Microgrid Advocates Push Back as Utility Challenges Standby Rate Change

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Responding to a utility rehearing request, microgrid advocates are urging California regulators to uphold their decision to slash a major part of standby charges for eligible microgrids, highlighting the role microgrids play in protecting Californians as utilities shut down power to prevent wildfires.

standby charges

By Lisa-S/Shutterstock.com

The issue, now before the California Public Utilities Commission (CPUC), centers on the commission’s mid-July decision to suspend the capacity reservation component of the standby charge for eligible microgrids. San Diego Gas & Electric (SDG&E) has asked the commission to revisit the decision.

The “Track 3” 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 to keep power supply at-the-ready for self-generation customers should their systems stop producing electricity.

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

The initiative is in response to SB 1339, legislation that directed the CPUC to remove barriers to microgrid development, “without shifting costs between ratepayers.”

In its Aug. 16 rehearing request, SDG&E said the commission’s decision created an illegal cost shift between customer groups.

Microgrid supporters rebut utility arguments

In a joint filing, the Microgrid Resources Coalition (MRC), the National Fuel Cell Research Center and the Green Power Institute on Aug. 31 said the utility misinterpreted the prohibition on cost shifting. Bloom echoed the concern in separate comments.

SDG&E adopted an “inappropriately narrow” definition of cost shifting, according to the MRC.

SDG&E suggests that any costs borne by ratepayers who don’t directly benefit from microgrids is prohibited,” the coalition said.

Who is subsidizing who?

The utility’s argument ignores three years of public safety planned shutoffs (PSPS) that have been wreaking havoc on the California grid and on critical facilities, the coalition said. PSPS happen when utilities institute blackouts to reduce the chance utility equipment could spark a wildfire.

“It is not cost shifting to adopt microgrid-related policies, which help to harden the grid and protect critical facilities, because it is incontrovertible that all ratepayers benefit from such policies — and particularly those in at-risk areas from PSPS and other shutoff events this summer and in later years,” the coalition said. 

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The coalition contends the planned blackouts create a massive cost shift from utility shareholders to ratepayers because there is no compensation provided to ratepayers when they lose power during a PSPS.

We are supporting microgrid solutions for resiliency in significant part because of the potential for microgrids to end this unfortunate cost shifting that is currently occurring and is expected to continue for many more years,” the coalition said.

SDG&E’s reading of the ban on cost shifts would make SB 1339 useless, according to the coalition.

“Any new tariff that removes a barrier or compensates a microgrid will involve costs that must be paid, and if the prohibition on cost shifting were to read literally in this way, the statute would be a nullity,” the coalition said.

Bloom: CPUC followed cost-causation principles

Bloom argued the microgrid statute doesn’t reduce the commission’s authority to set electric rates following cost-causation principles so that customers who create utility expenses pay for them.

The decision to suspend capacity reservation charges for eligible microgrids “is an extension of the commission’s long-held and well-founded policy that appropriate rate design must adhere to the principle of cost-causation,” Bloom said.

“Allocating standby charges to those resources that reduce the need for standby service is a violation of cost-causation principles, and procurement of standby power for those resources is imprudent,” the company said.

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  1. “Standby charges are fees utilities use to cover their costs to keep power supply at-the-ready for self-generation customers should their systems stop producing electricity.”

    It seems to me that the blackouts in the summer of 2020 and the continuing use of the PSPS are contradictory to a “standby capacity” being at the ready when grid distribution is constricted and needs hardening, before one (could) send capacity to areas that need it “at the ready”. A tight circular fallacy laden argument that should NOT be rewarded by a “standby charge”.

    “In its Aug. 16 rehearing request, SDG&E said the commission’s decision created an illegal cost shift between customer groups.”

    Yeah, SDG&E who bought Legislator Lorena Gonzalez to push their AB1139, which thankfully died in committee shouldn’t get a pass on what’s legal and illegal in the power industry. C&I, CCAs are all seriously looking at Micro-grids for their businesses and communities due to the PSPS which costs folks in lost business and commerce every time one is invoked. This is the (consequence) of years of putting dividends over O&M, this whining over customer loss and energy ‘unfairness’ is their fault, not the customers fault.