Utilities urge California to write the rules before launching micro utilities
California’s investor-owned utilities (IOU) told state regulators that an unintended consequence of turning entire communities into microgrids would be to exempt often-affluent neighborhoods from paying their fair share of the costs of maintaining the statewide grid while also providing financial assistance to low-income ratepayers.
The Golden State’s major electric companies lined up this week to urge the California Public Utilities Commission (CPUC) to dismiss, or at least table indefinitely, Sunnova Energy International Inc.’s application to turn subdivisions into separate “micro utilities.” These entities would be largely self-reliant in terms of electricity production but would also be able to separate themselves from the current regulatory regime and, presumably, the various attached fees paid by their neighbors.
“An apt phrase applies to the (Sunnova) application and its discriminatory impact – ‘cream skimming,’” lawyers for San Diego Gas & Electric Company (SDG&E) declared in a filing opposing Sunnova’s application to become the state’s first official micro-utility.
The “cream” being skimmed in this case would be the upscale neighborhoods that would otherwise be connected directly to their local IOUs.
“The Application proposes communities for the affluent, where they may supply their energy needs free from legacy equipment, rates, and possibly PPP (public purpose program) costs, as well as the costs and responsibilities of a POLR (provider of last resort),” SDG&E continued. Sunnova Community Microgrids California, LLC (SCMC) “and the developer can thereby attract customers who presumably are of lower credit risk and can afford the latest distributed energy technology. There is no place for such discrimination on a public utility network,” SDG&E said.
Sunnova is asking the CPUC to grant its SCMC division micro-utility status. The plan is to then have Sunnova negotiate deals with major property developers to incorporate solar panels, storage batteries and other microgrid features into the new homes as they are being built. The result would be sizable subdivisions and planned communities that are largely self-sufficient when it comes to electricity and not liable for a variety of charges tacked onto every other ratepayer’s monthly tab.
“We see a future where communities, neighborhoods, and businesses can operate independently from the legacy grid with sustainable energy sources that provide uninterrupted power,” said founder and CEO William J. (John) Berger.
California utilities have welcomed the idea of establishing microgrids around the state to support grid resiliency and renewable energy supplies. Many of the projects are based on battery storage and will be used to provide power for school districts, hospitals, and public-safety operations. Earlier this fall, Sunnova announced it was working with Pacific Gas & Electric (PG&E) to add its solar-plus-storage capabilities to an unspecified low-to-middle income neighborhood in Northern California that “defers the need for PG&E to upgrade the distribution infrastructure at certain substations, cost-effectively extending the useful life of that existing grid infrastructure.”
A micro utility like the one Sunnova envisions for SCMC, however, may be a different animal because it would presumably be much larger and geographically dispersed than a typical local microgrid. The utilities implied that it was too early in the rulemaking process to start granting micro-utility licenses. “Rather than coming forward with a concrete proposal supported by specific evidence, the Application asks the Commission to approve a potential business model for SCMC to become or have subsidiaries that act as private, investor-owned, micro-IOUs that will build, own, and operate solar and storage microgrids without providing the necessary details to define those operations,” Southern California Edison (SCE) said in its brief.
The utilities also raised questions about how current regulations would apply when it comes to grid interconnections, which would allow the not-quite-cloistered micro utility communities to sell their excess solar power or import outside electrons in the event of an emergency or if demand simply outstrips their generating capacity for whatever reason. “Importantly, the Application does not address cost allocation issues such as how SCMC’s micro-IOU customers will pay for departing load costs and SCE’s costs associated with investing in, and maintaining, the larger SCE electrical system that they will be relying on to supply power,” the SCE brief said.
The state Public Advocates Office joined the IOUs in urging the CPUC to reject the SCMC application, at least for now, and allow the regulators to complete the painstaking rulemaking process rather and address the many “what ifs” raised by the utilities rather than allow them to slip in under the wire with any number of loose ends hanging. “SCMC’s failure to coordinate its Application with the Rulemaking means that the Commission would have to address numerous comprehensive and important issues with far less robust analysis and stakeholder input than in the Rulemaking,” it said.
Environmental organizations and other backers of the SCMC preferred to look at the long-term benefits of deploying as many microgrids as possible as quickly as possible and cross the various regulatory bridges when the state arrives at them. Their briefs envisioned microgrids being deployed in affordable-housing projects or forming electric vehicle charging networks.
While some of the utility briefs even questioned the potential benefits of independent micro-utilities over more modest microgrids tied in with the IOUs, the CPUC will face mounting public pressure to move the rulemaking on micro-utilities along and give Californians new options. “High inflation and overall economic distress is further reinforcing the value of the cost savings and predictable nature of the essential energy services Sunnova provides,” Berger said in a conference call with stock analysts earlier this year. “As centralized utilities continue to increase their rates, demand remains strong for our energy services while homeowners seek to offset rising energy costs and increase their energy reliability.”
