BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2861


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          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  








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            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.









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          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:  









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          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.










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          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; 








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               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  








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               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  








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            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:











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             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?









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             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) By  April 1, 2017,   December 17, 2017,  the  
            commission  shall  may 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  








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            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  








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            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)










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          California Energy Storage Alliance




          Opposition


          None on file




          Analysis Prepared by:Sue Kateley / U. & C. / (916) 319-2083