Conclusions of Law

1. The SGIP incentives should be reduced for certain types of projects as set forth herein and the maximum percentage cap for such projects should be eliminated. The SGIP incentive payment of $4.50 per watt for renewable fuel cells should be retained.

2. The SGIP rules should be modified to eliminate the requirement that proponents of projects reapply for incentives in the subsequent funding cycle, according to a process developed by the Working Group.

3. The SGIP rules should account for multiple incentives that may be available for a single project and preserve existing funding resources for maximum disbursal.

4. The SGIP rules should be modified to increase the maximum eligible capacity size to 5 megawatts, but retain incentive payments only up to 1 megawatt.

5. The data release format should be modified to resemble that used by the CEC for its Emerging Renewable Incentives Program.

6. Program administrators should be required to make project information available at their websites.

7. SGIP incentives should be structured so that they predictably decline over a ten-year period. The Working Group should be directed to develop a plan to that end and the final elements of that plan should be subject to Commission approval.

8. As discussed in this decision, SDG&E should extend its contract with SDREO for program administrative services through 2007.

9. AB 1685 provides the Commission with flexibility to make changes to the SGIP, including changes in the annual program budget.

10. AB 1685 requires combustion-operated fossil-fueled DG projects to meet specified statewide emissions criteria to qualify for SGIP incentives. The program handbook should reflect these emissions and eligibility requirements and the option for project proponents to certify compliance either with documentation from the California Air Resources Board or by submitting manufacturer emission specifications, a permit to operate, and project-specific efficiency calculations. Utilities should implement related provisions of AB 1685 as set forth herein.

11. D.01-03-073 intended that SGIP funds should not be awarded to public or investor-owned gas or electricity distribution utilities that generate or purchase electricity or natural gas for wholesale or retail sales.

12. SGIP rules should be modified to remove the restrictions limiting funding for the California state university system, other state agencies and corporate parents.

ORDER

IT IS ORDERED that:

1. The Self Generation Incentive Program (SGIP) incentives are hereby modified as set forth herein and the maximum percentage cap for such projects is

hereby eliminated. The SGIP incentive payment of $4.50 per watt for renewable fuel cells is retained.

2. SGIP incentives for all levels shall be based on installed capacity rather than a maximum percentage cap, consistent with this order.

3. The Working Group shall, within 60 days of the effective date of this order and following consultation with interested parties, develop data release formatting and publication protocols as set forth herein, and implement them within 90 days of the effective date of this order.

4. Program administrators shall post required information at their respective websites within 30 days of the effective date of this order, as set forth herein.

5. The SGIP rules are hereby modified to increase the maximum eligible capacity size to 5 megawatts, except that incentive payments are retained at the 1-megawatt level.

6. The Working Group shall, within 90 days of the effective date of this order and following consultation with interested parties, file a proposal to modify the incentive structure so that incentive amounts decline gradually over the next ten years. This exit plan shall not go into effect without subsequent Commission approval and following an opportunity for parties to comment on the Working Group filing.

7. SDG&E shall, within 30 days of the effective date of this order, submit to Energy Division, an extension to the administrative services contract with SDREO through 2007.

8. The Working Group shall, within 30 days of the effective date of this order, modify the program handbook to (1) assure a method for certification by project proponents of compliance with the air emissions standards required by AB 1685 as set forth herein; (2) eliminate the requirement that proponents of projects reapply for incentives in the subsequent funding cycle; (3) clarify the program handbook to provide that SGIP funds may not be awarded to public or investor-owned gas or electricity distribution utilities that generate or purchase electricity or natural gas for wholesale or retail sales; (4) raise from one to 4 MW the annual restrictions on funding for the California University system, other state agencies and corporations; (5) include procedural or financial mechanisms to deter inappropriate reservation requests; and (6) grant projects with multiple funding sources as set forth herein.

9. Program administrators are authorized to direct their consultant to update the September 2, 2003 comparative assessment report with data collected from June 2003 through May 2006, for submission by September 15, 2006. The report shall clearly identify all program administrators and address the performance of each.

10. For good cause, the Assigned Commissioner or Administrative Law Judge may modify the due dates set forth in this decision.

This order is effective today.

Dated December 16, 2004, at San Francisco, California.

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