HBA-SEP H.B. 2845 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2845 By: Danburg Energy Resources 3/23/2001 Introduced BACKGROUND AND PURPOSE Increased population in urban areas combined with a growing high tech industry has increased the need for reliable electrical power which in the past has been met through the construction of large central station power plants. However, transmission constraints in some areas could lead to periodic shortages during peak demand times. To ease the peak time strain on the electrical grid, the Public Utility Commission of Texas has encouraged the development of small scale distributed generation technologies. These technologies such as natural gas and diesel fuel emit significantly more emissions per-kilowatt-hour than large central station power plants which can contribute to an increase in air pollution. Low emission fuel cell technologies are or are near commercial availability, though at current rates these units may not be available in significant numbers at competitive prices for another five years. Certain incentives might encourage the use of fuel cells and accelerate the pace of deployment. House Bill 2845 creates the Texas Fuel Cell Commercialization Initiative (initiative) to provide these incentives. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the State Energy Conservation Office in SECTION 2 (Section 2305.032, Government Code) of this bill. ANALYSIS House Bill 2845 amends the Government Code to create the Texas Fuel Cell Commercialization Initiative (initiative) and to redirect certain federal oil overcharge restitution funds from the loanstar revolving loan program to the initiative. The State Energy Conservation Office (energy office) is required to complete the transition of funds from the loanstar loan program to the initiative over no more than a two year period. The bill requires the energy office to form a fuel cell advisory committee (advisory committee) to help the energy office determine the most cost effective means to foster the accelerated commercial development and availability of clean small-scale fuel cell technology to Texas residents and businesses, and to encourage the growth of the fuel cell industry and related products and services in Texas. The bill sets forth the duties and membership of the advisory committee. The energy office is responsible for the creation and administration of the initiative program of standardoffer incentives, to competitively promote and facilitate the accelerated commercialization of clean smallscale fuel cell power generation and small combined heat and power fuel cell systems, particularly for use in nonattainment or near-nonattainment areas. The bill requires incentives to be made available to competitive companies, which install the systems on customer premises, at the customer's request. Installing companies must demonstrate proper installation and system performance in order to claim the incentive. Incentives are also required to be performance, or production based, and to be designed to encourage competitive pricing and accelerate the adoption of fuel cell technology to the extent feasible. The bill requires the energy office to adopt rules to implement the initiative no later than January 1, 2003. The rules are required to provide for the smooth transition from the current use of the loanstar fund to implementation of the initiative, allowing for completion of existing projects being financed, and a diminishing rate of financing of new projects, in order to allow for the timely expansion of the new initiative. The bill requires the energy office to amend the State Energy Plan (plan) to encompass the initiative and to pursue the approval of the Untied States Department of Energy for use of federally allocated funds as necessary to meet the January 1, 2003 deadline. The energy office is authorized to use five percent of the funds allocated to the initiative for administrative costs and for education-related efforts associated with the initiative. The energy office is also authorized to use up to an additional five percent for administration and education or development related efforts associated with the initiative which the advisory committee agrees would enhance the overall impact of the program. The bill requires the energy office to annually report to the Legislative Budget Board (LBB) on the progress of the initiative and to provide the LBB with the modified plan, and an accounting for Oil Overcharge Restitution Fund conversion and expenditures. The bill further requires the energy office to endeavor to cooperate with and seek the assistance and support of the Texas Natural Resources Conservation Commission, and other state or local agencies as appropriate, in development of program plans, rules and guidelines or operating procedures. EFFECTIVE DATE September 1, 2001.