2. Background
On June 26, 2008, we opened this rulemaking to implement the provisions of Assembly Bill (AB) 1613, codified as Pub. Util. Code §§ 2840 et seq. (Stats. 2007, ch. 713.) AB 1613 established the Waste Heat and Carbon Emissions Reduction Act which relates to the utilization of excess waste heat through combined heat and power (CHP) technologies.3 The legislation expresses the intent to support and facilitate both consumer and utility-owned CHP systems and imposes certain requirements on the Commission, the California Energy Commission (CEC), the California Air Resources Board (ARB) and electric corporations.
The Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judge (Scoping Memo) issued on November 4, 2008, divided this proceeding into two phases. The first phase of this proceeding addresses the policies and procedures for purchase of excess electricity from eligible CHP systems, including the development of a standard contract. The Scoping Memo directed the Commission's Energy Division staff to prepare a draft proposal for consideration and discussion at a workshop. On February 3, 2009, Energy Division staff submitted its proposed policies and procedures for purchase of excess electricity in the form of a draft AB 1613 contract (Staff Proposal). A workshop was held to discuss the Staff Proposal on February 27, 2009. Prior to the workshop, pre-workshop comments were filed by Fuel Cell Energy, Inc. (Fuel Cell), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E), Energy Producers and Users Coalition (EPUC), California Cogeneration Council (CCC), Sierra Pacific Power Corp. (Sierra Pacific), California Clean DG Coalition (CCDC), The Utility Reform Network (TURN), and Pacific Gas and Electric Company (PG&E).
Following the workshop, the assigned Commissioner and Administrative Law Judge (ALJ) issued an Amended Scoping Memo which directed parties to work together to review the Staff Proposal and propose specific revisions to the terms and conditions of the draft AB 1613 contract. Parties were also asked to brief four additional issues.4
A Working Group, consisting of the IOUs, governmental entities, smaller utilities, CHP representatives, consumer groups and other interested parties, met during April and May to review the Staff Proposal and proposed changes. The Working Group's report (Working Group Report) was submitted on May 15, 2009. Comments on the Working Group Report and in response to the four issues were filed on June 1, 2009 by SCE, SDG&E, PG&E, TURN, the Division of Ratepayer Advocates (DRA), EPUC, the California Independent Petroleum Association, Fuel Cell, jointly by Merced Irrigation District and Modesto Irrigation Districts (jointly, Irrigation Districts), and CCDC. Reply comments were filed on June 15, 2009 by PG&E, SDG&E, SCE, Fuel Cell, Irrigation Districts, Alliance for Retail Energy Markets (AReM) and CCDC.
A simplified AB 1613 contract for small CHP systems was subsequently filed by the Working Group on June 30, 2009. Comments on this simplified contract were filed on July 10, 2009 by SCE, PG&E, jointly by SDG&E and Southern California Gas Company (SoCalGas), Fuel Cell and CCDC.
On July 31, 2009, Energy Division staff submitted its final proposal on the standard contract terms and pricing for eligible CHP systems (Final Staff Proposal). In developing the Final Staff Proposal, Energy Division staff proposed that the Commission use the following guiding principles:
· Expand the market for small to medium scale (i.e., systems no more than 20 megawatts (MW)), highly efficient CHP in California and in so doing provide significant greenhouse gas (GHG) emissions reductions.
· Be simple and transparent - terms and conditions should be the same for each utility.
· To the greatest extent possible, lower the transaction costs for the seller, the buyer, and the regulator.
· Equitably allocate financial risk, relative to project size, between the buyer and the seller.
· Facilitate interconnection of projects that efficiently utilize the existing distribution system.
· Complement, but not interfere with or replace, existing programs, such as the Self-Generation Incentive Program.
· Provide sufficient payment to stimulate untapped markets and build new projects, but not overpay.
Among other things, the Final Staff Proposal recommends:
· two separate contracts for purchase of excess electricity. A standard contract would be offered to all eligible CHP systems up to 20 MW, and a simplified contract would be offered to eligible CHP systems that export up to 5 MW;
· transferring all GHG attributes and GHG compliance costs, if any, to the buyer; and
· an interim cap of 500 MW on the amount of excess electricity to be purchased.
The Final Staff Proposal also proposed two options for the pricing of power and sought parties' comments on these proposals.
Comments to the Final Staff Proposal were filed on August 24, 2009 by SCE, Fuel Cell, DRA, CCDC, jointly by SDG&E and SoCalGas, Sierra Pacific, Mountain Utilities, and jointly by PG&E and TURN. Reply comments were filed on September 4, 2009 by SCE, Fuel Cell, CCDC, jointly by PG&E and TURN, and jointly by CCC, EPUC and the Cogeneration Association of California.
3 CHP (sometimes referred to as cogeneration) is the production of two kinds of energy - electricity and thermal heat - from a single source of fuel.
4 These issues concerned whether a simplified contract should be developed, how the terms "indifference" and "benefitting customer" should be interpreted, and whether a maximum kilowatt limitation should be established.
