BILL ANALYSIS �
AB 2340
Page 1
Date of Hearing: April 23, 2012
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 2340 (Williams) - As Introduced: February 24, 2012
SUBJECT : Distribution grid: distributed generation.
SUMMARY : Requires the California Public Utilities Commission
(PUC) to hold a formal proceeding, on or before July 1, 2013, to
develop rules for ratepayer reimbursement of distribution grid
upgrade costs to accommodate the interconnection of developers
of generating facilities.
EXISTING LAW :
1)States the PUC has regulatory authority over public utilities,
including electrical corporations, as defined.
2)Requires the PUC to administer, until January 1, 2016, a
self-generation incentive program for distributed generation
resources to facilitate the integration of those resources
into the electrical grid, improve efficiency and reliability
of the distribution and transmission system, and reduce
emissions of greenhouse gases, peak demand, and ratepayer
costs.
3)States requirements apply to projects that interconnect on the
side of the electrical meter that is controlled by a customer
of a utility and designed to provide electricity that is
generally consumed on site by the customer (known as PUC Rule
21). The PUC has oversight of Rule 21.
4)Federal laws apply to projects that interconnect on the side
of the electrical meter that is controlled by the utility and
designed to provide electricity that will be purchased by the
utility for sale to a customer. There are two types of
possible interconnection rules, one for transmission level
interconnection and another for all others. The Generator
Interconnection Process applies to transmission
interconnection requests and is administered by the California
Independent System Operator (CAISO). Local electric utilities
administer the other, distribution level interconnection
request. It is known as the Wholesale Distribution Access
Tariff, (WDAT). Both GIP and WDAT are overseen by The Federal
AB 2340
Page 2
Energy Regulatory Commission (FERC.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, "interconnection of
Wholesale Distributed Generation (WDG) facilities is a lengthy,
risky and expensive process. Currently, WDG developers are not
reimbursed for any costs necessary to interconnect WDG projects
to the distribution grid therefore shoulder all the upfront
costs and associated risks. Ultimately, these costs are paid for
by the ratepayers through the power purchase agreement (PPA)
only after the developer has installed a project. It follows
that since ratepayers cover these costs regardless of when a
project is completed, simply shifting the time at which these
costs are covered will remove a major disincentive to project
developers without adding new costs to the ratepayers.
1)Background : Distributed generation (DG) facilities that are
located close to where energy is consumed provide many
benefits to the grid, such as avoiding transmission costs and
line losses. WDG consists of DG facilities that interconnect
to the distribution grid and sell all of their output directly
to the utility.
Interconnection rules and processes are designed to ensure
that generation facilities connect to the electricity grid in
a manner that does create safety or reliability problems for
customers who rely on the electricity from the grid.
In light of successful deployment of customer-side renewable
energy projects, and lower costs of renewable technologies,
there is more opportunity to develop local generation that can
serve more than one customer at a time. This type of project
is commonly known as 'distributed generation.' The PUC has
implemented or is in the process of implementing programs to
encourage greater deployment of distributed generation (DG),
including the Reverse Auction Mechanism (RAM) and Feed in
Tariffs (FIT). The PUC has also approved photovoltaic DG
programs at both PG&E and SCE. These projects range in size
from 1 Megawatt (MW) to 20 MW. For the most part, they are
designed to interconnect through the WDAT procedure.
Governor Brown has established a goal to install 12,000
megawatts of new localized energy resources to help meet
California's clean energy and economic development goals. To
AB 2340
Page 3
achieve this, more investments into the distribution grid may
be warranted.
2)WDG developers : Currently, WDG developers are not reimbursed
for any costs necessary to interconnect WDG projects to the
distribution grid. Conversely, developers of facilities
interconnected to the transmission grid are fully reimbursed
for transmission grid upgrade costs over a five-year period.
While transmission grid upgrade costs are shared by the state
ratepayers, distribution grid upgrade costs and the associated
risks are shouldered by the WDG developers.
3)Reforms underway : Since August 2011, the PUC has led a reform
effort to redesign Rule 21 to accommodate today's volume of
exporting generating facilities applying for interconnection
to the distribution system. The reform is occurring within a
confidential settlement involving approximately 80 parties,
including IOUs, the California ISO, ratepayer advocates,
independent power producers, renewable energy advocates, best
practices organizations, and state and federal agencies. By
consensus of the settlement parties, the revised Rule 21
specifically retains the direct cost assignment for
distribution system upgrades, and cost-related issues are
recommended as within the scope of Phase 2.
In addition, the PUC's energy storage proceeding is examining
ways that energy storage can reduce the impact of generating
facilities on the distribution system. A reduced impact will
reduce distribution system upgrade costs for the developer.
Finally, the PUC's Resource Adequacy proceeding will begin
developing the rules for implementing a straw proposal of the
California Independent System Operator straw proposal to
provide Resource Adequacy Deliverability for Distributed
Generation. CAISO's proposal, which the PUC supports at a
staff level, will provide additional market signals about
efficient siting.
4)Unintended consequences : This bill suggests ratepayers bear
the cost of distribution upgrades required for generator
interconnection. Shifting the upgrade costs from the generator
to the ratepayers could potentially increase rates by
requiring customers to pay for upgrades that may not be
economic. This could also remove an incentive for generators
to locate where network upgrades and energy generation
AB 2340
Page 4
optimally benefit the grid, and shift the risks of upgrades
for generation projects that never get built from developers
to utility customers.
5)Suggested amendments : The author and this committee may wish
to amend the bill to allow the PUC with the flexibility to
determine which distribution costs, if any, are appropriate
for rate-based support.
6)Technical amendment : The word "distributed" is used
incorrectly in the current version of the bill. The author and
this committee may wish to amend the bill to replace the
reference of "wholesale distribution generation" with
"wholesale distributed generation. "
REGISTERED SUPPORT / OPPOSITION :
Support
Absolutely Solar Inc. (ASI)
American Biogas Council
Clean Coalition (sponsor)
Environmental Health Coalition
Green-Collar Jobs Campaign of the Ella Baker Center for Human
Right
Sierra Club California
Solar Developers Council
Opposition
PacifiCorp (unless amended)
San Diego Gas & Electric (SDG&E) (unless amended)
Sempra Energy utilities (SEu)
Southern California Edison (SCE)
The Utility Reform Network (TURN) (unless amended)
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083