Natural Gas Vehicles

Several parties, including Clean Energy, NRDC/UCS, SDG&E/SoCalGas, SCE, and PG&E, support regulating natural gas vehicles as part of the transportation sector, rather than the natural gas sector. SDG&E/SoCalGas believe that natural gas vehicles should be viewed as sources of conservation-based efforts, not GHG sources that should be capped. Clean Energy states that California utilities should "not be penalized for the increased use of natural gas that results from their successful efforts to accelerate the market penetration of natural gas vehicles..." PG&E recommends that distributors of natural gas for combustion by natural gas vehicles should receive credit for any GHG-related fuel-substitution value.

NRDC/UCS argue that, if petroleum-based transportation fuels were excluded from a cap, it would be important to take further steps not to disadvantage natural gas used for transportation. In their view, this could be done either by excluding natural gas used for transportation from the cap or by adopting other policies to compensate.

Kern does not address the appropriate sector for regulation, but comments that natural gas vehicles should not be subject to a cap.

IP believes that natural gas vehicles should be included in the State's GHG plan, but that it is not clear yet whether natural gas vehicle fuel is best addressed within the natural gas sector or directly by ARB.

Combined Heat and Power (CHP)

Parties advocate several different approaches to attributing the emissions from CHP facilities to the electricity and natural gas sectors. These facilities, which include cogeneration facilities, are typically used by large industrial end users to serve on-site power needs and to provide thermal output for industrial process. Some smaller end users have installed CHP facilities where the thermal output is used for on-site heating and cooling.

El Paso/Mojave believe that larger CHP facilities should be placed in a downstream electricity cap, and smaller CHP facilities should be regulated with efficiency programs, like other small users.

EPUC/CAC advocate that emissions from CHP facilities be attributed to neither the electricity nor the natural gas sector. These parties assert that emissions from CHP facilities are best regulated in a separate sector. IP supports the EPUC/CAC position that a separate sector should be created for CHP facilities, to avoid discouraging the development and operation of these resources. SDG&E/SoCalGas support designating CHP facilities as point sources, arguing that this approach would make attributing GHG emissions between industrial and electric generation unnecessary.

NRDC/UCS argue, as a preliminary position, that large CHP facilities should be regulated as point sources, while smaller CHP facilities should be regulated within the natural gas sector, with the local distribution companies as the point of regulation. NRDC/UCS also say that this issue may require further evaluation once the design of an overall GHG regulatory system has been developed.

Other parties, including PG&E, SMUD, and SCE, favor attributing the emissions from CHP facilities to both the electricity and the industrial sectors. SMUD believes that CHP emissions should be split between the sectors according to the proportion of electricity and thermal energy production. SCE urges that the electricity portion of cogeneration, CHP, and distributed generation should be regulated as part of the electricity sector. SCE also argues that, if these sources are not included in the electricity sector due to their size, they should be included in the natural gas sector, either as a point source or through the local distribution company. PG&E argues that, under a deliverer point of regulation for electricity (its preferred approach), emissions from CHP facilities would be regulated as electricity generation while natural gas combustion for industrial processes should be regulated as industrial stationary sources.

Distributed Generation

Another source of GHG emissions related to natural gas combustion is distributed generation facilities where end users combust natural gas for the purpose of meeting on-site electricity needs. Unlike CHP, these facilities do not serve an accompanying thermal load. NRDC/UCS and SCE support including emissions from distributed generation facilities that generate electricity within the electricity sector. SCE supports including within the natural gas sector any of these facilities that, due to their size, would not be included in the electricity sector. NRDC/UCS state that this issue may need further investigation once the design of the overall GHG regulatory system has been determined.