Office of House Bill AnalysisH.B. 2845
By: Danburg
Energy Resources


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.  


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.   


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. 


September 1, 2001.