Agricultural Internal Combustion Engine Conversion Incentive Program

The Agricultural Internal Combustion Engine Conversion Incentive Program (AG-ICE) offers reduced electricity rates in exchange for permanently retiring a stationary diesel-driven engine utilized for on-farm irrigation purposes.

The AG-ICE program will provide approximately a 20 percent discount from the AG-5B/C rates offered by Pacific Gas and Electric Company in 2004 when we made our filing to the California Public Utilities Commission. The average rate of 7.5 cents/kilowatthour (kwh) was developed to approximate the cost of operating a diesel engine at a fuel price of $1.15/gallon. The AG-ICE program was designed, in coordination with the Agricultural Energy Consumers Association and the California Farm Bureau Federation.

AG-ICE rate provides competitive electricity rates and long-term certainty to growers. Under the AG-ICE program, the average electricity rate will not be subject to any changes other than an annual 1.5% increase, which will occur each year on January 1. With the exception of this annual escalation, PG&E and the California Public Utilities Commission have agreed not to adjust the rate until the program expires on December 31, 2015.

With this rate certainty moving forward, growers will be able to calculate the actual electricity price for every year through 2015, and compare the costs of conversion with other regulatory options such as mandatory engine replacement currently being considered by the local air districts. This long-term electric rate certainty also reduces the risk of highly volatile diesel prices.

AG-ICE program will offer additional incentives for the line extension process. In addition to the normal line extension allowance, the AG-ICE program offers an additional allowance, the “environmental adder,” to reduce the up-front conversion costs for the farmer. The adder will be based on the size of the electric motor that will be installed, and should help to cover most, if not all, line extension costs for growers. Also, PG&E will allow growers to make four quarterly payments to spread out any remaining line extension costs. Finally, follow-up usage audits will not be conducted by PG&E, which eliminates the possibility of deficiency payments down the road.

AG-ICE program offers new options for growers who operated diesel-driven irrigation pumps. In the coming months, local air districts statewide will be adopting new regulations pertaining to diesel-driven agricultural equipment. As a result, it is very likely that growers will face additional costs to upgrade or replace their diesel engines. Converting to electricity may also mean additional costs to growers. By creating an electricity rate that approximates the current cost of operating a diesel engine, the AG-ICE rate offers a new option for growers, and a way to meet new regulations without additional costs to growers.

For more information visit PGE's web page