BILL ANALYSIS Ó AB 2861 Page 1 Date of Hearing: April 20, 2016 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Mike Gatto, Chair AB 2861 (Ting) - As Introduced February 19, 2016 SUBJECT: Electricity: distribution grid interconnection dispute resolution process SUMMARY: Requires the California Public Utilities Commission (CPUC) to establish an electric distribution system interconnection dispute process. Specifically, this bill: 1)Requires the CPUC to establish an expedited distribution system interconnection process by July 1, 2017, with a goal of resolving interconnection disputes within 60 days. 2)Establishes a distribution grid interconnection technical advisory panel consisting of at least eight individuals selected by the CPUC: Four from electrical corporations and four not from electrical corporations. 3)Authorizes the CPUC to determine the length of the term of each member. 4)Requires any member of the panel to not participate in any discussion if that member is an employee of, or contractor to, an electrical corporation, an employee of a vendor with an open application, or has a financial interest or financial AB 2861 Page 2 relationship to a person or corporation with a financial interest in the outcome of the decision. 5)Requires the advisory panel to select a review plan of four members for each dispute. 6)Allows an interconnection applicant to seek resolution through the expedited process after working with the electric corporation operating the distribution grid. 7)Allows parties to withdraw from the dispute resolution process upon agreeing to a final settlement of the dispute. 8)Requires, if a dispute is filed with the CPUC, the CPUC to ensure that a technical advisory panel shall review the dispute and make a recommendation to the executive director CPUC within 30 days of receiving the dispute. 9)Requires the CPUC to establish a public process to allow the electrical corporation, the applicant, and other interested parties to file written comments on the recommendation of the technical advisory panel. 10)Authorizes the advisory panel to request appropriate documents from the electrical corporation involved in the dispute. 11)Limits the scope of the technical advisory panel's review to issues regarding compliance with the established interconnection rules and making recommendations to resolve specific customer disputes and recommending associated corrective actions. 12)Specifies the panel has no authority to assess penalties. 13)Requires the CPUC executive director to review recommendations form the technical advisory panel within 30 days and prepare an order to the electrical corporation to resolve the dispute. AB 2861 Page 3 14)Authorizes, if the technical advisory panel recommendation is not a consensus of all panel members, the CPUC executive director to make the final decision to resolve the dispute. 15)Provides any interested person seeking CPUC review of the executive director's determination within 10 days of the determination. Upon receipt of the request for review, the executive director or the energy division director shall prepare a proposed resolution of the matter for approval by the CPUC. 16)Directs the CPUC to provide the members of the technical advisory panel that are not from electrical corporations with an appropriate per diem compensation consistent with Government Code Section 19822.5. EXISTING LAW: 1)Defines "distributed resources" to means distributed renewable generation resources, energy efficiency, energy storage, electric vehicles, and demand response technologies. (Public Utilities Code 769) 2)Requires each electrical corporation, as a part of its distribution planning process, to consider specified nonutility owned distributed energy resources as an alternative to investments in its distribution system to ensure reliable electric services at the lowest possible costs. (Public Utilities Code 769) FISCAL EFFECT: Unknown. COMMENTS: AB 2861 Page 4 1)Author's statement: "This bill expedites the process of getting more energy storage connected to a utility's electric grid, which in turn means more renewable energy can be obtained. This benefits all Californians by getting more clean renewable power on-line and further advances energy storage technologies." 2)Background: The CPUC currently has an Alternative Dispute Resolution (ADR) Process in its interconnection rules (Rule 21 Section K). The process first provides a structure for bilateral negotiations, and then directs unresolved disputes to the CPUC's ADR process. ADR is administered by the CPUC's Administrative Law Judge (ALJ) Division, and provides a dispute resolution forum for all utility service provision under the CPUC's jurisdiction. Data has not been collected on the number of disputes related to Rule 21 interconnection that have gone through the ADR process. Anecdotally, as described above, the process has rarely, if ever, been used by interconnection applicants. Instead, developers complain to Energy Division staff, who, according to the CPUC, lack the engineering expertise and decision-making authority to effectively intervene in interconnection disputes beyond informally mediating between developers and utilities. 3)How Many Interconnection Disputes? In addition, the CPUC states that the current ADR process has rarely, if ever, been used by interconnection applicants. Instead, developers often raise complaints with Energy Division staff. CPUC staff typically attempt to informally mediate between developers and utilities. In the last year, CPUC staff has received 20-30 informal requests for assistance with interconnection disputes. Of these, the CPUC states that three to five involved an engineering dispute. AB 2861 Page 5 4)Technical Advisory Panel Process and CPUC Technical Issues: According to the CPUC, the technical advisory panel and 60-day dispute resolution process proposed in this bill would largely, if not entirely, supplant the existing process. For instance, if the bill becomes law, Rule 21 Section K will likely continue to provide a structure for bilateral negotiations before directing applicants to file disputes with the technical advisory panel, instead of directing disputes into ADR. Also according to the CPUC, The technical advisory panel would likely be administered by Energy Division, which would entail the following administrative work: a) Determining panel selection criteria, term length, panel charter, guidelines for reviews and recommendations, and other programmatic elements; b) Facilitating a stakeholder process to determine necessary revisions to Rule 21 in order to integrate the expedited dispute resolution process into the Rule 21 process workflow; c) Launching a competitive solicitation process to solicit and contract with panel members; d) Administration of panel members' contracts and compensation; e) Creating standardized process workflows for: i) Receiving applicant disputes; AB 2861 Page 6 ii) Assigning panel members to each dispute; iii) Managing the panel's review and recommendation process; iv) Tracking panel members' time; v) Submitting panel recommendations to the Executive Director; vi) Establishing a public process for parties to file written comments on the panel's recommendations; and vii) Establishing a public process for parties to request CPUC review, via CPUC resolution, of the Executive Director's final order on dispute resolution. f) Working in conjunction with Legal Division on potentially substantial legal analysis due to the conflicted positions of at least half of the technical advisory panel. The CPUC also states that the bill could create significant additional functions for Energy Division staff and the CPUC's Executive Director, as well as ongoing tasks for Legal Division and rulemaking start-up tasks for Administrative Law Judge (ALJ) Division staff, including: a) The Executive Director would review both unanimous and split recommendations of the technical advisory panel and issue orders with binding force; b) The Executive Director or the Energy Division Director would be required to issue a proposed resolution when a AB 2861 Page 7 request for review of an order is received; c) Energy Division staff would likely play a significant role supporting the technical advisory panel, Executive Director, and Energy Division Director; d) Energy Division staff would have ongoing administration and contract management tasks related to the utility and non-utility members of the technical advisory panel; e) Legal Division would likely be asked to review and advise the technical advisory panel, Executive Director, and Energy Division Director; and f) CPUC staff would be required to make sure the panel meets all applicable laws, including the Bagley-Keene Open Meeting Act and conflict of interest laws. Also according to the CPUC, even though they are sponsoring this bill they have identified a number of technical issues with the proposal in this bill. They state that the legislation may be considered duplicative of the CPUC's existing formal complaint and ADR processes, in that this bill creates a confusing and legally-challenging parallel decision-making process for the CPUC. According to the CPUC, it has only recently received its first interconnection-related complaint, no developer has entered the ADR process to staff's knowledge. The proposed makeup of the panel in this bill might be difficult to manage and could be unnecessarily complex. The goal of the panel is to provide CPUC staff and the Executive Director an independent analysis of engineering or contractual factual disputes between the utility and developers. These AB 2861 Page 8 disputes can involve technical details that are beyond the training of CPUC staff. A multiple member panel is not the only way to provide this independent analysis and the same goal could be meet by contracting with a single independent expert (IE) to review the dispute along with CPUC staff. IEs are already used successfully to advise the CPUC on power purchase agreements. The CPUC recommends the following amendments to this bill: a) To emphasize efficiency in the interconnection process under this bill. b) This bill should provide the CPUC the discretion to implement an Expedited Interconnection Dispute Resolution Process consistent with the goals of a streamlined, low-cost interconnection dispute resolution process that issues binding decisions in 60 days or less, in a manner that most efficiently fits within existing CPUC processes. c) This bill should delay the program implementation deadline from April 1, 2017, to December 1, 2017, to give the CPUC adequate time to implement and staff the expedited interconnection dispute resolution process, assuming it would be effective on January 1, 2017. d) This bill should be amended to replace the technical advisory panel with an independent expert/special master (in the vein of the Independent Evaluator monitoring of Power Purchase Agreements). 5)Clarifications Needed: As written there are several unanswered questions, such as: AB 2861 Page 9 a) If there are so few disputes, is this Advisory panel needed? b) Why isn't the current ADR used in disputes? c) Does this new process replace the current ADR? If it does not, would a dispute first be addressed by the existing ADR and then referred to the new ADR? How does that help resolve disputes in a timely manner? d) What is the scope of the Advisory Panel's work? Is it limited to interconnection or can it also take on disputes related to costs to meet Rule 21 requirements? Can it take on disputes that are outside of Rule 21, such as legal matters between the utility and the project owner/developer? e) Can the Advisory Panel propose new rules or interpret existing rules? f) Who pays for the cost of the Advisory Panel? Should ratepayers pay these costs or should the loser pay? If a utility loses on the dispute should ratepayers pay or shareholders pay? What if there is more than one dispute and some are won and some are lost? Should it be proportional cost allocation in this case? g) Should developers who have a direct financial interest in the outcome of a dispute be able to serve on the advisory panel? h) Should deliberations be extended if the CPUC needs more time to safely address a dispute? AB 2861 Page 10 The author may wish to consider an amendment that will make the requirement to establish an advisory panel permissive, specify that persons with direct financial interest in the outcome of a dispute may not serve on the advisory panel, and provide a means to extend deliberations if the CPUC needs more time to address a dispute. 1)Related Legislation. SB 106 (Budget and Fiscal Review Committee) of 2015: Includes, among other things, a proposal to create a similar dispute resolution process. Pending on the Senate Inactive File. 2)Suggested amendments: SECTION 1. Section 769.5 is added to the Public Utilities Code, to read: 769.5. (a) ByApril 1, 2017,December 17, 2017, the commissionshallmay establish an expedited distribution grid interconnection dispute resolution process with the goal of resolving disputes over interconnection applications that are within the jurisdiction of the commission in no more than 60 days from the time the dispute is formally brought to the commission. If the commission needs more than 60 days to fairly and safely address the dispute, the commission shall take such needed time. (b) The expedited distribution grid interconnection dispute resolution process shall include the following elements: (1) A distribution grid interconnection technical advisory panel consisting of at least eight individuals selected by the commission. Four of the technical advisory panel members shall be from electrical corporations and four shall not be from electrical corporations. The commission shall determine the length of the term of each member. If any member of the panel AB 2861 Page 11 is an employee of, or contractor to, an electrical corporation to which the contested interconnection application has been submitted; or is the applicant, or an employee of the installer for the applicant, or a third party solar Power Purchase Agreement provider for the applicant who has a direct financial interest in the contested interconnection application, an employee of a vendor with an open application, or has a financial interest or financial relationship to a person or corporation with a financial interest in the outcome of the decision,that member shall not participate as a technical advisory panel member for the dispute resolution process for that contested interconnection application.in any discussion involving that electrical corporation, vendor, or financially interested person or corporation. (2) A review panel of four members shall be selected from the technical advisory panel for each dispute. (3) If an applicant is unable to resolve an interconnection-related dispute after working with the electrical corporation operating the distribution grid, the applicant may seek resolution of the dispute using the commission's expedited distribution grid interconnection dispute resolution process. (4) Upon agreeing to a final settlement of the dispute, parties shall be free to withdraw from the dispute resolution process. (5) If the dispute is filed with the commission, the commission shall ensure that a technical advisory panel shall review the dispute and make a recommendation to the executive director of the commission within 30 days of receiving the dispute. (6) The commission shall establish a public process to allow the electrical corporation, the applicant, and other interested parties to file written comments on the recommendation of the technical advisory panel. (7) The panel shall request appropriate documents from the electrical corporation involved in the dispute, including, but not limited to, interconnection application studies. (8) The scope of the technical advisory panel's review shall AB 2861 Page 12 be limited to issues regarding compliance with the established interconnection rules. Any recommendations shall ensure safe and reliable interconnection. (9) The scope of the technical advisory panel's review is limited to making recommendations to resolve specific customer disputes and recommending associated corrective actions, and the panel shall have no authority to assess penalties. (10) Upon receipt of the recommendation from the technical advisory panel, the executive director shall have 30 days to review the recommendation and to prepare an order to the electrical corporation resolving the dispute. If the review panel from the technical advisory panel cannot agree on recommendations, then each recommendation of a review panel member shall be submitted to the executive director, who shall make the decision resolving the dispute. (11) Any interested person seeking commission review of the executive director's determination shall file the request for review within 10 days of the determination. Upon receipt of the request for review, the executive director or the energy division director shall prepare a proposed resolution of the matter for approval by the commission. (c) The commission shall provide the members of the technical advisory panel that are not from electrical corporations with an appropriate per diem compensation consistent with Section 19822.5 of the Government Code. REGISTERED SUPPORT / OPPOSITION: Support CPUC (Sponsor) AB 2861 Page 13 California Energy Storage Alliance Opposition None on file Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083