Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations, as defined. Existing law establishes a specified energy metering program that is available to an eligible fuel cell customer-generator, as defined. A fuel cell electrical generating facility is eligible for the program if it has a capacity of not more than 5 megawatts. Existing law requires that an electrical corporation file with the commission a standard tariff providing for this energy metering for eligible fuel cell customer-generators and make the tariff available to eligible fuel cell customer-generators upon request, on a first-come-first-served basis, until the total cumulative rated generating capacity of the eligible fuel cell electrical generating facilities receiving service pursuant to the tariff reaches a specified level. Existing law provides that a fuel cell electrical generating facility is not eligible for the tariff unless it commences operation on or before December 31, 2021.

This bill would change eligible fuel cell electrical generating facility to eligible electrical generating facility and would additionally make eligible a facility that electromechanically converts fuel to electricity for purposes of the above-described energy metering program. The bill would make conforming and nonsubstantive changes.

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

Because the program that is expanded under the provisions of this bill would be implemented through a decision or order of the commission, a violation of these provisions would impose a state-mandated local program by expanding the application of a crime.

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

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

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations, as defined. Existing law establishes a specified energy metering program that is available to an eligible fuel cell customer-generator, as defined. A fuel cell electrical generating facility is eligible for the program if it has a capacity of not more than 5 megawatts. Existing law requires that an electrical corporation file with the commission a standard tariff providing for this energy metering for eligible fuel cell customer-generators and make the tariff available to eligible fuel cell customer-generators upon request, on a first-come-first-served basis, until the total cumulative rated generating capacity of the eligible fuel cell electrical generating facilities receiving service pursuant to the tariff reaches a specified level. Existing law provides that a fuel cell electrical generating facility is not eligible for the tariff unless it commences operation on or before December 31, 2021.

This bill would change eligible fuel cell electrical generating facility to eligible electrical generating facility and would additionally make eligible a facility that electromechanically converts fuel to electricity for purposes of the above-described energy metering program. The bill would make conforming and nonsubstantive changes.

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

Because the program that is expanded under the provisions of this bill would be implemented through a decision or order of the commission, a violation of these provisions would impose a state-mandated local program by expanding the application of a crime.

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

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

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations, as defined. Existing law establishes a net specified energy metering program that is available to an eligible fuel cell customer-generator, as defined. A fuel cell electrical generating facility is eligible for the program if it has a capacity of not more than one megawatt. 5 megawatts. Existing law requires that an electrical corporation file with the PUC commission a standard tariff providing for net this energy metering for eligible fuel cell customer-generators and make this the tariff available to eligible fuel cell customer-generators upon request, on a first-come-first-served basis, until the total cumulative rated generating capacity of the eligible fuel cell electrical generating facilities receiving service pursuant to the tariff reaches a specified level. Existing law provides that a fuel cell electrical generating facility is not eligible for the tariff unless it commences operation on or before December 31, 2021.

This bill would make a nonsubstantive change to the above provision. change eligible fuel cell electrical generating facility to eligible electrical generating facility and would additionally make eligible a facility that electromechanically converts fuel to electricity for purposes of the above-described energy metering program. The bill would make conforming and nonsubstantive changes.

Under existing law, the Public Utilities Commission (PUC) has regulatory authority over public utilities, including electrical corporations, as defined. Existing law establishes a net energy metering program that is available to an eligible fuel cell customer-generator, as defined. A fuel cell electrical generating facility is eligible for the program if it has a capacity of not more than one megawatt. Existing law requires that an electrical corporation file with the PUC a standard tariff providing for net energy metering for eligible fuel cell customer-generators and make this tariff available to eligible fuel cell customer-generators upon request, on a first-come-first-served basis, until the total cumulative rated generating capacity of the eligible fuel cell electrical generating facilities receiving service pursuant to the tariff reaches a specified level. Existing law provides that a fuel cell electrical generating facility is not eligible for the tariff unless it commences operation on or before December 31, 2021.

This bill would make a nonsubstantive change to the above provision.

GOVERNOR'S VETO

GV Bill Id:AB 36

Author:(Nazarian)

As Enrolled Ver:September 19, 2017

2/3 vote

Original Committee Reference: U. & E.

SUMMARY: Expands the fuel cell net energy metering tariff (NEM-FC) to include all technologies using fuel to mechanically generate electricity as long as those technologies comply with emission standards established by the California Air Resources Board (CARB).

FISCAL EFFECT: According to both Appropriations Committees, this measure will result in minor, absorbable costs to the state.

COMMENTS:

1. Purpose. According to the author, existing law provides net energy metering eligibility for fuel cells but unnecessarily excludes other clean and innovative distributed generation technologies including linear generations, microturbines, and combined heat and power. This bill allows eligible technologies in addition to fuel cells to be installed at customer facilities so long as all CARB emissions standards are met.
2. Net Energy Metering. NEM tariffs allow a customer to reduce energy charges as a result of energy generated behind the customer's meter. Specialized metering measures the difference between the amounts of electricity the system generates throughout the month and the amount of electricity supplied by the utility. The difference is net energy and participating customers are referred to as customer-generators. NEM tariffs are available to customers for electricity generated from renewable resources and fuel cells fueled by natural gas, and have the result of off-setting electricity costs but also reducing related transmission, distribution, demand, and other charges.

AB 1214 (Firebaugh), Chapter 661, Statutes of 2003, created a separate NEM program for fuel cells (NEM-FC). The NEM-FC tariff provides credits equal to only the electric generation portion of a customer's retail rate, an amount less than other NEM-eligible technologies. But this NEM-FC tariff applies almost exclusively to fuel cells that use natural gas; fuel cells that use renewable fuels are eligible for the higher, standard NEM rate.

AB 1637 (Low), Chapter 658, Statutes of 2016, extended the sunset of NEM-FC to December 31, 2021, and expanded the program. As a result of that bill, the NEM-FC eligible project size increased from 1 megawatt to 5 megawatts, the total program cap increased, and generating technologies were required to meet criteria pollutant emission standards and a new schedule of annual greenhouse gas (GHG) emission reduction standards adopted by CARB. Although AB 1637 requires CARB to adopt the GHG standards by March 31, 2017, CARB has not yet published proposed standards and is not scheduled to adopt them until later this year.

1. Impact on GHG Goals. The author opines that the expansion of the NEM-FC brought forward in this bill would create technology-neutral policy. Yet, this expansion perpetuates the subsidization of fossil fueled resources when the state is trying to reduce its reliance. In the case of natural gas technologies, all technologies using renewable natural gas are eligible for a standard NEM tariff; however, only the NEM-FC tariff covers fossil fuel-derived natural gas fuel cells. This policy distinction is based on the overall reduction in GHG emissions for renewable natural gas, based on a life-cycle analysis which considers the elimination of resources from the waste stream. The low cost of natural gas makes the NEM tariff financially attractive; however, the extension and expansion of the tariff eliminates a customer base for biogas and development of a market for renewable fuels.

GOVERNOR'S VETO MESSAGE:

This bill broadens eligibility for the Fuel Cell Net Energy Metering program to include electromechanical on-site electricity generation technologies that converts gas to electricity.

AB 1637, a bill I signed into law just last year, continued the existing fuel cell program based specifically on its ability to further reduce greenhouse gases. As we continue to develop a cleaner grid, I prefer to evaluate the effectiveness of the reformed fuel cell program before expanding it to other technologies.

Analysis Prepared by: Laura McWilliams / U. & E. / (916) 319-2083 FN: 0002447

 THIRD READING  

Bill No: AB 36

Author:

:

Vote:

SENATE ENERGY, U. & C. COMMITTEE: 10-0, 6/6/17

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

NO VOTE RECORDED: Stern

ASSEMBLY FLOOR: 77-0, 5/11/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill modifies the existing net-energy metering fuel-cell program (NEM-FC) to include any onsite electricity generation technology that otherwise meets existing program requirements.

ANALYSIS:

Existing law:

1. Requires, generally, every electric utility to offer a net-energy metering (NEM) tariff to a customer-generator using an onsite renewable energy generation facility of no greater than one megawatt (MW) until the total generating capacity used by eligible customer-generators exceeds five percent of the electric utility’s aggregate customer peak demand or until July 1, 2017, whichever is earlier. This is known as the NEM-Renewables program. (Public Utilities Code §2827)
2. Requires the California Public Utilities Commission (CPUC), by December 31, 2015, to develop a successor program to the NEM-Renewables program, which the investor-owned utilities (IOUs) must offer to customer-generators using an onsite renewable energy generation facility. (Public Utilities Code §2827.1)
3. Requires each IOU, until December 31, 2021, to offer a NEM tariff for a customer who generates electricity using an onsite fuel cell electrical generating facility not greater than five MW until total installed fuel cell electrical generation resources reaches the IOU’s proportional share of 500 MW. This is known as NEM-FC.

Requires the California Air Resources Board (ARB), in consultation with the California Energy Commission, by March 31, 2017, and updated every three years thereafter, to establish annual greenhouse gas (GHG) emission reduction standards for a fuel cell electrical generation resource. The standard is to ensure each fuel cell electrical generation resource eligible for the NEM-FC program reduce GHG emissions compared to electrical grid resources, including renewable resources, that the fuel cell electrical generation resource displaces. Limits eligibility for the NEM-FC program to customers who use fuel cell technology that meets (a) ARB’s annual GHG emission reduction standard as described in the preceding paragraph and (b) ARB regulations for distributed generation authorized by existing law. (Public Utilities Code §2827.10)

1. Directs the ARB to adopt a certification program and uniform emission standards for electrical generation technologies, such as distributed generation systems, that are exempt from local air district permitting requirements. (Health and Safety Code §41514.9)

This bill modifies the existing NEM-FC program, so that the program’s NEM tariff is available to any onsite electricity generating technology that otherwise meets the program’s requirements.

Background

NEM Programs encourage installation of onsite electricity generation. NEM programs allow a customer who has installed an on-site distributed electricity generation facility to receive a payment at a prearranged price for the electricity produced by the customer. In theory, all distributed generation can benefit the electric system. Those benefits come in the form of reduced need for generation during peak periods of demand. In addition, distributed generation may provide locational benefits, such as relief of congestion or diminished need to build transmission.

With those potential benefits in mind, California law has established two types of NEM programs. One NEM program, sometimes referred to as the renewable NEM program, is for facilities that use electricity generation technologies that use renewable resources to generate electricity. The other NEM program is for facilities that use onsite fuel cells to generate electricity.

Why just fuel-cells? Last year, after much debate, the Legislature extended through 2021 the existing NEM-FC program and expanded, from one MW to five MW, the program limit on eligible fuel cell electrical generating facilities. Fuel cells use conventional natural gas to produce electricity through a chemical reaction. There are, however, other nonrenewable distributed generation technologies, other than fuel cells, that use conventional natural gas to produce electricity. The Legislature, when considering changes to the NEM-FC program in 2016, did not expand the NEM-FC program to include technologies other than fuel cells that otherwise meet NEM-FC program requirements, though industry representatives proposed such an expansion. Nonetheless, there is no clear policy rationale for continuing to exclude from the program other distributed electrical generation resources that successfully meet the air pollution, emissions and other criteria specified in statute.

Interconnection costs. Connecting a distributed energy resource to a utility’s distribution network can impose costs. These costs may include processing and administrative costs, distribution engineering costs, and metering inspection and commissioning costs. To the extent these costs are not paid by the customer installing the distributed energy resource, those costs shift to other ratepayers.

For the NEM-Renewables program, statute explicitly addresses interconnection costs. Specifically, Public Utilities Code §2827.1(b)(5) authorizes the CPUC to modify the NEM-Renewables tariff in order to “allow projects greater than one megawatt that do not have significant impact on the distribution grid to be built to the size of the onsite load if the projects with a capacity of more than one megawatt are subject to reasonable interconnection charges.” In keeping with this statutory authority, the CPUC, in Decision 16-01-044, determined that NEM-Renewables customers should “pay a reasonable fee for interconnection of their systems.”

In giving direction for setting of the fee, the CPUC distinguishes between systems up to one MW and systems larger than 1 megawatt. For the smaller systems, the CPUC decision directs the IOU’s to set the interconnection fee “based on each IOU's costs of interconnection,” whereas the IOU should set the interconnection fee for larger systems should cover all interconnection and upgrade costs to ensure such systems “do not have significant impact on the distribution system.”

The interconnection fee of each of the IOUs varies. For its part, PG&E reports that its interconnection fee for smaller NEM-Renewable customers is $145. The fee for larger NEM-Renewable customers varies, depending on necessary interconnection and upgrade costs.

Existing statute seems to prohibit the CPUC from making a similar determination regarding interconnection cost for NEM-FC projects. Specifically, Public Utilities Code §2827.10(e)(1) states:

Any new or additional demand charge, standby charge, customer charge, minimum monthly charge, interconnection charge, or other charge that would increase an eligible fuel cell customer-generator’s costs beyond those of other customers in the rate class to which the eligible fuel cell customer-generator would otherwise be assigned are contrary to the intent of the Legislature in enacting this section, and shall not form a part of net energy metering tariffs.

There is no policy rationale for treating the interconnection and upgrade costs of the two NEM programs differently. Not requiring NEM-FC customers to pay such costs shifts the costs on to other ratepayers.

Related/Prior Legislation

AB 1637 (Low, Chapter 658, Statutes of 2016) extended the sunset of NEM-FC to December 31, 2021, and expanded the program. As a result of that bill, the NEM-FC eligible project size increased from one MW to five MW, the total program cap increased, and generating technologies were required to meet criteria pollutant emission standards and a new schedule of annual GHG emission reduction standards adopted by ARB.

AB 1530 (Levine, 2016) would have excused from nonbypassable, otherwise levied against all electricity used by customers of an electrical corporation, the electricity used by customers who use certain onsite generation technologies to produce that electricity. The bill passed the Senate Energy, Utilities and Communications Committee on a 6-4 vote but died in the Senate Environmental Quality Committee.

AB 327 (Perea, Chapter 611, Statutes of 2013) required IOUs to submit plans for deploying distributed energy resources to the CPUC.

AB 427 (Mullin, 2013) would have exempted bottoming cycle combined heat and power from nonbypassable charges. The bill failed to pass the Assembly Utilities and Commerce Committee.

AB 365 (Mullin, 2013) was similar to AB 1530. The bill passed the Senate Energy, Utilities and Communications Committee on a vote of 7-2 but was held in the Senate Appropriations Committee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• Minor costs (Utilities Reimbursement Account) to the CPUC to revise guidance documents, review additional technologies, and correspond with stakeholders.
• Minor costs (Cost of Implementation Fund) to ARB to consider additional technologies in its standards.
• Unknown, potentially significant, cost shifts to ratepayers due to exemption for interconnection costs. (See staff comments in the Appropriations Committee analysis)

SUPPORT: (Verified 9/15/17)

BMC Technology

Bright Light Welding & Manufacturing

BT Laser Inc.

California Manufacturing & Technology Association

Capstone Turbine Corporation

Caterpillar

DE Solutions

Diamond Tool & Die, Inc.

End-2-End Manufacturing

ETAGEN

FDS Manufacturing Company

Holt of California

Huffman’s Welding Works

Lux Manufacturing

Phamtec, Inc.

Regatta Solutions

Silicon Valley Leadership Group

SoCalGas

Solar Turbines

Tecogen

Truck & Engine Manufacturers Association

Western Energy Systems

OPPOSITION: (Verified 9/15/17)

None received

ARGUMENTS IN SUPPORT: According to the author:

Since 2003, other innovative, clean distributed generation technologies have been developed which achieve environmental and efficiency benefits equivalent to many of the fuel cells currently eligible for NEM-FC.

A properly inclusive NEM program has huge potential to support California’s important and ambitious clean energy objectives. However, it is only by advancing technology neutral policies that the State can maximize both the environmental and market-driven technological advancements that are increasingly critical to ensure both a robust economy and a clean environment.

ASSEMBLY FLOOR: 77-0, 5/11/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Dahle, O'Donnell, Patterson

Prepared by:

9/15/17 20:27:10

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

AB 36 (Nazarian) - Eligible fuel cell electrical generating facilities: energy metering

This bill does not meet the criteria for referral to the Suspense File.

SUMMARY: AB 36 expands eligibility for the non-renewable net energy metering (NEM) program to additionally include any electrical generation technology that otherwise meets the eligibility requirements.

Fiscal Impact:

• Minor costs (Utilities Reimbursement Account) to the California Public Utilities Commission (CPUC) to revise guidance documents, review additional technologies, and correspond with stakeholders.
• Minor costs (Cost of Implementation Fund) to the California Air Resources Board (ARB) to consider additional technologies in its standards.
• Unknown, potentially significant, cost shifts to ratepayers due to exemption for interconnection costs. (See staff comments)

Background:

Existing law. Each investor-owned utility (IOU) is required to offer a NEM tariff for a customer who generates electricity using an onsite fuel cell until total installed fuel cell electrical generation resources reaches the IOU’s proportional share of 500 megawatt (MW) installed after January 1, 2017. To be eligible, fuel cells must: (1) commence operation on or before December 31, 2021; (2) be sized under than five MW; (3) comply with the ARB distributed generation certification standards (establishing emissions limits for oxides of nitrogen and other criteria pollutants); and (4).reduce greenhouse gas (GHG) emissions based on ARB’s GHG emissions reduction standards applicable each year. Fuel cells must continue to meet the applicable annual standard during operation to maintain eligibility for the NEM tariff.

What is Net Energy Metering (NEM)? NEM is a billing mechanism available to customers who install small solar, wind, biogas, and fuel cell generation facilities (5 MW or less) to serve all or a portion of onsite electricity needs. Under NEM tariffs, participating customers receive a monthly bill credit equal to the retail rate of excess generation exported to the grid when not serving onsite electricity needs. At the end of a customer’s 12-month billing period, any balance of surplus electricity is trued-up at a separate fair market value, known as net surplus compensation. NEM customers are exempt from standby charges, and departing load charges. NEM-FC customers are also exempt from costs associated with interconnection application fees, studies and distribution upgrades.

Fuel Cell Net Energy Metering Program (NEM-FC). NEM-FC was created by statute in 2003 to encourage the development of eligible fuel cell electrical generating facilities using technologies the CPUC has determined will achieve GHG emissions reductions.

Currently, the program applies almost exclusively to fuel cells that use natural gas; fuel cells that use renewable fuels are eligible for the higher, standard NEM rate.

In 2016, AB 1637 (Low) extended the program sunset five years (to December 31, 2021), expanded the program eligibility to projects up to 5 MW (from 1 MW), increased the statewide program cap to 500 MW, required generating technologies to meet criteria pollutant emissions standards, and directed ARB to establish and annually update GHG standards to assure that each eligible fuel cell reduces GHG emissions compared to the electrical grid. ARB anticipates that the standards will be adopted later this year. As of January 1, 2017, approximately 76 MW have been installed under NEM-FC.

Proposed Law:

This bill expands eligibility for the non-renewable NEM program to additionally include any electrical generation technology that otherwise meets the eligibility requirements.

Related Legislation:

AB 1637 (Low, Chapter 658, Statutes of 2016) extended the sunset for the NEM-FC program to December 31, 2021. The bill also increased the eligible project size from 1

MW to 5 MW, increased the total program, and required generating technologies to meet criteria pollutant emissions standards and a new schedule of annual GHG emissions reduction standards adopted by ARB.

AB 1214 (Firebaugh, Chapter 661, Statutes of 2003) created NEM-FC, which provides a credit equal to the electric generation portion of a customer’s retail rate.

Staff Comments:

Program eligibility relies upon dated emissions regulations. The purpose of NEM-FC is to encourage adoption of technologies that help the state achieve its climate change goals. Under current statute, an “eligible customer-generator”, among other things, must comply with the emissions standards adopted by the ARB pursuant to the distributed generation certification program requirements of Section 94203 of Title 17 of the California Code of Regulations, or any successor regulation. These regulations were adopted in 2007. Given the vast and significant advances in climate change policies and technology since 2007 (and 2015), it’s unlikely that these regulations reflect current policies and expectations related to emissions. ARB is in the process of updating the regulations, which are expected to be completed by the end of 2017. ARB stated that these regulations are being written to be technology neutral so cost associated with this bill, if any, will be minimal.

Transmission cost exemption is inconsistent with state policy for NEM-renewables. When interconnection costs are not paid by the customer installing the distributed energy resource, those costs shift to other ratepayers. For the NEM-Renewables program, the CPUC is authorized to subject certain customers to “reasonable interconnection charges,” and exercised this authority in Decision 16-01-044. The interconnection fees vary by investor-owned utility vary. Pacific Gas & Electric reports assesses a $145 interconnection fee for smaller NEM-Renewable customers: the fee for larger NEM-Renewable customers depends on necessary interconnection and upgrade costs.

Existing statute seems to prohibit the CPUC from making a similar determination regarding interconnection cost for NEM-FC projects. Given the interconnection fees imposed on NEM-Renewables customers, and the potential for significantly high interconnection costs for the newly-eligible technologies, it is unclear why this bill maintains the exemption. This exemption maintains the cost shift to non-using ratepayers (in the low millions) including the state, which represents approximately one to two percent of rates paid.

Staff recommends that the bill is amended to align with the NEM renewables program and require customers to pay interconnection fees.

State mandate not reimbursable. This bill constitutes a state mandate. However, under the California Constitution, cost associated with the following are not reimbursable (1) legislation defining a new crime or changing an existing definition of a crime; (2) mandates on local agencies or school districts because have the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated; or (3) legislative mandates requested by the local affected agency. The bill language indicates the activities required in this bill are not reimbursable based on criteria (1) and (2).

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: Hearing Date: 6/6/2017

SUBJECT:

DIGEST: This bill modifies the existing net-energy metering fuel-cell program (NEM-FC) to include any onsite electricity generation technology that otherwise meets existing program requirements.

ANALYSIS:

Existing law:

1. Generally, requires every electric utility to offer a net-energy metering (NEM) tariff to a customer-generator using an onsite renewable energy generation facility of no greater than one megawatt (MW) until the total generating capacity used by eligible customer-generators exceeds five percent of the electric utility’s aggregate customer peak demand or until July 1, 2017, whichever is earlier. This is known as the NEM-Renewables program. (Public Utilities Code §2827)
2. Requires the CPUC, by December 31, 2015, to develop a successor program to the NEM-Renewables program, which the IOUs must offer to customer-generators using an onsite renewable energy generation facility. (Public Utilities Code §2827.1)
3. Requires each investor-owned utility (IOU), until December 31, 2021, to offer a NEM tariff for a customer who generates electricity using an onsite fuel cell electrical generating facility not greater than five MW until total installed fuel cell electrical generation resources reaches the IOU’s proportional share of 500 MW. This is known as NEM-FC.

Requires California Air Resources Board (ARB), in consultation with the California Energy Commission (CEC), by March 31, 2017, and updated every three years thereafter, to establish annual greenhouse gas (GHG) emission reduction standards for a fuel cell electrical generation resource. The standard is to ensure each fuel cell electrical generation resource eligible for the NEM-FC program reduce GHG emissions compared to electrical grid resources, including renewable resources, that the fuel cell electrical generation resource displaces. Limits eligibility for the NEM-FC program to customers who use fuel cell technology that meets (a) ARB’s annual GHG emission reduction standard as described in the preceding paragraph and (b) ARB regulations for distributed generation authorized by existing law. (Public Utilities Code §2827.10)

1. Directs the ARB to adopt a certification program and uniform emission standards for electrical generation technologies, such as distributed generation systems, that are exempt from local air district permitting requirements. (Health and Safety Code §41514.9)

This bill modifies the existing NEM-FC program, so that the program’s NEM tariff is available to any onsite electricity generating technology that otherwise meets the program’s requirements.

Background

NEM Programs Encourage Installation of Onsite Electricity Generation. NEM programs allow a customer who has installed an on-site distributed electricity generation facility to receive a payment at a prearranged price for the electricity produced by the customer. In theory, all distributed generation can benefit the electric system. Those benefits come in the form of reduced need for generation during peak periods of demand. In addition, distributed generation may provide locational benefits, such as relief of congestion or diminished need to build transmission.

With those potential benefits in mind, California law has established two types of NEM programs. One NEM program, sometimes referred to as the renewable NEM program, is for facilities that use electricity generation technologies that use renewable resources to generate electricity. The other NEM program is for facilities that use onsite fuel cells to generate electricity.

Why Just Fuel-cells? Last year, after much debate, the Legislature extended through 2021 the existing NEM-FC program and expanded, from one MW to five MW, the program limit on eligible fuel cell electrical generating facilities. Fuel cells use conventional natural gas to produce electricity through a chemical reaction. There are, however, other nonrenewable distributed generation technologies, other than fuel cells, that use conventional natural gas to produce electricity. The Legislature, when considering changes to the NEM-FC program in 2016, did not expand the NEM-FC program to include technologies other than fuel cells that otherwise meet NEM-FC program requirements, though industry representatives proposed such an expansion. Nonetheless, there is no clear policy rationale for continuing to exclude from the program other distributed electrical generation resources that successfully meet the air pollution, emissions and other criteria specified in statute.

Interconnection Costs. Connecting a distributed energy resource to a utility’s distribution network can impose costs. These costs may include processing and administrative costs, distribution engineering costs, and metering inspection and commissioning costs. To the extent these costs are not paid by the customer installing the distributed energy resource, those costs shift to other ratepayers.

For the NEM-Renewables program, statute explicitly addresses interconnection costs. Specifically, Public Utilities Code §2827.1(b)(5) authorizes the CPUC to modify the NEM-Renewables tariff in order to “allow projects greater than one megawatt that do not have significant impact on the distribution grid to be built to the size of the onsite load if the projects with a capacity of more than one megawatt are subject to reasonable interconnection charges.” In keeping with this statutory authority, the CPUC, in Decision 16-01-044, determined that NEM-Renewables customers should “pay a reasonable fee for interconnection of their systems.”

In giving direction for setting of the fee, the CPUC distinguishes between systems up to one MW and systems larger than 1 megawatt. For the smaller systems, the CPUC decision directs the IOU’s to set the interconnection fee “based on each IOU's costs of interconnection,” whereas the IOU should set the interconnection fee for larger systems should cover all interconnection and upgrade costs to ensure such systems “do not have significant impact on the distribution system.”

The interconnection fee of each of the IOU’s vary. For its part, PG&E reports that its interconnection fee for smaller NEM-Renewable customers is $145. The fee for larger NEM-Renewable customers varies, depending on necessary interconnection and upgrade costs.

Existing statute seems to prohibit the CPUC from making a similar determination regarding interconnection cost for NEM-FC projects. Specifically, Public Utilities Code §2827.10(e)(1) states:

Any new or additional demand charge, standby charge, customer charge, minimum monthly charge, interconnection charge, or other charge that would increase an eligible fuel cell customer-generator’s costs beyond those of other customers in the rate class to which the eligible fuel cell customer-generator would otherwise be assigned are contrary to the intent of the Legislature in enacting this section, and shall not form a part of net energy metering tariffs.

There is no policy rationale for treating the interconnection and upgrade costs of the two NEM programs differently. Not requiring NEM-FC customers to pay such costs shifts the costs on to other ratepayers. The committee should consider amending this bill to authorize the CPUC to consider NEM-FC interconnection upgrade costs similar to its consideration of NEM-Renewables interconnection and upgrade costs.

Prior/Related Legislation

AB 1637 (Low, Chapter 658, Statutes of 2016) extended the sunset of NEM-FC to December 31, 2021, and expanded the program. As a result of that bill, the NEM-FC eligible project size increased from one MW to five MW, the total program cap increased, and generating technologies were required to meet criteria pollutant emission standards and a new schedule of annual GHG emission reduction standards adopted by ARB.

AB 1530 (Levine, 2016) would have excused from nonbypassable, otherwise levied against all electricity used by customers of an electrical corporation, the electricity used by customers who use certain onsite generation technologies to produce that electricity. The bill passed the Senate Committee on Energy, Utilities and Communications on a 6-4 vote but died in the Senate Committee on Environmental Quality.

AB 327 (Perea, Chapter 611, Statutes of 2013) required IOUs to submit plans for deploying distributed energy resources to the CPUC.

AB 427 (Mullin, 2013) would have exempted bottoming cycle combined heat and power from nonbypassable charges. The bill failed to pass the Assembly Committee on Utilities and Commerce.

AB 365 (Mullin, 2013) was similar to AB 1530. The bill passed the Committee on Energy, Utilities and Communication on a vote of 7-2 but was held in Senate Committee on Appropriations.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

BMC Technology

Bright Light Welding & Manufacturing

BT Laser Inc.

California Manufacturing & Technology Association

Capstone Turbine Corporation

Caterpillar

DE Solutions

Diamond Tool & Die, Inc.

ETAGEN

FDS Manufacturing Company

Holt of California

Huffman’s Welding Works

Lux Manufacturing

Phamtec, Inc.

Regatta Solutions

Silicon Valley Leadership Group

Solar Turbines

Tecogen

Truck & Engine Manufacturers Association

Western Energy Systems

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

Since 2003, other innovative, clean distributed generation technologies have been developed which achieve environmental and efficiency benefits equivalent to many of the fuel cells currently eligible for NEM-FC.

A properly inclusive NEM program has huge potential to support California’s important and ambitious clean energy objectives. However, it is only by advancing technology neutral policies that the State can maximize both the environmental and market-driven technological advancements that are increasingly critical to ensure both a robust economy and a clean environment.

-- END --

Date of Hearing: May 3, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 36

Author:(Nazarian) – As Amended Ver:April 4, 2017

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

SUMMARY:

This bill expands eligibility for the non-renewable net energy metering (NEM) program currently limited to fuel cells to include any electrical generation technology that otherwise meets the eligibility requirements. Specifically, the electrical generation technology must meet the requirements for fuel cells in existing law that requires the technology to:

1. Commence operation on or before December 31, 2021.
2. Be not greater than five megawatts (MWs).
3. Comply with the Air Resources Board (ARB) distributed generation certification standards (establishing emission limits for oxides of nitrogen and other criteria pollutants).
4. Reduce greenhouse gas (GHG) emissions based on ARB GHG emission reduction standards applicable each year to assure that each eligible technology reduces GHG emissions compared to the electrical grid. The electrical generation technology must continue to meet the applicable annual standard during operation to maintain eligibility for the NEM tariff.

FISCAL EFFECT:

1. Absorbable Public Utilities Commission (PUC) administrative costs.
2. Absorbable ARB costs.

COMMENTS:

1. Purpose. According to the author, existing law provides net energy metering eligibility for fuel cells but unnecessarily excludes other clean and innovative distributed generation technologies including linear generations, microturbines and combined heat and power.

This bill allows eligible technologies in addition to fuel cells to be installed at customer facilities so long as all ARB emissions standards are met.

1. Net Energy Metering. NEM tariffs allow a customer to reduce energy charges as a result of energy generated behind the customer’s meter. Specialized metering measures the difference between the amount of electricity the system generates throughout the month and the amount of electricity supplied by the utility. The difference is net energy and participating customers are referred to as customer-generators. NEM tariffs are available to customers for electricity generated from renewable resources and fuel cells fueled by natural gas, and have the result of off-setting electricity costs but also reducing related transmission, distribution, demand, and other charges.

AB 1214 (Firebaugh), Chapter 661, Statutes of 2003, created a separate NEM program for fuel cells (NEM-FC). The NEM-FC tariff provides credits equal to only the electric generation portion of a customer’s retail rate, an amount less than other NEM-eligible technologies. But this NEM-FC tariff applies almost exclusively to fuel cells that use natural gas; fuel cells that use renewable fuels are eligible for the higher, standard NEM rate.

AB 1637 (Low), Chapter 658, Statutes of 2016, extended the sunset of NEM-FC to December 31, 2021, and expanded the program. As a result of that bill, the NEM-FC eligible project size increased from 1 MW to 5 MW, the total program cap increased, and generating technologies were required to meet criteria pollutant emission standards and a new schedule of annual GHG emission reduction standards adopted by ARB. Although AB 1637 requires ARB to adopt the GHG standards by March 31, 2017, ARB has not yet published proposed standards and is not scheduled to adopt them until later this year.

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

Date of Hearing: April 24, 2017

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Cristina Garcia, Chair

ABPCA Bill Id:AB 36 (

Author:Nazarian) – As Amended Ver:April 4, 2017

SUBJECT: Eligible fuel cell electrical generating facilities: energy metering

SUMMARY: Expands eligibility for the non-renewable net energy metering (NEM) program, currently limited to fuel cells, to include any electrical generation technology that otherwise meets the eligibility requirements.

EXISTING LAW: Requires each investor-owned utility (IOU) to offer a NEM tariff for a customer who generates electricity using an onsite fuel cell until total installed fuel cell electrical generation resources reaches the IOU’s proportional share of 500 megawatt (MW) installed after January 1, 2017. To be eligible, fuel cells must:

1. Commence operation on or before December 31, 2021.
2. Be not greater than five MWs.
3. Comply with the Air Resources Board (ARB) distributed generation certification standards (establishing emission limits for oxides of nitrogen and other criteria pollutants).
4. Reduce greenhouse gas (GHG) emissions based on ARB GHG emission reduction standards applicable each year to assure that each eligible fuel cell reduces GHG emissions compared to the electrical grid. Fuel cells must continue to meet the applicable annual standard during operation to maintain eligibility for the NEM tariff.

FISCAL EFFECT: Unknown

COMMENTS:

1. Background. The NEM tariffs allow a customer to reduce energy charges as a result of energy generated behind the customer’s meter. Specialized metering measures the difference between the amount of electricity the system generates throughout the month and the amount of electricity supplied by the utility. The difference is net energy and participating customers are referred to as customer-generators. NEM tariffs are available to customers for electricity generated from renewable resources and fuel cells fueled by natural gas, and have the result of off-setting electricity costs but also reducing related transmission, distribution, demand, and other charges.

AB 1214 (Firebaugh, 2003) created a separate NEM program for fuel cells (NEM-FC). The NEM-FC tariff provides credits equal to only the electric generation portion of a customer’s retail rate, an amount less than other NEM-eligible technologies. But this NEM-FC tariff applies almost exclusively to fuel cells that use natural gas; fuel cells that use renewable fuels are eligible for the higher, standard NEM rate. AB 1637 (Low, 2016) extended the sunset of NEM-FC to December 31, 2021, and expanded the program. As a result of that bill, the NEM-FC eligible project size increased from 1 MW to 5 MW, the total program cap increased, and generating technologies were required to meet criteria pollutant emission standards and a new schedule of annual GHG emission reduction standards adopted by ARB. Although AB 1637 requires ARB to adopt the GHG standards by March 31, 2017, ARB has not yet published proposed standards and is not scheduled to adopt them until later this year.

1. Author's statement:

Existing law provides net energy metering eligibility for fuel cells but unnecessarily excludes other clean and innovative distributed generation technologies including linear generations, microturbines and combined heat and power. AB 36 will create a technology neutral program where technologies are rewarded based upon performance criteria rather than technology type, further driving innovation. Eligible technologies – in addition to fuel cells – may be installed at customer facilities so long as all ARB emissions standards are met.

1. Each eligible generator must reduce GHG emissions compared to electrical grid. In extending fuel cell NEM, AB 1637 established more stringent GHG standards to assure eligible projects remain cleaner than the grid each year of operation. AB 1637 required ARB to set new GHG standards which are expected to be lower than the prior Public Utilities Commission standards at the outset, and get progressively lower each year as the overall GHG emissions from the grid decrease due to implementation of a 50% Renewables Portfolio Standard, reduction of coal imports, and other factors. AB 1637's GHG standard applies to existing installed fuel cells, as well as future installed fuel cells, requiring all NEM participants to meet annual GHG reduction standards, to be adopted by ARB, to remain eligible for NEM. This bill retains the same standard, which all technologies must meet to remain eligible for NEM.

REGISTERED SUPPORT / OPPOSITION:

Support

BMC Technology

Bright Light Welding & Manufacturing

BT Laser, Inc.

California Manufacturing Technology Association

Capstone Turbine Corporation

Caterpillar

DE Solutions

Diamond Tool & Die, Inc.

End-2-End Manufacturing

ETAGEN

FDS Manufacturing Company

Holt of California

Huffman’s Welding Works

Lux Manufacturing

Phamtec, Inc.

Regatta Solutions

Solar Turbines

Tecogen

Western Energy Systems

Opposition

None on file

Analysis Prepared by: Lawrence Lingbloom / NAT. RES. /

Date of Hearing: April 19, 2017

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

ABPCA Bill Id:AB 36 (

Author:Nazarian) – As Amended Ver:March 21, 2017

SUBJECT: Eligible fuel cell electrical generating facilities: energy metering

SUMMARY: Expands the fuel cell net energy metering tariff (NEM-FC) to include all technologies using fuel to mechanically generate electricity as long as those technologies comply with emission standards established by the Air Resources Board.

EXISTING LAW:

1. Requires each electrical investor owned utility (IOU) to offer a NEM tariff with a credit for all electricity generated by a customer-owned renewable resource against the customer's usage of electricity sold by the utility, on a kilowatt hour basis (kWh), a procedure known as "net energy metering" (NEM). (Public Utilities Code §§ 2827, 2827.1)
2. Requires each IOU to offer a NEM tariff for fuel cells, defined as technologies that chemically convert fuel to electricity. The program has a 500 megawatt (MW) program cap with a five MW cap for each project and an overall sunset date of December 31, 2017. (Public Utilities Code § 2827.10)

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:

What are NEM tariffs? The NEM tariffs allow a customer to reduce energy charges as a result of energy generated behind the customer’s meter. Specialized metering measures the difference between the amount of electricity the system generates throughout the month and the amount of electricity supplied by the utility. The difference is net energy, and participating customers are referred to as customer-generators. NEM tariffs are available to customers for electricity generated from renewable resources and fuel cells fueled by natural gas, and have the result of off-setting electricity costs but also reducing related transmission, distribution, demand and other charges.

AB 1214 (Firebaugh, 2003) created a separate NEM program for fuel cells. The NEM-FC tariff provides credits equal to only the electric generation portion of a customer’s retail rate, an amount less than other NEM-eligible technologies. But this NEM-FC tariff applies almost exclusively to fuel cells that use natural gas; fuel cells that use renewable fuels are eligible for the higher, standard NEM rate. AB 1637 (Low, 2016) extended the sunset of NEM-FC to December 31, 2021 and expanded the program.^[1] As a result of that bill, the NEM-FC eligible project size increased from 1 MW to 5 MWs, the total program cap increased by an additional 500 MW, and generating technologies were required to meet criteria pollutant emission standards and a new schedule of annual GHG emission reduction standards adopted by CARB.^[2] The CARB GHG standards for NEM-FC are still being determined, and are expected to be released sometime in 2017. The updated statute has been interpreted by the CPUC to require all fuel cells – both those previously installed and new ones coming online – to meet CARB’s new GHG emissions standards.^[3] Moreover, both new and existing fuel cells are required to meet the GHG standard on an ongoing basis, not merely at the time of interconnection.

COMMENTS:

1. Author’s Statement. According to the author’s office, “By limiting NEM eligibility to fuel cells, the state, unfortunately, picks winners and losers. Additionally, the current NEM-FC program stifles innovation and prevents other California based distributed generation companies from being able to compete for this important subsidy. By advancing technology neutral policies, AB 36 can maximize both the environmental and market-driven technological advancements, create fair competition and advance a robust economy.”
   
2. Electromechanical vs. Electrochemical. This bill expands eligible fuel conversion technologies to include electric generation that is mechanical not just chemical. Mechanical fuel conversion generates electricity from mechanical movement. This process is fundamental in combustion technology, where turbines, engines, or other moving parts spin or rotate in order to generate an electromagnetic field. Chemical fuel conversion generates electricity from a chemical reaction. This process is fundamental in batteries and fuel cells, where fuels are stripped of their electrons in order to generate an electric current. By expanding the definition of eligible technologies to include electromechanical generation, this bill would expand the NEM-FC to include all natural gas sources of electricity generation, from fuel cells to natural-gas fired generators or combined heat and power applications. This expansion would make the NEM-FC program not fuel cell-limited, but rather create a NEM-natural gas program the eligibility of which is established by fuel use and emissions standards.
3. Impact on GHG Goals? The author opines that the expansion of the NEM-FC brought forward in this bill would create technology-neutral policy. Yet, this expansion perpetuates the subsidization of fossil fueled resources when the state is trying to reduce its reliance. In the case of natural gas technologies, all technologies using renewable natural gas are eligible for a standard NEM tariff; however, only the NEM-FC tariff covers fossil fuel-derived natural gas fuel cells. This policy distinction is based on the overall reduction in GHG emissions for renewable natural gas, based on a life-cycle analysis which considers the elimination of resources from the waste stream used as fuel sources in the generation of electricity. The cost of natural gas is low to customer-generators which makes the tariff financially attractive. However, the use of the tariff eliminates a customer base for biogas and development of a market for renewable fuels.

DOUBLE REFERRAL. This bill is double referred; upon passage in this Committee, this bill will be referred to the Assembly Natural Resources Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

BMC Technology
Bright Light Welding & Manufacturing 
Bt Laser Inc.
California Manufacturers And Technology Association
Capstone Turbine Corporation
Catepillar
DE Solutions
Diamond Tool & Die, Inc.
End 2 End Manufacturing 
Etagen
Fds Manufacturing Company 
Holt Of California
Huffmans Welding Works 
Lux Manufacturing Inc. 
Phamtec, Inc.
Regatta Solutions
Solar Turbines
Western Energy Systems

18 Individuals

Opposition

None on file.

Analysis Prepared by: Laura McWilliams / U. & E. /

1. PUC §2827.10 ↑

2. California Code of Regulations §94203 ↑

3. Edward Randolph, Director of Energy Division at CPUC; “Disposition Letter” Modifications to Net Energy Metering Fuel Cell Tariffs Pursuant to Assembly Bill 1637; Feb. 8^th, 2017; https://www.pge.com/tariffs/tm2/pdf/ELEC_4971-E.pdf ↑