Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and that facilitate the development of a variety of sources of in-state biomethane. The commission has adopted 2 decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects. Existing law requires the commission to modify the monetary incentive program in specified respects and to extend the program, as modified, until December 31, 2021. Existing law additionally requires the commission, before exhaustion of the funds available pursuant to the biomethane monetary incentive program, and before the expiration of the program, 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.

With respect to the requirement that the commission consider options to promote the in-state production and distribution of biomethane, including consideration of recovery in rates of the costs of investments for the 3 purposes described above, the bill would additionally require the commission to open a proceeding to consider those options by no later than July 1, 2019.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and that facilitate the development of a variety of sources of in-state biomethane. The commission has adopted 2 decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects. Existing law requires the commission to modify the monetary incentive program in specified respects and to extend the program, as modified, until December 31, 2021. Existing law additionally requires the commission, before exhaustion of the funds available pursuant to the biomethane monetary incentive program, and before the expiration of the program, 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.

With respect to the requirement that the commission consider options to promote the in-state production and distribution of biomethane, including consideration of recovery in rates of the costs of investments for the 3 purposes described above, the bill would additionally require the commission to open a proceeding to consider those options by no later than July 1, 2019.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and that facilitate the development of a variety of sources of in-state biomethane. The commission has adopted 2 decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects. Existing law requires the commission to modify the monetary incentive program in specified respects and to extend the program, as modified, until December 31, 2021. Existing law additionally requires the commission, before exhaustion of the funds available pursuant to the biomethane monetary incentive program, and before the expiration of the program, 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.

With respect to the requirement that the commission consider options to promote the in-state production and distribution of biomethane, including consideration of recovery in rates of the costs of investments for the 3 purposes described above, the bill would replace the requirement that this consideration be made before expiration of the program, to instead additionally require the commission to open a proceeding to consider those options by no later than July 1, 2019.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and that facilitate the development of a variety of sources of in-state biomethane. The commission has adopted 2 decisions implementing these requirements, the 2nd of which adopted a 5-year monetary incentive program effective June 11, 2015, for biomethane projects. Existing law requires the commission to modify the monetary incentive program in specified respects and to extend the program, as modified, until December 31, 2021. Existing law additionally requires the commission, before exhaustion of the funds available pursuant to the biomethane monetary incentive program, and before the expiration of the program, 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, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. Existing law requires the commission to adopt policies and programs that promote the in-state production and distribution of biomethane, as defined, and that facilitate the development of a variety of sources of in-state biomethane.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable. 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.

This bill would state the intent of the Legislature to enact legislation establishing goals for the procurement of biomethane. authorize gas corporations to include in their rate bases all reasonable costs incurred to interconnect biomass conversion facilities and anaerobic digestion facilities to their common carrier pipelines.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including gas corporations. 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.

This bill would state the intent of the Legislature to enact legislation establishing goals for the procurement of biomethane.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 3187

Author:(Grayson)

As Amended Ver:August 21, 2018

Majority vote

Original Committee Reference: U. & E.

SUMMARY: This bill requires the California Public Utilities Commission (CPUC) open a proceeding not later than July 1, 2019 to consider options to promote the in-state production and distribution of biomethane.

The Senate amendments are technical and clarify provisions of the bill.

EXISTING LAW:

1. Establishes a $5 million interconnection project cap for dairy cluster biomethane projects, and a $3 million project cap for other biomethane projects, funded by a 2015 CPUC decision through January 1, 2022. (Public Utilities Code Section 399.19)
2. Requires the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane and requires that those policies and programs facilitate the development of a variety of sources of in-state biomethane. (Public Utilities Code Section 399.24)
3. Requires the CPUC to consider options, including whether to allow recovery in rates, to facilitate 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 and to achieve interconnection with facilities that generate biomethane. (Public Utilities Code Section 784.2)

FISCAL EFFECT:

According to the Senate Appropriations Committee, the fiscal impact would be $339,205 to the CPUC for staffing and implementation costs.

COMMENTS: The CPUC is currently mandated to facilitate the procurement and installation of the infrastructure necessary to connect biomethane generation and collection equipment with the gas transmission system. In its last decision on the program, the CPUC indicated it would open a future proceeding to further assess the program but has not yet done so. The statute requires review before the funds are exhausted but that "deadline" seems rather elusive and does not provide certainty of review for the industry. This bill provides a deadline for the CPUC to open the proceeding to consider interconnection options no later than July 1, 2019.

Analysis Prepared by: Kellie Smith / U. & E. / (916) 319-2083 FN: 0004950

 THIRD READING  

Bill No: AB 3187

Author:

:

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 11-0, 6/19/18

AYES: Hueso, Morrell, Bradford, Cannella, Hertzberg, Hill, McGuire, Skinner, Stern, Vidak, Wiener

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/16/18

AYES: Portantino, Bates, Beall, Bradford, Hill, Nielsen, Wiener

ASSEMBLY FLOOR: 70-0, 5/25/18 (Consent) - See last page for vote

SUBJECT:

SOURCE: Coalition for Renewable Natural Gas

DIGEST:

This bill updates a requirement in existing law that the California Public Utilities Commission (CPUC) consider options to promote the in-state production and distribution of biomethane. Under this bill, the CPUC will be directed to open a proceeding, by no later than July 1, 2019, to consider options to promote the in-state production and distribution of biomethane.

ANALYSIS:

Existing law:

1. Requires the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane and requires that those policies and programs facilitate the development of a variety of sources of in-state biomethane. (Public Utilities Code §399.24)
2. Requires the CPUC to consider options, including whether to allow recovery in rates, to facilitate 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 and to achieve interconnection with facilities that generate biomethane. (Public Utilities Code §784.2)
3. Requires the CPUC to adopt pipeline access rules that ensure that each gas corporation provides nondiscriminatory access to the 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 Air Resources Board (ARB) to implement a strategy to reduce emissions of short-lived climate pollutants to achieve a reduction in methane by 40 percent, hydrofluorocarbon gases by 40 percent, and anthropogenic black carbon by 50 percent below 2013 levels by 2030. (Health and Safety Code §39730.5)
5. Requires the CPUC to adopt standards for biomethane that specify the concentrations of constituents of concerns that are reasonably necessary to protect public health, ensure pipeline integrity and safety, and to adopt monitoring, testing, reporting and recordkeeping protocols. (Health and Safety Code §25421)

This bill:

1. Requires the CPUC to open a proceeding by no later than July 1, 2019, to consider options to further the goals to promote in-state production and distribution of biomethane before the exhaustion of the funds made available pursuant to the monetary incentive program for biomethane projects adopted in CPUC Decisions (D. 15-06-029, D. 14-01-034, and Adoption of Biomethane Promotion Policies and Program).
2. Requires the CPUC in determining whether to allow recovery in rates of the costs of investments to promote in state production and distribution of biomethane to ensure that prudent and reasonable investments for infrastructure provide a direct benefit to all classes of ratepayers and are in the interest of all classes of ratepayers.

Background

Biogas and biomethane. 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. Current law 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 greenhouse gas (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 CO₂ and other impurities. Current law 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.

CPUC biomethane standards and subsidies. Current law 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. The standards were to address the reluctance of gas corporations 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 pipeline system. In response to these concerns and legislative mandates, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of gas producer costs of connecting to utility pipelines. As modified by 2016 legislation, program funding will pay up to 50 percent of a biomethane project’s interconnection cost, up to $3 million per project. The CPUC noted that the capped subsidy would “limit the financial exposure of utility ratepayers.” To-date, the CPUC has not received any applications for the biomethane subsidy program. However, one landfill gas project is reported to be preparing to apply and five daily biomethane projects are also possibilities. Before those funds are exhausted, the CPUC was directed to evaluate the current monetary incentive programs for renewable gas production and pipeline interconnection and consider whether it is prudent reasonable to continue those incentives. The assessment does not appear to have been commenced but the projects are also not complete.

This bill. The CPUC is currently mandated to facilitate the procurement and installation of the pipelines and associated infrastructure, including recovery in rates. In its last decision on the program, the CPUC indicated it would open a future proceeding to further assess the program but has not yet done so. The statute requires review before the funds are exhausted but that “deadline” seems rather elusive and does not provide certainty of review for the industry. As amended in the Assembly Committee on Utilities and Energy, this bill now provides a more certain deadline for the CPUC to open the proceeding to consider interconnection options no later than July 1, 2019. More recent amendments further protect ratepayers by requiring that all classes of ratepayers are provided a direct benefit from these investments.

Related/Prior Legislation

SB 1440 (Hueso, 2018) requires the ARB, in consultation with the CPUC, before January 1, 2020, to adopt a biomethane procurement requirement for gas corporations with over 100,000 customers in furtherance of conservation requirements, policies in current law and other requirements. Specifically, the bill requires the overall procurement mandate to be initially set at 32 billion cubic feet (bcf). The bill is waiting to be considered before the full Assembly.

SB 1383 (Lara, Chapter 395, Statutes of 2016) required state agencies to consider and, as appropriate, adopt policies and incentives to significantly increase the sustainable production and use of renewable gas, including biomethane to meet the state’s climate change, renewable energy, low-carbon fuel, and short-lived climate pollutants goals, including black carbon, landfill diversion, and dairy methane targets.

AB 2313 (Williams, Chapter 571, Statutes of 2016) increased the monetary incentive amounts available to biomethane projects and directed the CPUC to consider whether to allow recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network.

AB 1900 (Gatto, Chapter 602, Statutes of 2012) directed the CPUC to identify landfill gas constituents, develop testing protocols for landfill gas injected into common carrier pipelines, adopt standards for biomethane to ensure pipeline safety and integrity, and adopt rules to ensure open access to the gas pipeline system.

AB 2196 (Chesbro, Chapter 605, Statutes of 2012) ensured that biogas qualifies for renewal portfolio standard credit, provided its production, delivery and use meet certain conditions.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local: No

According to the Senate Appropriations Committee, the fiscal impact would be $339,205 to the CPUC for staffing and implementation costs.

SUPPORT: (Verified 8/16/18)

Coalition for Renewable Natural Gas (source)

California Grocers Association

Cambrian Energy

Montauk Energy

Southern California Gas

OPPOSITION: (Verified 8/16/18)

None received

ARGUMENTS IN SUPPORT: According to the author, “The cost of interconnection to a common-carrier pipeline is one of the most significant barriers to increased biogas production. These costs include necessary studies, permitting and regulatory review, land acquisition, design and construction, equipment and materials procurement, and gas flow metering. The CPUC is currently required to consider options to increase the use of biomethane, including consideration of whether to allow cost recovery in rates, sometime ‘Before the exhaustion of the funds’ in the biomethane interconnection monetary incentive program. To date, few projects have utilized the program or those funds, so it is unclear when the proceedings will actually start. AB 3187 will direct the California Public Utilities Commission (CPUC) to consider whether to allow recovery in rates for biomethane interconnection projects no later than July 1, 2019.”

ASSEMBLY FLOOR: 70-0, 5/25/18

AYES: Acosta, Aguiar-Curry, Baker, Berman, Bigelow, Bloom, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Voepel, Weber, Wood, Rendon

NO VOTE RECORDED: Travis Allen, Arambula, Bonta, Brough, Levine, Mullin, Steinorth, Waldron

Prepared by:

8/21/18 19:02:52

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2017 - 2018 Regular Session

AB 3187 (Grayson) - Biomethane: gas corporations: rates: interconnection

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

The following information is revised to reflect amendments

adopted by the committee on August 16, 2018

Bill Summary:

This bill would update a requirement in existing law that the California Public Utilities Commission (CPUC) consider options to promote the in-state production and distribution of biomethane.

Fiscal Impact:

• $339,205 to the CPUC for staffing and implementation costs.

Author Amendments:

Require a proceeding in addition to current requirements.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2017 - 2018 Regular Session

AB 3187 (Grayson) - Biomethane: gas corporations: rates: interconnection

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

Bill Summary:

This bill would update a requirement in existing law that the California Public Utilities Commission (CPUC) consider options to promote the in-state production and distribution of biomethane.

Fiscal Impact:

$339,205 to the CPUC for staffing and implementation costs.

Proposed Law:

:

This bill would update a requirement in existing law that the CPUC consider options to promote the in-state production and distribution of biomethane. Under this bill, the CPUC, no later than July 1, 2019, must open a proceeding to consider options to promote the in-state production and distribution of biomethane, instead of prior to expiration of the program as existing statute states..

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: AB 3187 Hearing Date: 6/19/2018

SUBJECT: Biomethane: gas corporations: rates: interconnection

DIGEST: This bill would update a requirement in existing law that the California Public Utilities Commission (CPUC) consider options to promote the in-state production and distribution of biomethane. Under this bill, the CPUC, no later than July 1, 2019, must open a proceeding to consider options to promote the in-state production and distribution of biomethane, instead of prior to expiration of the program as existing statute states..

ANALYSIS:

Existing law:

1. Requires the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane and requires that those policies and programs facilitate the development of a variety of sources of in-state biomethane. (Public Utilities Code §399.24)
2. Requires the CPUC to consider options, including whether to allow recovery in rates, to facilitate 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 and to achieve interconnection with facilities that generate biomethane. (Public Utilities Code §784.2)
3. Requires the CPUC to adopt pipeline access rules that ensure that each gas corporation provides nondiscriminatory access to the 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 Air Resources Board (ARB) to implement a strategy to reduce emissions of short-lived climate pollutants to achieve a reduction in methane by 40 percent, hydrofluorocarbon gases by 40 percent, and anthropogenic black carbon by 50 percent below 2013 levels by 2030. (Health and Safety Code §39730.5)
5. Requires the CPUC to adopt standards for biomethane that specify the concentrations of constituents of concerns that are reasonably necessary to protect public health, ensure pipeline integrity and safety, and to adopt monitoring, testing, reporting and recordkeeping protocols. (Health and Safety Code §25421)

This bill would require before the exhaustion of the funds made available pursuant to 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, and no later than July 1, 2019, instead of before the expiration of the program, the CPUC is required to open a proceeding to consider options to further the goals of Section 399.24, including consideration of whether to allow recovery in rates of the costs of investments to do each of the following:

Background

Biogas and biomethane. 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. Current law 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 greenhouse gas (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 CO2 and other impurities. Current law 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.

CPUC biomethane standards and subsidies. Current law 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. The standards were to address the reluctance of gas corporations 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 pipeline system. In response to these concerns and legislative mandates, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of gas producer costs of connecting to utility pipelines. As modified by 2016 legislation, program funding will pay up to 50 percent of a biomethane project’s interconnection cost, up to $3 million per project. The CPUC noted that the capped subsidy would “limit the financial exposure of utility ratepayers.” To-date, the CPUC has not received any applications for the biomethane subsidy program. However, one landfill gas project is reported to be preparing to apply and five daily biomethane projects are also possibilities. Before those funds are exhausted, the CPUC was directed to evaluate the current monetary incentive programs for renewable gas production and pipeline interconnection and consider whether it is prudent reasonable to continue those incentives. The assessment does not appear to have been commenced but the projects are also not complete.

This bill. The CPUC currently has the mandate to facilitate the procurement and installation of these pipelines, including recovery in rates. In its last decision on the program, the CPUC indicated it would open a future proceeding to further assess the program but has not yet done so. The statute requires review before the funds are exhausted but that “deadline” seems rather elusive and does not provide certainty of review for the industry. As amended in the Assembly Committee on Utilities and Energy, this bill now provides a more certain deadline for the CPUC to open the proceeding to consider interconnection options no later than July 1, 2019.

Prior/Related Legislation

SB 1440 (Hueso, 2018) requires the ARB, in consultation with the CPUC, before January 1, 2020, to adopt a biomethane procurement requirement for gas corporations with over 100,000 customers in furtherance of conservation requirements, policies in current law and other requirements. Specifically, the bill requires the overall procurement mandate to be initially set at 32 billion cubic feet (bcf).

AB 1900 (Gatto, Chapter 602, Statutes of 2012) directed the CPUC to identify landfill gas constituents, develop testing protocols for landfill gas injected into common carrier pipelines, adopt standards for biomethane to ensure pipeline safety and integrity, and adopt rules to ensure open access to the gas pipeline system.

AB 2196 (Chesbro, Chapter 605, Statutes of 2012) ensured that biogas qualifies for renewal portfolio standard credit, provided its production, delivery and use meet certain conditions.

AB 2313 (Williams, Chapter 571, Statutes of 2016) increased the monetary incentive amounts available to biomethane projects and directed the CPUC to consider whether to allow recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network.

SB 1383 (Lara, Chapter 395, Statutes of 2016) required state agencies to consider and, as appropriate, adopt policies and incentives to significantly increase the sustainable production and use of renewable gas, including biomethane to meet the state’s climate change, renewable energy, low-carbon fuel, and short-lived climate pollutants goals, including black carbon, landfill diversion, and dairy methane targets.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

Coalition for Renewable Natural Gas (Source)

California Grocers Association

Cambrian Energy

Montauk Energy

Southern California Gas

OPPOSITION:

Agricultural Energy Consumers Association

ARGUMENTS IN SUPPORT: According to the author:

“The cost of interconnection to a common-carrier pipeline is one of the most significant barriers to increased biogas production. These costs include necessary studies, permitting and regulatory review, land acquisition, design and construction, equipment and materials procurement, and gas flow metering. The CPUC is currently required to consider options to increase the use of biomethane, including consideration of whether to allow cost recovery in rates, sometime “Before the exhaustion of the funds” in the biomethane interconnection monetary incentive program. To date, few projects have utilized the program or those funds, so it is unclear when the proceedings will actually start. AB 3187 will direct the California Public Utilities Commission (CPUC) to consider whether to allow recovery in rates for biomethane interconnection projects no later than July 1, 2019.”

ARGUMENTS IN OPPOSITION: The arguments by Agricultural Energy Consumers Association in opposition to this bill concern language that was previously in this bill regarding rate recovery for interconnection of biomethane projects and the implications for increased gas rates.

-- END --

Date of Hearing: May 16, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 3187

Author:(Grayson) – As Amended Ver:May 1, 2018

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

SUMMARY:

This bill updates a requirement in existing law that the California Public Utilities Commission (CPUC) consider options to promote the in-state production and distribution of biomethane. Under the bill, the CPUC, no later than July 1, 2019, must open a proceeding to consider options to promote the in-state production and distribution of biomethane. This differs from current law, which requires the CPUC to consider, prior to expiration of the program, options to promote the in-state production and distribution of biomethane.

FISCAL EFFECT:

Negligible new costs to the CPUC. This is because the bill specifies a date—July 1, 2019—by which the CPUC is to complete its consideration of options to promote the in-state production and distribution of biomethane, but it does not create the requirement itself.

COMMENTS:

Background and Purpose. 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. Current law 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.

Current law directs the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane. To that end, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of gas producer costs of connecting to utility pipelines. As modified by 2016 legislation, program funding will pay up to 50 % of a biomethane project’s interconnection cost, up to $3 million per project. The CPUC noted that the capped subsidy would “limit the financial exposure of utility ratepayers.” To-date, the CPUC has not received any applications for the biomethane subsidy program, though it reports one landfill gas project is preparing to apply and five daily biomethane projects are possibilities.

The author intends this bill to lead to more instate Biomethane production and use. The author acknowledges the bill was significantly paired back in the Assembly Committee on Utilities and Energy.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: April 25, 2018

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

ABPCA Bill Id:AB 3187 (

Author:Grayson) – As Amended Ver:April 11, 2018

SUBJECT: Biomethane: gas corporations: rates: interconnection

SUMMARY: Requires the California Public Utilities Commission (CPUC) to approve all just and reasonable costs requested by a gas corporation (IOU) for interconnecting biomethane production to the existing pipeline system, including costs for the point of receipt and for any downstream facilities required to facilitate the receipt of biomethane.

EXISTING LAW:

1. Establishes a $5 million interconnection project cap for dairy cluster biomethane projects, and a $3 million project cap for other biomethane projects, funded by a 2015 CPUC decision through January 1, 2022. (Public Utilities Code § 399.19)
2. Requires the CPUC to adopt policies and programs that promote the in-state production and distribution of biomethane and requires that those policies and programs facilitate the development of a variety of sources of in-state biomethane. (Public Utilities Code § 399.24)
3. Requires the CPUC to consider options, including whether to allow recovery in rates, to facilitate 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 and to achieve interconnection with facilities that generate biomethane. (Public Utilities Code § 784.2)
4. Requires the CPUC to adopt pipeline access rules that ensure that each gas corporation provides nondiscriminatory access to the 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)
5. Requires the Air Resources Board (CARB) to implement a strategy to reduce emissions of short-lived climate pollutants to achieve a reduction in methane by 40 percent, hydrofluorocarbon gases by 40 percent, and anthropogenic black carbon by 50 percent below 2013 levels by 2030. (Health and Safety Code § 39730.5)
6. Directs CARB to adopt regulations to reduce methane emissions from livestock and dairy manure by up to 40 percent below 2013 levels by 2030 granted the regulations are economically feasible and a market exists for the products generated by these projects. (Health and Safety Code § 39730.7)
7. Requires the CPUC to adopt standards for biomethane that specify the concentrations of constituents of concerns that are reasonably necessary to protect public health, ensure pipeline integrity and safety, and to adopt monitoring, testing, reporting and recordkeeping protocols. (Health and Safety Code § 25421)
8. Requires the California Energy Commission (CEC) to hold public hearings to identify impediments that limit procurement of biomethane in California, including impediments to interconnection, and to offer solutions. (Public Resources Code § 25326)
9. Requests the California Council on Science and Technology to undertake and complete a study analyzing the regional and gas corporation specific issues relating to minimum heating value and maximum siloxane specifications adopted by the PUC for biomethane before it can be injected into common carrier gas pipelines. (Public Utilities Code § 784.1)

FISCAL EFFECT: This bill is keyed fiscal and will be referred to the Appropriations Committee for its review of the fiscal effect of this bill. It is important to note however that the Appropriations Committee limits its analysis to the impact on overall state agency impacts and cannot assess the impacts of policy on the costs of electricity or gas service to ratepayers.

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. Current law 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. Current law 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.

CPUC Biomethane Standards and Subsidies – Current law 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. The standards were to address the reluctance of gas corporations 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 pipeline system. In response to these concerns and legislative mandates, the CPUC adopted a $40 million ratepayer-funded program to offset a portion of gas producer costs of connecting to utility pipelines. As modified by 2016 legislation, program funding will pay up to 50 percent of a biomethane project’s interconnection cost, up to $3 million per project. The CPUC noted that the capped subsidy would “limit the financial exposure of utility ratepayers.” To-date, the CPUC has not received any applications for the biomethane subsidy program. However, one landfill gas project is reported to be preparing to apply and five daily biomethane projects are also possibilities.

COMMENTS:

1. Author’s Statement. The author states that the cost of interconnection to a common-carrier pipeline is one of the most significant barriers to increased biogas production. These costs include necessary studies, permitting and regulatory review, land acquisition, design and construction, equipment and materials procurement, and gas flow metering. An industry survey found that interconnection costs can range from $1.5 million to $3 million, depending on location (rural or urban), and proximity to a utility pipeline. In practice, individual projects have been given estimates of $5 million for a one-mile pipeline. A project in Tulare County received an estimate of $1.5 million for a 100-foot interconnection.
   
   These investments historically have had difficulty attracting the upfront investment needed for the capital-intensive development of necessary pipeline infrastructure due to market uncertainty. Until a competitive market develops, in order to meet California’s ambitious waste diversion and carbon reduction goals, the cost of building biogas infrastructure must come down for the project developer.
   
   AB 3187 will authorize gas corporations to rate base the investments required to interconnect biomethane production to existing common carrier pipelines. By allowing the reasonable recovery of costs through utility rates, these projects will be able to realize their statewide GHG reduction benefits on a larger scale and in a shorter timeframe.
   
2. Subsidy Expansion. Facilitating a market for biomethane gas development and interconnection to the pipeline has been deemed a priority by the Legislature. Several bills have been adopted – three in the 2015-16 legislative session – to facilitate projects interconnecting to natural gas pipelines. One bill included direction to the CPUC to double the subsidy for biomethane interconnection costs from $1.5 million to $3 million per project. Cluster dairy projects were authorized for up to $5 million per project. This bill removes the caps expanded in 2016 even though the original $40 million authorized by the CPUC has not been touched.
   
   Before those funds are exhausted, the CPUC was directed to evaluate the current monetary incentive programs for renewable gas production and pipeline interconnection and consider whether it is prudent reasonable to continue those incentives. The assessment does not appear to have been commenced but the projects are also not complete. This bill jumps ahead of that evaluative process and appears to not only provide funding to cover “interconnection costs” but also gathering lines, biogas conditioning/upgrading equipment, and monitoring and testing which is commonly referred to as “pre-injection costs.” Moreover, the bill mandates the CPUC to “approve, or modify and approve” and could be interpreted to limit the CPUCs authority to decide on an IOUs request for cost recovery because it doesn’t state “deny.” All of these costs would be included in the rates of all customers.
   
3. Cart Before the Horse. This bill reaches far beyond the prior legislative authority to increase the project cap on biomethane interconnection projects. However, the committee is not aware of any basis for this expansion other than there will be a lot of demand and it will be expensive. The market may need a boost now but an unlimited, expanded, permanent mandate in statute is not supported by the record at this time. Of particular concern is locking in permanent subsidies which may not be warranted as a competitive market grows. Additionally, the CPUC currently has the mandate to facilitate the procurement and installation of these pipelines, including recovery in rates. Before the CPUC has been able to evaluate costs and experiences of other pilot projects, it seems premature to mandate rate recovery of all costs when project funds have not been tapped.
   
   In its last decision on the program, the CPUC indicated it would open a future proceeding to further assess the program but has not yet done so. The statute requires review before the funds are exhausted but that “deadline” seems rather elusive and does not provide certainty of review for the industry. But rather than jumping ahead of the pilots and evaluation associated with the 2016 legislative package as this bill does, the committee may wish to consider modifying the trigger for CPUC review and instead require the CPUC to open the proceeding to consider interconnection options no later than July 1, 2019.
   
4. Related Legislation. SB 1440 (Hueso) requires the CPUC, before July 1, 2019, to establish a biomethane procurement program. Specifically, this bill establishes goals IOUs to collectively procure, on an annual basis, a proportionate share of a statewide total of 32 billion cubic feet of biomethane from sources that have a first point of interconnection with the pipeline system. This bill also sets goals for the procurement of biomethane produced from other specified sources. Status: Pending hearing in Senate Appropriations Committee
   
5. Prior Legislation.
   

AB 1900 (Gatto) directed the CPUC to identify landfill gas constituents, develop testing protocols for landfill gas injected into common carrier pipelines, adopt standards for biomethane to ensure pipeline safety and integrity, and adopt rules to ensure open access to the gas pipeline system. (Chapter 602, Statutes of 2012)

AB 2196 (Chesbro) ensured that biogas qualifies for RPS credit, provided its production, delivery and use meet certain conditions. (Chapter 605, Statutes of 2012)

AB 2313 (Williams) Increased the monetary incentive amounts available to biomethane projects and directed the CPUC to consider whether to allow recovery in utility rates the costs of utility infrastructure for biomethane interconnection with the natural gas pipeline network. (Chapter 571, Statutes of 2016)

SB 360 (Cannella, 2015) would have authorize the CPUC to consider providing the option to all gas corporations to engage in competitive bidding and direct investment in ratepayer financed biomethane collection equipment in California. The bill died in this committee.

SB 687 (Allen, 2015) would have established a renewable gas standard in California. The bill died in the Senate Committee on Appropriations.

SB 1383 (Lara) required state agencies to consider and, as appropriate, adopt policies and incentives to significantly increase the sustainable production and use of renewable gas, including biomethane to meet the state’s climate change, renewable energy, low-carbon fuel, and short-lived climate pollutants goals, including black carbon, landfill diversion, and dairy methane targets. (Chapter 395, Statutes of 2016)

SB 840 (Committee on Budget and Fiscal Review, required the CPUC to reevaluate its requirements and standards for biomethane to be injected into common carrier pipelines. (Chapter 341, Statutes of 2016)

SB 1122 (Rubio, Chapter 612, Statutes of 2012) required IOUs to collectively procure at least 250 MW of generation eligible for the RPS from bioenergy generation project, including biogas projects.

REGISTERED SUPPORT / OPPOSITION:

Support

Ameresco
California Grocers Association
Cambrian Energy
DMT
Dry Creek Landfill Inc.
DVO Inc.
Enerdyne Power Systems, Inc.
Energy Vision
Energy Vision
Montauk Energy
Morrow Renewables
New Phase Energy LLC
Republic Services Inc.
River Birch LLC
Rudarpa
Specialized Biogas Services
The Coalition For Renewable Natural Gas
WM Renewable Energy

Support If Amended

Clean Energy

Opposition

None on file.

Oppose Unless Amended

Agricultural Energy Consumers Association
The Utility Reform Network

Analysis Prepared by: Kellie Smith / U. & E. /