote the in-state production and distribution of biomethane, including whether to allow recovery in rates of the costs of investments to (1) facilitate direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between the natural gas transmission and distribution pipeline network and biomethane generation and collection equipment and of gathering lines for a dairy cluster biomethane project, (2) provide for the installation of utility infrastructure to achieve interconnection with facilities that generate biomethane, and (3) ensure that these investments for infrastructure are prudent and reasonable and provide a direct benefit to, and are in the interests of, all classes of ratepayers.

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 bill extends the monetary incentive program and requires action by the commission to implement certain of its requirements, and became failure to comply with these commission actions would be a crime, the bill would impose a state-mandated local program by creating a new 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.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt, by rule or order, (1) standards for biomethane that specify the concentrations of constituents of concern that are reasonably necessary to protect public health and ensure pipeline integrity and safety, as specified, and (2) requirements for monitoring, testing, reporting, and recordkeeping relative to those constituents of concern. Existing law requires the commission to require gas corporation tariffs to condition access to common carrier pipelines on the applicable customer meeting those standards and requirements. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and requires that these policies and programs facilitate the development of a variety of sources of in-state biomethane. The commission has adopted two decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects pursuant to which a qualifying project is entitled to a one-time payment of 50% of the interconnection costs incurred by the biomethane producer, up to a total payment of $1,500,000. Total cost of the monetary incentive program for biomethane projects is limited to $40,000,000 over the 5-year life of the program.

This bill would require the commission to modify the monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1,500,000 to $3,000,000. The bill would require the commission to increase the total available incentive limitation for a dairy cluster biomethane project to $5,000,000 and would authorize the use of incentive payments subject to this limitation for interconnection costs and costs incurred for gathering lines for transport of biogas to a centralized processing facility for the project. The bill would require the commission to extend the program, as modified, until December 31, 2021. Before the exhaustion of the funds available pursuant to the monetary incentive program, and before the expiration of the program, the bill would require the commission to consider options to promote the in-state production and distribution of biomethane, including whether to allow recovery in rates of the costs of investments to (1) facilitate direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between the natural gas transmission and distribution pipeline network and biomethane generation and collection equipment and of gathering lines for a dairy cluster biomethane project, (2) provide for the installation of utility infrastructure to achieve interconnection with facilities that generate biomethane, and (3) ensure that these investments for infrastructure are prudent and reasonable and provide a direct benefit to, and are in the interests of, all classes of ratepayers.

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 bill extends the monetary incentive program and requires action by the commission to implement certain of its requirements, and became failure to comply with these commission actions would be a crime, the bill would impose a state-mandated local program by creating a new 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.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt, by rule or order, (1) standards for biomethane that specify the concentrations of constituents of concern that are reasonably necessary to protect public health and ensure pipeline integrity and safety, as specified, and (2) requirements for monitoring, testing, reporting, and recordkeeping relative to those constituents of concern. Existing law requires the commission to require gas corporation tariffs to condition access to common carrier pipelines on the applicable customer meeting those standards and requirements. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and requires that these policies and programs facilitate the development of a variety of sources of in-state biomethane. The commission has adopted two decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects pursuant to which a qualifying project is entitled to a one-time payment of 50% of the interconnection costs incurred by the biomethane producer, up to a total payment of $1,500,000. Total cost of the monetary incentive program for biomethane projects is limited to $40,000,000 over the 5-year life of the program.

This bill would require the commission to modify the monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1,500,000 to $3,000,000. The bill would require the commission to increase the total available incentive limitation for a dairy cluster biomethane project to $5,000,000 and would require that authorize the use of incentive payments subject to this limitation for interconnection costs and costs incurred for gathering lines for transport of biogas to a centralized processing facility for the project be treated as an interconnection cost. project. The bill would require the commission to extend the program, as modified, until December 31, 2021. Before the exhaustion of the funds available pursuant to the monetary incentive program, and before the expiration of the program, the bill would require the commission to consider options to promote the in-state production and distribution of biomethane, including whether to allow recovery in rates of the costs of investments to (1) facilitate direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between the natural gas transmission and distribution pipeline network and biomethane generation and collection equipment, and equipment and of gathering lines for a dairy cluster biomethane project, (2) provide for the installation of utility infrastructure to achieve interconnection with facilities that generate biomethane. biomethane, and (3) ensure that these investments for infrastructure are prudent and reasonable and provide a direct benefit to, and are in the interests of, all classes of ratepayers.

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 bill extends the monetary incentive program and requires action by the commission to implement certain of its requirements, and became failure to comply with these commission actions would be a crime, the bill would impose a state-mandated local program by creating a new 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.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt, by rule or order, (1) standards for biomethane that specify the concentrations of constituents of concern that are reasonably necessary to protect public health and ensure pipeline integrity and safety, as specified, and (2) requirements for monitoring, testing, reporting, and recordkeeping relative to those constituents of concern. Existing law requires the commission to require gas corporation tariffs to condition access to common carrier pipelines on the applicable customer meeting those standards and requirements. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, that and requires that these policies and programs facilitate the development of a variety of sources of in-state biomethane. The commission has adopted two decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects pursuant to which a qualifying project is entitled to a one-time payment of 50% of the interconnection costs incurred by the biomethane producer, up to a total payment of $1,500,000. Total cost of the monetary incentive program for biomethane projects is limited to $40,000,000 over the 5-year life of the program.

This bill would require the commission to modify the monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1,500,000 to $3,000,000. The bill would require the commission to increase the total available incentive limitation for a dairy cluster biomethane project to $5,000,000 and would require that gathering lines for transport of biogas to a centralized processing facility for the project be treated as an interconnection cost. The bill would require the commission to extend the program, as modified, until December 31, 2021. Upon Before the exhaustion of the funds available pursuant to the monetary incentive program, and before the expiration of the program, the bill would require the commission to consider whether to allow recovery in rates of the costs of investments to (1) facilitate direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between the natural gas transmission and distribution pipeline network and biomethane generation and collection equipment, and (2) provide for the installation of utility infrastructure to achieve interconnection with facilities that generate biomethane.

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 bill extends the monetary incentive program and requires action by the commission to implement certain of its requirements, and became failure to comply with these commission actions would be a crime, the bill would impose a state-mandated local program by creating a new 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.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt, by rule or order, (1) standards for biomethane that specify the concentrations of constituents of concern that are reasonably necessary to protect public health and ensure pipeline integrity and safety, as specified, and (2) requirements for monitoring, testing, reporting, and recordkeeping relative to those constituents of concern. Existing law requires the commission to require gas corporation tariffs to condition access to common carrier pipelines on the applicable customer meeting those standards and requirements. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, that facilitate the development of a variety of sources of in-state biomethane. The commission has adopted two decisions implementing these requirements, the second 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects pursuant to which a qualifying project is entitled to a one-time payment of 50% of the interconnection costs incurred by the biomethane producer, up to a total payment of $1,500,000. Total cost of the monetary incentive program for biomethane projects is limited to $40,000,000 over the 5-year life of the program.

This bill would require the commission to modify the monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1,500,000 to $3,000,000. The bill would require the commission to increase the total available incentive limitation for a dairy cluster biomethane project to $5,000,000 and would require that gathering lines for transport of biogas to a centralized processing facility for the project be treated as an interconnection cost. The bill would require the commission to extend the program, as modified, until December 31, 2021. Upon exhaustion of the funds available pursuant to the monetary incentive program, the bill would require the commission to consider whether to allow recovery in rates of the costs of investments to (1) facilitate direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between the natural gas transmission and distribution pipeline network and biomethane generation and collection equipment, and (2) provide for the installation of utility infrastructure to achieve interconnection with facilities that generate biomethane.

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 bill extends the monetary incentive program and requires action by the commission to implement certain of its requirements and requirements, and became failure to comply with the commissions rules these commission actions would be a crime, the bill would impose a state-mandated local program by creating a new 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.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt, by rule or order, (1) standards for biomethane that specify the concentrations of constituents of concern that are reasonably necessary to protect public health and ensure pipeline integrity and safety, as specified, and (2) requirements for monitoring, testing, reporting, and recordkeeping, as specified. recordkeeping relative to those constituents of concern. Existing law requires the commission to require gas corporation tariffs to condition access to common carrier pipelines on the applicable customer meeting those standards and requirements. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, that facilitate the development of a variety of sources of in-state biomethane. The commission has adopted two decisions implementing these requirements, the second of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects pursuant to which a qualifying project is entitled to a one-time payment of 50% of the interconnection costs incurred by the biomethane producer, up to a total payment of $1,500,000. Total cost of the monetary incentive program for biomethane projects is limited to $40,000,000 over the 5-year life of the program.

This bill would require the commission to modify the monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1,500,000 to $3,000,000. The bill would require the commission to increase the total available incentive limitation for a dairy cluster biomethane project to $5,000,000 and would require that gathering lines for transport of biogas to a centralized processing facility for the project be treated as an interconnection cost. The bill would require the commission to extend the program, as modified, until December 31, 2021.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law requires the commission to adopt, by rule or order, (1) standards for biomethane that specify the concentrations of constituents of concern that are reasonably necessary to protect public health and ensure pipeline integrity and safety, as specified, and (2) requirements for monitoring, testing, reporting, and recordkeeping, as specified. Existing law requires the commission to require gas corporation tariffs to condition access to common carrier pipelines on the applicable customer meeting those standards and requirements. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, that facilitate the development of a variety of sources of in-state biomethane. The commission has adopted two decisions implementing these requirements, the second of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects pursuant to which a qualifying project is entitled to a one-time payment of 50% of the interconnection costs incurred by the biomethane producer, up to a total payment of $1,500,000. Total cost of the monetary incentive program for biomethane projects is limited to $40,000,000 over the 5-year life of the program.

This bill would require the commission to modify the monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1,500,000 to $3,000,000. The bill would require the commission to increase the total available incentive limitation for a dairy cluster biomethane project to $5,000,000 and would require that gathering lines for transport of biogas to a centralized processing facility for the project be treated as an interconnection cost. The bill would require the commission to extend the program, as modified, until December 31, 2021.

Existing law designates the State Air Resources Board as the state agency charged with coordinating efforts to attain and maintain ambient air quality standards, to conduct research into the causes of and solution to air pollution, and to systematically attack the serious problem caused by motor vehicles. The California Global Warming Solutions Act of 2006 establishes the state board as the state agency responsible for monitoring and regulating sources emitting greenhouse gases.

This bill would require the state board to study and evaluate a strategy or strategies to increase the instate production and use of renewable natural gas, as defined, to further specified goals.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2313

Author:(Williams)

As Amended Ver:August 19, 2016

Majority vote

Original Committee Reference: U. & C.

SUMMARY: Increases ratepayer-funded incentive amounts available to encourage development of biomethane projects and directs the California Public Utilities Commission (CPUC) to consider whether to allow additional ratepayer funds to be provided for the cost of infrastructure for biomethane to interconnect with the natural gas pipeline network.

The Senate amendments allow the CPUC to consider whether to allow recovery in rates of the costs of investments for direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between biomethane facilities to the natural gas transmission and distribution pipeline network, as specified.

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. One-time costs of approximately $550,000 and ongoing costs of approximately $60,000 (Utilities Reimbursement Account) to the CPUC.
2. Unknown, potentially significant costs to the state as a ratepayer.

COMMENTS:

Background: Biogas and biomethane: natural gas by other names. Bioenergy is renewable energy produced from biomass wastes including forest and other wood waste, agriculture and food processing wastes, organic urban waste, waste and emissions from water treatment facilities, landfill gas and other organic waste sources. Biomass waste can be used to generate renewable electricity, liquid fuels and biogas.

Statute defines "biogas" as a gas produced from the anaerobic decomposition of organic material. The result is a gaseous mixture composed primarily of carbon dioxide and methane. Depending on where it is produced, biogas can be categorized as landfill gas or digester gas. Landfill gas is produced by decomposition of organic waste in a municipal solid waste landfill. Digester gas is typically produced from livestock manure, sewage treatment or food waste.

AB 1900 (Gatto), Chapter 602, Statutes of 2012, was passed to facilitate in-state biogas production by enabling it to be transported in common carrier pipelines. In 2014, the CPUC adopted standards for the protection of both public health and pipeline and end-use equipment. The CPUC also adopted a decision that considered the costs associated with injecting biomethane into natural gas pipelines and assigned those to biomethane producers as is consistent with the statutory requirement to provide nondiscriminatory access to common carrier pipelines. However, in the same decision, the CPUC recognized that AB 1900 specifically required adoption of "policies and programs that promote the in-state production and distribution of biomethane" and adopted a ratepayer funded program that will offset a portion of the costs to gas producers of connecting to utility pipelines. The program is capped at a total of $40 million and will pay up to 50% of a project's interconnection cost but not exceed to $1.5 million. No pipeline biogas project has been built or applied for since the enactment of AB 1900.

Analysis Prepared by: Sue Kateley / U. & C. / (916) 319-2083 FN: 0004882

 THIRD READING  

Bill No: AB 2313

Author:

:

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 9-0, 6/27/16

AYES: Morrell, Cannella, Gaines, Hertzberg, Hill, Lara, Leyva, McGuire, Pavley

NO VOTE RECORDED: Hueso, Wolk

SENATE APPROPRIATIONS COMMITTEE: 6-1, 8/11/16

AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza

NOES: Nielsen

ASSEMBLY FLOOR: 57-20, 5/23/16 - See last page for vote

SUBJECT:

SOURCE: Bioenergy Association of California

DIGEST: This bill (a) increases the monetary incentive amounts available to biomethane projects and (b) directs the California Public Utilities Commission (CPUC) to consider whether to allow recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network.

Senate Floor Amendments of 8/19/16 (a) require the CPUC, when considering options to promote the use of in-state biomethane, ensure investments provide “direct” benefits to all class of ratepayers; and (b) clarify that costs for gathering lines are not interconnection costs.

ANALYSIS:

Existing law:

1. Requires the CPUC to adopt standards that specify the concentrations of constituents of concern that are found in biomethane, and to adopt monitoring, testing, reporting, and recordkeeping protocols, to ensure the protection of human health and the integrity and safety of pipelines and pipeline facilities. (Health & Safety Code §25421 et seq.)
2. Requires CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. (Public Utilities Code §399.24 )
3. Requires the CPUC to adopt pipeline access rules that ensure that each gas corporation provides nondiscriminatory open access to its gas pipeline system to any party for the purposes of physically interconnecting with the gas pipeline system and effectuating the delivery of gas. (Public Utilities Code §784.)
4. Requires the California Energy Commission (CEC) to hold public hearings to identify in its Integrated Energy Policy Report impediments that limit procurement of biomethane in California, including, but not limited to, impediments to interconnection, and to offer solutions. (Public Resources Code §25326.)

This bill:

1. Directs the CPUC to modify, and extend until December 31, 2021, the monetary incentive program for biomethane projects as follows:
   1. Except for a dairy cluster biomethane project, increase, the total available incentive limit from $1.5 million the $3.0 million.
   2. For a dairy cluster biomethane project, increase the total available incentive limit from $1.5 million to $5 million.
2. Sunsets the preceding requirements as of January 1, 2022, unless a later enacted statute, that is enacted before January 1, 2022, deletes or extends that date.
3. Directs the CPUC, before the exhaustion of the funds and expiration of the program described above, to consider options to further the promotion of the in-state production and distribution of biomethane, including recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network.

Background

Biogas and biomethane: natural gas by other names. Bioenergy is renewable energy produced from biomass wastes including forest and other wood waste, agriculture and food processing wastes, organic urban waste, waste and emissions from water treatment facilities, landfill gas and other organic waste sources. Biomass waste can be used to generate renewable electricity, liquid fuels and biogas.

Statute defines “biogas” as a gas produced from the anaerobic decomposition of organic material. The result is a gaseous mixture composed primarily of carbon dioxide and methane. Depending on where it is produced, biogas can be categorized as landfill gas or digester gas. Landfill gas is produced by decomposition of organic waste in a municipal solid waste landfill. Digester gas is typically produced from livestock manure, sewage treatment or food waste.

From an environmental perspective, biogas has several advantages over conventional natural gas. Combustion of natural gas, including biogas, releases carbon dioxide (CO₂) into the atmosphere. However, the combustion of natural gas destroys methane, a gas that is a much more potent GHG than is CO₂. In addition to destroying methane, the combustion of biogas, for CO₂ accounting purposes, is considered carbon neutral. This is because the carbon in biogas, unlike the carbon in conventional natural gas, was so recently present in the atmosphere. In addition, biogas can be used to displace the use of fossil fuels, such as conventional natural gas, thereby further decreasing its carbon intensity.

Biogas can be used directly to produce electricity or can be converted to biomethane by removing carbon dioxide and other impurities. Statute defines “biomethane” as biogas that meets the standards, adopted by the CPUC in keeping with statute, for injection into a common carrier pipeline. Biomethane can replace fossil sources of natural gas in homes and factories and compressed or liquefied as natural gas used in vehicles. Biomethane can also be used to produce renewable hydrogen in fuel cells. [2012 Bioenergy Action Plan ]

CPUC biomethane standards and subsidies. Statute directs the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. In response to statutory mandate, the CPUC, in 2014, adopted health and safety standards that limit the amounts of certain constituents determined to be harmful to either human health or pipeline integrity in pipeline injected biomethane. [See CPUC Decision 14-01-034.]  The standards are to address the reluctance of energy utilities to inject biomethane into natural gas pipelines.

The CPUC acknowledged that its biomethane standards would increase the costs of a biomethane producer who seeks to inject biomethane into a utilities gas pipeline system. Industry representatives estimate a cost of $1 million per mile to build an interconnection to an existing utility pipeline and another $1.5 million to connect the line and set up testing and monitoring equipment. In 2015, the CPUC found that gas producers should bear all costs relating to the processing and pipeline injection of biomethane. [See CPUC Decision 15-06-029.] To substantiate its conclusion, the CPUC reasoned as follows:

Since the Legislature intended in AB 1900 that there be nondiscriminatory open access to the utilities’ gas pipeline systems, and because the Legislature intended that the Commission adopt biomethane standards to ensure the protection of human health, and pipeline and pipeline facility integrity and safety, we conclude that the cost of complying with [this decision] is to be borne by the biomethane producers.

The CPUC’s decision went on to note that natural gas producers are responsible for the cost of conditioning their gas to meet specifications that allow injection into a utility gas pipeline system. The CPUC concluded that the statutory principal of nondiscrimination dictates that biomethane producers be responsible for such costs, too.

Yet, the CPUC, in the same decision, acknowledged the statutory requirement that that it adopt policies and programs that promote the in-state production and distribution of biomethane. Pursuant to this statutory requirement, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of the costs to gas producers of connecting to utility pipelines. Program funding will pay up to 50 percent of a biomethane project’s interconnection cost, up to $1.5 million per project.  The CPUC did not explain how subsidizing the interconnection costs of some gas producers jibed with the statutory mandate of nondiscrimination treatment of gas producers. The CPUC did, however, note that such subsidies would “limit the financial exposure of utility ratepayers.”

To-date, the CPUC has not received any applications for the biomethane subsidy program. According to the CPUC, there are no biomethane facilities currently being built in the state of California, partly due to high costs of cleaning up raw biogas and partly due to low conventional natural gas prices. Bill proponents contend this absolute lack of program activity indicates the subsidy amounts available are too small. Staff of the CPUC seem to agree with that assessment. This bill would modify the program by doubling the program incentive per-project limit to $3 million, except in the case of a dairy cluster biomethane project, for which the limit would be $5 million. The author justifies the generosity shown to the latter category of project by noting the higher cost associated with such projects, which achieve greater efficiencies through economies of scale. In any case, this bill maintains the overall program cap of $40 million.

Consider, again, ratebasing the interconnection costs. As described above, the CPUC balked at allocating some or all of the costs of complying with its biomethane standards onto a utility and its shareholders. To do so, the CPUC concluded, would discriminate between different classes of gas producers, and such discrimination is prohibited by Public Utilities Code §784. In any case, the bill directs the CPUC, prior to the exhaustion of the funds or expiration of the program authorized by this bill, to consider options to promote the in-state production and distribution of biomethane, including the recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network. The bill directs the CPUC, in doing so, to ensure that investments for biomethane infrastructure provide a direct benefit, such as safety, reliability, affordability, or greenhouse gas reduction, to, and are in the interests of, all classes of ratepayers.

Related/Prior Legislation

AB 1900 (Gatto, Chapter 602, Statutes of 2012) required the CPUC to adopt new health and safety standards for landfill gas, to hold public hearings to identify impediments to in-state biomethane use, and develop policies and programs to increase the in-state use of biomethane.

AB 2196 (Chesbro, Chapter 605, Statutes of 2012) clarified the definition of an eligible renewable electrical generation facility to include a facility that generates electricity utilizing biomethane delivered through a common carrier pipeline if the source and delivery of the fuel can be verified by the CEC.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Committee on Appropriations:

• One-time costs of approximately $550,000 and ongoing costs of approximately $60,000 (Utilities Reimbursement Account) to the CPUC.
• Unknown, potentially significant costs to the state as a ratepayer.

SUPPORT: (Verified 8/19/16)

Bioenergy Association of California (source)

Bloom Energy

Agricultural Energy Consumers Association

All Power Labs

American Biogas Council

Atlas ReFuel

California Air Pollution Control Officers Association

California Special Districts Association

Clean Energy

Coalition for Renewable Natural Gas

CR&R, Inc.

Eisenmann Corp.

Harvest Power

Los Angeles County Solid Waste Management Committee/Integrated Waste

Management Task Force

Organic Waste Solutions

Pacific Gas and Electric Company

Sanitation Districts of Los Angeles County

Solid Waste Association of North America

Southern California Gas Company

TSS Consultants

Victor Valley Water Reclamation Authority

West Biofuels

OPPOSITION: (Verified 8/19/16)

None received

ARGUMENTS IN SUPPORT: According to the author:

AB 1900 (Gatto, Chapter 602, Statutes of 2012) was passed to facilitate in-state biogas production by enabling it to be transported in common carrier pipelines. In 2014, the CPUC adopted standards for the protection of both public health and pipeline and end-use equipment. The CPUC also adopted a decision that considered the costs associated with injecting biomethane into natural gas pipelines and assigned those to biomethane producers as is consistent with the statutory requirement to provide nondiscriminatory access to common carrier pipelines. However, in the same decision, the CPUC recognized that AB 1900 specifically required adoption of “policies and programs that promote the in-state production and distribution of biomethane” and adopted a ratepayer funded program that will offset a portion of the costs to gas producers of connecting to utility pipelines. The program is capped at a total of $40 million and will pay up to 50 percent of a project’s interconnection cost but not exceed to $1.5 million.

Since the new standards were adopted, not one new pipeline biogas project has been built or applied for the financial incentive. While a program like this is important to supporting and promoting biomethane, the individual project cap of $1.5 million isn’t reflective of the actual cost to interconnect. The Bioenergy Association estimates the cost to interconnect is $1.5-$3 million per mile. Recently, SoCalGas gave a producer in Riverside County an initial estimate of $5 million for a one-mile pipeline. Another project in Tulare County received an estimate of $1.5 million for a 100-foot interconnection.

A decarbonized gas supply is essential in order to meet the state’s goals for reducing greenhouse gas emissions, short-lived climate pollutants, and the state’s goals for promoting the use of renewable energy resources in place of burning fossil fuels. AB 2313 addresses what has been a significant challenge to truly decarbonizing the gas sector – biomethane is an under-utilized resource and the market has been slow to develop in California because the collection, purification, and pipeline injection of biomethane is cost prohibitive.

ASSEMBLY FLOOR: 57-20, 5/23/16

AYES: Alejo, Atkins, Baker, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Bigelow, Brough, Chang, Chávez, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Linder, Mayes, Melendez, Obernolte, Steinorth, Wagner

NO VOTE RECORDED: Arambula, Eggman, Patterson

Prepared by:

8/22/16 22:10:22

**** END ****

 THIRD READING  

Bill No: AB 2313

Author:

:

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 9-0, 6/27/16

AYES: Morrell, Cannella, Gaines, Hertzberg, Hill, Lara, Leyva, McGuire, Pavley

NO VOTE RECORDED: Hueso, Wolk

SENATE APPROPRIATIONS COMMITTEE: 6-1, 8/11/16

AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza

NOES: Nielsen

ASSEMBLY FLOOR: 57-20, 5/23/16 - See last page for vote

SUBJECT:

SOURCE: Bioenergy Association of California

DIGEST: This bill (a) increases the monetary incentive amounts available to biomethane projects and (b) directs the California Public Utilities Commission (CPUC) to consider whether to allow recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network.

ANALYSIS:

Existing law:

1. Requires the CPUC to adopt standards that specify the concentrations of constituents of concern that are found in biomethane, and to adopt monitoring, testing, reporting, and recordkeeping protocols, to ensure the protection of human health and the integrity and safety of pipelines and pipeline facilities. (Health & Safety Code §25421 et seq.)
2. Requires CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. (Public Utilities Code §399.24 )
3. Requires the CPUC to adopt pipeline access rules that ensure that each gas corporation provides nondiscriminatory open access to its gas pipeline system to any party for the purposes of physically interconnecting with the gas pipeline system and effectuating the delivery of gas. (Public Utilities Code §784.)
4. Requires the California Energy Commission (CEC) to hold public hearings to identify in its Integrated Energy Policy Report impediments that limit procurement of biomethane in California, including, but not limited to, impediments to interconnection, and to offer solutions. (Public Resources Code §25326.)

This bill:

1. Directs the CPUC to modify, and extend until December 31, 2021, the monetary incentive program for biomethane projects as follows:
   1. Except for a dairy cluster biomethane project, increase, the total available incentive limit from $1.5 million the $3.0 million.
   2. For a dairy cluster biomethane project, increase the total available incentive limit from $1.5 million to $5 million.
   3. Pertaining to safety, gas quality, and environmental protection.
2. Sunsets the preceding requirements as of January 1, 2026, unless a later enacted statute, that is enacted before January 1, 2026, deletes or extends that date.
3. Directs the CPUC, before the exhaustion of the funds and expiration of the program described above, to consider whether to allow recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network.

Background

Biogas and biomethane: natural gas by other names. Bioenergy is renewable energy produced from biomass wastes including forest and other wood waste, agriculture and food processing wastes, organic urban waste, waste and emissions from water treatment facilities, landfill gas and other organic waste sources. Biomass waste can be used to generate renewable electricity, liquid fuels and biogas.

Statute defines “biogas” as a gas produced from the anaerobic decomposition of organic material. The result is a gaseous mixture composed primarily of carbon dioxide and methane. Depending on where it is produced, biogas can be categorized as landfill gas or digester gas. Landfill gas is produced by decomposition of organic waste in a municipal solid waste landfill. Digester gas is typically produced from livestock manure, sewage treatment or food waste.

From an environmental perspective, biogas has several advantages over conventional natural gas. Combustion of natural gas, including biogas, releases carbon dioxide (CO₂) into the atmosphere. However, the combustion of natural gas destroys methane, a gas that is a much more potent GHG than is CO₂. In addition to destroying methane, the combustion of biogas, for CO₂ accounting purposes, is considered carbon neutral. This is because the carbon in biogas, unlike the carbon in conventional natural gas, was so recently present in the atmosphere. In addition, biogas can be used to displace the use of fossil fuels, such as conventional natural gas, thereby further decreasing its carbon intensity.

Biogas can be used directly to produce electricity or can be converted to biomethane by removing carbon dioxide and other impurities. Statute defines “biomethane” as biogas that meets the standards, adopted by the CPUC in keeping with statute, for injection into a common carrier pipeline. Biomethane can replace fossil sources of natural gas in homes and factories and compressed or liquefied as natural gas used in vehicles. Biomethane can also be used to produce renewable hydrogen in fuel cells. [2012 Bioenergy Action Plan ]

CPUC biomethane standards and subsidies. Statute directs the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. In response to statutory mandate, the CPUC, in 2014, adopted health and safety standards that limit the amounts of certain constituents determined to be harmful to either human health or pipeline integrity in pipeline injected biomethane. [See CPUC Decision 14-01-034.]  The standards are to address the reluctance of energy utilities to inject biomethane into natural gas pipelines.

The CPUC acknowledged that its biomethane standards would increase the costs of a biomethane producer who seeks to inject biomethane into a utilities gas pipeline system. Industry representatives estimate a cost of $1 million per mile to build an interconnection to an existing utility pipeline and another $1.5 million to connect the line and set up testing and monitoring equipment. In 2015, the CPUC found that gas producers should bear all costs relating to the processing and pipeline injection of biomethane. [See CPUC Decision 15-06-029.] To substantiate its conclusion, the CPUC reasoned as follows:

Since the Legislature intended in AB 1900 that there be nondiscriminatory open access to the utilities’ gas pipeline systems, and because the Legislature intended that the Commission adopt biomethane standards to ensure the protection of human health, and pipeline and pipeline facility integrity and safety, we conclude that the cost of complying with [this decision] is to be borne by the biomethane producers.

The CPUC’s decision went on to note that natural gas producers are responsible for the cost of conditioning their gas to meet specifications that allow injection into a utility gas pipeline system. The CPUC concluded that the statutory principal of nondiscrimination dictates that biomethane producers be responsible for such costs, too.

Yet, the CPUC, in the same decision, acknowledged the statutory requirement that that it adopt policies and programs that promote the in-state production and distribution of biomethane. Pursuant to this statutory requirement, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of the costs to gas producers of connecting to utility pipelines. Program funding will pay up to 50 percent of a biomethane project’s interconnection cost, up to $1.5 million per project.  The CPUC did not explain how subsidizing the interconnection costs of some gas producers jibed with the statutory mandate of nondiscrimination treatment of gas producers. The CPUC did, however, note that such subsidies would “limit the financial exposure of utility ratepayers.”

To-date, the CPUC has not received any applications for the biomethane subsidy program. According to the CPUC, there are no biomethane facilities currently being built in the state of California, partly due to high costs of cleaning up raw biogas and partly due to low conventional natural gas prices. Bill proponents contend this absolute lack of program activity indicates the subsidy amounts available are too small. Staff of the CPUC seem to agree with that assessment. This bill would modify the program by doubling the program incentive per-project limit to $3 million, except in the case of a dairy cluster biomethane project, for which the limit would be $5 million. The author justifies the generosity shown to the latter category of project by noting the higher cost associated with such projects, which achieve greater efficiencies through economies of scale. In any case, this bill maintains the overall program cap of $40 million.

Consider, again, ratebasing the interconnection costs. As described above, the CPUC balked at allocating some or all of the costs of complying with its biomethane standards onto a utility and its shareholders. To do so, the CPUC concluded, would discriminate between different classes of gas producers, and such discrimination is prohibited by Public Utilities Code §784. In any case, the bill directs the CPUC, prior to the exhaustion of the funds or expiration of the program authorized by this bill, to again consider whether to allow recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network.

Related/Prior Legislation

AB 1900 (Gatto, Chapter 602, Statutes of 2012) required the CPUC to adopt new health and safety standards for landfill gas, to hold public hearings to identify impediments to in-state biomethane use, and develop policies and programs to increase the in-state use of biomethane.

AB 2196 (Chesbro, Chapter 605, Statutes of 2012) clarified the definition of an eligible renewable electrical generation facility to include a facility that generates electricity utilizing biomethane delivered through a common carrier pipeline if the source and delivery of the fuel can be verified by the CEC.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Committee on Appropriations:

• One-time costs of approximately $550,000 and ongoing costs of approximately $60,000 (Utilities Reimbursement Account) to the CPUC.
• Unknown, potentially significant costs to the state as a ratepayer.

SUPPORT: (Verified 8/11/16)

Bioenergy Association of California (source)

Bloom Energy

Agricultural Energy Consumers Association

All Power Labs

American Biogas Council

Atlas ReFuel

California Air Pollution Control Officers Association

California Special Districts Association

Clean Energy

Coalition for Renewable Natural Gas

CR&R, Inc.

Eisenmann Corp.

Harvest Power

Los Angeles County Solid Waste Management Committee/Integrated Waste

Management Task Force

Organic Waste Solutions

Pacific Gas and Electric Company

Sanitation Districts of Los Angeles County

Solid Waste Association of North America

Southern California Gas Company

TSS Consultants

Victor Valley Water Reclamation Authority

West Biofuels

OPPOSITION: (Verified 8/11/16)

None received

ARGUMENTS IN SUPPORT: According to the author:

AB 1900 (Gatto, Chapter 602, Statutes of 2012) was passed to facilitate in-state biogas production by enabling it to be transported in common carrier pipelines. In 2014, the CPUC adopted standards for the protection of both public health and pipeline and end-use equipment. The CPUC also adopted a decision that considered the costs associated with injecting biomethane into natural gas pipelines and assigned those to biomethane producers as is consistent with the statutory requirement to provide nondiscriminatory access to common carrier pipelines. However, in the same decision, the CPUC recognized that AB 1900 specifically required adoption of “policies and programs that promote the in-state production and distribution of biomethane” and adopted a ratepayer funded program that will offset a portion of the costs to gas producers of connecting to utility pipelines. The program is capped at a total of $40 million and will pay up to 50 percent of a project’s interconnection cost but not exceed to $1.5 million.

Since the new standards were adopted, not one new pipeline biogas project has been built or applied for the financial incentive. While a program like this is important to supporting and promoting biomethane, the individual project cap of $1.5 million isn’t reflective of the actual cost to interconnect. The Bioenergy Association estimates the cost to interconnect is $1.5-$3 million per mile. Recently, SoCalGas gave a producer in Riverside County an initial estimate of $5 million for a one-mile pipeline. Another project in Tulare County received an estimate of $1.5 million for a 100-foot interconnection.

A decarbonized gas supply is essential in order to meet the state’s goals for reducing greenhouse gas emissions, short-lived climate pollutants, and the state’s goals for promoting the use of renewable energy resources in place of burning fossil fuels. AB 2313 addresses what has been a significant challenge to truly decarbonizing the gas sector – biomethane is an under-utilized resource and the market has been slow to develop in California because the collection, purification, and pipeline injection of biomethane is cost prohibitive.

ASSEMBLY FLOOR: 57-20, 5/23/16

AYES: Alejo, Atkins, Baker, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Nazarian, O'Donnell, Olsen, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Wilk, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Bigelow, Brough, Chang, Chávez, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Linder, Mayes, Melendez, Obernolte, Steinorth, Wagner

NO VOTE RECORDED: Arambula, Eggman, Patterson

Prepared by:

8/16/16 9:19:02

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 2313 (Williams) - Renewable natural gas: monetary incentive program for biomethane projects: pipeline infrastructure

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 11, 2016

Bill Summary:

1. AB 2313 increases the monetary incentive amounts available to biomethane projects and directs the California Public Utilities Commission (CPUC) to consider whether to allow the recovery of rates of the cost for specified activities.

Fiscal Impact:

• One-time costs of approximately $550,000 and ongoing costs of approximately $60,000 (Utilities Reimbursement Account) to the CPUC.
• Unknown, potentially significant costs to the state as a ratepayer.

Author Amendments:

Make technical, clarifying amendments.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 2313 (Williams) - Renewable natural gas: monetary incentive program for biomethane projects: pipeline infrastructure

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

1. AB 2313 increases the monetary incentive amounts available to biomethane projects and directs the California Public Utilities Commission (CPUC) to consider whether to allow the recovery of rates of the cost for specified activities.

Fiscal Impact:

• One-time costs of approximately $550,000 and ongoing costs of approximately $60,000 (Utilities Reimbursement Account) to the CPUC. (See staff comments)
• Unknown, potentially significant costs to the state as a ratepayer.

Background:

Biogas and biomethane: natural gas by other names. Bioenergy is renewable energy produced from biomass wastes including forest and other wood waste, agriculture and food processing wastes, organic urban waste, waste and emissions from water treatment facilities, landfill gas and other organic waste sources. Biomass waste can be used to generate renewable electricity, liquid fuels and biogas.

Statute defines “biogas” as a gas produced from the anaerobic decomposition of organic material. The result is a gaseous mixture composed primarily of carbon dioxide and methane. Depending on where it is produced, biogas can be categorized as landfill gas or digester gas. Landfill gas is produced by decomposition of organic waste in a municipal solid waste landfill. Digester gas is typically produced from livestock manure, sewage treatment or food waste.

1900 (Gatto, Chapter 602, Statutes of 2012) was passed to facilitate in-state biogas production by enabling it to be transported in common carrier pipelines. In 2014, the CPUC adopted standards for the protection of both public health and pipeline and end-use equipment. The CPUC also adopted a decision that considered the costs associated with injecting biomethane into natural gas pipelines and assigned those to biomethane producers as is consistent with the statutory requirement to provide nondiscriminatory access to common carrier pipelines. However, in the same decision, the CPUC recognized that AB 1900 specifically required adoption of “policies and programs that promote the in-state production and distribution of biomethane” and adopted a ratepayer funded program that will offset a portion of the costs to gas producers of connecting to utility pipelines. The program is capped at a total of $40 million and will pay up to 50 percent of a project’s interconnection cost but not exceed to $1.5 million. No pipeline biogas project has been built or applied for since the enactment of this bill.

Proposed Law:

This bill:

1. Requires the CPUC to modify and extend until December 31, 2021, its decision 15-06-029 for biomethane projects.
2. Increases the incentive limitation for all projects except dairy clusters from $1.5 million to $3 million.
3. Increases the incentive limitation for all dairy cluster projects to $5 million.
4. Defines a dairy cluster biomethane project as a biomethane project of three or more dairies in close proximity to one another employing multiple facilities for the capture of biogas that is transported by multiple gathering lines to a centralized processing facility where the biogas is processed to meet the biomethane standards adopted by the CPUC and injected to a gas pipeline through a single interconnection.
5. Specifies that costs incurred for gathering lines for a dairy cluster biomethane project must be treated as an interconnection cost.
6. Sunsets the bill on January 1, 2022.
7. Requires the CPUC, upon exhaustion of the fund, to consider whether to allow the recovery of rates of the cost of investment to do each of the following:
   1. Facilitate direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between the natural gas utility and distribution network and biomethane generation and collection equipment.
   2. Provide for the installation of utility infrastructure to achieve interconnection with facilities that generate biomethane.

Staff Comments:

Purpose. According to the author “Since the new standards were adopted, not one new pipeline biogas project has been built or applied for the financial incentive. While a program like this is important to supporting and promoting biomethane, the individual project cap of $1.5 million isn’t reflective of the actual cost to interconnect. The Bioenergy Association estimates the cost to interconnect is $1.5-$3 million per mile. Recently, SoCalGas gave a producer in Riverside County an initial estimate of $5 million for a one-mile pipeline. Another project in Tulare County received an estimate of $1.5 million for a 100-foot interconnection.

A decarbonized gas supply is essential in order to meet the state’s goals for reducing greenhouse gas emissions, short-lived climate pollutants, and the state’s goals for promoting the use of renewable energy resources in place of burning fossil fuels. AB 2313 addresses what has been a significant challenge to truly decarbonizing the gas sector – biomethane is an under-utilized resource and the market has been slow to develop in California because the collection, purification, and pipeline injection of biomethane is cost prohibitive.

CPUC fiscal. According to the CPUC, implementation of this bill would require the following:

• One (1) Administrative Law Judge II for one (1) year to preside over a proceeding (e.g., R.13-02-008 or a new proceeding) to implement proposed Public Utilities Code sections 399.23 and 784.2.
• One (1) Public Utilities Counsel IV for one (1) year to litigate and advise the Commission on the aforementioned proceeding.
• One (1) Public Utilities Regulatory Analyst V for one (1) year to facilitate workshops, gather information from stakeholders, and advise the Commission on the aforementioned proceeding.
• One half (0.5) Utilities Engineer full-time to staff the aforementioned proceeding and adequately represent Integrity Management (safety) concerns as well as review and analyze data.

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2015 - 2016 Regular

Bill No: Hearing Date: 6/27/2016

SUBJECT:

DIGEST: This bill (a) increases the monetary incentive amounts available to biomethane projects and (b) directs the California Public Utilities Commission (CPUC) to develop rules for gas corporations for the interconnection of biomethane generation to the natural gas distribution system.

ANALYSIS:

Existing law:

1. Requires the CPUC to adopt standards that specify the concentrations of constituents of concern that are found in biomethane, and to adopt monitoring, testing, reporting, and recordkeeping protocols, to ensure the protection of human health and the integrity and safety of pipelines and pipeline facilities. (Health & Safety Code §25421 et seq.)
2. Requires CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. (Public Utilities Code §399.24 )
3. Requires the CPUC to adopt pipeline access rules that ensure that each gas corporation provides nondiscriminatory open access to its gas pipeline system to any party for the purposes of physically interconnecting with the gas pipeline system and effectuating the delivery of gas. (Public Utilities Code §784.)
4. Requires the California Energy Commission (CEC) to hold public hearings to identify in its Integrated Energy Policy Report impediments that limit procurement of biomethane in California, including, but not limited to, impediments to interconnection, and to offer solutions. (Public Resources Code §25326.)

This bill:

1. Directs the CPUC to modify, and extend until December 31, 2021, the monetary incentive program for biomethane projects as follows:
   1. Except for a dairy cluster biomethane project, increase, the total available incentive limit from $1.5 million the $3.0 million.
   2. For a dairy cluster biomethane project, increase the total available incentive limit from $1.5 million to $5 million.
2. Requires the CPUC, by January 2, 2018, in consultation with the California Air Resources Board (ARB) and the CEC, to establish rules for gas corporations that do all of the following:
   1. Facilitate direct investment in the procurement and installation of utility infrastructure necessary to achieve interconnection between the natural gas transmission and distribution pipeline network and biomethane generation and collection equipment, including, for a dairy digester cluster project, as defined in Section 399.23, gathering lines.
   2. Provide for the installation of utility infrastructure to achieve interconnection with facilities that generate biomethane.
   3. Provide that prudent and reasonable investments for infrastructure pursuant to paragraphs (1) and (2) are recoverable in rates and recovered as a direct benefit to, and in the interests of, all classes of ratepayers.
   4. Financially protect ratepayers by ensuring that infrastructure is installed for biomethane projects that will actually be built and operated and that will be cost effective, considering the volume and carbon intensity of the biomethane, the costs of interconnection, alternatives available to the biomethane use and distribution, and other costs and benefits.
   5. Ensure that biomethane facilities that interconnect to the natural gas transmission and distribution pipeline network meet all applicable laws and standards, including those laws, rules, and regulations pertaining to safety, gas quality, and environmental protection.
3. This section shall remain in effect only until January 1, 2026, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2026, deletes or extends that date.

Background

Biogas and biomethane: natural gas by other names. Bioenergy is renewable energy produced from biomass wastes including forest and other wood waste, agriculture and food processing wastes, organic urban waste, waste and emissions from water treatment facilities, landfill gas and other organic waste sources. Biomass waste can be used to generate renewable electricity, liquid fuels and biogas.

Statute defines “biogas” as a gas produced from the anaerobic decomposition of organic material. The result is a gaseous mixture composed primarily of carbon dioxide and methane. Depending on where it is produced, biogas can be categorized as landfill gas or digester gas. Landfill gas is produced by decomposition of organic waste in a municipal solid waste landfill. Digester gas is typically produced from livestock manure, sewage treatment or food waste.

From an environmental perspective, biogas has several advantages over conventional natural gas. Combustion of natural gas, including biogas, releases carbon dioxide (CO₂) into the atmosphere. However, the combustion of natural gas destroys methane, a gas that is a much more potent GHG than is CO₂. In addition to destroying methane, the combustion of biogas, for CO₂ accounting purposes, is considered carbon neutral. This is because the carbon in biogas, unlike the carbon in conventional natural gas, was so recently present in the atmosphere. In addition, biogas can be used to displace the use of fossil fuels, such as conventional natural gas, thereby further decreasing its carbon intensity.

Biogas can be used directly to produce electricity or can be converted to biomethane by removing carbon dioxide and other impurities. Statute defines “biomethane” as biogas that meets the standards, adopted by the CPUC in keeping with statute, for injection into a common carrier pipeline. Biomethane can replace fossil sources of natural gas in homes and factories and compressed or liquefied as natural gas used in vehicles. Biomethane can also be used to produce renewable hydrogen in fuel cells.^[1]

CPUC biomethane standards and subsidies. Statute directs the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. In response to statutory mandate, the CPUC, in 2014, adopted health and safety standards that limit the amounts of certain constituents determined to be harmful to either human health or pipeline integrity in pipeline injected biomethane.^[2]  The standards are to address the reluctance of energy utilities to inject biomethane into natural gas pipelines.

The CPUC acknowledged that its biomethane standards would increase the costs of a biomethane producer who seeks to inject biomethane into a utilities gas pipeline system. Industry representatives estimate a cost of $1 million per mile to build an interconnection to an existing utility pipeline and another $1.5 million to connect the line and set up testing and monitoring equipment. In 2015, the CPUC found that gas producers should bear all costs relating to the processing and pipeline injection of biomethane. ^[3] To substantiate its conclusion, the CPUC reasoned as follows:

Since the Legislature intended in AB 1900 that there be nondiscriminatory open access to the utilities’ gas pipeline systems, and because the Legislature intended that the Commission adopt biomethane standards to ensure the protection of human health, and pipeline and pipeline facility integrity and safety, we conclude that the cost of complying with [this decision] is to be borne by the biomethane producers.

The CPUC’s decision went on to note that natural gas producers are responsible for the cost of conditioning their gas to meet specifications that allow injection into a utility gas pipeline system. The CPUC concluded that the statutory principal of nondiscrimination dictates that biomethane producers be responsible for such costs, too.

Yet, the CPUC, in the same decision, acknowledged the statutory requirement that that it adopt policies and programs that promote the in-state production and distribution of biomethane. Pursuant to this statutory requirement, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of the costs to gas producers of connecting to utility pipelines. Program funding will pay up to 50 percent of a biomethane project’s interconnection cost, up to $1.5 million per project.  The CPUC did not explain how subsidizing the interconnection costs of some gas producers jibed with the statutory mandate of nondiscrimination treatment of gas producers. The CPUC did, however, note that such subsidies would “limit the financial exposure of utility ratepayers.”

To-date, the CPUC has not received any applications for the biomethane subsidy program. According to the CPUC, there are no biomethane facilities currently being built in the state of California, partly due to high costs of cleaning up raw biogas and partly due to low conventional natural gas prices. Bill proponents contend this absolute lack of program activity indicates the subsidy amounts available are too small. Staff of the CPUC seem to agree with that assessment. This bill would modify the program by doubling the program incentive per-project limit to $3 million, except in the case of a dairy cluster biomethane project, for which the limit would be $5 million. The author justifies the generosity shown to the latter category of project by noting the higher cost associated with such projects, which achieve greater efficiencies through economies of scale. In any case, this bill maintains the overall program cap of $40 million.

It is reasonable to increase program caps as proposed by this bill. Perhaps the higher amounts will spur program activity.

Who you calling discriminatory? As described above, the CPUC balked at allocating some or all of the costs of complying with its biomethane standards onto a utility and its shareholders. To do so, the CPUC concluded, would discriminate between different classes of gas producers, and such discrimination is prohibited by Public Utilities Code §784.

In its most recent amendments, this bill proposes to direct the CPUC to establish rules for gas corporations that provide that the costs to interconnect to a biomethane project are recoverable in rates and recovered as a direct benefit to, and in the interests of, all classes of ratepayers. This differs from the treatment of the interconnection costs of electricity generation, which generally are borne by the developer. And, of course, it directly contradicts the decision of the CPUC.

However, it seems inconsistent to judge, as the CPUC did, ratebasing the interconnection costs of a biomethane project discriminatory but not to judge direct subsidy of those costs as similarly discriminatory. In any case, the CPUC based its conclusion of discrimination on the requirements of the law. This bill changes the requirements of the law: it expressly directs the CPUC to treat the interconnection cost of biomethane producers differently. Therefore, were this bill to become law, the CPUC’s determination of discrimination would be overwhelmed.

Nonetheless, it seems premature to require the CPUC to ratebase a biomethane producer’s interconnection costs. The state already offers to generously subsidize such costs; this bill would double that generosity. Bill proponents, such as Southern California Gas (SoCalGas), contend the increased subsidy would fund only a handful of projects, and that dozens of projects are needed to meet state policy goals. That might be the case. Then again, it might not.

Down the line, the state may need to socialize the cost of biomethane production through ratebasing. But, for now, better to wait to judge the effectiveness of the augmented subsidies before making such radical change to the treatment of biomethane interconnection costs. The author should consider deleting the provisions of Section 2 from this bill in their entirety.

Prior/Related Legislation

AB 1900 (Gatto, Chapter 602, Statutes of 2012) required the CPUC to adopt new health and safety standards for landfill gas, to hold public hearings to identify impediments to in-state biomethane use, and develop policies and programs to increase the in-state use of biomethane.

AB 2196 (Chesbro, Chapter 605, Statutes of 2012) clarified the definition of an eligible renewable electrical generation facility to include a facility that generates electricity utilizing biomethane delivered through a common carrier pipeline if the source and delivery of the fuel can be verified by the CEC.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

Bioenergy Association of California (Source)

Agricultural Energy Consumers Association

All Power Labs

American Biogas Council

Atlas ReFuel

California Special Districts Association

Clean Energy

Coalition for Renewable Natural Gas

CR&R, Inc.

Eisenmann Corp.

Harvest Power

Los Angeles County Solid Waste Management Committee/Integrated Waste

Management Task Force

Organic Waste Solutions

Pacific Gas and Electric Company

Sanitation Districts of Los Angeles County

Solid Waste Association of North America

Southern California Gas Company

TSS Consultants

Victor Valley Water Reclamation Authority

West Biofuels

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

AB 1900 (Gatto, Chapter 602, Statutes of 2012) was passed to facilitate in-state biogas production by enabling it to be transported in common carrier pipelines. In 2014, the CPUC adopted standards for the protection of both public health and pipeline and end-use equipment. The CPUC also adopted a decision that considered the costs associated with injecting biomethane into natural gas pipelines and assigned those to biomethane producers as is consistent with the statutory requirement to provide nondiscriminatory access to common carrier pipelines. However, in the same decision, the CPUC recognized that AB 1900 specifically required adoption of “policies and programs that promote the in-state production and distribution of biomethane” and adopted a ratepayer funded program that will offset a portion of the costs to gas producers of connecting to utility pipelines. The program is capped at a total of $40 million and will pay up to 50 percent of a project’s interconnection cost but not exceed to $1.5 million.

Since the new standards were adopted, not one new pipeline biogas project has been built or applied for the financial incentive. While a program like this is important to supporting and promoting biomethane, the individual project cap of $1.5 million isn’t reflective of the actual cost to interconnect. The Bioenergy Association estimates the cost to interconnect is $1.5-$3 million per mile. Recently, SoCalGas gave a producer in Riverside County an initial estimate of $5 million for a one-mile pipeline. Another project in Tulare County received an estimate of $1.5 million for a 100-foot interconnection.

A decarbonized gas supply is essential in order to meet the state’s goals for reducing greenhouse gas emissions, short-lived climate pollutants, and the state’s goals for promoting the use of renewable energy resources in place of burning fossil fuels. AB 2313 addresses what has been a significant challenge to truly decarbonizing the gas sector – biomethane is an under-utilized resource and the market has been slow to develop in California because the collection, purification, and pipeline injection of biomethane is cost prohibitive.

-- END --

1. 2012 Bioenergy Action Plan ↑

2. See CPUC Decision 14-01-034. ↑

3. See CPUC Decision 15-06-029. ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 2313

Author:(Williams)

As Amended Ver:April 26, 2016

Majority vote

SUMMARY: Increases monetary incentives for biomethane projects until December 31, 2021. Specifically, this bill:

1. Requires the California Public Utilities Commission (PUC) to modify an existing monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1.5 million to $3 million.
2. Requires the PUC to increase the total available incentive limitation for a dairy cluster biomethane project to $5 million. A dairy cluster biomethane project is a project of three or more dairies in close proximity to one another, as specified.
3. Requires gathering lines for the transport of biogas to a centralized processing facility to be treated as an interconnection cost.

FISCAL EFFECT: According to the Assembly Appropriations Committee, no additional state costs.

COMMENTS:

1. Rationale. In June 2015, the PUC issued a decision (D.1506029) providing a five-year monetary incentive program to encourage biomethane producers to design, construct, and to successfully operate biomethane projects that interconnect with the gas utilities' pipeline systems. Each biomethane project built over the next five years, or until program funds are exhausted, is eligible to receive 50% of the project's interconnection costs, up to $1.5 million per project. The program is capped at $40 million.

According to the author, the individual project cap isn't reflective of the actual cost to interconnect, which is estimated to be between $1.5 million and $3 million per mile.

This bill increases the cap per project to facilitate the development of biomethane projects throughout California in the solid waste, dairy, and waste water sectors.

Background. California uses more than two trillion cubic feet of natural gas per year, but could produce almost 300 billion cubic feet of renewable gas per year just from organic waste from food, livestock, agriculture, yard waste, construction debris, soiled paper and forest biomass. Three hundred billion cubic feet is equal to 0.3 trillion cubic feet. According to the American Biogas Council, California has 276 operational biogas systems, but has the potential for 1,187 more.

The current monetary incentive requires PG&E, San Diego Gas and Electric, SoCalGas, and Southwest Gas to establish accounts to track the costs associated with the monetary incentive a biomethane producer may receive if it successfully interconnects and operates the project with the gas utility. The program is capped at $40 million and the utilities may recover the monetary incentive amount in rates, plus interest, from its customers.

This bill modifies the amount a project may receive but stays within the existing $40 million cap.

Analysis Prepared by: Sue Kateley / U. & C. / (916) 319-2083 FN: 0002971

Date of Hearing: May 11, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2313

Author:(Williams) – As Amended Ver:April 26, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

The bill increases monetary incentives for biomethane projects until December 31, 2021. Specifically, this bill:

1. Requires the California Public Utilities Commission (PUC) to modify an existing monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1.5 million to $3 million.
2. Requires the PUC to increase the total available incentive limitation for a dairy cluster biomethane project to $5 million. A dairy cluster biomethane project is a project of three or more dairies in close proximity to one another, as specified.
3. Requires gathering lines for the transport of biogas to a centralized processing facility to be treated as an interconnection cost.

FISCAL EFFECT:

No additional state costs.

COMMENTS:

1. Rationale. In June 2015, the PUC issued a decision (D.1506029) which provided a five-year monetary incentive program to encourage biomethane producers to design, construct, and to successfully operate biomethane projects that interconnect with the gas utilities' pipeline systems. Each biomethane project built over the next five years, or until program funds are exhausted, is eligible to receive 50% of the project's interconnection costs, up to $1.5 million per project. The program is capped at $40 million.

According to the author, the individual project cap isn't reflective of the actual cost to interconnect, which is estimated to be between $1.5 million and $3 million per mile.

This bill increases the cap per project to facilitate the development of biomethane projects throughout California in the solid waste, dairy, and waste water sectors.

1. Background. California uses more than two trillion cubic feet of natural gas per year, but could produce almost 300 billion cubic feet of renewable gas per year just from organic waste from food, livestock, agriculture, yard waste, construction debris, soiled paper and forest biomass. According to the American Biogas Council, California has 276 operational biogas systems, but has the potential for 1,187 more.

The current monetary incentive requires PG&E, San Diego Gas and Electric, SoCalGas, and Southwest Gas to establish accounts to track the costs associated with the monetary incentive a biomethane producer may receive if it successfully interconnects and operates the project with the gas utility. The program is capped at $40 million and the utilities may recover the monetary incentive amount in rates, plus interest, from its customers.

This bill modifies the amount a project may receive but stays within the existing $40 million cap.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE

Mike Gatto, Chair

ABPCA Bill Id:AB 2313 (

Author:Williams) – As Amended Ver:March 16, 2016

SUBJECT: Renewable natural gas: monetary incentive program for biomethane projects

SUMMARY: Increases monetary incentives for biomethane projects. Specifically, this bill:

1. Requires the California Public Utilities Commission (CPUC) to modify an existing monetary incentive program for biomethane projects so that the total available incentive limitation for a project, other than a dairy cluster biomethane project, as defined, is increased from $1.5 million to $3 million.
2. Requires the CPUC to increase the total available incentive limitation for a dairy cluster biomethane project to $5 million and would require that gathering lines for transport of biogas to a centralized processing facility for the project be treated as an interconnection cost.
3. Defines a "dairy cluster biomethane project" to mean a biomethane project of three or more dairies in close proximity to one another employing multiple facilities for the capture of biogas that is transported by multiple gathering lines to a centralized processing facility where the biogas is processed to meet the biomethane standards.

EXISTING LAW requires the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane and that the policies and programs shall facilitate the development of a variety of sources of in-state biomethane. (Public Utilities Code Section 399.24)

FISCAL EFFECT: Unknown.

COMMENTS:

1. Author's Statement: "California is a leader in the fight against climate change. The state has adopted dozens of policies to increase low carbon fuels, renewable energy, energy efficiency, recycling, carbon sequestration and more. But, California must reduce emissions from the gas sector and encourage in-state refining of biofuel to meet long term climate goals. Natural gas use has been increasing in recent years and will likely to continue to do so given the rapid increase in gas fired power plants and the historically low price in natural gas.  Alternatively, biomethane, which can be produced from biological material, can provide immediate and significant greenhouse gas reductions and other benefits. However, the cost to comply with pipeline regulatory requirements make pipeline biomethane cost-prohibitive.

"As a remedy to this problem, the California Public Utilities Commission [CPUC] adopted a ratepayer funded program that will offset a portion of the costs to gas producers of connecting to utility pipelines. The program is capped at a total of $40 million and will pay up to 50% of a project’s interconnection cost but not exceed to $1.5 million. While a program like this is important to supporting and promoting biomethane, the individual project cap of $1.5 million isn’t reflective of the actual cost to interconnect. Other estimates are closer to $1.5-$3 million per mile. AB 2313 increases the cap per project on the incentive to $3 million for individual projects and $5 million for the gathering lines for a dairy cluster projects – an amount that producers say would truly change the economics of a biomethane project, but still small enough that more than a dozen projects could benefit from it. It’s enough to, coupled with a mix of private investment and public grants, facilitate the development of biomethane projects throughout California that span the waste water, solid waste, and dairy sectors."

1. Background: In June 2015, the CPUC issued a decision (D.1506029) which provided a five-year monetary incentive program to encourage biomethane producers to design, construct, and to successfully operate biomethane projects that interconnect with the gas utilities' pipeline systems so as to inject biomethane that can be safely used at an end user's home or business. As described in this decision, each biomethane project that is built over the next five years, or sooner if the program funds are exhausted before that period, can receive 50% of the project's interconnection costs, up to $1.5 million, to help offset these costs upon the successful interconnection and operation of the facility.

According to the CPUC there are three types of costs that one is likely to encounter in developing and operating a biomethane project in California. These costs consist of the following:

• 1. The pre-injection costs incurred prior to the injection of biomethane into the utility pipeline;
  2. The interconnection costs incurred in order to interconnect the biomethane facility with the utility pipeline; and
  3. The post-injection ongoing costs of maintaining and operating the biomethane facility and the pipeline access.
     1. Pre-injection costs include costs related to the development of the biomethane receipt point facility, the cost of upgrading the biogas to biomethane, the cost of testing the biomethane, and the cost of the monitoring, testing, reporting, and recordkeeping systems. Such costs include one-time pre-injection testing and start-up costs.
     2. Interconnection costs consist of the necessary studies, permitting and regulatory, land, design and construction, and equipment and materials, to connect the biomethane receipt point facility to the utility pipeline, and to meter the gas flow. Stakeholders in the proceeding stated these interconnection costs could range from $1.5 million to $3 million, depending on the landfill's location (rural or urban), and the project’s proximity to the utility’s pipeline.
     3. Post-injection costs are the ongoing costs of equipment, odorants, and labor costs needed to comply with the routine operating costs associated with the testing and monitoring for some or all of the biomethane constituents, as well as operations and maintenance expenses associated with the receipt point facility. These post-injection costs could also include the cost of blending. If the blending process requires the use of propane to elevate the heating value of the biomethane, stakeholders in the proceeding state that propane cost will add at least an additional $262,262 annually.

While a program like this is important to supporting and promoting biomethane, the individual project cap of $1.5 million isn’t reflective of the actual cost to interconnect. The Bioenergy Association estimates the cost to interconnect is $1.5-$3 million per mile. Below are estimates from the Bioenergy Association for interconnection and pipeline construction for bioenergy projects:

• • 1. CR&R received a $5 million estimate from Southern California Gas Company (SoCalGas) for a one-mile pipeline in Riverside County.
    2. A Colony Energy project in Tulare County received an estimate of $1.5 million for a 100-foot interconnection with SoCalGas.
    3. An Organic Waste Systems project received a Pacific Gas and Electric (PG&E) estimate of $4.2 million for a 2.2 mile interconnection for 1000 million cubic feet per day (MCF/day) with an Maximum Allowable Operating Pressure (MAOP) of 985 psig.
    4. Sempra provided an interconnection estimate to Real Energy of $1.2 million for a one million cubic feet per day interconnection and $1.9 million for a 10 million cubic feet per day interconnection.  A one-mile feeder line would add $2.2 million to the cost.

1. Why Biomethane? According to a report^[1] on decarbonizing the gas sector, California uses more than two trillion cubic feet of natural gas per year (and growing). The report states that California could produce almost 300 billion cubic feet of renewable gas per year just from organic waste --the waste from food and food processing, livestock, agriculture, yard waste, construction debris and other wood waste, soiled paper and forest biomass.

300 billion cubic feet is equal to 0.3 trillion cubic feet.

According to the American Biogas Council, California has 276 operational biogas systems, but has the potential for 1,187 more.

1. Who Funds this Program? The CPUC decision authorizing the current monetary incentive specifies that PG&E, San Diego Gas and Electric, SoCalGas, and Southwest Gas are to establish accounts to track the costs associated with the monetary incentive that a biomethane producer may receive if it successfully interconnects and operates a biomethane project with the gas utility, and to recover the monetary incentive amount in rates, plus interest, from its customers.

This bill increases the funds that would be allocated from ratepayers for these incentives.

1. Five-Year Program: This bill would increase the monetary incentive of an existing five-year program. According to the CPUC decision:

This monetary incentive program shall be in effect for a period of five years from the effective date of this decision. If there is any unused incentive funding at the end of this five-year period, this program shall terminate. If there are funds remaining at the time of program termination, then biomethane projects that have started to inject merchantable biomethane into the utility’s pipeline system as of the termination date of this program are eligible for an incentive payment if they otherwise meet the program criteria.

Thus, the incentives authorized by the CPUC expire in 2020. If enacted, this bill will make the added incentives available beginning no sooner than 2017, depending on when the CPUC incorporates the provisions of this statute.

In order to provide additional time for the enhanced incentives to be available, the author may wish to consider specifying that the program authorized by this statute will sunset 5 years after the CPUC implements its' provisions.

1. Arguments in Support: Supporters state the increased incentives will help overcome significant economic barriers to developing projects and enhance pipeline injection projects. They also state that this bill will generate revenue and local energy supplies; reduce methane and black carbon and reduce landfilling of organic waste over time by providing a long-term market for the biomethane in California. Another supporter states that the incentives provided by this bill together with other grant funding from cap and trade dollars and other state programs will make their project financially viable for cities that use their waste management services.
2. Suggested amendments:

SECTION 1.  Section 399.23 is added to the Public Utilities Code, to read:

399.23. The commission shall modify and extend until January 1, 2022 the monetary incentive program for biomethane projects adopted in Decision 15-06-029 (June 11, 2015), Decision Regarding the Costs of Compliance with Decision 14-01-034 and Adoption of Biomethane Promotion Policies and Program, as follows:

(a) Except for a dairy cluster biomethane project, the total available incentive limitation for a project shall be increased from one million five hundred thousand dollars ($1,500,000) to three million dollars ($3,000,000).

(b) For a dairy cluster biomethane project, the total available incentive limitation shall be raised to five million dollars ($5,000,000). For purposes of this subdivision, a dairy cluster biomethane project means a biomethane project of three or more dairies in close proximity to one another employing multiple facilities for the capture of biogas that is transported by multiple gathering lines to a centralized processing facility where the biogas is processed to meet the biomethane standards adopted by the commission pursuant to subdivisions (c) and (d) of Section 25421 of the Health and Safety Code and injected into the pipeline of the gas corporation through a single interconnection. Costs incurred for gathering lines for a dairy cluster biomethane project shall be treated as an interconnection cost.

(e) This section shall remain in effect only until January 1, 2022, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2022, deletes or extends that date.

REGISTERED SUPPORT / OPPOSITION:

Support

American Biogas Council

Agricultural Energy Consumers Association

Bioenergy Association of California

Clean Energy

Harvest Power Inc.

Los Angeles County of Sanitation Districts

TSS Consultants

Opposition

None on file.

Analysis Prepared by: Sue Kateley / U. & C. / (916) 319-2083

1. Decarbonizing the Gas Sector: Why California Needs a Renewable Gas Standard, Bioenergy Association of California, November 2014. ↑