BILL NUMBER: SB 90	CHAPTERED
	BILL TEXT

	CHAPTER   905
	FILED WITH SECRETARY OF STATE   OCTOBER 12, 1997
	APPROVED BY GOVERNOR   OCTOBER 12, 1997
	PASSED THE SENATE   SEPTEMBER 13, 1997
	PASSED THE ASSEMBLY   SEPTEMBER 12, 1997
	AMENDED IN ASSEMBLY   SEPTEMBER 11, 1997
	AMENDED IN ASSEMBLY   SEPTEMBER 8, 1997
	AMENDED IN ASSEMBLY   AUGUST 29, 1997
	AMENDED IN ASSEMBLY   JULY 9, 1997
	AMENDED IN SENATE   JUNE 3, 1997
	AMENDED IN SENATE   APRIL 21, 1997

INTRODUCED BY  Senator Sher
   (Principal coauthor:  Assembly Member Martinez)
   (Coauthors:  Assembly Members Baca, Bustamante, Campbell,
Cardenas, Kuehl, Kuykendall, Leonard, Machado, Murray, Runner,
Sweeney, Villaraigosa, Washington, Woods, and Wright)

                        DECEMBER 18, 1996

   An act to add Chapter 7.1 (commencing with Section 25620) to
Division 15 of, and to add and repeal Section 25620.9 of, the Public
Resources Code, and to amend Section 371 of, to add Sections 383.5
and 384 to, and to add Article 5 (commencing with Section 445) to
Chapter 2.5 of Part 1 of Division 1 of, and to add and repeal Section
380 of, the Public Utilities Code, relating to energy resources, and
making an appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 90, Sher.  Energy resources:  renewable energy resources:
funding.
   (1) Existing law requires that specified revenues collected by
electrical corporations, from a nonbypassable charge for the creation
and operation of an Independent Power Exchange, be transferred to a
subaccount of the Energy Resources Program Account administered by
the State Energy Resources Conservation and Development Commission,
to be held until further action of the Legislature, to be used for
purposes relating to the creation and development of specified
renewable resource electricity generation technologies.
   This bill would require those revenues collected by electrical
corporations for renewable resource technologies to be deposited
instead in the Renewable Resource Trust Fund, which the bill would
create, and into accounts in the trust fund, which the bill would
create.  The bill would continuously appropriate that money to the
commission and prescribe the purposes for which it may be expended,
subject to a determination by the commission of the eligibility of
awards, and to certification by the commission.  The bill would
prescribe related matters.
   The bill would require that funds transferred to the commission
for purposes of public interest research, development, and
demonstration be transferred to the Public Interest Research,
Development, and Demonstration Fund, which the bill would create, as
specified.
   The bill would establish the Public Interest Energy Research,
Demonstration, and Development Program for the purpose of making
awards for public interest energy research, development, and
demonstration projects or programs that are not provided for by
competitive and regulated markets.  The bill would prescribe
procedures for the development, implementation, and administration of
the program, as specified.  The bill would require the commission,
not later than January 1, 1999, to designate a panel of independent
experts with special expertise in public interest research,
development, and demonstration programs to conduct a comprehensive
evaluation of the program, as provided, and would require the panel
to submit specified reports to the Governor and to the Legislature on
implementation of the program.  The bill would impose various
requirements pertaining to legislative oversight and legislative
committee approval of implementation of the program.
   (2) Existing law specifies that, in recognition of statutory
authority and past investments existing as of December 20, 1995, and
subject to a specified fire wall, the obligation to pay the
uneconomic costs of specified energy generation-related assets and
obligations shall not apply to specified irrigation districts, water
districts, water storage districts, municipal utility districts, and
other water agencies, as provided.
   This bill would authorize the Lower Tule River Irrigation District
to request an allocation from the commission pursuant to a specified
provision that exempts certain irrigation districts from the
obligation to pay specified uneconomic costs of an electrical
corporation's generation-related assets and obligations, if the
district complies with specified requirements.
   (3) Existing law authorizes the imposition of specified standby
charges for standby electricity generation, transmission, and
distribution facilities to private energy producers that employ other
than a conventional power source for the generation of electricity.

   This bill would, to recognize the potential for microgeneration
facilities to enhance reliability, power quality, and to provide
other demonstrable benefits to the electric transmission or
distribution system, require an electrical corporation, as defined,
until June 30, 2000, to waive the otherwise applicable standby charge
for each eligible customer, as defined, in accordance with specified
requirements.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  (a) The Legislature hereby finds and declares that the
purpose of revenues collected by electrical corporations pursuant to
paragraph (3) of subdivision (c) of Section 381 of the Public
Utilities Code is to assist in-state operation and development of
existing and new and emerging renewable resource technologies, and to
secure for the state the environmental, economic, and reliability
benefits that development and continued operation of those new and
emerging technology resource facilities will provide.  The transition
period for restructuring California's electrical services industry,
as generally provided for in Chapter 854 of the Statutes of 1996,
poses a unique set of circumstances for these particular public goods
programs, making it necessary, therefore, to provide legislative
guidance for the reasonable allocation of revenues collected pursuant
to Section 381 of the Public Utilities Code.
   (b) (1) The Legislature further finds and declares that, to
accomplish the financial transactions intended by Chapter 854 with
respect to the in-state operation and development of existing and new
and emerging renewable resource technologies, it is necessary for
the state to act in a fiduciary capacity for the disbursement of
revenues collected by electrical corporations for those purposes.
   (2) It is the intent of the Legislature that state agencies acting
in such a fiduciary capacity in the disbursement of revenues
collected by electrical corporations specifically for renewable
resource technologies shall not exercise administrative discretion in
the disbursement of those revenues that is inconsistent with the
allocation mechanisms authorized by this act or the authority under
which those revenues are otherwise collected.
  SEC. 2.  Chapter 7.1 (commencing with Section 25620) is added to
Division 15 of the Public Resources Code, to read:

      CHAPTER 7.1.  PUBLIC INTEREST ENERGY RESEARCH, DEMONSTRATION,
AND DEVELOPMENT PROGRAM

   25620.  The Legislature hereby finds and declares all of the
following:
   (a) It is in the best interests of the people of this state that
the quality of life of its citizens be improved by providing
environmentally sound, safe, reliable, and affordable energy services
and products.
   (b) To improve the quality of life of this state's citizens, it is
proper and appropriate for the state to undertake public interest
energy research, development, and demonstration projects that are not
adequately provided for by competitive and regulated energy markets.

   (c) Public interest energy research, demonstration, and
development projects should advance energy science or technologies of
value to California citizens and should be consistent with the
policies of Chapter 854 of the Statutes of 1996.
   (d) The commission should use its adopted "Strategic Plan for
Implementing the Research, Demonstration, and Development Provisions
of AB 1890" to ensure compliance with policies and provisions of
Chapter 854 of the Statutes of 1996 in the administration of public
interest energy research, demonstration, and development programs.
   25620.1.  (a) The commission shall develop, implement, and
administer the Public Interest Research, Development, and
Demonstration Program, which is hereby created.  The program shall
include a full range of research, development, and demonstration
activities that, as determined by the commission, are not adequately
provided for by competitive and regulated markets.
   (b) The program shall consist of a balanced portfolio that
addresses California's energy and environmental needs, technology
opportunities, and system reliability.  To achieve balance, the
commission shall actively solicit applications for the
underrepresented subject areas of end-use energy efficiency,
renewable technologies, and environmental enhancements.  The
portfolio shall include the relevant core subject areas of
environmental enhancements, end-use efficiency,
environmentally-preferred advanced generation technologies, renewable
technologies, and other strategic energy research, including public
interest system reliability research, demonstration, and development
not adequately addressed by the Public Utilities Commission.  The
portfolio shall be reviewed annually by the commission through a
public process.  That annual review process shall consider technology
status, development barriers, and expected benefits.
   (c) The term "award," as used in this chapter, may include, but is
not limited to, contracts, grants, loans, and other financial
agreements designed to fund public interest research, demonstration,
and development projects or programs.
   25620.2.  (a) The commission shall administer the program in a
manner that is consistent with the purposes of Chapter 854 of the
Statutes of 1996, and shall ensure that the program meets all of the
following criteria:
   (1) Demonstrates a balance of benefits to all sectors that
contribute to the funding under Section 381 of the Public Utilities
Code.
   (2) Addresses key technical and scientific barriers.
   (3) Demonstrates a balance between short-term, mid-term, and
long-term potential.
   (4) Ensures that research currently, previously, or about to be
undertaken by research organizations is not unnecessarily duplicated.

   (b) To ensure the efficient implementation and administration of
the program, the commission shall do both of the following:
   (1) Develop procedures for the solicitation of award applications
for project or program funding, and to ensure efficient program
management.
   (2) Evaluate and select programs and projects, based on merit,
that will be funded under the program.
   (c) To ensure the success of electric industry restructuring in
the transition to a new market structure and to implement the
program, the commission shall adopt regulations, as defined in
subdivision (g) of Section 11342 of the Government Code, in
accordance with the following procedures:
   (1) Prepare a preliminary text of the proposed regulation and
provide a copy of the preliminary text to any person requesting a
copy.
   (2) Provide public notice of the proposed regulation to any person
who has requested notice of the regulations prepared by the
commission.  The notice shall contain all of the following:
   (A) A clear overview explaining the proposed regulation.
   (B) Instructions on how to obtain a copy of the proposed
regulations.
   (C) A statement that if a public hearing is not scheduled for the
purpose of reviewing a proposed regulation, any person may request,
not later than 15 days prior to the close of the written comment
period, a public hearing conducted in accordance with the procedures
set forth in Section 11346.8 of the Government Code.
   (D) A deadline for the submission of written comments.
   (3) Accept written public comments for 30 calendar days after
providing the notice required in paragraph (2).
   (4) Certify that all written comments were read and considered by
the commission.
   (5) Place all written comments in a record that includes copies of
any written factual support used in developing the proposed
regulation, including written reports and copies of any transcripts
or minutes in connection with any public hearings on the adoption of
the regulation.  The record shall be open to public inspection and
available to the courts.
   (6) Provide public notice of any substantial revision of the
proposed regulation at least 15 days prior to the expiration of the
deadline for public comments and comment period using the procedures
provided in paragraph (2).
   (7) Conduct public hearings, if a hearing is requested by an
interested party, that shall be conducted in accordance with the
procedures set forth in Section 11346.8 of the Government Code.
   (8) Adopt any proposed regulation at a regularly scheduled and
noticed meeting of the commission.  The regulation shall become
effective immediately unless otherwise provided by the commission.
   (9) Publish any adopted regulation in a manner that makes copies
of the regulation easily available to the public.  Any adopted
regulation shall also be made available on the Internet.  The
commission shall transmit a copy of an adopted regulation to the
Office of Administrative Law for publication, or, if the commission
determines that printing the regulation is impractical, an
appropriate reference as to where a copy of the regulation may be
obtained.
   (10) Notwithstanding any other provision of law, this subdivision
provides an interim exception from the requirements of Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code for regulations required to implement Sections
25621 and 25622 that are adopted under the procedures specified in
this subdivision.
   (11) This subdivision shall become inoperative on January 1, 2000,
unless a later enacted statute deletes or extends that date.
However, after January 1, 2000, the commission shall not be required
to repeat any procedural step in adopting a regulation that has been
completed before January 1, 2000, using the procedures specified in
this subdivision.
   25620.3.  The commission may, consistent with the requirements of
Section 25620.2, provide awards to any individual or entity proposing
a public interest research, demonstration, and development project
or program.
   25620.4.  (a) To the extent that intellectual property is
developed under this chapter, an equitable share of rights in the
intellectual property or in the benefits derived therefrom shall
accrue to the State of California.
   (b) The commission may determine what share, if any, of the
intellectual property, or the benefits derived therefrom, shall
accrue to the state.  The commission may negotiate sharing mechanisms
for intellectual property or benefits with award recipients.
   25620.5.  (a) The commission may solicit applications for awards,
using a sealed competitive bid, competitive negotiation process,
multiparty agreement, single source, or sole source method.
   (b) A sealed bid method may be used when goods and services to be
acquired can be described with sufficient specificity so that bids
can be evaluated against specifications and criteria set forth in the
solicitation for bids.
   (c) The commission may use a competitive negotiation process in
any of the following circumstances:
   (1) Whenever the desired contract is not for a fixed price.
   (2) Whenever project specifications cannot be drafted in
sufficient detail so as to be applicable to a sealed competitive bid.

   (3) Whenever there is a need to compare the different price,
quality, and contractual factors of the bids submitted.
   (4) Whenever there is a need to afford bidders an opportunity to
revise their proposals.
   (5) Whenever oral or written discussions with bidders concerning
the technical and price aspects of their proposals will provide
better projects to the state.
   (6) Whenever the price of the contract is not the determining
factor.
   (d) The commission may establish multiparty and interagency
agreements with other entities to advance a defined research,
development, and demonstration project purposes.  The commission
shall be a party to those agreements and shall share in the roles,
responsibilities, risks, investments, and results of the agreement.
   (e) The commission may choose from among two or more business
entities capable of supplying or providing goods or services that
meet a specified need of the commission.  The cost to the state shall
be reasonable and the commission shall only enter into a single
source contract with a particular entity if the commission determines
that it is in the state's best interests.
   (f) The commission, in accordance with subdivision (g), may select
projects on a sole source basis when the cost to the state is
reasonable and when, in consultation with the Department of General
Services, the commission makes any of the following determinations:
   (1) The proposal was unsolicited and meets the evaluation criteria
of this chapter.
   (2) The expertise, service, or product is unique.
   (3) The urgency of the need for the information or deliverable is
such that a competitive solicitation would frustrate timely
performance.
   (4) The contract funds the next phase of a multiphased proposal
and the existing agreement is being satisfactorily performed.
   (5) When it is determined by the commission to be in the best
interests of the state.
   (g) The commission shall not utilize a sole source basis for a
project pursuant to subdivision (f), unless both of the following
conditions are met:
   (1) The commission, at least 30 days prior to taking an action
pursuant to subdivision (f), notifies the Joint Legislative Budget
Committee, in writing of its intent to take the proposed action.
   (2) The Joint Legislative Budget Committee either approves or
fails to disapprove the proposed action within 30 days from the date
of notification required by paragraph (1).
   (h) The commission shall submit quarterly reports to the
Legislative Analyst and to the appropriate fiscal and policy
committees of the Legislature that review bills relating to energy
and public utilities.  The reports shall contain an evaluation of the
progress and status of the implementation of this section.
   (i) The provisions of this section are severable.  If any
provision of this section or its application is held to be invalid,
that invalidity shall not affect other provisions or applications
that can be given effect without the invalid provision or
application.
   25620.6.  The commission, in consultation with the Department of
General Services, may purchase insurance coverage necessary to
implement an award.  Funding for the purchase of insurance may be
made from money in the Public Interest Research, Development, and
Demonstration Fund created pursuant to Section 384 of the Public
Utilities Code.
   25620.7.  The commission may contract for, or through interagency
agreement obtain, technical or administrative services support to
reduce the overhead and administrative costs of implementing the
program.  Funding for this purpose shall be made from money in the
Public Interest Research, Development, and Demonstration Fund.
   25620.8.  The commission shall prepare and submit to the
Legislature an annual report on awards made pursuant to this chapter.
  The report shall include information on the names of award
recipients, the amount of awards, and the types of projects funded,
an evaluation of the success of any funded projects, and any
recommendations for improvements in the program.  The commission
shall establish procedures for protecting confidential or proprietary
information and shall consult with all interested parties in the
preparation of the annual report.
   25620.9.  (a) Not later than January 1, 1999, the commission shall
designate a panel of independent experts with special expertise in
public interest research, development, and demonstration programs.
The panel shall conduct a comprehensive evaluation of the program
established pursuant to this chapter.  The evaluation shall include a
review of the public value of programs established pursuant to this
chapter, and shall evaluate factors including, but not limited to,
the monetary and nonmonetary benefits to public health and the
environment of those programs, and the benefits of those programs in
providing funds for technology development that would otherwise not
be funded.
   (b) Not later than March 31, 2000, the panel designated pursuant
to subdivision (a) shall submit a preliminary report to the Governor
and to the Legislature on its findings and recommendations on the
implementation of the program established pursuant to this chapter.
The panel, not later than March 31, 2001, shall submit a final report
to the Governor and to the Legislature, including any additional
findings and recommendations regarding implementation of the program.

   (c) This section shall remain in effect only until January 1,
2002, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2002, deletes or extends
that date.
  SEC. 3.  Section 371 of the Public Utilities Code is amended to
read:
   371.  (a) Except as provided in Sections 372 and 374, the
uneconomic costs provided in Sections 367, 368, 375, and 376 shall be
applied to each customer based on the amount of electricity
purchased by the customer from an electrical corporation or alternate
supplier of electricity, subject to changes in usage occurring in
the normal course of business.
   (b) Changes in usage occurring in the normal course of business
are those resulting from changes in business cycles, termination of
operations, departure from the utility service territory, weather,
reduced production, modifications to production equipment or
operations, changes in production or manufacturing processes, fuel
switching, including installation of fuel cells pending a contrary
determination by the California Energy Resources Conservation and
Development Commission in Section 383, enhancement or increased
efficiency of equipment or performance of existing self-cogeneration
equipment, replacement of existing cogeneration equipment with new
power generation equipment of similar size as described in paragraph
(1) of subdivision (a) of Section 372, installation of demand-side
management equipment or facilities, energy conservation efforts, or
other similar factors.
   (c) Nothing in this section shall be interpreted to exempt or
alter the obligation of a customer to comply with Chapter 5
(commencing with Section 119075) of Part 15 of Division 104 of the
Health and Safety Code.  Nothing in this section shall be construed
as a limitation on the ability of residential customers to alter
their pattern of electricity purchases by activities on the customer
side of the meter.
  SEC. 4.  Section 383.5 is added to the Public Utilities Code, to
read:
   383.5.  (a) As used in this section, the following terms have the
following meaning:
   (1) "In-state renewable electricity generation technology" means
biomass, solar thermal, photovoltaic, wind, geothermal, small
hydropower of 30 megawatts or less, waste tire, digester gas,
landfill gas, and municipal solid waste generation technologies, as
described in the report, defined in paragraph (2), including any
additions or enhancements thereto, that are produced in facilities
located in this state and placed in operation after September 26,
1996, or that were operational prior to that date, and that are also
certified under Section 292.2904 of Title 18 of the Code of Federal
Regulations as a qualifying small power production facility either
located in California, or that began selling electricity to a
California electrical corporation prior to September 26, 1996, under
a Standard Offer Power Purchase Agreement authorized by the
California Public Utilities Commission.
   (2) "Report" means the Policy Report on AB 1890 Renewables Funding
(March 1997, Publication Number P500-97-002) submitted to the
Legislature by the State Energy Resources Conservation and
Development Commission.
   (b) (1) Forty-five percent of the money collected pursuant to
paragraph (3) of subdivision (c) of Section 381, up to two hundred
forty-three million dollars ($243,000,000), shall be used for
programs that are designed to improve the competitiveness of existing
in-state renewable electricity generation technology facilities, and
to secure for the state the environmental, economic, and reliability
benefits that continued operation of those facilities will provide.

   (2) Any funds used to support in-state renewable electricity
generation technology facilities pursuant to this subdivision shall
be expended in accordance with the provisions of the report, subject
to all of the following requirements:
   (A) Funding for existing renewable electricity generation
technologies shall be grouped into three technology tiers, as
follows:
   (i) Twenty-five percent of the money, up to one hundred
thirty-five million dollars ($135,000,000), shall be used to fund
first tier technologies, including biomass, solar thermal, and whole
waste tire technologies.
   (ii) Thirteen percent of the money, up to seventy million two
hundred thousand dollars ($70,200,000) shall be used to fund second
tier wind technologies.
   (iii) Seven percent of the money, up to thirty-seven million eight
hundred thousand dollars ($37,800,000), shall be used to fund third
tier technologies, including geothermal, small hydropower, digester
gas, landfill gas, and municipal solid waste technologies.
   (B) The State Energy Resources Conservation and Development
Commission shall establish a cents per kilowatthour production
incentive, not to exceed the payment caps per kilowatthour
established in the report representing the difference between target
prices and the market clearing price for electricity, if sufficient
funds are available.  If there are insufficient funds in any payment
period to pay either the difference between the target and market
price or the payment caps, production incentives shall be based on
the amount determined by dividing available funds by eligible
generation.  The target price for Tier 1 technologies shall not be
based on less than four cents ($0.04) per kilowatthour.  The market
clearing price for electricity shall be the energy prices paid to
nonutility power generators as provided in Section 390.
   (C) Funding for each type of existing in-state renewable
electricity generation technology shall be reduced each year during
the period from January 1, 1998, to January 1, 2002, to encourage the
development of increasingly competitive technologies.
   (D) Facilities that are eligible to receive funding pursuant to
this section shall be certified in accordance with the requirements
set forth in the report and may not receive payments for any
electricity produced that has any of the following characteristics:
   (i) Is sold under a fixed energy price payment under a long-term
contract with an existing in-state electrical corporation.
   (ii) Derives from utility-owned facility that is receiving, or is
eligible to receive, recovery of above-market facility costs through
a competitive transition charge.
   (iii) Is used onsite, sold to customers in a manner that excludes
competitive transition charge payments, or is otherwise excluded from
competitive transition charge payments.
   (c) (1) Thirty percent of the money, up to one hundred sixty-two
million dollars ($162,000,000), collected pursuant to paragraph (3)
of subdivision (c) of Section 381, shall be used for programs
designed to foster the development of new in-state renewable
electricity generation technology facilities, and to secure for the
state the environmental, economic, and reliability benefits that
continued operation of those facilities will provide.  Funds to
further the purposes of this subdivision may be committed for
multiple years.
   (2) Any funds used for new in-state renewable electricity
generation technology facilities pursuant to this subdivision shall
be expended in accordance with the report, subject to all of the
following requirements:
   (A) Funds shall be allocated for proposed projects based on a
competitive solicitation process whereby production incentives, not
to exceed one and one-half cents ($.015) per kilowatthour, are
awarded to the lowest bidders, provided that not more than 25 percent
of the funds allocated pursuant to paragraph (1) may be awarded to a
single project.
   (B) Funds expended for production incentives shall be paid over a
five-year period commencing on the date that a project begins
electricity production, provided that the project shall be
operational prior to January 1, 2002.
   (C) The amount of funds expended shall be increased for each
successive year during the period from January 1, 1998, to January 1,
2002, as fewer projects are expected to be funded during the first
few years after funding becomes available.
   (D) Facilities that are eligible to receive payments from the New
Renewable Resources Account created pursuant to paragraph (2) of
subdivision (a) of Section 445 of the Public Utilities Code shall be
certified as specified in the report and may not receive payments for
any electricity produced that has any of the following
characteristics:
   (i) Is sold under an existing long-term contract with an existing
in-state electrical corporation if the contract includes fixed energy
or capacity payments.
   (ii) Is used onsite and is sold to customers in a manner that
excludes competitive transition charge payments, or is otherwise
excluded from competitive transition charge payments.
   (iii) Is produced by a facility that is owned by customer-owned
electricity generating systems.
   (E) Eligibility to compete for funds or to receive funds shall not
be contingent upon the location or nature of the power purchaser.
   (3) Repowered wind projects shall be eligible for funding under
this subdivision if the new investment is at least 80 percent of the
value of the repowered facility.
   (d) (1) Ten percent of the money collected pursuant to paragraph
(3) of subdivision (c) of  Section 381, up to fifty-four million
dollars ($54,000,000), shall be used for a multiyear, consumer-based
program to foster the development of emerging renewable technologies
in distributed generation applications.  Funds to further the
purposes of this subdivision may be committed for multiple years.
   (2) Any funds used for emerging technologies pursuant to this
subdivision shall be expended in accordance with all of the following
requirements:
   (A) Funding for emerging technologies shall be provided through a
competitive, market-based process that shall be in place for a period
of not less than four years, and shall be structured so as to allow
eligible emerging technology manufacturers and suppliers to
anticipate and plan for increased sale and installation volumes over
the life of the program.
   (B) The program shall provide monetary rebates, buydowns, or
equivalent incentives, subject to subparagraph (C) of paragraph (2)
of subdivision (d), to purchasers, lessees, lessors, or sellers of
eligible electricity generating systems.  Incentives shall benefit
the end-use consumer of renewable generation by directly and
exclusively reducing the cost of the eligible system, or the cost of
electricity produced by the eligible system.  Incentives shall be
issued on the basis of the rated electrical capacity of the system
measured in watts.  The amount of the per-watt incentive shall
decline over the term of the program, with a corresponding increase
in the amount of total
electrical capacity eligible for the incentive, thereby encouraging
the manufacturers and suppliers of eligible systems to reduce system
costs.  Incentives shall be limited to a maximum percentage of the
system price, as defined by the State Energy Resources Conservation
and Development Commission, and the maximum incentive percentage
shall decline over the term of the program, as shall the per-watt
incentive, in amounts to be determined by the State Energy Resources
Conservation and Development Commission.
   (C) Eligible distributed emerging technologies are photovoltaic,
solar thermal electric, fuel cell technologies that utilize renewable
fuels, and wind turbines of not more than ten kilowatts rated
electrical capacity per customer site, provided that the technologies
meet the emerging technology eligibility criteria contained in the
report prepared by State Energy Resources Conservation and
Development Commission.  Eligible electricity generating systems are
intended primarily to offset part or all of the consumer's own
electrical energy demand, and shall not be owned by electrical
corporations or publicly owned utilities, be located at a customer
site that is not receiving distribution service from existing
in-state electrical corporations.  Not less than 60 percent of the
available incentive funds shall be reserved for systems of 10
kilowatts rated electrical capacity or smaller, and not less than 15
percent of the funds shall be reserved for systems of 100 kilowatts
rated electrical capacity or smaller.  All eligible electricity
generating system components shall be new and unused, and shall not
have been previously placed in service in any other location or for
any other application.  Systems and their fuel resource shall be
located on the premises of the end-use consumer of the electricity
produced, and all eligible electricity generating systems shall be
connected to the utility grid in California.
   (D) The State Energy Resources Conservation and Development
Commission shall also determine, in collaboration with industry and
consumer interests, if a program provision limiting the amount of
funds available for any single project is warranted, and determine
how federal, state, or other funds or incentives not related to this
section that are already available, or that may become available for
eligible electricity generating systems, may impact the availability
of funds allocated under this section, if at all.  The emerging
renewable technologies program shall be implemented not later than
March 31, 1998, and incentives shall be available for eligible
electricity generating systems that are placed in service after
January 1, 1998, in accordance with the program provisions developed
by the State Energy Resources Conservation and Development
Commission.  However, projects placed in service after January 1,
1998, and prior to September 1, 1998, shall not be subject to limits,
if any, that may be determined by the commission, pursuant to this
subparagraph.
   (e) Fifteen percent of the money collected pursuant to paragraph
(3) of subdivision (c) of Section 381, up to eighty-one million
dollars ($81,000,000), shall be used for programs designed to provide
customer credits for purchases of renewable energy produced by
certified energy providers, to disseminate information regarding
renewable energy technologies, to promote purchases of renewable
energy, to help develop a consumer market for renewable energy, and
to help develop a consumer market for renewable energy technologies,
as provided in the report, subject to the following requirements:
   (1) (A) Fourteen percent of the money, up to seventy-five million
six hundred thousand dollars ($75,600,000), shall be expended to
provide customer credits for purchases of renewable energy produced
by certified energy providers.  Customer credits shall be awarded to
California retail customers located in the service territory of an
investor-owned utility that is subject to Section 381 who purchase
qualifying renewable electric power through transactions traceable to
specific generation sources by any auditable contract trail or
equivalent that provides commercial verification that the electricity
source claimed has been sold not more than once to a retail
customer.  Credits may be given without regard to whether the power
supplier is also receiving funds under any other subdivision of this
section.
   (B) Credits awarded pursuant to this paragraph may be paid
directly to energy marketers, aggregators, or generators if those
persons or entities account for the credits on the recipient customer'
s utility bills.  Credits shall not exceed one and one-half cents
($.015) per kilowatthour.  Credits awarded to members of the combined
class of customers, other than residential and small commercial
customers, shall not exceed one thousand dollars ($1,000) per
customer in 1998 and 1999.  Thereafter, the State Energy Resources
Conservation and Development Commission shall determine by January 10
of each year the average customer incentive rebate level paid over
the preceding calendar year.  In the event that the payments have
remained at the one and one-half cents ($.015) per kilowatthour cap
over the preceding calendar year, the one thousand dollars ($1,000)
per customer cap shall be removed for that calendar year, except that
in no event shall more than fifteen million dollars ($15,000,000) of
the total customer incentive funds be awarded to members of the
combined class of customers other than residential and small
commercial customers.
   (C) Funding for credits pursuant to this paragraph shall be
increased for each successive year during the period from January 1,
1998, to January 1, 2002, to encourage the increasing use of those
credits.
   (D) The State Energy Resources Conservation and Development
Commission shall develop interim criteria and procedures for the
certification of energy providers and for the identification of
energy purchasers who are eligible to receive funds pursuant to this
paragraph through a process consistent with this paragraph.  Such
criteria and procedures shall apply only to funding eligibility and
shall not extend to other renewable marketing claims.
   (2) One percent of the money, up to five million four hundred
thousand dollars ($5,400,000), shall be expended to promote renewable
energy and to disseminate information on renewable energy
technologies, including emerging renewable technologies, and to help
develop a consumer market for renewable energy and for small-scale
emerging renewable energy technologies.
   (f) (1) The State Energy Resources Conservation and Development
Commission shall adopt guidelines governing the funding programs
authorized under this section, at a publicly noticed meeting offering
all interested parties an opportunity to comment.  Substantive
changes to the guidelines shall not be adopted without at least 10
days' written notice to the public.  The public notice of meetings
required by this paragraph shall not be less than 30 days.
Notwithstanding any other provision of law, any guidelines adopted
pursuant to this section shall be deemed to satisfy the requirements
of Chapter 3.5 (commencing with Section 11340) of Division 3 of Title
2 of the Government Code.
   (2) The State Energy Resources Conservation and Development
Commission shall, in collaboration with eligible emerging technology
industry stakeholders and consumer interests, complete the emerging
technology program design, as outlined in subdivision (d), and
implement its provisions.
   (3) Awards made pursuant to this section are grants, subject to
appeal to the State Energy Resources Conservation and Development
Commission upon a showing that factors other than those described in
the guidelines adopted by the State Energy Resources Conservation and
Development Commission were applied in making the awards and
payments.  Any actions taken by an applicant to apply for, or become
or remain eligible and certified to receive, payments or awards,
including satisfying conditions specified by the State Energy
Resources Conservation and Development Commission, shall not
constitute the rendering of goods, services, or a direct benefit to
the State Energy Resources Conservation and Development Commission.
   (g) The State Energy Resources Conservation and Development
Commission shall report to the Legislature on or before May 31, 2000,
and on or before May 31 of every second year thereafter, regarding
the results of the mechanisms funded pursuant to this section.
Reports prepared pursuant to this section shall include a description
of the allocation of funds among existing, new and emerging
technologies; the allocation of funds among programs, including
consumer-side incentives; and the need for the reallocation of money
among those technologies.  The reports shall also address the
allocation of funds from interest on the accounts described in this
section, money in the accounts described in subdivision (e) of
Section 381, and money included in the accounts pursuant to Section
385.  Notwithstanding paragraph (4) of subdivision (b) of Section 383
or subdivisions (b), (c), (d), and (e) of Section 383.5, money may
be reallocated without further legislative action among existing,
new, and emerging technologies and consumer-side programs in a manner
consistent with the report.
  SEC. 5.  Section 384 is added to the Public Utilities Code, to
read:
   384.  (a) Funds transferred to the State Energy Resources
Conservation and Development Commission pursuant to this article for
purposes of public interest research, development, and demonstration
shall be transferred to the Public Interest Research, Development,
and Demonstration Fund, which is hereby created in the State
Treasury.  The fund is a trust fund and shall contain money from all
interest, repayments, disencumbrances, royalties, and any other
proceeds appropriated, transferred, or otherwise received for
purposes pertaining to public interest research, development, and
demonstration.  Any appropriations that are made from the fund shall
have an encumbrance period of not longer than two years, and a
liquidation period of not longer than four years.
   (b) The State Energy Resources Conservation and Development
Commission shall report annually to the appropriate budget committees
of the Legislature on any encumbrances or liquidations that are
outstanding at the time the commission's budget is submitted to the
Legislature for review.
  SEC. 6.  Article 5 (commencing with Section 445) is added to
Chapter 2.5 of Part 1 of Division 1 of the Public Utilities Code, to
read:

      Article 5.  Collection and Disposition of Fees for Renewable
Energy Technologies

   445.  (a) The Renewable Resource Trust Fund is hereby created in
the State Treasury.
   (b) The following accounts are hereby created within the Renewable
Resource Trust Fund:
   (1) The Existing Renewable Resources Account.
   (2) New Renewable Resources Account.
   (3) Emerging Renewable Resources Account.
   (4) Customer-Side Renewable Resource Purchases Account.
   (c) The money in the fund may be expended for the state's
administration of this article only upon appropriation by the
Legislature in the annual Budget Act.
   (d) Notwithstanding Section 383, that portion of revenues
collected by electrical corporations for the benefit of in-state
operation and development of existing and new and emerging renewable
resource technologies, pursuant to paragraph (3) of subdivision (c)
of Section 381, shall be transmitted to the State Energy Resources
Conservation and Development Commission at least quarterly for
deposit in the Renewable Resource Trust Fund.  After setting aside in
the fund money that may be needed for expenditures authorized by the
annual Budget Act in accordance with subdivision (c), the Treasurer
shall immediately deposit money received pursuant to this section
into the accounts created pursuant to subdivision (b) in proportions
designated by the State Energy Resources Conservation and Development
Commission for the current calendar year.  Notwithstanding Section
13340 of the Government Code, the money in the fund and the accounts
within the fund are hereby continuously appropriated to the State
Energy Resources Conservation and Development Commission without
regard to fiscal year for the purposes enumerated in Section 383.5.
   (e) Upon notification by the State Energy Resources Conservation
and Development Commission, the Controller shall pay all awards of
the money in the accounts created pursuant to subdivision (c) for
purposes of furthering the purposes of subdivision (c) of Section
383.5.  The eligibility of each award shall be determined solely by
the State Energy Resources Conservation and Development Commission
based on the procedures it adopts under subdivision (f) of Section
383.5.  Based on the eligibility of each award, the State Energy
Resources Conservation and Development Commission shall also
establish the need for a multiyear commitment to any particular award
and so advise the Department of Finance.  Eligible awards submitted
by the State Energy Resources Conservation and Development Commission
to the Controller shall be accompanied by information specifying the
account from which payment should be made and the amount of each
payment; a summary description of how payment of the award furthers
the purposes of subdivision (c) of Section 383.5; and an accounting
of future costs associated with any award or group of awards known to
the State Energy Resources Conservation and Development Commission
to represent a portion of a multiyear funding commitment.
   (f) The State Energy Resources Conservation and Development
Commission may transfer funds between accounts for cash-flow
purposes, provided that the balance due each account is restored and
the transfer does not adversely affect any of the accounts.  The
State Energy Resources Conservation and Development Commission shall
examine the cash-flow in the respective accounts on an annual basis,
and shall annually prepare and submit to the Legislature a report
that describes the status of account transfers and repayments.  Any
other unallocated funds in any account shall remain in the respective
account, and be available for the purposes of this section until
December 31, 2001.  After that date, money may be reallocated without
further legislative action among existing, new, and emerging
technologies and consumer-side programs in a manner consistent with
the report described in subdivision (a) of Section 383.5.
   (g) The State Energy Resources Conservation and Development
Commission shall, on a quarterly basis, report to the Legislature on
the implementation of this article.  Those quarterly reports shall be
submitted to the Legislature not more than 15 days after the close
of each quarter and shall include information describing the awards
submitted to the Treasurer pursuant to this article, the cumulative
commitment of claims by account, the relative demand for funds by
account, a forecast of future awards, and other matters the
commission determines may be of importance to the Legislature.
   (h) The Department of Finance, commencing March 1, 1999, shall
conduct an independent audit of the Renewable Resource Trust Fund and
its related accounts annually, and provide an audit report to the
Legislature not later than March 1 of each year for which this
article is operative.  The Department of Finance's report shall
include information regarding revenues, payment of awards, reserves
held for future commitments, unencumbered cash balances, and other
matters that the Director of Finance determines may be of importance
to the Legislature.
  SEC. 7.  Section 380 is added to the Public Utilities Code, to
read:
   380.  (a) To recognize the potential for microgeneration
facilities to enhance reliability, power quality, and to provide
other demonstrable benefits to the electric transmission or
distribution system, an electrical corporation shall waive the
otherwise applicable standby charge for each eligible customer.
   (b) The cumulative load for which a waiver is authorized pursuant
to this section shall not exceed 1 megawatt (1MW) total, and shall be
located in the service territory of the electrical corporation.
   (c) For purposes of this section, "electrical corporation" means
an electrical corporation that, as of December 20, 1995, served at
least four million customers, and that was also a gas corporation
that served less than four thousand customers.
   (d) For purposes of this section, "eligible customer" means a
customer who has installed a microgeneration facility as defined in
subdivision (f) of Section 331 on or after 90 days from the effective
date of this section if that facility meets all of the following
requirements:
   (1) Is operated in parallel with the electrical corporation's
transmission and distribution system.
   (2) Is subject to the electrical corporation's standby tariff.
   (3) Is in full compliance with the best available control
technology (BACT).
   (e) To implement the provisions of this section, an electrical
corporation as defined in subdivision (b) shall, not later than 90
days from the effective date of this section, file with the
commission appropriate revisions to the standby tariff schedule.
   (f) Any waiver granted pursuant to this section shall expire on
June 30, 2000.
   (g) This section shall remain in effect until June 30, 2000, and
as of that date is repealed, unless a later enacted statute, that is
enacted before June 30, 2000, deletes or extends that date.
  SEC. 8.  (a) Notwithstanding paragraph (5) of subdivision (a) of
Section 374 of the Public Utilities Code, the Lower Tule River
Irrigation District may request an allocation from the State Energy
Conservation and Development Commission pursuant to paragraph (1) of
subdivision (a) of Section 374 of the Public Utilities Code if the
district meets both of the following requirements:
   (1) The district complies with the provisions of paragraph (1) of
subdivision (a) of Section 374.
   (2) The district receives no direct or indirect benefit pursuant
to paragraph (3) of subdivision (a) of Section 374 of the Public
Utilities Code.
   (b) The commission shall, within 30 days from the effective date
of this section, assess the viability of the request for an
allocation that is authorized pursuant to this section in accordance
with the requirements of paragraph (1) of subdivision (a) of Section
374, to determine if the request is consistent with the criteria
previously applied by the commission in its decision of March 26,
1997, regarding the implementation of Section 374 of the Public
Utilities Code (Docket No. 96-IRR-1890).
   (c) For purposes of achieving an orderly, equitable phasein of all
authorized allocations within the service territory of the
electrical corporation in which the district is located, the
commission, in accordance with subparagraph (B) of paragraph (1) of
subdivision (a) of Section 374 of the Public Utilities Code, may make
adjustments to the phasein of allocations that have been previously
authorized.