UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

Transcription

1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Revised Regulations Governing Small Power Production and Cogeneration Facilities ) ) ) ) ) Docket No. RM SOUTHERN CALIFORNIA EDISON COMPANY S COMMENTS ON NOTICE OF PROPOSED RULEMAKING REGARDING REVISED REGULATIONS GOVERNING SMALL POWER PRODUCTION AND COGENERATION FACILITIES J. ERIC ISKEN CATHY A. KARLSTAD Dated: November 8, 2005 Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Facsimile: (626) Cathy.Karlstad@sce.com

2 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Revised Regulations Governing Small Power Production and Cogeneration Facilities ) ) ) ) ) Docket No. RM SOUTHERN CALIFORNIA EDISON COMPANY S COMMENTS ON NOTICE OF PROPOSED RULEMAKING REGARDING REVISED REGULATIONS GOVERNING SMALL POWER PRODUCTION AND COGENERATION FACILITIES I. INTRODUCTION Southern California Edison Company (SCE) hereby submits the following comments on the Federal Energy Regulatory Commission s (Commission or FERC) Notice of Proposed Rulemaking issued on October 11, 2005 in Docket No. RM and published in the Federal Register at 70 Fed. Reg. 60,456 on October 18, 2005 (NOPR). SCE, a wholly owned subsidiary of Edison International, is a California investor-owned utility, subject to the Commission s jurisdiction. SCE purchases power from small power production and cogeneration facilities. The NOPR proposes to amend the Commission s regulations governing small power production and cogeneration facilities pursuant to section 1253 of the Energy Policy Act of 2005 (Energy Policy Act) and section 210 of the Public Utility Regulatory Policies Act of 1978, as amended (PURPA). Section 1253 of the Energy Policy Act made significant changes to section 210 of PURPA, including, among other things, 1

3 directing the Commission to issue a rule revising the criteria in 18 C.F.R for new 1 qualifying cogeneration facilities (qualifying facilities or QFs) seeking to sell electric energy pursuant to section 210 of PURPA to ensure that: (1) the thermal output of new qualifying cogeneration facilities is used in a productive and beneficial manner; (2) the output of new qualifying cogeneration facilities is used fundamentally for industrial, commercial, or institutional purposes and is not intended fundamentally for sale to an electric utility; and (3) continuing progress is made in the development of efficient electric energy generating technology. 2 In the NOPR, the Commission proposes to implement the requirements of the Energy Policy Act by: (1) issu[ing] a rule ensuring that new qualifying cogeneration facilities are using their thermal output in a productive and beneficial manner; that the electrical, thermal, chemical and mechanical output of new qualifying cogeneration facilities is used fundamentally for industrial, commercial or institutional purposes; and that there is continuing progress in the development of efficient electric energy generating technology; (2) amend[ing] Form 556 to reflect the criteria for new qualifying cogeneration facilities, (3) issu[ing] a rule eliminating ownership limitations for qualifying cogeneration and small power production facilities; and (4) amend[ing] the exemptions available to qualifying facilities (QFs) from the requirements of the Federal Power Act (FPA) and the Public Utility Holding Company Act of 1935 (PUHCA). 3 SCE supports the proposed changes to the Commission s regulations set forth in the Edison Electric Institute s (EEI) comments on the NOPR for the reasons stated in 1 The Energy Policy Act describes as new those qualifying cogeneration facilities to which the revised standards will apply in new PURPA section 210(n)(1)(A). The Energy Policy Act does not expressly define new facilities although new PURPA section 210(n)(2) states that the current regulatory scheme continues to apply to certain existing facilities. As used in these comments, new qualifying cogeneration facilities include any existing facility that is modified after the date of the final rule such that the technology utilized is materially changed or the capacity of the facility is materially increased. 2 Energy Policy Act section 1253(a). 2

4 those comments; except as discussed below, SCE also recommends that the Commission increase the operating standard set forth in 18 C.F.R (a)(1) for new qualifying topping-cycle cogeneration facilities to 60 percent, as opposed to the 20 percent recommended by EEI. In addition, as explained below, SCE recommends that EEI s proposed 60 percent efficiency standard for new topping-cycle cogeneration facilities primarily fueled by natural gas apply to all new topping-cycle cogeneration facilities; that the Commission increase the efficiency standard set forth in 18 C.F.R (b) for new qualifying bottoming-cycle cogeneration facilities to 60 percent; and that the Commission make a minor modification to the proposed regulation (18 C.F.R (c)) limiting the Federal Power Act (FPA) exemption. Furthermore, given the complex technical issues involved in changing the operating and efficiency standards for new qualifying cogeneration facilities and Congress directive in the Energy Policy Act that the Commission ensure continuing progress in the development of efficient electric energy generating technology, SCE supports EEI s recommendation that the Commission convene a technical conference. II. COMMENTS A. The Commission Should Increase the Operating Standard for New Topping- Cycle Cogeneration Facilities to At Least 60 Percent EEI s comments on the NOPR recommend that the Commission increase the operating standard set forth in 18 C.F.R (a)(1) for new topping-cycle cogeneration facilities to 20 percent. SCE agrees with EEI that the operating standard should be increased, but believes that it should be increased to at least 60 percent. Continued from the previous page 3 NOPR at 1 (footnotes and citations omitted). 3

5 New PURPA section 210(n)(1)(A) requires the Commission to ensure that the output of a new cogeneration facility is used fundamentally for industrial, commercial, or institutional purposes and is not intended fundamentally for sale to an electric utility..., and that continuing progress is made in the development of efficient electric energy generating technology. In the NOPR, the Commission explains that, in its experience, cogeneration facilities designed to minimally meet the existing operating standard, i.e., those whose thermal output constitutes only 5 percent of their total energy output, are the facilities most likely to be designed fundamentally to sell electric output to electric utilities rather than being designed fundamentally to provide electrical, thermal, and other output for industrial, commercial, or institutional purposes. 4 Despite the Commission s experience, the Commission proposes no change to an operating standard that was set twenty-five years ago. A cogeneration facility that produces only 5 percent thermal output is a PURPA machine that is designed and operated to sell electricity to an electric utility. The Commission must increase the operating standard to ensure that a new qualifying cogeneration facility is fully integrated with its host, and that the output of the facility is used fundamentally for the production of thermal energy for industrial, commercial, or institutional purposes, and not fundamentally for production of electricity for sale to an electric utility. However, the 20 percent operating standard advocated by EEI is not sufficient to achieve the statutory purpose. SCE proposes that the Commission increase 4 NOPR at 13. 4

6 the operating standard for new topping-cycle cogeneration facilities to a minimum of 60 percent. There have been dramatic changes in cogeneration technology since 1980, when the current operating standard was formulated. Cogeneration advocates and the United States Department of Energy have made claims that support the 60 percent operating standard proposed by SCE. The United States Combined Heat & Power Association claims, in a comparison of the typical fuel input needed to produce a certain amount of electricity and heat using conventional generation and cogeneration, that a cogenerator produces 35 units of electrical output and 50 units of thermal output for every 100 units of fuel input. 5 This amounts to a 58.8 percent operating standard (50 / (50+35) x 100% = 58.8%). The United States Department of Energy claims, in another comparison of the fuel input needed to produce a certain amount of electricity and heat using conventional generation and cogeneration, that a cogenerator produces 39 units of electrical output and 50 units of thermal output for every 100 units of fuel input. 6 This amounts to a 56.2 percent operating standard (50 / (50+39) x 100% = 56.2%). Moreover, in a recent regulatory proceeding in California, a cogeneration advocate assumed that a cogenerator produces 30 Btu of electrical output and 50 Btu of thermal output for every 100 Btu of fuel input to support an assertion that cogenerators 5 See United States Combined Heat & Power Association, CHP Basics, at 6 See United States Department of Energy, Energy Efficiency and Renewable Energy, CHP Technologies, Technology Basics, at tech_basics.html. 5

7 could save California a significant quantity of natural gas. 7 This amounts to a 62.5 percent operating standard (50 / (50+30) x 100% = 62.5%). Another cogeneration advocate submitted a study comparing conventional generation with cogeneration, which shows a cogenerator system that produces 31 units of electrical output and 52 units of thermal output for every 100 units of fuel input. 8 This amounts to a 62.7 percent operating standard (52/(52+31) x 100% = 62.7%). The average operating standard produced by the claims of the United States Department of Energy and cogeneration advocates listed above is 60 percent. Thus, based upon the directives of the Energy Policy Act and the cogeneration community s own claims, SCE recommends that 60 percent become the new interim operating standard. SCE also recommends that the Commission conduct a technical conference on the operating standard as a way of implementing the continuing progress language in the Energy Policy Act, given the technical complexities of determining a new operating standard. SCE proposes that the Commission adopt the following language in new 18 C.F.R (a)(1) regarding the operating standard: (a) Operating and efficiency standards for topping-cycle facilities (1) Operating Standard. (i) Except as provided in paragraph (a)(1)(ii) of this section, for any topping-cycle cogeneration facility, the useful thermal energy output of the facility must be no less than 5 percent of the total energy output during the 12-month period beginning with the date the 7 See Data Request Response of Cogeneration Association of California and the Energy Producers and Users Coalition in Rulemaking and Rulemaking R before the California Public Utilities Commission (attached hereto as Attachment A). 8 See Energy and Environmental Analysis, Inc., Natural Gas Impacts of Increased CHP at 4 (October 2003), Attachment RTB-3 to Prepared Direct Testimony of R. Thomas Beach on behalf of the California Cogeneration Council filed August 31, 2005 in Rulemaking and Rulemaking R before the California Public Utilities Commission (attached hereto as Attachment B). 6

8 facility first produces electric energy, and any calendar year subsequent to the year in which the facility first produces electric energy. (ii) For any topping-cycle cogeneration facility that (A) was not a qualifying cogeneration facility on August 8, 2005, or for which a notice of self-certification, self-recertification or an application for Commission certification under was not filed prior to [date of promulgation of final rule] and (B) seeks to sell electric energy to electric utilities pursuant to section 210 of the Public Utility Regulatory Policies Act of 1978, the useful thermal energy output of the facility must be no less than 60 percent of the total energy output during the 12-month period beginning with the date the facility first produces electric energy, and any calendar year subsequent to the year in which the facility first produces electric energy and must meet the requirements of B. The Commission Should Increase the Efficiency Standard for All New Cogeneration Facilities to 60 Percent EEI s comments propose several amendments to the efficiency standards in 18 C.F.R , including revising the definition in 18 C.F.R (m) to use higher heating value, revising the definition in 18 C.F.R (m) to utilize the total energy input of all fuels, and increasing the efficiency standard in 18 C.F.R (a)(2) for new topping-cycle cogeneration facilities primarily fueled by natural gas to 60 percent. SCE supports all of these proposals. In addition, SCE recommends that EEI s proposed 60 percent efficiency standard for new topping-cycle cogeneration facilities apply to all new topping-cycle cogeneration facilities, not just those primarily fueled by natural gas. There is no reason to only apply the 60 percent efficiency standard to those new topping-cycle cogeneration facilities that are primarily fueled by natural gas. SCE also proposes that the efficiency standard in 18 C.F.R (b) for new bottoming-cycle cogeneration facilities be increased to 60 percent to prevent any perception of a bias towards any particular cogeneration method. 7

9 New PURPA section 210(n)(1)(A)(iii) requires the Commission to revise its cogenerator regulations to ensure that cogenerators show continuing progress in the development of efficient electric energy generating technology. As discussed in EEI s comments, there have been substantial improvements in efficiency since the current efficiency standards for cogeneration facilities were developed twenty-five years ago. Accordingly, the efficiency standards for bottoming-cycle cogeneration facilities should be increased for new facilities to reflect modern improved waste heat recovery technology. A facility seeking qualification as a qualifying cogeneration facility must be required by the Commission to show that it is designed to use the cogeneration technology that results in the lowest total energy input to the facility to meet the fundamental energy requirements of the industrial, commercial, or institutional purpose and that this total energy input is less than that required by separate non-cogeneration processes. SCE agrees with EEI that the efficiency standard is sufficiently complex and technical that a technical conference would be appropriate as a means to clarify how the Commission should implement the continuing progress language in the Energy Policy Act by setting a new efficiency standard. SCE recommends that the 60 percent efficiency standard for all new topping-cycle and bottoming-cycle cogeneration facilities be used. SCE proposes that the Commission adopt the following language in new 18 C.F.R (b)(2) regarding the efficiency standard for bottoming-cycle cogeneration facilities: For any bottoming-cycle cogeneration facility that (A) was not a qualifying cogeneration facility on August 8, 2005, or for which a notice 8

10 of self-certification, self-recertification or an application for Commission certification under was not filed prior to [date of promulgation of final rule] and (B) seeks to sell electric energy to electric utilities pursuant to Section 210 of the Public Utility Regulatory Policies Act of 1978, the useful power output of the facility during the 12-month period beginning with the date the facility first produces electric energy, and any calendar year subsequent to the year in which the facility first produces electric energy must be no less than 60 percent of the energy input for supplementary firing. SCE also proposes that the Commission adopt the following language in new 18 C.F.R (b)(3): For any bottoming-cycle cogeneration facility not covered by paragraph (b)(1) or (b)(2) of this section, there is no efficiency standard. C. The Commission Should Modify the Language of the Proposed FPA Exemption In a new 18 C.F.R , the Commission proposes to narrow the scope of the FPA exemption for qualifying facility sales transactions so that sections 205 and 206 of the FPA would now cover market-based sales. 9 The Commission, however, proposes to retain the FPA exemption for transactions which are subject to the state regulatory oversight as part of a state s implementation of PURPA. 10 SCE does not oppose this narrowing of the FPA exemption in concept. The Commission s proposed regulation describes those transactions still subject to the FPA exemption as sales... made pursuant to a state regulatory authority avoided cost regime This description is potentially ambiguous because avoided cost regime is not defined and because it could be interpreted to include state programs that are not 9 See NOPR at See NOPR at See Proposed 18 C.F.R (c)(1). 9

11 grounded in PURPA. SCE believes that it would be clearer to describe the transactions still subject to the FPA exemption as those sales... made pursuant to a state regulatory authority s implementation of the Public Utility Regulatory Policies Act of , and proposes that this change be made to the Commission s proposed 18 C.F.R (c)(1). Accordingly, SCE proposes that the Commission s new 18 C.F.R (c)(1) read as follows: Sections 205 and 206; however, sales of energy or capacity made pursuant to a state regulatory authority s implementation of the Public Utility Regulatory Policies Act of 1978 shall be exempt from scrutiny under sections 205 and 206. III. COMMUNICATIONS The name and address of the person who should be included on the official service list in this proceeding, and to whom communications should be addressed is: Cathy A. Karlstad Southern California Edison Company 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Facsimile: (626) Cathy.Karlstad@sce.com IV. CONCLUSION For the foregoing reasons, SCE respectfully requests that the Commission adopt the revisions to its regulations proposed above and in EEI s comments, with the exceptions noted above. 10

12 Respectfully submitted, J. ERIC ISKEN CATHY A. KARLSTAD By: Cathy A. Karlstad Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY Dated: November 8,

13 CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Rosemead, California, this 8th day of November, Samantha Bertolone Case Analyst SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770

14 Cathy A. Karlstad Attorney November 8, 2005 Ms. Magalie R. Salas, Secretary FEDERAL ENERGY REGULATORY COMMISSION 888 First Street, N.E. Washington, D.C RE: DOCKET NO. RM Dear Ms. Salas: Enclosed please find for filing with the Commission the original and fourteen copies of the in the above-captioned matter. We request that a copy of this document be file-stamped and returned for our records. A self-addressed, stamped envelope is enclosed for your convenience. Your courtesy and cooperation in this matter are appreciated. Very truly yours, Enclosures Cathy A. Karlstad cc: All Parties of Record

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