California's Rule 21 Decision Comes with Big Wins for Customers

Today's long-awaited, unanimous Rule 21 decision by the California Public Utilities Commission (CPUC) comes with some very important wins for the energy customer who is interested in investing in distributed renewable energy.

Today's long-awaited, unanimous Rule 21 decision by the California Public Utilities Commission (CPUC) comes with some very important wins for the energy customer who is interested in investing in distributed renewable energy.


Most importantly, the CPUC voted to adopt new interconnection procedures that will significantly increase the ability of customers to predict and obtain certainty regarding the costs associated with the interconnection process. Currently, consumers wishing to connect a distributed energy system to the electric grid are given estimates that are subject to change at any point. The actual costs can vary significantly from the initial estimate, which creates considerable uncertainty for the financing process.
In addition, the commission's order takes important steps to help clarify the interconnection process for energy storage systems, and sets forth a path for further consideration of smart inverters, which can help manage higher penetrations of distributed resources on the grid.

"This decision further clears the path for interconnection customers and sets new next-generation best practices in place in the country's largest clean energy market," says Sara Baldwin Auck, regulatory director of the Interstate Renewable Energy Council (IREC), which has been at the forefront of shaping these notable reforms since the proceeding began in 2011. "IREC commends the commission for its continued leadership in this area and extends its thanks to the California utilities and many stakeholders who have worked together over the last five years to make Rule 21 the most innovative and progressive set of interconnection standards in the country."

Many of the reforms already adopted as a result of early stages of this proceeding are now best practices utilized by the Federal Energy Regulatory Commission (FERC), as well as other states. We expect the changes adopted today will be similarly instructive to other states facing similar issues in the future.

Since the beginning of the proceeding, one of the principle issues that parties grappled with is how to improve the accuracy, predictability and certainty around the costs associated with upgrades necessary to interconnect projects to the utility grid. While numerous reforms have helped improve the interconnection review process along the way, this decision marks the first time the commission has directly improved the certainty surrounding cost estimates. The decision does this in two ways:

• It requires the utilities to provide estimates within a "cost envelope" of +/-25 percent. Interconnection customers are responsible for costs up to 125 percent of the original estimate. If actual costs exceed 125 percent, a process will allow the utilities to spread those costs across the rate base, but only after they have demonstrated that their inability to accurately estimate the costs was reasonable. If costs are below 75 percent, then the rate base will retain the difference after a similar showing in an attempt to balance out the impact on ratepayers.
• It requires the utilities to publish cost guides that will show the standard prices for typical interconnection upgrades. This will improve the ability for customers to predict in advance the likely costs associated with interconnection upgrades.
The cost envelope approach was first recommended for consideration by IREC in 2012, built on IREC's experience with a similar process used by Massachusetts, the only other state to offer cost certainty to interconnection customers.

A second key aspect of today's decision is the adoption of a process for the review of non-exporting energy storage systems. IREC's Sky Stanfield, who represents the national not-for-profit in regulatory matters, explains:

"California is the first state to consider, in a meaningful way, how best to review the interconnection of energy storage systems. Through a consensus driven process, the parties reached general agreement on an approach for how both the charging and discharging functions of energy storage systems should be reviewed under Rule 21. The adopted approach ensures that the load from energy storage systems is not treated differently from other types of customer load when it comes to assigning costs for review and upgrades."

The process also helps to streamline the review for energy storage projects, which are also subject to Rules 2, 3, 15 and 16.

IREC highlighted this issue of needing to clarify the process for reviewing the load and generation impacts from energy storage in a 2015 report, Deploying Distributed Energy Storage.

"This decision comes at a time when California is working on far-reaching reforms to the way that the distribution system is planned for and operated," adds Stanfield. "While the commission closed this proceeding, it is anticipated that the state will once again revisit Rule 21 later this year or early next, as it moves toward full rollout of the Integration Capacity Analyses (ICA) that are under development in the Distributed Resources Planning (DRP) proceeding."

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About IREC
Clean energy is critical to achieving a sustainable and economically strong future. To pave this clean energy path, IREC works to expand consumer access to clean energy; generates information and objective analysis grounded in best practices and standards; and leads programs to build a quality clean energy workforce. A not-for-profit organization since 1982, IREC's programs and policies have benefitted energy consumers, policymakers, utilities and the clean energy industry. As of July 2013, IREC is an accredited American National Standards Developer. For more information, visit http://www.irecusa.org

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