CPUC Orders Actions to Support Microgrid Development

The California Public Utilities Commission (CPUC) has issued Decision 21-01-018 adopting microgrid rates, tariffs, and rules for large investor-owned electrical corporations (IOUs) to facilitate the commercialization of microgrids pursuant to Senate Bill 1339. The Decision addresses Track 2 issues in the microgrid rulemaking, R.19-09-009, and adopts (with modifications) proposals offered in an Energy Division staff proposal . The Resiliency and Microgrids Working Group will begin addressing Track 3 issues in February 2021.

The Decision adopts several initiatives intended to facilitate the commercialization of microgrids. First, the CPUC directed Southern California Edison Company (SCE) to revise its Rule 2 to permit installing added or special facilities microgrids. The IOUs’ Rule 2 currently defines customer electric service specifications, including added and special facilities. Generally, added and special facilities are additional equipment either requested by a customer or required by the IOU. Under the Decision, SCE will amend its Rule 2 to remove examples of added and special facilities, clarifying that microgrid control systems and equipment may be installed under the Rule.

Second, the CPUC directed SCE and Pacific Gas and Electric Company (PG&E) to revise their Rule 18, and San Diego Gas & Electric Company (SDG&E) to revise its Rule 19, to allow microgrids to serve critical customers on adjacent parcels. With some exceptions, Section 218 of the California Public Utilities Code requires any entity that sells energy to more than two contiguous parcels or across the street to become an electrical corporation regulated by the CPUC. The Decision allows for microgrids owned by public agencies or by a third party serving public agencies to also supply electricity to critical facilities owned or operated by a public agency on adjacent premises without becoming a regulated, electrical corporation. Addressing Rule 18 and 19 is a crucial step in removing a significant barrier to microgrid development. However, the CPUC set a limit of 10 microgrid projects for each of the IOUs’ service territories.

Third, the IOUs must each form a new microgrid tariff for their respective service territories. The microgrid tariff will be available to a single customer establishing a microgrid at a single account. The microgrid must consist of generation resources that are interconnected under the terms of Electric Rule 21 and eligible under the IOU’s current net metering requirements. The tariff will not provide an additional revenue stream for microgrid developers, but the cost responsibility surcharges applicable to microgrids will be reconsidered in Track 3 of the rulemaking.

Fourth, the Decision directed the IOUs to develop a Microgrid Incentive Program to fund clean community microgrids that support the critical needs of vulnerable populations most likely to be impacted by grid outages. The total program budget is capped at $200 million. Single customer projects are excluded from this incentive program. Funds will be allocated to projects based on a scoring prioritization system. The IOUs will convene public workshops to form a full program implementation plan.

Fifth, the CPUC directed the IOUs to develop a clear pathway by which diverse technologies can provide disconnection of a premises’ entire electrical service to support electrical isolation during a wider grid outage. The IOUs will study technologies that use the integral remote disconnect switch, found in most smart meters, as well as other technologies and approaches that support electrical disconnection during a wider grid outage.

Sixth, the Decision adopted an interim approach for reserving temporary generation for safe-to-energize substations for 2021, as well as a process for transitioning to clean temporary generation after 2021. The interim approach allows the IOUs to procure diesel generation and other temporary backup generation to meet reliability needs for 2021. The Decision required any IOU reserving temporary generation under the Decision to document its plans to establish clean substation microgrid projects serving at least one substation. The Decision also required the IOUs to file an application by June 30, 2021 describing the utility’s plan for transitioning to clean sources of generation in future years to power customers during PSPS events. Diesel backup generation has also become a concern of the California Energy Commission (CEC), which a held a workshop on January 21, 2021 to discuss ongoing efforts to develop clean energy alternatives to diesel backup generator systems. The CEC is expected to address microgrids in Volume II of its Draft 2020 Integrated Energy Policy Report Update.

The CPUC’s work in the microgrid rulemaking will continue. The Resiliency and Microgrids Working Group will consider several issues in Track 3 including: the applicability of standby charges; a multi-property microgrid tariff; the value of the resiliency that microgrids offer; microgrid interconnection; and revisiting the customer-facing microgrid tariff adopted in the Decision.

If you have any questions regarding the Decision or the CPUC’s microgrid rulemaking, please contact ESHD attorneys Christian Briggs or Brian Biering.