Utility Asks California Agency to Reverse Decision Waiving Standby Charges for Microgrids

San Diego Gas & Electric (SDG&E) this week asked the California Public Utilities Commission (CPUC) to reverse its decision to waive a key component of standby charges for microgrids, saying it creates an illegal cost shift between customer groups.

The issue centers on the commission’s mid-July decision to suspend the capacity reservation component of the standby charge for eligible microgrids.

The decision was part of the commission’s multiphase effort to spur the commercial development of microgrids.

Standby charges are fees utilities use to cover their costs for being available to supply electricity to self-generation customers when their systems aren’t producing electricity.

The charges, which total about 2 cents per kWh in California, can make microgrid projects financially unviable, according to microgrid advocates.

In its decision last month, the commission rejected arguments raised by the state’s investor-owned utilities — Pacific Gas & Electric, Southern California Edison and SDG&E — that eliminating the standby charges for microgrids would violate a ban on shifting costs from one group of customers to other ones.

Utility: Law bars any cost shift

In a rehearing request filed Aug. 16, SDG&E said the commission’s decision violates a statutory bar on cost shifting.

“It causes nonparticipating customers to bear the costs — but not the benefits — of supporting the microgrid customer,” the utility said. “This is true for all of the utilities, but it is especially true for SDG&E because its standby charge consists entirely of a capacity reservation charge.”

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The decision is flawed because the commission failed to identify or quantify any specific benefit to the utility’s customers from a standby charge suspension, according to SDG&E.

It also fails to show that the value of the suspension is reasonably equal to the benefit eligible facilities will provide to other customers that pay for the standby services, the utility said.

The commission said it couldn’t reduce or eliminate standby charges, yet it did remove the capacity reservation charge, which is a core part of any standby charge, according to SDG&E.

“There is no practical distinction between a reduction of the standby charge and a suspension of a single component of the standby charge,” the utility said.

In its decision, the CPUC limited its waiver to certain microgrids and established a “demand assurance amount” that microgrids which unexpectedly draw on utility power supplies will pay utilities.

Those provisions, which may reduce costs shifts, are still inadequate because no amount of a cost shift is allowed, according to SDG&E.

“A limited cost shift — whether limited because suspension applies only to some subset of customers or because there is the potential for some offsetting revenue through the demand assurance amount — is still a cost shift prohibited by statute,” the utility said.

SDG&E alleges due process violation

The utility contends the suspension was first floated in the proposed decision and wasn’t fully vetted through the public comment process.

SDG&E asked the CPUC to allow oral arguments to discuss the issue.

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