2. Background

Pub. Util. Code §399.15(b) codifies Assembly Bill (AB) 970, which was signed by the Governor on September 6, 2000. Among other things, §399.15(b) requires the Commission to establish incentives for distributed generation. Distributed generation includes technologies such as internal combustion engines, microturbines, small gas turbines, wind turbines, photovoltaics, fuel cells and cogeneration that are installed on the customer side of the utility meter, and provide electricity for a portion or all of the customer's electric load.

In response to AB 970, the Commission directed the Energy Division to develop an incentive program for public comment. In their comments, parties expressed concern over providing incentives to non-renewable technologies. To mitigate these concerns, the Commission determined that Level 2 and 3 technologies, i.e., fuel cells utilizing non-renewable fuels, microturbines, small natural gas turbines and internal combustion engines must utilize waste heat recovery at the customer site in order to be eligible for incentive payments. In addition, the Commission required that any fossil-fired facility (Level 3) must contribute to the reliability of the transmission or distribution system, in order to qualify for incentives under the program.

With respect to the heat recovery standards, the Commission directed the Energy Division to work with interested parties to develop recommended standards for Commission consideration and approval. On May 2, 2001, the Energy Division submitted for comment a report summarizing proposals submitted by the program administrators of the self-generation program: Pacific Gas and Electric Company (PG&E), SCE, Southern California Gas Company (SoCal), and San Diego Gas and Electric Company (SDG&E)/San Diego Regional Energy Office (SDREO). Energy Division received comments on the report on May 9 from PG&E, SCE, National Resources Defense Council/American Council for an Energy Efficient Economy (NRDC/ACEEE), Onsite Energy Corporation (Onsite), Ingersoll-Rand and RealEnergy, Inc. (RealEnergy).

On May 17, 2001, SCE filed an Emergency Petition To Modify D.01-03-073 (Petition). SCE requests that the Commission eliminate the reliability requirement for fossil-fired facilities. PG&E filed comments, as did SoCal, SDG&E and SDREO jointly (Joint parties) in support of the Petition.