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
(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
(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
(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
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
(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.