Article 3.5. Distributed Energy Resources of California Public Utilities Code >> Division 1. >> Part 1. >> Chapter 2.3. >> Article 3.5.

As used in this article, "distributed energy resources" means electric generation technology that meets all of the following criteria:
  (a) Commences initial operation between May 1, 2001, and June 1, 2003, except that gas-fired distributed energy resources that are not operated in a combined heat and power application shall commence operation no later than September 1, 2002.
  (b) Is located within a single facility.
  (c) Is five megawatts or smaller in aggregate capacity.
  (d) Serves onsite loads or over-the-fence transactions allowed under Sections 216 and 218.
  (e) Is powered by any fuel other than diesel.
  (f) Complies with emission standards and guidance adopted by the State Air Resources Board pursuant to Sections 41514.9 and 41514.10 of the Health and Safety Code. Prior to the adoption of those standards and guidance, for the purpose of this article, distributed energy resources shall meet emission levels equivalent to nine parts per million oxides of nitrogen, or the equivalent standard taking into account efficiency as determined by the State Air Resources Board, averaged over a three-hour period, or best available control technology for the applicable air district, whichever is lower, except for distributed generation units that displace and therefore significantly reduce emissions from natural gas flares or reinjection compressors, as determined by the State Air Resources Board. These units shall comply with the applicable best available control technology as determined by the air pollution control district or air quality management district in which they are located.

(a) As used in this article, "ultraclean and low-emission distributed generation" means any electric generation technology that meets both of the following criteria:
  (1) Commences initial operation between January 1, 2003, and December 31, 2008.
  (2) Produces zero emissions during its operation or produces emissions during its operation that are equal to or less than the 2007 State Air Resources Board emission limits for distributed generation, except that technologies operating by combustion must operate in a combined heat and power application with a 60-percent system efficiency on a higher heating value.
  (b) In establishing rates and fees, the commission may consider energy efficiency and emissions performance to encourage early compliance with air quality standards established by the State Air Resources Board for ultraclean and low-emission distributed generation.

(a) The commission shall require each electrical corporation under the operational control of the Independent System Operator as of January 1, 2001, to modify its tariffs so that all customers installing new distributed energy resources in accordance with the criteria described in Section 353.1 are served under rates, rules, and requirements identical to those of a customer within the same rate schedule that does not use distributed energy resources, and to withdraw any provisions in otherwise applicable tariffs that activate other tariffs, rates, or rules if a customer uses distributed energy resources.
  (b) To qualify for the tariffs described in subdivision (a), each customer with distributed energy resources that meet the criteria of Section 353.1 shall participate in a real-time metering and pricing program, when these programs become available, in which rates for any energy purchased from the electrical corporation reflect the actual cost to the electrical corporation of energy it purchases at the time it is consumed by the customer. Prior to the time these programs become available, the customer shall participate in a time-of-use pricing tariff. On or before December 31, 2001, the commission shall adopt a real time pricing tariff for the purpose of this section.
  (c) Except as specified in Section 353.7, customers may not be subject to the application of additional rates or tariffs solely because of their use of distributed energy resources to serve onsite loads or over-the-fence transactions allowed under Sections 216 and 218.

Each electrical corporation, as part of its distribution planning process, shall consider nonutility owned distributed energy resources as a possible alternative to investments in its distribution system in order to ensure reliable electric service at the lowest possible cost.

Notwithstanding Section 353.3, nothing in this article may result in any exemption from reasonable interconnection charges, lead to any reduction in contributions by each customer class to public purpose programs funded under Section 399.8, or relieve any customer of any obligation determined by the commission to result from participation in the purchase of power through the Department of Water Resources pursuant to Division 27 (commencing with Section 80000) of the Water Code.

In establishing the rates required under this article, the commission shall create a firewall that segregates distribution cost recovery so that any net costs, taking into account the actual costs and benefits of distributed energy resources, proportional to each customer class, as determined by the commission, resulting from the tariff modifications granted to members of each customer class may be recovered only from that class.

A local publicly owned electric utility or a local publicly owned utility otherwise providing electrical service, shall review at the earliest practicable date its rates, tariffs, and rules to identify barriers to and determine the appropriate balance of costs and benefits of distributed energy resources in order to facilitate the installation of these resources in the interests of their customer-owners and the state, and shall hold at least one noticed public meeting to solicit public comment on the review and any recommended changes. However, notwithstanding any other provision of this article, such an entity has the sole authority to undertake such a review and to make modifications to its rates, tariffs, and rules as the governing body of that utility determines to be necessary.

(a) The commission shall require each electrical corporation to establish new tariffs on or before January 1, 2003, for customers using distributed energy resources, including, but not limited to, those that do not meet all of the criteria described in Section 353.1. However, after January 1, 2003, distributed energy resources that meet all of the criteria described in Section 353.1 shall continue to be subject only to those tariffs in existence pursuant to Section 353.3, until June 1, 2011, except that installations that do not operate in a combined heat and power application will be subject to those tariffs in existence pursuant to Section 353.3 only until June 1, 2006. Those tariffs required pursuant to this section shall ensure that all net distribution costs incurred to serve each customer class, taking into account the actual costs and benefits of distributed energy resources, proportional to each customer class, as determined by the commission, are fully recovered only from that class. The commission shall require each electrical corporation, in establishing those rates, to ensure that customers with similar load profiles within a customer class will, to the extent practicable, be subject to the same utility rates, regardless of their use of distributed energy resources to serve onsite loads or over-the-fence transactions allowed under Sections 216 and 218. Customers with dedicated facilities shall remain responsible for their obligations regarding payment for those facilities.
  (b) The commission shall prepare and submit to the Legislature, on or before June 1, 2002, a report describing its proposed methodology for determining the new rates and the process by which it will establish those rates.
  (c) In establishing the tariffs, the commission shall consider coincident peakload, and the reliability of the onsite generation, as determined by the frequency and duration of outages, so that customers with more reliable onsite generation and those that reduce peak demand pay a lower cost-based rate.

(a) In order to evaluate the efficiency, emissions, and reliability of distributed energy resources with a capacity greater than 10 kilowatts, customers that install those resources pursuant to this article shall report to the commission, on an annual basis, all of the following information, as recorded on a monthly basis:
  (1) Heat rate for the resource.
  (2) Total kilowatthours produced in the peak and off-peak periods, as determined by the ISO.
  (3) Emissions data for the resource, as required by the State Air Resources Board or the appropriate air quality management district or air pollution control district.
  (b) The commission shall release the information submitted pursuant to subdivision (a) in a manner that does not identify the individual user of the distributed energy resource.
  (c) The commission, in consultation with the State Air Resources Board, air quality management districts, air pollution control districts, and the State Energy Resources Conservation and Development Commission, shall evaluate the information submitted pursuant to subdivision (a) and, within two years of the effective date of the act adding this article, prepare and submit to the Governor and the Legislature a report recommending any changes to this article it determines necessary based upon that information.