Direct the California Public Utilities Commission to advance performance-based regulation

The traditional utility ratemaking structure does not fully reflect the need for multi-party investment in the distributed technologies needed to drive a clean, resilient grid. To prioritize these needs, the legislature could direct the California Public Utilities Commission to introduce performance-based regulation for investor-owned utilities, tying their returns to performance on resilience, decarbonization, affordability, equity, and safety metrics.

Direct the California Public Utilities Commission and California Energy Commission to encourage utility and public investment in low-carbon resilience infrastructure

To ensure that key infrastructure is deployed at sufficient speed and scale while protecting ratepayers, regulators may need to consider alternative investment and ownership models for these investments. The legislature could direct the California Public Utilities Commission to conduct a formal review of investor-owned utilities’ return on equity to evaluate which asset types in the grid of the future may require a reduced return on equity, which may lend themselves to public ownership (to be financed by public debt or equity), and which could be developed, owned, and operated by independent third parties. For the public ownership category, legislators could consider the ownership model of electric co-ops, which provide service at long-term cost without distribution of surplus revenues to shareholders

Leverage funding outside the rate base to finance resilience investments

To finance resilience assets that are particularly urgent and do not fit in utilities’ investment and ownership strategies, the legislature could consider a bond measure or allocation of tax dollars with funds dedicated to major distributed resource investments. Local resilience infrastructure with community-level applications will generate significant statewide benefit in terms of wildfire risk reduction and grid reliability services.

Accelerate grid regionalization to reduce costs of decarbonization

A regional, multi-state electrical wholesale market would advance decarbonization goals by reducing renewable energy costs through reduced system redundancies as well as economies of scale for diverse new clean energy technologies. Access to a larger electricity market including energy resources throughout the West would allow California utilities and CCAs to secure additional diverse, utility-scale renewable generation that is necessary to support a decarbonized grid.

Update the Rule 21 process to include cost-sharing for grid upgrades.

When a new distributed resource interconnection will require an upgrade to grid infrastructure (for capacity or safety reasons), the applicant is typically responsible for the full cost of that upgrade. This front-loading of costs can often discourage deployment of new technologies. The commission could update Rule 21 to include a cost-sharing mechanism for these upgrades, requiring first movers to pay only an appropriate share of costs and utilities to allocate the remaining costs among later beneficiaries of the grid upgrade

Allow and support utilities and CCAs to develop community and regional markets for energy and grid services

Distribution system operators (DSOs) can manage the local distribution grid to encourage the cost-effective use of flexible distributed generation and demand-response assets. Introducing new DSO capacities into the California grid could provide a much-needed boost to key resilient and low-carbon grid technologies, allowing communities and regions to get the most economic and energy value out of their investments.

Restructure and expand low-income ratepayer assistance programs to guarantee affordability in the face of increasing costs from resilience and decarbonization investments

The California Alternative Rates for Energy program (CARE), Family Electric Rate Assistance program (FERA), and Low-Income Home Energy Assistance Program (LIHEAP) provide lower-income Californians with financial assistance to pay energy bills, but these programs may be inadequate to make energy affordable as utilities and communities begin to invest in essential, but expensive, clean and resilient grid technologies. To address this pressing equity issue, the commission (and/or the legislature) could restructure CARE, FERA, and LIHEAP to guarantee customer affordability—instead of providing limited subsidies—using a non-volumetric, need-centered basis.

Direct the California Public Utilities Commission, Energy Commission, Independent System Operator, and Air Resources Board to institute a new collaborative research and planning process focused on resilient decarbonization

The legislature could create a new “grid of the future” planning process involving leaders from each agency. Topics could include accelerating integration of distributed generation and microgrids, ramping up building performance and load management technologies to support resilient decarbonization, mechanisms to develop new markets, and allocation of state incentives and subsidies with an equity and resilience focus, and planning system reliability over multiple time horizons.

Permit targeted relaxation of Bagley-Keene requirements within this ‘grid of the future’ planning process

The Bagley-Keene Act, which sets strict open meeting and public process requirements for state agency deliberations, can in some cases restrict the ability of leaders at state energy agencies from engaging in fact-finding and making decisions at the pace necessary to rapidly achieve grid resilience and decarbonization.

Update Rule 21 interconnection processes to accelerate distributed generation and storage deployment

Commission actions to speed interconnections could include: Creating a regulatory presumption of approval, with the burden of proof on the utility to demonstrate that an application will violate safety or capacity needs (whereas the current process that effectively places the burden of proof on applicants); limiting utilities’ review to the anticipated impact on grid safety and capacity (ensuring the focus is entirely on these issues); and requiring utilities to proactively propose alternatives to customer applications (rather than issuing simple rejections).

Update Rule 2 and Rule 21 to streamline microgrid installations

For an applicant building a clean microgrid that incorporates solar and/or storage technology, the overlap between Rules 2 and 21 requires management of two parallel application processes, often handled by separate utility teams, creating significant administrative and cost burdens and in some cases leading to two separate meter installations. The Public Utilities Commission could update this legacy system by requiring utilities to develop combined Rule 2/21 application processes for clean microgrids with a single, streamlined application including technical requirements for islanding systems and for renewable/storage telemetry.

Update resource adequacy requirements to increase flexibility

Updating resource adequacy requirements to allow greater flexibility for the deployment of battery storage, for example by setting tiers that offer additional resource adequacy credit for incrementally greater storage durations (with a step-down to reflect diminishing marginal benefits as deployment increases), could facilitate entry of more long-duration storage assets onto the grid, increasing resilience and supporting a wider market for the technology.

Restructure rate cases and integrated resource planning to lower the cost of participation

Rate cases and integrated resource planning are typically comprehensive processes by design, allowing utilities and the agency to address a host of related issues in a single proceeding. However, this structure requires advocates and other stakeholders to participate in long, complex processes that entail significant staff time, legal review, procedural compliance, and associated costs. The commission could consider steps to facilitate more involvement from these voices, such as supporting limited, issue-specific intervenor status for community resilience issues or exploring methods to break proceedings into smaller pieces.

Split the California Public Utilities Commission’s energy and non-energy capacities to allow dedicated focus on pressing energy needs

The broad scope of the California Public Utilities Commission’s jurisdiction, including both energy and non-energy (telecommunications, water, rail, transportation) capacities can detract from the agency’s ability to make progress on increasingly complex and rapid-response grid resilience questions. Restructuring the Public Utilities Commission so that a group of commissioners are dedicated exclusively to energy matters could them build greater expertise and afford them more flexibility to participate in cross-agency grid resilience planning processes.

Initiate a regulatory process to identify data necessary to achieve the clean and resilient grid transition through a single data-sharing platform.

Under AB 802, the commission already conducts an energy consumption disclosure and benchmarking program for large commercial and residential buildings. The commission could expand its AB 802 data collection regulations to encompass all energy use information relevant for emerging resilient technologies, in particular for emerging technologies such as building-side load management systems. The legislature could enhance this authority by specifying categories of resilience data (in an open-ended manner to ensure adaptability to future technologies) and by adding smaller residential and commercial buildings to the commission’s purview. The commission could add this resilience-focused data to the current AB 802 benchmarking database it is building, or it could work with the Public Utilities Commission, utilities, CCAs, and advocates on a separate data transfer platform, with similar security and customer anonymization terms and data formats for consistency and machine-readability.

Appropriate funds for local governments, CCAs, and the California Energy Commission to develop new grid data collection and management capacities

While local governments and CCAs are the closest to essential facilities and vulnerable residents whose energy needs will be prioritized in developing resilience investment plans, they also may lack the staff and funds to effectively manage the data that inform those needs. Utilities and state regulatory leaders will largely rely on local actors to communicate these needs, share data with distribution providers, and manage some of the microgrid, building load management, and distributed technologies that will support resilience. To ensure that new resilience-related data collected by utilities is used efficiently, the legislature could appropriate funds to local public health, emergency services, and planning departments to hire dedicated staff and upgrade IT systems, working with CCAs in applicable jurisdictions.

Convene a body to review confidentiality, physical asset security, and cybersecurity claims to facilitate access to secure energy data.

The substantial need for confidentiality regarding the location and nature of critical grid assets, which have significant physical security implications, may conflict with the integration of new data-dependent grid technologies, which raise a range of potential questions around cybersecurity and customer data. But without a neutral arbiter or agreed set of standards for such claims, regulators and advocates are forced to defer to utilities’ judgments, potentially slowing the exchange of valuable data to an unnecessary degree. The Governor’s Office of Planning and Research could convene the Governor’s Military Council, the California Department of Technology, the California Energy Commission, the California Public Utilities Commission, utility experts, and ratepayer advocates to review types of utility data and claims of physical asset security-, cybersecurity- and privacy-based confidentiality and develop authoritative guidance on what is legitimately confidential.