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Wary of 'gold plating,' California to issue guidance on grid modernization

Seeking to ensure that California spends wisely when upgrading its distribution grids to accommodate high levels of solar, energy storage, electric vehicles and other distributed energy resources, state energy regulators are pitching a new process for vetting billions of dollars of potential utility investments in coming years.

Synchronized with investor-owned utilities' annual distribution resource plans and their triennial general rate cases, the California Public Utilities Commission proposal aims to give direction on "what grid modernization investments are needed going forward" to overcome "integration issues" related to distributed resources, PUC analyst Dina Mackin said during a June 5 workshop in San Francisco on the regulator's recent white paper on the topic.

The goals of the proposal, issued last month, are to boost the adoption of distributed resources "that can cost-effectively provide [greenhouse gas] reductions and provide grid services," connect such resources "to existing and new markets," include them in distribution system planning and guarantee related investments "result in net benefits that are equitably distributed to all ratepayers," Mackin said.

The commission this month is taking comments on the proposal to inform a decision on "grid modernization guidance" this summer or fall, according to the document. "The guidance aims to help the Commission establish a process that will enable transparent review to ensure that the [investor-owned utilities] identify and make cost-effective grid modernization investments necessary to support [distributed energy] growth that is realistically expected to materialize, while avoiding 'gold-plating' the grid with technology that is not necessary for [distributed energy] integration," it said.

The forthcoming decision will impact, at least informally, how the PUC considers Edison International subsidiary Southern California Edison Co.'s $2 billion-plus grid modernization initiative, proposed as part of its 2018 general rate case. The regulator expects to issue a proposed decision on SoCalEd's contested request by the end of this year. The PUC's Office of Ratepayer Advocates in April urged the regulator reject the utility's grid investment plan, a recommendation seconded by the solar industry in May. The new process would be incorporated more formally into future rate cases of PG&E Corp. subsidiary Pacific Gas and Electric Co. and Sempra Energy's San Diego Gas & Electric Co.

"When we're talking about investments to support [distributed energy] growth, I think we need to be very clear that we're looking at strategic investments that not only include how can we modernize the grid to support [distributed resources], but also how can we utilize the capabilities of [distributed resources] to avoid investments that may not be necessary," Jim Baak, director of advocacy group Vote Solar's grid integration program, said at the workshop.

Defining distribution grid needs

The importance of making that distinction is why the PUC white paper suggested that utilities submit an annual "grid needs assessment" as part of their distribution resource plans, responded Mackin. The evaluation would be based on growth estimates for distributed energy resources, an analysis of "the available load and generation hosting capacity at every circuit node in the [utilities'] distribution systems," and an analysis of "the net benefits that [distributed energy resources] can provide at any given location."

The grid needs assessment would form the basis of utilities' "grid modernization plans" and a new "distribution investment deferral framework" also under consideration. Rather than being limited to the three-year horizon of general rate cases, the regulator is asking utilities to consider the next 10 years of grid investments. The PUC would grant final approval of proposed grid upgrade plans in rate case decisions, however.

Marcel Hawiger, an attorney with ratepayer advocacy group The Utility Reform Network, urged regulators to consider requiring utilities to distinguish between customer-owned and wholesale distributed energy resources in considering their needs. "In every instance where Edison can identify any problem due to [distributed energy], it has been due to a large wholesale project," he added, referring to SoCalEd's general rate case. Utility representatives at the meeting did not respond to Hawiger's claim. Written comments on the PUC's white paper are due June 19.