"Qualifying facilities" legislation may be introduced

By CMTA Staff

Capitol Update, Jan. 27, 2006 Share this on FacebookTweet thisEmail this to a friend

Pacific Gas & Electric is seeking to amend current law relating to Qualifying Facilities (QFs), a move that could adversely impact thousands of megawatts of combined heat and power (CHP), also known as cogeneration and renewable energy currently under contract in California.  

Thus far, no legislator has agreed to author such a bill, but the utility still has plenty of time.  The bill introduction deadline isn’t until February 24th and even after that point, it is commonplace for language to be amended into bills further along in the legislative process.  

QFs include industrial and other CHP, where heat that would otherwise be wasted is used to generate electricity and renewable resources such as biomass, wind and geothermal.  

QFs provide power to the electric grid through contracts with the state’s investor owned utilities, including PG&E.  Pursuant to the Federal Public Utility Regulatory Policies Act (PURPA), QFs are entitled to be paid the utility's avoided cost (i.e., what the utility would have charged to generate power to serve incremental load absent the availability of the QF).  Section 390 of the California Public Utilities Code, enacted more than a decade ago, established a formula for determining the amount to be paid a QF for energy delivered to the utility, pursuant to PURPA.

The CPUC presently has the legal authority to modify the basis upon which QF payments are calculated, if they determine it necessary, as happened in 2001.  Legislative changes to Section 390 would cause unnecessary regulatory uncertainty in determining prices paid to QFs.  It would also have an adverse effect on both the continuing operation of existing QF and CHP facilities and investment in the development of new facilities at a time when state policymakers should be doing all that they can to encourage new electric generation in the state.  

QFs represent about 30 percent of California’s energy supply.  CHP also provides an important environmental benefit as well, by reducing greenhouse gas emissions, as noted in the state Integrated Energy Policy Report.  Now is not the time to amend Section 390 and the state’s QF policy.
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