4. Reliability Requirement For Fossil-Fired Technologies

In its Petition, SCE proposes to delete the requirement that Level 3 technologies (microturbines and internal combustion engines) provide documentation that they will enhance transmission or distribution reliability before they qualify for the incentives under the self-generation program. SCE argues that the term "enhancing reliability" in AB 970 was intended to refer to overall supply reliability, and not to the reliability of the transmission or distribution system. SCE further argues that distributed generation will improve the reliability of the distribution system only in fairly limited circumstances, and that implementation of the reliability standard adopted by D.01-03-073 could be costly and contentious. For these reasons, SCE proposes to remove the transmission and distribution reliability requirement and define "reliability" in terms of generation reliability only. The Joint Parties and Onsite support SCE's Petition, for similar reasons.

PG&E believes that either the SCE proposal or the transmission and distribution requirements contained in D.01-03-073 represent fair readings of legislative intent. Although PG&E shares SCE's overall concerns about the reliability standard adopted by D.01-03-073, PG&E proposed a compromise approach to the working group to implement the decision. Specifically, PG&E proposed paying the incentive to any unit locating in an constrained transmission local reliability area, as defined by the California Independent System Operator (ISO). In addition, the unit would need to ensure (with physical assurance capability) that customer load equivalent to the output of the unit is automatically dropped if the unit fails during local distribution peak periods. Even though this approach is not completely consistent with PG&E's view of when a distributed generation unit will truly provide distribution reliability benefits, PG&E believes it is an appropriate way of allocating funding to a broader universe of distributed generation developers.