California Regulators’ Tariff Plan Seeks Utility Domination of Microgrids, Stakeholders Warn

When the California Legislature passed SB 1339 in 2018, the goal was to create a microgrid tariff that would help commercialize microgrids, allowing for third-party microgrid development and ensuring microgrids’ potential benefits would serve those who receive microgrid power, the grid and ratepayers.

Now, a group of nonprofit stakeholders – as well as microgrid developers – say the proceeding has veered in the wrong direction and is focusing only on utility monopolization of community microgrids. At issue is a tariff that addresses multiproperty microgrids, which span more than one property and often require the use of utility distribution assets to transmit the microgrid power.

In a letter to the California Public Utilities Commission (CPUC), the non-profit stakeholder group – which includes the Climate Center, Green Power Institute, Vote Solar, Local Government Sustainable Energy Coalition and the Center for Biological Diversity – complained that a July 18 “scoping memo” from the commission, along with an Aug. 8 Administrative Law Judge (ALJ) ruling, left stakeholders out of the discussion about how to create the tariff for multi-property microgrids.

Stakeholders tell CPUC to “get it right”

The stakeholders urged the commission to take the time necessary and “get it right.”

Scoping memos are issued by the CPUC commissioner assigned to a case and lay out the specific questions and topics the CPUC will address in the case, as well as a timetable for action. They also provide direction about which entities will perform certain activities, explained Lorenzo Kristov, a consultant to the Climate Center who specializes in electric policy, structure and market design.

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“The [July 18] scoping memo eliminates, without explanation, crucial stakeholder participation processes that were included in the Assigned Commissioner’s prior scoping ruling on the same topic, issued on Dec. 17, 2021, but never implemented,” said the letter from the nonprofit organizations.

The ALJ’s Aug. 8 ruling asked investor-owned utilities (IOUs) to prepare tariffs based on Pacific Gas & Electric’s (PG&E) Community Microgrid Enablement Tariff (CMET), a program that now applies to only one community microgrid – the Redwood Coast Airport Microgrid, which received a $5 million grant from the California Energy Commission, plus $6 million in matching funding from the Redwood Coast Energy Authority. Without this kind of funding for community microgrids, it’s unlikely that CMET will yield additional microgrids, opponents of the plan argue.

Microgrid developers oppose using PG&E’s community microgrid tariff as basis 

“So far as we are aware, CMET has not spawned any new microgrid development,” said Allie Detrio, senior adviser to the Microgrid Resources Coalition (MRC) in the western U.S. “There are many other promising approaches to multi-customer microgrids,” she added. Because community microgrids offer extensive resilience benefits, the MRC wants the CPUC to return to its original vision and allow a broader experiment with community microgrids, she said.

“We are very disappointed with the changes in the revised scoping memo that dismiss stakeholder participation,” said Jamie Charles, manager of grid services policy at Sunnova Energy. “We saw this as a great opportunity to work with the state and develop community microgrids.” In September 2022, Sunnova Energy proposed building and operating community microgrids as microutilities, but the CPUC rejected the proposal.

The recent CPUC scoping memo reflects the CPUC’s efforts to protect utilities, according to Kristov, who said he has been following distributed energy for 10 years.

In 2013, he began seeing distributed energy resources (DERs) operators interested in participating in the California Independent System Operator market. He saw this as a game changer that could alter how the 20th century electricity system works. Integrating DERs can provide advances in resilience, energy justice and decarbonization, he added. But California needs to create a new set of rules that allow DERs to achieve their value.

Is the CPUC protecting investor-owned utilities?

“The CPUC sees DERs as a threat. Utilities see them as a threat. Their primary concern is saving the current system,” Kristov said. “It’s all about enabling investor-owned utilities to dominate the microgrid space.”

Neither the CPUC nor PG&E responded to requests for comment. 

Using CMET as the basis for a multiproperty microgrid tariff will make it difficult to realize the benefits of microgrids, he and others said.

“A big part of the benefits these microgrids can bring is serving the community within the microgrid and hardening the grid for the bulk power system through their ability to shed peak load, shut off circuits at risk, inject excess energy into the grid and provide grid services,” said Sunova Energy’s Charles.

Community microgrids can provide many benefits

Ideally, multiproperty microgrids should be operated as a single controllable entity that allows customers to share power, which creates efficiencies. In addition, community microgrids can provide services to the grid by taking the microgrid off-grid during energy shortages, for example, said Kristov.

“But the CPUC and staff have said they don’t see any value of a community microgrid operating as a single controllable entity unless there’s an outage on the main grid,” Kristov said. That would happen only under emergency conditions and would only be valuable to the customers who receive power directly from the microgrid. “That’s a starting presumption that undermines a lot of the potential value of operating a microgrid 24 hours a day, 365 days a year,” he said.

Under the directive from the ALJ, utilities are the only entities allowed to operate community microgrids when they’re in island mode, said Kristov.

“This excludes a community municipality or third party to be the operator and use the utility’s wires. They are saying only the utility can be the operator,” he said.

Microgrid Resources Coalition offers alternative tariff ideas

Detrio suggested a number of other strategies for deploying community microgrids, including:

• Microgrids sponsored by community choice aggregators.
• Community-sponsored microgrids that deliver power over utility wires.
• Community-owned microgrids for environmental and social justice communities.
• Microutilities such as those proposed by Sunnova Energy that would explore a standardized framework for microutilities under 5 MW.
• Campus microgrids that involve changes in master metering so adjacent properties can interconnect and share energy.
• In its letter, the Climate Center and its associates asked the CPUC to drop the requirement that utilities base their tariffs on CMET.

In addition, the group asked the CPUC to issue proposed guiding principles for developing a multiproperty tariff and hold a public workshop to discuss the proposal along with stakeholder proposals.

“The IOUs would be allowed to use the CMET as the basis for their proposals if they wish, but neither they nor any other parties should be required to do so,” said the letter from the nonprofit organizations.

Nonprofit coalition wants CPUC to backtrack, involve stakeholders

Ideally, the CPUC should issue a staff proposal that reflects a summary of the various proposals – including those from stakeholders – and the CPUC should hold one or more public workshops about the proposal, followed by comments from stakeholders. After this process is complete, the CPUC should release a proposed decision, said the letter to the CPUC.

Despite efforts from the nonprofits and microgrid developers who hope the CPUC will backtrack and allow for stakeholder participation, Sunnova’s Charles has little hope that the CPUC will explore alternative proposals. Right now, the only opportunity for third parties to comment will be after utility proposals have been submitted to the CPUC – rather than before, which could possibly help shape the tariff proposals.

“The revised scoping memo shows a lack of consideration for stakeholder participation in the new microgrid multiproperty tariff creation. Before, stakeholders could participate. This will impact the outcome and benefit the utilities instead of the ratepayers,” said Charles.