CPUC Opens Rulemaking to Incorporate Distributed Energy Resources Into Grid Planning Process for California's Investor-Owned Utilities

by Latham & Watkins LLP

On August 14, 2014, the California Public Utilities Commission (“CPUC”) issued an Order Instituting Rulemaking (“Order”) to establish policies, procedures, and rules to guide California investor-owned electric utilities (“IOUs”) in developing their Distribution Resources Plan Proposals (“DRPs”) in accordance with the requirements of Public Utilities Code Section 769.  In particular, the rulemaking will evaluate the IOUs’ existing and future electric distribution infrastructure and planning procedures with respect to incorporating Distributed Energy Resources (“DERs”) into the planning and operation of their electric distribution systems.  DERs include distributed renewable generation resources, energy efficiency, energy storage, electric vehicles, and demand response technologies. 

AB 327 (Stats. 2013, ch. 611) added Section 769 to the Public Utilities Code, requiring IOUs to file DRPs with the CPUC by July 1, 2015.  The Order provides that the purpose of the rulemaking is both to guide the IOUs in the development of their DRPs and to review, approve or modify their DRPs as envisioned in AB 327.  Section 769 mandates that the DRPs provide a roadmap for the integration of cost-effective DERs into the planning and operations of the IOUs’ electric distribution systems with the goal of yielding net benefits to ratepayers.  Specifically, DRPs must identify optimal locations for the deployment of DERs by evaluating their locational value; proposing mechanisms for the deployment of cost-effective DERs; proposing cost-effective methods of coordinating DER deployment with existing programs, incentives, and tariffs; and identifying additional spending necessary to integrate DERs into distribution planning.

The Order references and attaches (as Appendix B) a draft paper, titled “More than Smart:  A Framework to Make the Distribution Grid More Open, Efficient and Resilient.” The Order states that the paper provides both a basis for questions to be asked in the rulemaking and a useful framework for which the rulemaking will establish policies, procedures, and rules for the development of the IOUs’ DRPs.  The paper, in turn, summarizes environmental and energy policy developments in California and technological innovations enabling greater customer choice that it asserts are forcing fundamental changes to California’s power system from a historically centralized structure to a substantially more decentralized future.  The paper reports that an estimated 15 GW of DERs will be deployed in California by 2020.  The paper outlines four key principles around the planning for and large-scale integration of DERs to implement AB 327:

  1. Distribution planning should start with a comprehensive, scenario-driven multi-stakeholder planning process that standardizes data and methodologies to address locational benefits and costs of DERs.
  2. California’s electric distribution system planning, design and investments should move towards an open, flexible, and node-friendly network system that enables seamless DER integration.
  3. California’s electric distribution system operators should have an expanded role in utility distribution operations (with the California Independent System Operator Corporation) and should act as a technology-neutral marketplace coordinator and situational awareness and operational information exchange facilitator while avoiding any operational conflicts of interest.
  4. Flexible DERs can provide value today to optimize markets, grid operations and investments.  California should expedite DER participation in wholesale markets and resource adequacy, unbundle distribution grid operations services, create a transparent process to monetize DER services and reduce unnecessary barriers for DER integration.

The Order outlines eleven elements for the preliminary scope of the rulemaking proceeding and poses a number of preliminary questions for stakeholder input (including a number of questions regarding the paper).  Comments in response to questions, scope, schedule, and other procedural issues in the rulemaking proceeding are due September 5, 2014. 

Preliminary Schedule



Issuance of Order Instituting Rulemaking

August 14, 2014

Interested parties file responses to the questions provided in Order, as well as any comments addressing scope, schedule, and other procedural issues

September 5, 2014

Energy Division Workshop

September 17, 2014

Replies to initial responses filed

September 22, 2014

Prehearing Conference


Staff Proposal for Guidance on Distribution Resources Plan Proposal

November 2014

Workshop on Staff Proposal (if requested)

November 2014

Parties comments and replies on Staff Proposal

December 2014

Ruling with final Guidance on Distribution Resource Plan Proposals

Late January 2015

Electric Utilities file DRPs

July 1, 2015

Commission Final Approval of Distribution Resource Plan Proposals Anticipated

March 2016


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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