III. Background - Recent DG Findings and Outstanding Issues

The prior DG rulemaking (R.99-10-025) principally examined the potential of DG to benefit the distribution system. In the timeframe of our previous rulemaking, when this Commission was not engaged in significant resource planning, such a limited focus was sensible. Now, however, to truly answer outstanding questions of costs and benefits, tariff structure and interconnection, and subsidy and market transformation, we step back to broaden our scope of inquiry. We expect that the record we develop here will reflect the increased understanding and market experience of DG resources, and as such we may revisit issues addressed in previous Commission decisions, as appropriate.

In May 2003, the Commission, CEC and California Power Authority (CPA) adopted an Energy Action Plan establishing objectives for the state's energy future. A number of issues concerning DG are identified in the plan. Specifically, as expressed in the EAP, the state will:

1. Promote clean, small generation resources located at load centers;

2. Determine whether and how to hold distributed generation customers responsible for costs associated with Department of Water Resources power purchases;

3. Determine system benefits of distributed generation and related costs;

4. Develop standards so that renewable distributed generation may participate in the Renewable Portfolio Standard program;

5. Standardize definitions of eligible distributed generation technologies across agencies to better leverage programs and activities that encourage distributed generation;

6. Collaborate with the Air Resources Board, Cal-EPA and representatives of local air quality districts to achieve better integration of energy and air quality policies and regulations affecting distributed generation;

7. Work together to further develop distributed generation policies, target research and development, track the market adoption of distributed generation technologies, identify cumulative energy system impacts and examine issues associated with new technologies and their use.

We solicit comments on achieving these goals, with the exception of DWR cost responsibility (accomplished in D.03-04-030, and not to be re-litigated here) and RPS participation (ongoing in the RPS phase of R.01-10-024). DG as an energy resource for the IOU and ratepayer needs now to be considered in a broader policy context, building on the work completed in the Commission's previous DG proceedings, and connected to the resource planning and procurement process with specific findings and directives.