Two years ago the California Public Utilities Commission (Commission) issued Decision 21-01-018 adopting rates, tariffs, and rules for facilitating the commercialization of microgrids pursuant to Senate Bill 1339 and ordering the three large investor-owned electric utilities (IOUs) to submit a plan for implementing the Microgrid Incentive Program (MIP). Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E) submitted a draft Joint IOU MIP Implementation Plan in December 2021, and throughout 2022 the Commission held a series of workshops, invited comments, and issued a staff proposal to address issues related to the utilities’ MIP Implementation Plan.
On February 9, 2023 the Commission issued a Proposed Decision Adopting Implementation Rules for the MIP. The Proposed Decision balances statutory requirements against its “duty to mitigate the effects of grid emergencies that result in disruption of service” – especially for disadvantaged communities. It also finds that the MIP will likely offer multiple benefits to utility customers. In summary, the Proposed Decision recommends that:
- The IOUs’ Implementation Plan will be adopted with modifications.
- Only projects located at least in part in an area of “higher risk” for outages will qualify, and the microgrid must serve a disadvantaged community or provide critical or community resilience services to a disadvantaged community.
- Projects must be a “community microgrid” including multiple premises and multiple meters, be interconnected to the lower voltage (50 kV or less) distribution system, comply with California Air Resources Board (CARB) distributed generation certification requirements, be sized to serve at least 24 hours in island mode, and have aggregate emissions while islanded that are no greater than equivalent grid power.
- The MIP will be implemented in a five-stage process:
- Stage 1 – community outreach
- Stage 2 – consultation and application
- Stage 3 – application evaluation, scoring, incentive award and studies
- Stage 4 – contracting, project development and award payments
- Stage 5 – operations
- The utilities’ proposed scoring and weighting methodology is appropriate.
- A development grant of $25,000 should be awarded after acceptance of an applicant’s MIP proposal because awarding it earlier would risk waste of ratepayer funds.
- Utilities’ proposed MIP Handbook content is appropriate, and the Handbook should be made available to the public within 90 days after adoption of this Proposed Decision. The Handbook will include a list of external grant sources available for MIP applicants in order to ensure that external funding is leveraged if possible.
- An umbrella microgrid operating agreement (MOA) will include interconnection agreements, special facilities agreement, design/procurement/construction agreements, operation and maintenance agreements, and enforceable milestones.
- Utilities will submit quarterly status reports that include prescribed information on program implementation.
- The MIP’s $200 million budget will be allocated between the utilities, with 10 percent reserved for administrative costs. Any leftover funds will be returned to ratepayers.
- Costs will be recovered on an annual basis from all customers through distribution rates.
- SCE and SDG&E’s proposal to provide matching funds for utility infrastructure upgrades and enabling the islanding function is approved up to a $3 million per project cap. This funding is in addition to the total MIP budget.
- A 24-month deadline for commercial operations will commence with execution of the MOA.
- Projects will be screened for long-term financial feasibility.
- Utility proposed scoring criteria will ensure every applicant has a fair shot at funding.
Acknowledging that parties raised concerns on a variety of issues (including foundational eligibility limits) that are “out of scope,” the Proposed Decision indicates that the next phase of the proceeding will consider such issues in the context of exploring “the appropriate form of a multi-customer microgrid tariff.”
Comments on the Proposed Decision are due March 1, 2023, reply comments March 6. The Proposed Decision is expected to be on the agenda for a vote at the Commission’s March 16, 2023 business meeting.
Contact: Lynn Haug, Brian Biering
