SB 1398 Seeks Just Due for DG

By Published On: February 28, 2004

Because ratepayers would bear no costs, the entire state grid stands to benefit, and utilities might even make some profits, California should look toward distributed generation (DG) to head off potential power shortages, according to a bill introduced last week by Senator Bill Morrow (R-Oceanside). SB 1398 would neither establish incentives for those using such resources nor draw from state funds to encourage the DG market; rather, it would knock out utility tariffs thought to discourage on-site generation. ?Utilities shouldn?t use tariffs that hurt or thwart markets,? said Steven Greenberg, an unpaid consultant to Senator Morrow and a former executive of DG developer/ owner RealEnergy. He maintained that utility tariffs under current law ?penalize? customers who would install distributed generation (on-site power resources) to serve their own load. Under Morrow?s bill, customers with DG installations would be treated as ?reduction[s] of customer load,? thereby removing existing tariff requirements specific to DG use. ?This bill would eliminate a lot of the risk? that confronts potential distributed-generation customers in the form of unwieldy tariffs, Greenberg added. Greenberg ticked through a long list of projected benefits from distributed resources meeting low-emission or ?ultra-clean? standards. Compared to buying power from an electric company, the increased efficiency from an onsite combined heat-and-power application can cut power costs by 6 cents/kWh to 10 cents/kWh during peak hours, he said. For DG installations using natural gas, that improvement in efficiency translates to greater fuel economy for a resource fast becoming precious. In addition, every megawatt of distributed generation means one less megawatt in electric demand, which could serve to reduce the market price for power for all customers. More DG would mean less ?line loss? as power moves from a central station to outlying areas, which Greenberg estimated can run between 5 percent and 20 percent of total power produced on hot summer days. Plus, if the state?s economy begins to rebound, a resulting rise in electric load could lead to a wave of energy crisis?style blackouts should DG remain in the shadows, he said. According to figures posted on the California Energy Commission?s Web site, 238 distributed-generation projects as of December 2003?about 372 MW in total?have been authorized to interconnect to the grid since January 2001. (Figures are for all investor-owned utility service areas; projects are no larger than 5 MW and do not include solar assemblies.) Passage of SB 1398 could yield an additional 1,000 MW of DG power over the next few years, Greenberg said. ?I?m not suggesting that we won?t need central-station plants,? he said. ?But we can be very discriminating as to how we build them and where?and get the biggest bang for the buck.? The bill also would allow utilities to keep as profit 10 percent of all ratepayer savings achieved through deployment of distributed power resources. Regulators would have to ensure that altered DG tariffs are in place by the end of 2006. Greenberg noted that much of SB 1398, including the portion that would require the state grid operator to create markets for capacity and demand response, is already in place in the Northeast at the New York Independent System Operator and the PJM Interconnection. The scheme puts accurate market values in areas with the biggest physical need for on-site generation, he said, meaning that DG is boosted through market prices instead of ratepayer subsidies. Also under the bill, gas companies would be required to create a new noninterruptible DG gas rate by May 1, 2005. In other recent bill news, AB 1889 by Assemblymember Judy Chu (D-Monterey Park) was referred to the Assembly Utilities and Commerce Committee February 24. At present, the spot bill would toss out the portion of the Public Utilities Act calling for the creation of the Power Exchange (PX), which has all but expired. The bill also would relieve the California Public Utilities Commission of certain responsibilities related to the operation of the PX. AB 1889 is anticipated to be heard in committee on March 8.

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