2. Background and Procedural History

The Commission established the SGIP in Decision (D.) 01-03-073 pursuant to Pub. Util. Code § 399.15(b).1

Initially, the SGIP provided financial incentives to distributed generation (DG) technologies,2 including micro-turbines, small gas turbines, solar photovoltaics, wind turbines, fuel cells, and internal combustion engines at certain levels. Assembly Bill (AB) 27783 removed all incentives for photovoltaic systems from the SGIP as of January 2007, and provided incentives for photovoltaics through the California Solar Initiative. Thus, as of January 1, 2007, the SGIP provided incentives only to non-solar renewable and non-renewable DG technologies.

AB 2778 further amended Pub. Util. Code § 379.6 relating to SGIP and limited program eligibility for SGIP incentives to qualifying wind and fuel cell DG technologies, beginning January 1, 2008 through January 1, 2012.

The following table reflects the changes to the SGIP pursuant to AB 2778:4

Incentive Levels

Eligible Technologies

Incentive Offered ($/watt)

Minimum System Size

Maximum System Size

Maximum Incentive Size

Level 2 Renewable

Wind Turbines

$1.50/watt

30 kW

5 MW

1 MW

Renewable Fuel Cells

$4.50/watt

30 kW

Level 3 Non-Renewable

Non-Renewable Fuel Cells

$2.50/watt

None

5 MW

1 MW

By D.08-04-049, the Commission changed the incentive rates during 2008 and 2009 only. During these years, the Program Administrators (PAs) are to use any carryover funds from prior budget years to pay incentives up to 3 megawatts (MW) for qualifying fuel cell or wind DG projects. Incentives over 1 MW are to be paid at a lower rate.

In addition, D.08-04-049 established a tiered incentive structure for wind and fuel cells as follows:

Capacity

Incentive Rate

0-1 MW

100%

1MW-2 MW

50%

2 MW-3 MW

25%

2.1. Evaluation of Program Modification Requests

In D.03-08-013, the Commission established a multi-stepped evaluation process to consider requests to add technologies to the SGIP or evaluate related program changes which are referred to as Program Modification Requests (PMR).5 Below is a summary of the evaluation process set forth in D.03-08-013:

1. An applicant contacts a PA6 and develops a PMR package for submittal to the SGIP Working Group.7

2. The proposal is distributed to the SGIP Working Group for evaluation.

3. The applicant or the sponsoring PA will present the proposal to the SGIP Working Group.

4. The SGIP Working Group develops recommendations on the eligibility of the new technology or program rule modification.

5. The applicant has five days to comment on the SGIP Working Group's final recommendations to the assigned Commissioner.

6. The Energy Division will submit the SGIP Working Group's final recommendations and the Energy Division's recommendation to the assigned Commissioner within 90 days after the proposal is presented at the SGIP Working Group meeting.

7. The assigned Commissioner will issue a ruling requesting comments within 15 days and replies within five days on the Energy Division/Working Group recommendations. A Commission decision will address the recommendations and the public comments raised by the Assigned Commissioner's Ruling (ACR).

Since D.03-08-013, several applicants submitted PMRs to the Working Group. The SGIP Working Group reviewed the PMRs and pursuant to the requirements in D.03-08-013 submitted its recommendations to the Energy Division. On March 21, 2008, the Energy Division submitted the SGIP Working Group's recommendations along with its own recommendation to the assigned Commissioner for further consideration.8 In addition, the Energy Division submitted a proposal to modify the PMR evaluation process that was established in D.03-08-013.

On April 4, 2008, pursuant to the procedures set forth in D.03-08-013, the assigned Commissioner issued an ACR soliciting comments from interested parties on the SGIP Working Group's recommendations and the Energy Division's recommendations for the seven PMRs, and on the proposal by the Energy Division to modify the PMR review process.9

Comments were filed by the SGIP Working Group, UTC Power (UTC), and StrateGen Consulting LLC (StrateGen) and VRB Power Systems Inc. (VRB), and reply comments were filed by VRB on April 28, 2008. Because VRB's reply contained new information that was not available when the parties submitted their comments, the Administrative Law Judge (ALJ) issued a ruling on July 1, 2008, providing the parties an opportunity to respond to VRB's reply. Chevron Energy Solutions Company (Chevron Energy) and the SGIP PAs filed responses.

Concurrent with its reply, VRB also filed a motion for Leave to file confidential material under seal and for protective order. An ALJ ruling, dated July 1, 2008 granted VRB's request.

1 All statutory references are to the Public Utilities Code unless otherwise noted.

2 DG is a parallel or stand-alone electric generation unit generally located within the electric distribution system at or near the point of consumption. See Rulemaking (R.) 04-03-017, p. 6.

3 Chapter 617, Statutes of 2006.

4 D.08-01-029, p. 8.

5 This decision presents only a summary of the evaluation process. See D.03-08-013 for full text of the adopted evaluation process and guidelines.

6 SGIP Program Administrators are Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), Southern California Gas Company (SoCalGas), and the California Center for Sustainable Energy (CCSE), San Diego Gas & Electric Company (SDG&E), and the Energy Division of the California Public Utilities Commission.

7 The SGIP Working Group consists of SCE, PG&E, SoCalGas, CCSE, and SDG&E.

8 Energy Division's recommendation addresses only the PMRs that were eligible under SGIP in 2007. Several PMRs address either technologies that were not eligible for SGIP in 2007 or SGIP rules that are no longer relevant. As such, those PMRs are moot. For a list of those PMRs see Appendix B of the ACR, dated April 4, 2008.)

9 See Appendix B of the ACR for a list of the seven PMRs and the proposed PMR process.

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