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Exceptions to the Rule: Bypassing the California Transition Charge

Fortnightly Magazine - November 15 1996


California schools to plan their self-generation projects well before restructuring was envisioned.

In addition, at least a half-dozen large cogeneration plants planned by oil companies, industrials, and other customers have been covered by cogeneration deferral contracts from PG&E. These range in size from a long-deferred 100-Mw self-generation project at the Chevron refinery in Richmond, to a 49-Mw Exxon project at its Benicia refinery, to a 2.6-Mw cogeneration project deferred last year by the state corrections department for the Avendale prison.

Both PG&E and Southern California Edison (SCE) also have generic anti-cogeneration tariffs

in effect (em PG&E's covers up to 100-Mw of potential bypass. How much of that has been subscribed is unknown, however, because the utilities won the right to keep contract information under a cloak of confidentiality.

Under the terms of AB 1890, many of these projects might qualify for exemption if they are ever built.

The bill also allows up to a 20-percent capacity expansion at existing self-generation units (em including those able to provide "over the fence" service to neighboring loads. This could represent a new business opportunity.

A few analysts have pointed out that this competitive option appears limited both by the fact that most in-state cogeneration opportunities have long been exhausted, and by a provision in the bill that the load served by the system expansion has to be "affiliated" with the owner or operator of the cogeneration unit.

"Unaffiliated" load, on the other hand, will remain liable for the CTC only until June 30, 2000; everyone else must pay until 2002. So there could be at least an

18-month CTC exemption for localized cogeneration expansion opportunities.

Public Transit

Two other specific exemptions were afforded to potential expansion of "load served by preference power purchased from a federal power marketing agency or its successor." This language applies to the Bay Area Rapid Transit district (BART) in metropolitan San Francisco, and the University of California-Davis campus, which currently buy power from the Western Area Power Administration (WAPA) (em and in the case of BART, from the Bonneville Power Administration also (em and expect to increase their purchases in the future.

This exemption also appears to offer loopholes for other customers (em possibly including water districts that have taken over a 100-Mw WAPA allocation given up by members of the Northern California Power Agency and the City of Alameda.

The bill does not name eligible agencies, but states that related energy purchases must be "preference power ... used solely for the customer's own systems load and not for sale."

An interesting element of the BART exemption is that lost utility revenues will be collected from all ratepayer classes (em apparently the only instance of a breach in the law's "fire wall" against cross-class subsidization.


Many people believe there is an unlimited exemption for installing microgeneration units of 1 Mw or smaller, but no such exclusion appears in the legislation. What the measure does allow is an application to the CPUC for a "financing order" for customers to use the CTC bonds to cover transition costs associated with