California Public Utilities Commission Proceeding Updates Affecting the California Biogas Industry

Two pending proceedings at the California Public Utilities Commission ("CPUC") will substantially influence market opportunities for instate biogas producers.  The CPUC initiated a rulemaking last week to address a number of regulatory issues related to biomethane health and safety standards and pipeline open access.  Also, Commissioner Ferron recently issued a Scoping Memorandum and Ruling ("Ruling"), which identifies several biogas-related regulatory changes mandated by new legislation that will be addressed in the CPUC's rulemaking regarding the California Renewables Portfolio Standard ("RPS") program.  Both matters will likely be of critical importance to the production and distribution of biogas in California.

Order Instituting Rulemaking on Biomethane Issues and Pipeline Open Access

The CPUC adopted a revised Order Instituting Rulemaking ("OIR") on February 13, 2013, regarding biomethane issues and pipeline open access.  The CPUC's revised OIR states that this proceeding will address and adopt: 1) standards relating to health, safety, and facility integrity for biomethane injected into pipelines and requirements for monitoring, testing, reporting, and recordkeeping; and, 2) pipeline access rules providing for non-discriminatory open access for biomethane.  The rulemaking will also consider issues relating to the enforcement of CPUC biomethane rules. 

The CPUC is instituting this proceeding in light of Assembly Bill ("AB") 1900.  The California Legislature passed AB 1900 last year to remove barriers to the instate transmission of biomethane.  AB 1900 directs the CPUC and other agencies to develop new biomethane gas safety standards and requirements to prohibit utilities from creating anti-competitive barriers to biomethane gas. 

Interested parties may file comments on the issues presented in the OIR within 14 days of the OIR's adoption.  The gas utilities are required, and other interested parties are encouraged, to serve preliminary information regarding the topics to be covered within 30 days of the OIR's adoption.  A prehearing conference will be scheduled for a date within 45 to 60 days of the adoption of the OIR.

Expansion of the Renewables Portfolio Standard Proceeding to Address Bioenergy Enactmets

Commissioner Ferron issued a Ruling on January 9, 2013, which identifies additional issues for consideration in the rulemaking regarding the implementation and administration of the RPS program.  The RPS proceeding will now address the following actions mandated by statutes that became effective January 1, 2013, which affect the California biogas industry.

• Pursuant to AB 1900, described above, the CPUC will adopt polices and programs to promote the instate production of biomethane. 
• Senate Bill ("SB") 1122 directs the CPUC to require utilities to procure at least 250 megawatts of generation from bioenergy projects that commence operation on or after June 1, 2013.  SB 1122 also requires the CPUC to establish allocation of bioenergy procurement among the utilities and various types of bioenergy generation resources.  Pursuant to SB 1122, the CPUC must also direct the utilities to develop standard contract terms and a streamlined contracting process for bioenergy entities.  Lastly, SB 1122 requires the CPUC to encourage the utilities to offer programs and services that facilitate the development of the biogas industry.
• AB 2196 changes the treatment of biomethane fuel by the RPS program to provide that if a facility is based on landfill gas, digester gas, or another fuel delivered through a pipeline, the procurement of that fuel, including its source and delivery method, shall meet certain conditions.  The California Energy Commission is tasked with implementing most of these changes to the RPS program.  The CPUC will address the impact, if any, these changes may have on retail seller RPS compliance.

During the first quarter of 2013, a ruling will be issued seeking comments on enforcement issues, including the impact of AB 2196 on RPS program compliance, and a proposed decision is schedule for the third quarter of 2013.  A ruling will also be issued during the first quarter of 2013 seeking comments on the implementation of SB 1122.  A proposed decision on SB 1122 implementation and related bioenergy issues is scheduled to be issued during the second quarter of 2013. 

Conclusion

Both proceedings noted above offer many opportunities for interested parties to participate and influence policy and regulatory actions affecting the procurement of biogas in California.  Nossaman's expertise in the laws and public policies affecting this field and in practice before the CPUC may provide valuable assistance in creating solutions for those in the biogas industry.