Sunnova Energy, the architect of a plan to bring microutilities to California, said last week that opponents are trying to block it with self-serving “the sky-is-falling” arguments that lack precedent.
The residential solar installer is seeking approval before the California Public Utilities Commission (CPUC) to create microutilites. Serving newly built neighborhoods of fewer than 2,000 customers, the public utility microgrids would operate on local energy.
Investor-owned utilities (IOUs), labor and utility ratepayer interests came out swinging against the proposal earlier this month while environmental, clean energy and social equity advocates supported Sunnova. (See Big response to Sunnova’s microutility plan in California.)
Sunnova has asked the CPUC to hold a hearing where parties can dive more deeply into the plan.
Tax incentive deadline
In written comments filed last week with the commission, Sunnova said that time is of the essence for the commission to move on its application. Microgrid projects must be built by January 2025 to be eligible for a 30% federal tax incentive on controllers in the Inflation Reduction Act.
The proposal comes as Californians continue to face power outages created intentionally by utilities to avoid wildfires. In response, many businesses, institutions and the military are building microgrids to ensure they have reliable power, but regulations make it difficult for communities to do so unless an investor-owned utility undertakes the project. Sunnova is offering a new approach.
In its comments, Sunnova addressed several arguments lodged against its application, most of them from IOUs that contend that microutilities would need to be regulated the same way they are.
Worlds away from large power plants
But Sunnova said the microutilities are not as complex as utilities that operate large electric plants and therefore should not be regulated the same way.
The microgrids would use equipment that Sunnova said is “small-scale, mainly off-the-shelf and – to put it plainly – pretty ordinary,” including:
- Generation and battery storage installed at each residential home.
- Distribution wires and equipment interconnecting each home together as part of the microgrid.
- Community-scale solar, batteries and backup generation.
- A substation interconnecting the community distribution system, the community-scale assets and the larger grid.
- A microgrid controller.
Such equipment is installed every day in California and “is worlds away” from the complexity of large utility power plants, Sunnova said.
Some critics raised concerns that Sunnova did not propose specific locations for the microgrids it plans to build. Referencing precedent from telecommunications companies, Sunnova said that the commission can grant a utility a certificate to operate and then approve specific infrastructure at a later date.
Market-based rates
Sunnova also took issue with the idea that it is proposing to act in an unregulated fashion. The company said it is seeking approval as a regulated electrical corporation; however, it wants to set rates differently than the typical cost-of-service approach. Sunnova seeks permission to negotiate market-based rates, which it says the CPUC has allowed utilities to do in the past.
“Far from creating undue risk to customers, it would actually allow them to lock in reliable service and access to microgrid capabilities for a fixed rate over a long term. In contrast, none of the large IOUs offer their customers this kind of long-term rate certainty, but instead they pass through to their customers the ever-increasing costs of investments and the consequences of deferred maintenance and vulnerable infrastructure,” Sunnova said.
Microutilities would face competitive pressure to keep their rates low and service quality high, the company said. This includes competition from other utilities and solar and storage companies.
“No homebuilder will want to unreasonably increase the costs to homebuyers of purchasing homes in the community or provide them with substandard electric service,” Sunnova said.
Next steps
What happens next is in the CPUC’s hands. Sunnova has applied for a certificate that would allow it to operate as a utility. The company wants to win approval through what is known as a rate-setting proceeding. But some opponents want the Sunnova plan to be considered instead within a separate microgrid policy proceeding that has been underway for several years (R. 19-09-009).
Sunnova argued against its application being put into the microgrid proceeding, saying the docket has a different intent; it is designed to set microgrid rules for the state’s three large investor-owned utilities. Supporters of Sunnova’s plan are concerned that the application will get bogged down and delayed if it becomes part of the multiphase microgrid proceeding. Even if the application is considered in a rate-setting proceeding as Sunnova hopes, the company expects regulatory review to take at least a year. Microgrids within each neighborhood would undergo separate review after they are proposed.
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