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COM/CRC/jt2 Date of Issuance 9/15/2009
Decision 09-09-029 September 10, 2009
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Consider Smart Grid Technologies Pursuant to Federal Legislation and on the Commission's own Motion to Actively Guide Policy in California's Development of a Smart Grid System.
(Filed December 18, 2008)
Table of Contents
The American Recovery and Reinvestment Act of 2009 (Recovery Act) appropriated $4.5 billion "to modernize the electric grid."1 The United States Department of Energy issued Funding Opportunity Announcements (FOAs) establishing a Smart Grid Investment Grant Program2 and a Smart Grid Demonstrations3 program to provide funds in support of proposed projects.
As reflected in the Order Instituting Rulemaking that commenced this proceeding, this Commission supports national policies that seek to ensure that the evolution of our electric system will enable the key functional aspects of the Smart Grid.4 Specifically, the Commission embraced the language of the Energy Independence and Security Act of 2007, which states that "[i]t is the policy of the United States to support the modernization of the Nation's electricity transmission and distribution system to maintain a reliable and secure electricity infrastructure that can meet future demand growth."5
In this rulemaking the Commission intends to develop policies related to Smart Grid that further our state's energy policy goals as enunciated in the Energy Action Plan and state law, including Assembly Bill 32.
Modernizing the electric grid with additional two-way communications, sensors and control technologies, key components of a Smart Grid, can lead to substantial benefits for consumers. A Smart Grid can enable the integration of higher levels of renewable energy, energy storage, and, eventually, electric vehicles, at a lower cost to consumers. A Smart Grid can also facilitate consumer participation in demand response programs and help consumers to use energy more efficiently. Greater monitoring and automated controls can also reduce the frequency and duration of outages. Many of the advantages of a Smart Grid will contribute to reducing greenhouse gas emissions.
The Smart Grid funding provided by the Recovery Act creates an opportunity for California to expand and accelerate its activities to modernize the state's electric infrastructure at a significantly lower cost to ratepayers.
Governor Schwarzenegger has organized statewide efforts to pursue the maximum amount of Recovery Act funding in order to reduce the state's unemployment rate and stimulate the economy. He has also established a task force to "keep track of all of the dollars coming into the state and ensure that Californians see how effectively those dollars are being spent." The Commission, working collaboratively with the California Energy Commission (CEC) and the California Independent System Operator (CAISO), also wants to ensure that federal money comes to the state to further our state energy policies, create jobs, and stimulate the economy.
The processes and policies established by this decision are intended to align the timeline of the Commission's review of investor-owned utility Smart Grid projects with the Department of Energy's rapid timeline for reviewing and granting awards for projects. Thus, the processes we adopt are in some respects faster than typical Commission review processes. However, we have included a significant opportunity for review by the Commission and intervenors so that we can be confident that additional utility investments in Smart Grid projects are consistent with state policy and in the interest of ratepayers.
This decision finds that the benefits that The United States Department of Energy seeks to achieve through its Smart Grid grants would also be beneficial to investor-owned utility ratepayers. These benefits include improving reliability, increasing energy efficiency and demand response, and reducing greenhouse gas emissions. Furthermore, projects that receive The United States Department of Energy awards will be attractive from a cost perspective since utilities will have the opportunity to make investments and have only 50% of the cost (or less) fall to ratepayers.
The decision further determines that the unique circumstances associated with the Recovery Act, including the United States Department of Energy's rapid timeline for reviewing projects, granting awards, and starting construction, warrant rapid action on projects by this Commission. These are unique circumstances and the procedures we adopt in this decision do not set a precedent for future decisions. In this decision we adopt a Tier-3 advice letter process for the review of those projects that have received a United States Department of Energy Smart Grid Recovery Act award. The Commission will review the reasonableness of projects and expenditure of ratepayers funds by applying specific criteria enumerated in the decision. An investor-owned utility may seek approval through a Tier-3 Advice Letter filing, if, and only if, the project has been selected to receive an award by the United States Department of Energy, does not require a California Environmental Quality Act (CEQA) review, a Certificate of Public Convenience and Necessity (CPCN), or a permit to construct (PTC), does not require incremental ratepayer funding in excess of 50% of project costs, and does not require incremental ratepayer funding greater than $30 million. A party protesting the Advice Letter should demonstrate that the Advice Letter does not meet the conditions set forth herein.
An investor-owned utility also has the option to seek contingent approval for a project from the Commission in advance of the project being selected by the United States Department of Energy as described in this decision.
1 American Recovery and Reinvestment Act of 2009 (Recovery Act), Pub. L. 111-5 (H.R. 1), 123 Stat. 115.
2 United States Department of Energy, Financial Assistance Funding Opportunity Announcement: Smart Grid Investment Grant Program (SGIG) (DE-FOA-0000058), June 25, 2009.
3 U.S. Department of Energy, Financial Assistance Funding Opportunity Announcement: Smart Grid Demonstration Program (SGDP) (DE-FOA-0000036), June 25, 2009.
4 See Order Instituting Rulemaking 08-12-009 at 2.
5 Energy Information and Security Act Section (§) 1301.