VI. DG Issues Impacting the CAISO

On June 12, 2002 FERC approved the CAISO's Aggregated Distributed Generation Pilot Project (ADGPP). The Project was "designed to test arrangements for Generating Units with a rated capacity less than 1 MW that are not currently accommodated in CAISO markets to be aggregated into blocks no less than 1 MW but less than 10 MW, and to, in an aggregated fashion, schedule Energy with the CAISO and participate in the CAISO's Supplemental Energy Market."⁷ Due to a number of uncertainties, program design and other mitigating factors, such as the possible imposition of exit fees on DG customers and the necessity of complying with the ISO's ramp rates, the Project was terminated on December 31, 2002 with no active participants.

Despite this lack of participation, the CAISO has expressed its interest in further pursuing such an aggregation of DG units for participation in the Supplemental Energy Market or other CAISO program. Like the development of a wholesale tariff for DG transactions, such an initiative may prove necessary to maximize the potential of DG in California.

We invite parties to comment here, as well as in relevant proceedings at the CAISO, on how to effectuate such an aggregation program. It may be the case that such an effort is best undertaken by the CAISO; if so, parties should make this argument, and describe any coordinating or supplementary efforts this Commission should undertake towards this end. CAISO has also expressed its concern that, as DG policy is further refined, we ensure that DG is assessed a fair allocation of system costs and that sufficient reserves are procured to cover firm load served by DG. We share these concerns, as expressed elsewhere in this document, and will collaborate with the CAISO on these and other issues in the course of this proceeding. We also note that reserve issues are presently being considered in the Procurement docket, and we will coordinate with that docket on this point.