V. Interconnection Application Review Fees

Since 2000, Rule 21 of the utilities' tariffs has included fees for the review of applications to connect to the utilities' distribution system. The initial fee is $800, with a supplemental $600 for applications that require more than a screening. CEC believes these fees are substantially less than the utility's actual costs of processing the interconnection application. PG&E has been tracking costs for several years and estimates that, for some types of applications, it incurs an average of almost $29,000 for processing (including applications that are ultimately not completed).

The Working Group does not recommend changing the fees at this time but suggests the utilities track costs, as PG&E now does, for possible fee changes at a later date. The CEC concurs with this recommendation, believing that the fees are not intended to recover costs but are instead meant to discourage speculative projects.

The Commission has expressed strong support for DG project development in California and has designed its programs to promote that development. We have, however, expressed our concerns about the extent to which existing DG projects are cost-effective, given the incentives they receive and the costs they impose on ratepayers. The cost of processing an application and conducting needed facility inspections contributes to these costs and appears to be significant if PG&E tracking information is a reasonable indication. As the Working Group recognizes, the Commission recently held hearings in this proceeding to develop a method for assessing the costs and benefits of DG facilities and the program as a whole. We do not need to adopt such a methodology, however, to investigate the cost of application review and distribution system modifications that reflect utility costs.

In our role to oversee utility costs and revenues, we wonder whether the purpose of application review fees should be only to discourage speculative projects or whether in fact DG interconnection applicants should assume the full cost of the DG's interconnection. On the one hand, we wish to continue to encourage DG projects. On the other hand, subsidizing interconnection application review fees and distribution system modifications may encourage the development of projects that are not cost-effective. On balance, we believe DG interconnection applicants should ultimately assume at least some of the costs of interconnection reviews. If we find that additional incentives are required to promote development of cost-effective DG, we can provide additional subsidies or tailor the fees accordingly. We have no basis for increasing the fees associated with the initial and supplemental application reviews. For that reason and in deference to the CEC's recommendation, we retain the existing fees. We do, however, state our intent to bring them closer to cost based on utility proposals in subsequent general rate cases. In the meantime, we herein direct the utilities to track the costs of DG interconnection processing for 1) review in those rate cases and 2) the development of fees that are related to costs. In addition, we agree with PG&E that the utilities should be able to charge for extraordinary inspection trips where the trips are required as a result of customer delay. Each may propose specific fees for these inspections in their advice letter filings.