9. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner and Dorothy J. Duda is the assigned ALJ in this proceeding.
1. Fuel cells generate electricity through an electrochemical process that emits lower amounts of pollutants, such as nitrogen and sulfur oxides and, depending on waste heat utilization, less GHGs than conventional power plants.
2. Fuel cells are a preferred resource consistent with the State's loading order and as indicated by their inclusion as an eligible DG technology in the SGIP.
3. The proposed fuel cell projects have an estimated 10-year life and would output waste heat to the universities to serve campus thermal load and discharged water for landscape irrigation.
4. Each utility's Fuel Cell Project includes an electric-only, high efficiency fuel cell, where waste heat is used in the generation process.
5. The electric-only high efficiency fuel cells enhance the demonstrative and educational aspects of the Fuel Cell Projects.
6. PG&E and SCE plan to monitor fuel cell performance, reliability, and load characteristics in comparison to performance of conventional power plants.
7. The Fuel Cell Projects will enhance the universities' educational curriculum, particularly sustainable instructional programs in business, engineering, and environmental studies.
8. The universities have indicated they will only participate in the Fuel Cell Projects if PG&E and SCE own and operate the fuel cells.
9. Fuel cell installations have lagged behind other forms of clean technologies and have not significantly penetrated the market.
10. The Fuel Cell Projects are estimated to produce electricity at a weighted average levelized cost of 28 to 30.4 cents per kWh.
11. The Commission approved a 5 percent contingency rate for PG&E's Humboldt power plant and SCE's Mountainview Power Project in D.06-11-048 and D.03-12-059, respectively.
12. The Fuel Cell Projects contain contingency rates for capital costs that are significantly higher than the contingency rates recently approved by the Commission for power plant projects.
13. PG&E's O&M costs include several hundred thousand dollars in education and outreach labor costs.
14. PG&E requests $5.79 million for the first four years of non-fuel O&M costs, while SCE requests $8.9 million in non-fuel O&M for the 10-year life of its fuel cells.
15. DRA's proposed disallowances are based on an EEAI Report, which provides fuel cell cost estimates in 2007 dollars.
16. The fuel cell cost estimates in the applications are based on competitive proposals, in 2009 dollars, provided by fuel cell manufacturers and vendors.
17. In D.07-12-052, the Commission stated its preference that the utilities competitively procure new generation and set forth five categories that might warrant UOG outside a competitive procurement process, including procurement of "preferred resources."
18. The criteria in D.07-12-052 for procurement of new generation apply to the Fuel Cell Projects.
19. The Fuel Cell Projects are preferred resources because they are distributed generation and clean fossil fuel.
20. The Fuel Cell Projects involve an advanced and emerging technology that the market is unlikely to develop absent additional support.
21. A competitive RFO is infeasible for the Fuel Cell Projects because the projects involve a unique partnership between the utilities and the state universities for educational and demonstration purposes.
22. In D.08-09-012, the Commission established that CGDL and MDL customers are excluded from paying NBCs under D.04-12-048 and D.06-07-029 that arise from the utilities' new generation resources.
23. The Fuel Cell Projects are new generation resources as defined in D.08-09-012.
24. In D.01-03-073, the Commission barred utilities from receiving SGIP incentives.
25. The Fuel Cell Projects will be UOG and the electricity generated by the projects will go to the grid and not to the reduction of customer load.
26. PG&E's notice of its application was not published within the 10-day timeframe required by Rule 3.2 and excluded certain information such as mailing and e-mail addresses for the Commission and PG&E.
1. Fuel cells can play an important role in California's future energy mix.
2. The Commission should support the advancement of fuel cell technologies through the Fuel Cell Projects because investment in fuel cells through SGIP has lagged.
3. The Fuel Cell Projects can supplement the Commission's SGIP efforts to advance fuel cell technologies in California.
4. It is reasonable to rely on the fuel cell cost estimates in the applications because they are based on actual vendor cost estimates.
5. The large capital cost contingencies requested by PG&E and SCE are unreasonable and send an improper signal to utilities and vendors to enhance the project scope and costs up to the level of the contingencies.
6. The capital cost contingencies in the Fuel Cell Projects should be reduced in line with the 5 to 10 percent contingencies approved for other generation projects.
7. PG&E's Fuel Cell Project capital costs should be reduced to $20.3 million and SCE's Fuel Cell Project capital costs should be reduced to $19.1 million.
8. PG&E's non-fuel O&M costs should not include a contingency factor.
9. Ratepayers should not support the education and outreach labor costs proposed by PG&E.
10. PG&E's non-fuel O&M costs should be reduced from $5.79 million to $4.71 million for the first four years of plant operation.
11. PG&E and SCE should each track, for accounting purposes only, their respective Fuel Cell Project's avoided GHG emissions, as described in D.09-12-042. This tracking applies only to fuel cells deployed as a CHP application and not to electric-only fuel cells.
12. The applications comply with the criteria for UOG in D.07-12-052.
13. With respect to the Fuel Cell Projects, the Commission should not deviate from the NBC guidance established in D.08-09-012 for CGDL and MDL.
14. PG&E and SCE should not use SGIP funds for the Fuel Cell Project.
15. The ratemaking treatment proposed by PG&E and SCE for capital costs, O&M costs, and fuel costs for the Fuel Cell Projects should be approved, although if capital or O&M costs exceed estimates approved in this decision, the utilities may seek recovery of any difference in either a petition to modify this decision or a separate application.
16. PG&E should correct notice defects in future applications and ensure notice is timely given and provides all information required by Rule 3.2.
IT IS ORDERED that:
1. The application of Pacific Gas and Electric Company for approval of its Fuel Cell Project, is approved as modified to reduce capital costs to $20.3 million and reduce non-fuel operations and maintenance costs from $5.79 million to $4.71 million to remove any contingency and to exclude costs for education and outreach labor.
2. The application of Southern California Edison Company for approval of its Fuel Cell Installation Program is approved as modified to reduce capital costs to $19.1 million, to clarify that stranded costs shall be recovered in accordance with Decision 08-09-012, and to prohibit Southern California Edison from using Self-Generation Incentive Program funds for the project.
3. The ratemaking for Pacific Gas and Electric Company's Fuel Cell Project is approved as follows:
a. Pacific Gas and Electric Company may accrue the initial revenue requirement, as adjusted in this decision based on capital costs and operations and maintenance cost reductions, in its Utility Generation Balancing Account on the commercial operation date of the Fuel Cell Project.
b. Pacific Gas and Electric Company shall file an advice letter within 90 days of this decision to establish a Fuel Cell Project Memorandum Account to track the difference between estimated and actual capital costs and estimated and actual operations and maintenance costs.
c. After the commercial operation date of the Fuel Cell Project, if actual capital costs are less than $20.3 million, Pacific Gas and Electric Company shall file an advice letter to update the revenue requirement to reflect actual capital costs.
d. After each year of operation, Pacific Gas and Electric Company shall file an advice letter to adjust the previous year's Utility Generation Balancing Account entries to reflect actual operations and maintenance expenses, as long as they are no higher than $4.71 million for the first four years of plant operation.
e. Pacific Gas and Electric Company may seek recovery of reasonably incurred amounts above the estimated capital costs and operations and maintenance costs approved in this decision through either a petition for modification or a separate application.
f. Pacific Gas and Electric Company may seek recovery of fuel costs for the Fuel Cell Project through the Energy Resource Recovery Account.
4. The ratemaking for Southern California Edison Company's Fuel Cell Installation Program is approved as follows:
a. Southern California Edison Company shall file an advice letter within 90 days of this decision to establish a Fuel Cell Program Memorandum Account.
b. Southern California Edison Company shall record actual capital costs and operation and maintenance costs in the Fuel Cell Program Memorandum Account and transfer the balance monthly to the generation sub-account of Base Revenue Requirement Balancing Account, as long as the amounts are no higher than the estimates approved in this decision. If actual capital expenditures and actual annual operations and maintenance expenses are less than approved in this decision, then the recorded direct capital expenditures and operations and maintenance expenses are reasonable.
c. If capital costs are less than or equal to $19.1 million, and total operations and maintenance costs are less than or equal to $8.9 million, review of Southern California Edison Company's Fuel Cell Program Memorandum Account shall occur in Southern California Edison Company's annual Energy Resource Recovery Account Reasonableness proceeding. If costs exceed these amounts, Southern California Edison Company may file either a petition for modification or a separate application to seek recovery of the excess.
5. Pacific Gas and Electric Company and Southern California Edison Company may each recover stranded costs associated with their respective Fuel Cell Projects through a non-bypassable charge for a 10-year period following commercial operation of the fuel cells, consistent with Commission determinations in Decision 08-09-012.
6. Pacific Gas and Electric Company and Southern California Edison Company shall install metering and monitoring equipment at each project sufficient to provide the following project-specific information: electrical output (15 minute interval basis); thermal output (15 minute interval basis); fuel consumption (15 minute interval basis); system electrical efficiency; and overall system efficiency.
7. Beginning April 30, 2011 and every year thereafter, Pacific Gas and Electric Company and Southern California Edison Company shall each submit annual compliance reports to Energy Division providing an overview the performance of each project deployed pursuant to this decision. The information provided in these reports should include each project's annual capacity factor, system availability during system peak hours, annual fuel consumption, annual electrical output, annual thermal output, overall electrical efficiency for the year, and overall system efficiency for the year, as well as any other information that Pacific Gas and Electric Company and Southern California Edison believe would be useful in helping Energy Division assess the performance of these systems.
8. Applications (A.) 09-02-013 and A.09-04-018 are closed.
This order is effective today.
Dated April 8, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
I will file a concurrence.
/s/ TIMOTHY ALAN SIMON
Commissioner
I reserve the right to file a dissent.
/s/ DIAN M. GRUENEICH
Commissioner
Concurrence of Commissioner Timothy Alan Simon
Decision Authorizing Fuel Cell projects
A.09-02-013/D.10-04-028
I support this Decision authorizing six megawatts (MW) in proposed fuel cell projects, which are to be installed and maintained on various university campuses in PG&E and Edison's territories.15 These projects are consistent with our Assembly Bill 32 objectives and the Governor's Green Building Action Plan.16 Nevertheless, certain interested parties have raised relevant concerns regarding the costs and ratepayer benefits of these assorted projects relative to other generation alternatives. I believe that this is an opportunity to make a small, targeted investment in a sensible technology in order to stimulate market development.
There are a number of benefits to be gained from the maturation of the fuel cell market. For instance, fuel cell electrochemical processes yield clean electricity with low nitrogen oxide (NOx) and sulfux oxide (SOx) emissions, and relatively fewer greenhouse gas (GHG) emissions than conventional generation sources.17 In addition, there are potential university research benefits to be gained through their installation and management on the designated college and university campuses. A careful examination of required performance metrics for the electric-only and combined heat and power (CHP) fuel cells will stimulate greater efficiency of this distributed generation (DG) resource. I would also like to see further investigation of utilizing renewable natural gas18 as a relatively cleaner fuel substitute as these technologies develop further.
It is also my hope that by incrementally moving these technologies forward in a competitively neutral fashion, this Decision is sending the appropriate signals to the clean technology investment community that California will take global leadership in this critical energy source. It is widely known that our Self Generation Incentive Program (SGIP) has a substantially underutilized budget, and that we have a relatively small statewide fuel cell capacity of 12 MW. Thus, while the SGIP program would use less ratepayer funding for such DG projects, it has clearly not supported the kind fuel cell deployment that we had envisioned.19 Fuel cells are clearly not a new technology, but improvements in design, efficiency, and application should result in increased uptake and hopefully in cost reductions in the long run.
Dated April 13, 2009, at San Francisco, California.
/s/ TIMOTHY ALAN SIMON
TIMOTHY ALAN SIMON
Commissioner
15 Decision Authorizing Fuel Cell Projects (D.10-04-028), March 2, 2010, at 2.
16 Id. at 9.
17 See Finding of Fact 1 at 34.
18 Renewable natural gas sources could include dairy biogas, wastewater biomethane, and other sources of environmentally benign biofuels.
19 Id. at 13-17.
