DG Standby Fee Exemption

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Jan. 17, 2003 Share this on FacebookTweet thisEmail this to a friend

Senator Deirde Alpert (D-San Diego) has introduced Senate Bill 46, which extends the installation deadline for the standby fee exemption for small-scale distributed generation (DG) units to 2005.

Current law exempts DG units five megawatts and smaller from utility standby fees until 2011 if they come on line between May 1, 2001 and June 1, 2003. Alpert's bill extends the installation deadline to June 1, 2005.

DG enhances the reliability of the state's electric grid, and helps customers manage and stabilize their energy costs. It also provides businesses with a "hedge" against utility and market prices, enabling them to avoid some of the volatility that has occurred in the wholesale energy markets.

One of the key barriers to the deployment of DG is standby rates. By exempting burdensome standby fees, SB 46 will increase deployment of DG and help customer-generators manage and stabilize their energy costs while providing important reliability benefits to all Californians.

The exemption of standby fees contained in SB 46 contains a valuable financial incentive for businesses to install DG by making it less expensive to install and operate the units.

CMTA has taken a "support if amended" position on the bill, and is seeking to have amendments inserted into the bill expanding eligibility to DG units larger than 5 MW. Under CMTA's proposal, DG units producing more than 5 MW would receive a standby waiver on the first 5 MW of capacity.

The rationale for expanding eligibility above 5 MW is simple: standby charges are as big an impediment to large installations as small. What's more, as merchant power plant developers cancel still more projects, and the electricity supply outlook for 2004 and 2005 worsens, the need for additional generation resources like DG increases significantly.

SB 46 is very similar to AB 2307 (Kehoe), which stalled last year in the Senate Energy, Utilities, and Communications Committee.
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