Chapter 8. Energy Efficiency Systems of California Public Utilities Code >> Division 1. >> Part 2. >> Chapter 8.
This article shall be known and may be cited as the Waste
Heat and Carbon Emissions Reduction Act.
For purposes of this article, the following terms have the
(a) "Combined heat and power system" means a system that produces
both electricity and thermal energy for heating or cooling from a
single fuel input that meets all of the following:
(1) Is interconnected to, and operates in parallel with, the
electric transmission and distribution grid.
(2) Is sized to meet the eligible customer-generator's onsite
(3) Meets the efficiency standards of subdivisions (a) and (d),
and the greenhouse gases emissions performance standard of
subdivision (f) of Section 2843.
(b) "Eligible customer-generator" means a customer of an
electrical corporation that meets both of the following requirements:
(1) Uses a combined heat and power system with a generating
capacity of not more than 20 megawatts, that first commences
operation on or after January 1, 2008.
(2) Uses a time-of-use meter capable of registering the flow of
electricity in two directions. If the existing electrical meter of an
eligible customer-generator is not capable of measuring the flow of
electricity in two directions, the eligible customer-generator shall
be responsible for all expenses involved in purchasing and installing
a meter that is able to measure electricity flow in two directions.
If an additional meter or meters are installed, the electricity flow
calculations shall yield a result identical to that of a time-of-use
(c) "Electrical corporation" has the same meaning as defined in
(d) "Energy Commission" means the State Energy Resources
Conservation and Development Commission.
(e) "Excess electricity" means the net electricity exported to the
electrical grid, generated by a combined heat and power system that
is in compliance with Section 2843.
(f) "Greenhouse gas" or "greenhouse gases" includes all of the
following gases: carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.
The Legislature finds and declares all of the following:
(a) Combined heat and power systems produce both electricity and
thermal energy from a single fuel input, thus achieving much greater
efficiency than the usual separate systems for producing these forms
of energy, and reducing consumption of fuel.
(b) Combined heat and power systems recover heat that would
otherwise be wasted in separate energy applications, and use this
heat to avoid consumption of fuel that would otherwise be required to
(c) Gigawatthours of potential useful electricity and millions of
British thermal units of thermal energy could be derived from unused
waste heat that is currently being vented into the atmosphere.
(a) It is the intent of the Legislature that state policies
dramatically advance the efficiency of the state's use of natural
gas by capturing unused waste heat, and in so doing, help offset the
growing crisis in electricity supply and transmission congestion in
(b) It is the intent of the Legislature to reduce wasteful
consumption of energy through improved residential, commercial,
institutional, industrial, and manufacturer utilization of waste heat
whenever it is cost effective, technologically feasible, and
environmentally beneficial, particularly when this reduces emissions
of carbon dioxide and other carbon-based greenhouse gases.
(c) It is the intent of the Legislature to support and facilitate
both customer- and utility-owned combined heat and power systems.
(d) This article does not apply to, and shall not impact, combined
heat and power systems in operation prior to January 1, 2008, or
combined heat and power systems with a generating capacity greater
than 20 megawatts.
(a) The commission may require an electrical corporation to
purchase from an eligible customer-generator, excess electricity that
is delivered to the grid that is generated by a combined heat and
power system that is in compliance with Section 2843. The commission
may establish a maximum kilowatthours limitation on the amount of
excess electricity that an electrical corporation is required to
purchase if the commission finds that the anticipated excess
electricity generated has an adverse effect on long-term resource
planning or reliable operation of the grid. The commission shall
establish, in consultation with the Independent System Operator,
tariff provisions that facilitate both the provisions of this chapter
and the reliable operation of the grid.
(b) (1) Every electrical corporation shall file with the
commission a standard tariff for the purchase of excess electricity
from an eligible customer-generator.
(2) The tariff shall provide for payment for every kilowatthour
delivered to the electrical grid by the combined heat and power
system at a price determined by the commission.
(3) The tariff shall include flexible rates with options for
different durations, not to exceed 10 years, and fixed or variable
rates relative to the cost of natural gas.
(4) The commission shall ensure that ratepayers not utilizing
combined heat and power systems are held indifferent to the existence
of this tariff.
(c) The commission, in reviewing the tariff filed by an electrical
corporation, shall establish time-of-delivery rates that encourage
demand management and net generation of electricity during periods of
peak system demand.
(d) Every electrical corporation shall make the tariff available
to eligible customer-generators that own, or lease, and operate a
combined heat and power system within the service territory of the
electrical corporation, upon request. An electrical corporation may
make the terms of the tariff available to an eligible customer in the
form of a standard contract.
(e) The costs and benefits associated with any tariff or contract
entered into by an electrical corporation pursuant to this section
shall be allocated to all benefiting customers. For purposes of this
section "benefiting customers" may, as determined by the commission,
include bundled service customers of the electrical corporation,
customers of the electrical corporation that receive their electric
service through a direct transaction, as defined in subdivision (c)
of Section 331, and customers of an electrical corporation that
receive their electric service from a community choice aggregator, as
defined in Section 331.1.
(f) The physical generating capacity of the combined heat and
power system shall count toward the resource adequacy requirements of
load-serving entities for purposes of Section 380.
(g) The commission shall adopt or maintain standby rates or
charges for combined heat and power systems that are based only upon
assumptions that are supported by factual data, and shall exclude any
assumptions that forced outages or other reductions in electricity
generation by combined heat and power systems will occur
simultaneously on multiple systems, or during periods of peak
electrical system demand, or both.
(h) The commission may modify or adjust the requirements of this
article for any electrical corporation with less than 100,000 service
connections, as individual circumstances merit.
A local publicly owned electric utility serving retail
end-use customers shall establish a program that does both of the
(a) Allows retail end-use customers to utilize combined heat and
power systems that reduce emissions of greenhouse gases by achieving
improved efficiencies utilizing heat that would otherwise be wasted
in separate energy applications.
(b) Provides a market for the purchase of excess electricity
generated by a combined heat and power system, at a just and
reasonable rate, to be determined by the governing body of the
The commission, in approving a procurement plan for an
electrical corporation pursuant to Section 454.5, shall require that
the electrical corporation's procurement plan incorporate combined
heat and power solutions to the extent that it is cost effective
compared to other competing forms of wholesale generation,
technologically feasible, and environmentally beneficial,
particularly as it pertains to reducing emissions of carbon dioxide
and other greenhouse gases.
The commission shall ensure that an electrical corporation
utilizes long-term planning and a reliability assessment for upgrades
to its transmission and distribution systems and that any upgrades
are not inconsistent with promoting combined heat and power systems
that are cost effective, technologically feasible, and
environmentally beneficial, particularly as those combined heat and
power systems reduce emissions of greenhouse gases.
(a) The commission shall, for each electrical corporation,
establish a pay-as-you-save pilot program for eligible customers.
(b) For the purposes of this section, an "eligible customer" means
a customer of an electrical corporation that meets the following
(1) The customer uses a combined heat and power system with a
generating capacity of not more than 20 megawatts that is in
compliance with Section 2843.
(2) The customer is any of the following:
(A) A nonprofit organization described in Section 501(c) (3) of
the Internal Revenue Code (26 U.S.C. Sec. 501(c) (3)), that is exempt
from taxation under Section 501(a) of that code (26 U.S.C. Sec. 501
(B) A federal, state, or local government facility.
(c) The pilot program shall enable an eligible customer to finance
all of the upfront costs for the purchase and installation of a
combined heat and power system by repaying those costs over time
through on-bill financing at the difference between what an eligible
customer would have paid for electricity and the actual savings
derived for a period of up to 10 years.
(d) The commission shall ensure that the reasonable costs of the
electrical corporation associated with the pilot program are
(e) All costs of the pay-as-you-save program or financing
mechanisms shall be borne solely by the combined heat and power
generators that use the program or financing mechanisms, and the
commission shall ensure that the costs of the program are not shifted
to the other customers or classes of customers of the electrical
(f) Each electric corporation shall make on-bill financing
available to eligible customers until the statewide cumulative rated
generating capacity from pilot program combined heat and power
systems in the service territories of the three largest electrical
corporations in the state reaches 100 megawatts. An electrical
corporation shall only be required to participate in the pilot
program until it meets its proportionate share of the 100-megawatt
limitation, based on the percentage of its peak demand to the total
statewide peak demand within the service territories of all
(g) An approval made by the Department of Finance for a state
agency to purchase, lease, or otherwise acquire a combined heat and
power facility that would be financed through the pay-as-you-save
pilot program, may not be made sooner than 30 days after written
notification thereof is provided to the Chairperson of the Senate
Committee on Budget and Fiscal Review, the Chairperson of the
Assembly Committee on Budget, and the Chairperson of the Joint
Legislative Budget Committee, or not sooner than whatever lesser time
the Chairperson of the Joint Legislative Budget Committee may
(a) The Energy Commission shall, by January 1, 2010, adopt
guidelines that combined heat and power systems subject to this
chapter shall meet, and shall accomplish all of the following:
(1) Reduce waste energy.
(2) Be sized to meet the eligible customer-generator's thermal
(3) Operate continuously in a manner that meets the expected
thermal load and optimizes the efficient use of waste heat.
(4) Are cost effective, technologically feasible, and
(b) It is the intent of the Legislature that the guidelines do not
permit customers to operate as de facto wholesale generators with
guaranteed purchasers for their electricity.
(c) Notwithstanding any other provisions of law, the guidelines
required by this section shall be exempt from the requirements of
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code. The guidelines shall be adopted at
a publicly noticed meeting offering all interested parties an
opportunity to comment. At least 30 days' public notice shall be
given of the meeting required by this section, before the Energy
Commission initially adopts guidelines. Substantive changes to the
guidelines shall not be adopted without at least 10 days' written
notice to the public.
(d) Prior to January 1, 2010, the Energy Commission may adopt
temporary guidelines for combined heat and power systems that comply
with the parameters set forth in subdivision (a).
(e) (1) An eligible customer-generator's combined heat and power
system shall meet an oxides of nitrogen (NOx) emissions rate standard
of 0.07 pounds per megawatthour and a minimum efficiency of 60
percent. A minimum efficiency of 60 percent shall be measured as
useful energy output divided by fuel input. The efficiency
determination shall be based on 100-percent load.
(2) An eligible customer-generator's combined heat and power
system that meets the 60-percent efficiency standard may take a
credit to meet the applicable NOx emissions standard of 0.07 pounds
per megawatthour. Credit shall be at the rate of one megawatthour for
each 3.4 million British thermal units of heat recovered.
(f) An eligible customer-generator's combined heat and power
system shall comply with the greenhouse gases emission performance
standard established by the commission pursuant to Section 8341.
(g) An eligible customer-generator shall adequately maintain and
service the combined heat and power system so that during operation,
the system continues to meet or exceed the efficiency and emissions
standards established pursuant to subdivisions (a), (d), and (f).
The State Air Resources Board shall report to the Governor
and the Legislature by December 31, 2011, on the reduction in
emissions of greenhouse gases resulting from the increase of new
electrical generation that utilizes excess waste heat through
combined heat and power systems and recommend policies that further
the goals of this article.