BILL ANALYSIS Ó 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR SB 699 - Hill Hearing Date: April 30, 2013 S As Amended: April 4, 2013 FISCAL B 6 9 9 DESCRIPTION Current law requires the California Public Utilities Commission (CPUC) to submit to the Legislature a report on the impacts of distributed energy generation (DG) on California's transmission and distribution systems biennially and evaluate several specific issues including issues related to connecting DG to local distribution networks and regional grids including any barriers that affect the interconnection process. (PUC 321.7) Current orders of the CPUC require electrical corporations (IOUs) to provide detailed maps of preferred locations on the distribution grid where the deployment of DG could help address anticipated peak load growth or help congestion. The decision required the IOUs to provide this information in map form and to update this information on a monthly basis and make information available on preferred distribution substations based on the available capacity of that substation, updated on a real-time basis. (CPUC Decision 10-12-048) This bill requires IOUs to file reports with the CPUC disclosing the costs incurred during the prior year in sufficient detail so that stakeholders can determine whether specified DG policy objectives are achieved. BACKGROUND What is DG? - Distributed generation has different meanings in different regions and by different utilities. What generally distinguishes DG from other generation are three characteristics of an electric generating facility - connection, location, and generation capacity. DG can be on the customer's side of the meter or on the wholesale, or utility-side of the meter. In California's renewable procurement world, DG facilities are most frequently defined as non-centralized electricity power production facilities less than 20 megawatts interconnected at the distribution side of the electricity system. DG technologies include solar, wind and water-powered energy systems; and renewable and fossil-fueled internal combustion (IC) engines, small gas turbines, micro-turbines and fuel cells. The CPUC regulates DG policies and programs on both the customer and utility (wholesale) side of the electric meter for IOUs. Customer-side of the meter DG incentive programs include the California Solar Initiative and the Self-Generation Incentive Program. These programs are supported by the CPUC's oversight of net energy metering and interconnection policies. On the utility side of the meter, utilities procure distributed generation resources through a variety of procurement programs which includes the Renewable Portfolio Standard (RPS) program, including competitive solicitations, the Reverse Auction Mechanism (RAM), the renewable market adjusting tariff (Re-MAT), and utility solar programs. Distribution Grid & Interconnection - The deployment of DG has placed demands on the distribution grid which were never intended when designed decades ago as a means to deliver electricity from the generator to a transmission line to a substation and end-user or customer. Today, from the perspective of a renewable developer, the distribution grid is a relic of the 20th Century but it still achieves its fundamental purpose of the last century which is to keep the lights on - aka reliability. As the 21st century energy policy has developed and placed more demands on the distribution grid in particular such as pushing power back in the opposite direction for which is was never designed, it has required considerable attention of the regulators and utilities. This bill is the result of the continuing transition of that grid. For some it's not fast enough and for others they can't keep up. Interconnection Primer - The process and costs for a renewable generator to connect to the grid are demanding and start with an interconnection study done by the utility to determine the impact a new generator will have on the safety and reliability of the electrical grid and the costs that generator will have to incur to interconnect. A generator interconnecting to the distribution system can trigger three types of upgrades: interconnection facilities, distribution system upgrades, and transmission system network upgrades. In general, interconnection facilities are the least costly while transmission system network upgrades are the most costly. Interconnection Facilities: Include all facilities and equipment between the generating facility and the point of interconnection, including any modification, additions or upgrades that are necessary to physically and electrically interconnect the generating facility to the distribution provider's distribution system. Distribution System Upgrades: The additions, modifications, and upgrades to the distribution provider's distribution system at or beyond the point of interconnection to facilitate interconnection of the generating facility and render the service necessary to affect the interconnection customer's wholesale sale of electricity. Transmission System Network Upgrades: Additions, modifications, and upgrades to the distribution provider's transmission system required at or beyond the point at which the distribution system connects to the distribution provider's transmission system to accommodate the interconnection of the generating facility. Interconnection Review by CPUC - To encourage and ease the development of renewable DG resources, the CPUC has initiated several forums to consider improvements to distribution level interconnection rules and regulations. Most significantly was its September 2012 (D.12-09-018) decision which defined the appropriate interconnection study process for all types of generation resources seeking interconnection to the distribution system, creating distribution-level interconnection procedures for storage technologies, and evaluating and determining appropriate processes for establishing distribution-level interconnection queues. The settlement discussions which led to the decision included participation by a number of entities and government agencies. These included the Division of Ratepayer Advocates (DRA), the California Energy Commission (CEC), the California Independent System Operator (CAISO), numerous developers of DG, including renewables, storage, and combined heat and power, and advocacy groups supporting different segments of the DG market. A total of 81 entities participated and among those were most of the parties listed in support of this bill. That decision was immediately followed by the opening of a phase 2 proceeding which will give further consideration of objective criteria to make the interconnection review process more efficient; mechanisms to improve cost certainty; cost allocation policy between ratepayers and developers of DG; review of study deposits against actual study costs; development of the distribution group study process; consideration of timeline compliance and remedies; and consideration of additional form study agreements and interconnection agreements. This proceeding continues. (R. 11-09-011) COMMENTS 1. Author's Purpose . The author intends to "require California IOUs to report specified information about the distribution grid to better enable the developers of distributed resources and generation (i.e. distributed generation, storage, or other grid-supportive technologies) to determine suitable locations for development before committing time, energy, and financial resources into interconnection to any particular location. Under current law, IOUs are not required to publicly disclose line characteristics of the electrical distribution system in sufficient detail to evaluate siting options in advance of the siting process of a distributed resource. Since distributed resources and generation are an important part of California's loading order, the deployment of such resources should be as time- and resource-efficient as can be done while maintaining safe and reliable distribution service. More transparency - information symmetry between the utilities and distributed resources and generation developers - will help both parties achieve timely and grid-supportive citing solutions. 2. Aligning Author's Intent & Outcome . The broad policy objectives and structure of the bill as currently drafted may not result in the cost disclosure intended by the author. To achieve that goal, the author will make the following amendments in place of the current bill's content. (a) Distributed energy resources, including distributed generation, can reduce greenhouse gas emissions, reduce criteria air pollution, reduce water consumption, increase grid reliability, localize power generation, and decrease reliance on large, polluting generation facilities. (b) The Legislature has established programs and policies to support the commercialization and growth of distributed generation technologies, including the California Solar Initiative, Combined Heat and Power Feed-in-Tariff, Self-Generation Incentive Program, and the Renewable Market AdjustingTariff. (c) A central impediment to increased proliferation of distributed energy resources is a lack of transparency in current utility infrastructure investments in the distribution grid and in the costs and process associated with interconnection to the utility grid, costs that are ultimately born by ratepayers. (e) Transparency on what distribution grid investments have been made will allow policy makers and stakeholders to better understand and evaluate what types of distributed energy resources may be more cost effective and better serve the grid and ratepayers for future investments. Section XXX. For capital expenditures included in the distribution category of the electrical corporation's ratebase, the electrical corporation shall annually report expenditures for each project, to include the following: 1) The total dollar amount. 2) The type of equipment installed. 3) The purpose of the expenditures. 4) Whether or not the installations affect the interconnection and management of distributed energy resources. For each interconnection agreement executed with customers that interconnect distributed energy resources, the utility shall report all interconnection costs charged to the customer. 3. Ongoing Transition of the Grid . The CPUC has been aggressive in its review of the interconnection process and costs and has clearly stated and supported policies to "achieve the Commission's goal of ensuring a timely, non-discriminatory, cost-effective, and transparent process for interconnection to the utility distribution system." The second phase of a proceeding to guide the comprehensive redesign of the interconnection process is underway. The requests of this legislation, as proposed to be amended, seem more appropriate for that venue. The proponents report that they have made multiple requests for these costs to the IOUs but little information has been forthcoming. It is not clear how the release of cost data facilitates interconnection. POSITIONS Sponsor: Author Support: Bloom Energy Clean Coalition EtaGen Solar Energy Industries Association Sunrun Oppose: None on file. Kellie Smith SB 699 Analysis Hearing Date: April 30, 2013