3.1.6. Time-Of-Use (TOU) Requirements

SB 1 added Section 2851(a)(4) that required the Commission to require time-variant, or TOU, pricing for all ratepayers with a solar energy system and to develop a time-variant tariff that met certain conditions. In AB 1714, the Legislature amended that statute to authorize the Commission to delay implementation of time-variant pricing for ratepayers with a solar energy system until the effective date of new rates established in the utilities' next general rate cases, scheduled to be completed after January 1, 2009.

In this proceeding, we intend to address any issues surrounding implementation of time-variant tariffs for CSI incentive recipients, if they arise and are not otherwise addressed in the context of each utility's general rate case.

3.2. DG Policy Issues and SGIP Rules and Management

The SGIP was adopted by the Commission in D.01-03-073 and provides incentives to business and individuals who invest in distributed generation. The Commission's SGIP has so far encumbered more than $507 million in incentives and motivated more than 278 MW of DG capacity through 1,138 projects since 2001. In R.04-03-017, we refined our interconnection rules, revised incentive payments, and addressed budgetary and policy issues surrounding the program. In R.06-03-004, we addressed treatment of RECs for DG facilities, SGIP measurement and evaluation, and budgetary issues.

AB 2778⁶ amended Section 379.6 relating to SGIP and extended the program until January 1, 2012. The bill also limited technologies eligible for SGIP to qualifying wind and fuel cell distributed generation projects. All other technologies were deemed ineligible for SGIP incentives as of January 1, 2008.

In this proceeding, we will address, as needed, any policy, legal, or administrative issues that arise in the broad context of DG or within the ongoing SGIP. These may include, but are not limited to funding levels, incentive amounts, and program modification requests. We will also consider changes to incentive levels and technologies as market conditions change, as long as the changes are in compliance with Section 379.6. We intend to handle any pending Program Modification Requests (PMRs) that were submitted to Energy Division in accordance with the multi-step process established in D.03-08-013. These submissions request program changes or inclusion of additional technologies in the program. Our ongoing collaboration with the CEC will help us to understand and incorporate new DG technologies when and if they become viable, and if they comply with the program guidelines in Section 379.6.

We also intend to consider the ongoing work of the "Rule 21 Working Group." As part of R.04-03-017, the CEC took the initiative to work with the utilities and DG community to update the utilities' Rule 21 interconnection tariffs which govern interconnections between distribution systems of electric utilities and DG facilities. The Rule 21 Working Group spearheaded those efforts and is comprised of utility personnel, manufacturers of DG facilities, DG developers, DG customers, and regulators. The staff of the CEC has chaired the Rule 21 Working Group meetings and funded the group's research efforts for several years, and the group's work has resulted in dramatic reductions in the time and costs for most DG interconnections. In this proceeding, we will direct the Energy Division to convene a workshop to discuss the future role of the Rule 21 Working Group, and submit a report following the workshop with recommendations for our consideration.

In addition, we herein transfer to this new proceeding all records pertaining to a petition by FuelCell Energy to modify D.04-12-045 related to our SGIP. We expect to issue a decision resolving that petition in this new docket. Comments on any proposed decision should be filed in this new docket.

3.3. Distributed Generation Cost-Benefit Methodology

As we discussed in R.04-03-017, the Commission needs to establish a way of measuring costs and benefits of DG projects to meet our legislative obligations and to measure the success of various program elements and tailor incentives accordingly.⁷

In R.04-03-017, we began the process of investigating a cost-benefit methodology for DG projects. The Commission solicited testimony and held hearings on this matter in May 2005 following the issuance of a report sponsored by the Self-Generation Working Group and drafted by Itron, Inc. in March 2005.⁸ The proceeding was also guided by the "Standard Practice Manual" (SPM),⁹ which the Commission has used to evaluate utility energy efficiency programs for several years.

In September 2005, the assigned ALJ issued a proposed decision on this topic. The proposed decision was later withdrawn in order to coordinate its findings with the Commission's work in other related proceedings, including our rulemaking developing consistent avoided costs (R.04-04-025), and the work undertaken in energy efficiency proceedings (R.01-08-028 and related). At the same time, competing priorities surrounding the implementation of CSI in 2006 and 2007 prevented the Commission from completing its work on development of a cost-benefit methodology.

We expect to renew our efforts to finalize a cost-benefit methodology in this rulemaking, and the assigned ALJ will notify parties regarding how the Commission will proceed on this topic during the pendency of this proceeding. We incorporate the records of R.06-03-004 and R.04-03-017 into this docket to facilitate these efforts.

⁶ Chapter 617, Statutes of 2006.

⁷ Public Utilities Code Section 353.9, enacted in SB 28x of 2001, states in pertinent part:

"The commission shall create a firewall that segregates distribution cost recovery so that any net costs, taking into account the actual costs and benefits of distributed energy resources, proportional to each customer class, as determined by the commission, resulting from the tariff modifications granted to members of each customer class may be recovered only from that class."

Similarly, Section 2827(n) directs the Commission to:

"assess the environmental costs and benefits of net metering to customer-generators, ratepayers, and utilities, including any beneficial and adverse effects on public benefit programs and special purpose surcharges."

⁸ The March 2005 report is titled "Framework for Assessing the Cost-Effectiveness of the Self-Generation Incentive Program."

⁹ SPM is an abbreviation for "California Standard Practice Manual: Economic Analysis of Demand-Side Programs and Projects."