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
                                                                        
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                                      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