10. Line Loss Factor Calculation

As part of the contract "clean-up," the Joint Utilities recommended changes to Exhibit C, Section 2 of the standard contract (Exhibit B, Section 2 of the simplified contract) including adding a loss factor to the time of delivery period payment calculation, to be consistent with D.09-12-042. The Amended Scoping Memo asked parties to respond to the following question regarding a line loss factor: What is an appropriate calculation for line losses associated with moving the CHP project's power from the Delivery Point to the grid controlled by the California Independent System Operator (CAISO)?

San Joaquin recommends using the distribution loss factors that apply to QFs that interconnect to the distribution system. CCDC and FCE agree with San Joaquin. However, PG&E and SCE disagree with this approach stating that distribution loss factors are outdated and the global QF Settlement requires each Seller to install a CAISO compliant meter that will automatically adjust payments for line loss. PG&E and SCE recommend that the Commission look to the QF Settlement for provisions on delivery requirements and line loss calculations, if any. SDG&E contends that line loss factors should be calculated for each individual project.

10.1. Discussion

As mentioned previously, the October 2010 proposed QF Settlement does not seek to modify any decision in this docket and does not apply to open matters in the scope of this proceeding. We will not pre-judge a proposed settlement pending in other open dockets. Additionally, the location adjustment factors defined in the QF Settlement refer to transmission losses, not distribution losses that are under consideration in this proceeding. For these reasons, we do not believe that use of the location adjustment calculation in the QF Settlement is the appropriate reference for line loss calculations under this AB 1613 program.

However, we are persuaded by arguments from PG&E and SCE that use of the distribution loss factors, as proposed by San Joaquin, are also not appropriate. As clarified by SCE, the intent of the "loss factor" was to compensate the purchasing utility for the actual losses associated with delivering power at the first point of connection with the utility's facilities rather than the CAISO grid. Furthermore, it is clear in D.09-12-042 that the Seller is responsible for line losses from the Delivery Point to the Interconnection Point.²⁵ Generation Meter Multipliers and distribution loss factors established through D.01-01-007 would compensate generators for avoided losses rather than the purchasing utility for actual line loss.

We conclude that these line losses are best calculated as part of a project's interconnection process, whether that be through CAISO, Rule 21 or another interconnection process. While we understand the concern from CHP parties that this causes some uncertainty in project planning, because facilities participating in this program are small (under 20 MW) and will generally be serving local loads, we expect in most cases the line loss factor to be 1.0.

²⁵ D.09-12-042, Attachment A, § 1.03 at 3.