Existing law vests the Public Utilities Commission with jurisdiction over the delivery of electrical services. Existing law provides for the establishment of an Independent System Operator (ISO) as a nonprofit public benefit corporation and requires the ISO to make certain filings with the Federal Energy Regulatory Commission (FERC) and to seek authority from FERC as needed to give the ISO the ability to secure generating and transmission resources necessary to guarantee achievement of planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council and the North American Electric Reliability Council.

This bill would require the commission, in its oversight of large electrical corporations and its participation in the ISOs transmission planning process, to promote the consideration of the use of energy storage systems and demand response nonwire alternatives, as defined, as means to address the states transmission needs before the use of transmission wires. The bill would require the commission to ensure that transmission facility owners take certain actions in the transmission planning process regarding nonwire alternatives. The bill would require the commission to ensure that large electrical corporations include nonwire alternatives for consideration and select a nonwire alternative if it is the most cost effective or provides net benefits when compared with traditional transmission solutions.

Existing law vests the Public Utilities Commission with jurisdiction over the delivery of electrical services. Existing law provides for the establishment of an Independent System Operator (ISO) as a nonprofit public benefit corporation and requires the ISO to make certain filings with the Federal Energy Regulatory Commission (FERC) and to seek authority from FERC as needed to give the ISO the ability to secure generating and transmission resources necessary to guarantee achievement of planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council and the North American Electric Reliability Council.

This bill would require the commission, in its participation in the ISOs transmission planning process, to promote the consideration of the use of energy storage systems and demand response as means to address the states transmission needs before the use of transmission wires.

Date of Hearing: March 29, 2017

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

ABPCA Bill Id:AB 914 (

Author:Mullin) – As Amended Ver:March 20, 2017

SUBJECT: Transmission planning: energy storage and demand response

SUMMARY: Requires the California Public Utilities Commission (CPUC), in its oversight of electrical investor-owned utilities (IOUs), and its participation in the transmission planning process (TPP) of the Independent System Operator (ISO), to ensure that non-wires alternatives are considered before the use of traditional transmission assets or infrastructure. Specifically, this bill:

1. Requires the CPUC to ensure that transmission owners, as defined, consider non-wire alternatives as a substitute for new or upgraded transmission investments, and publicize analyses, costs, and benefits of wire and non-wire alternatives, including specific projects attributes and specified data, if the transmission owner proposes new or upgraded transmission investments in the ISO’s TPP.
   
2. Ensure that IOUs include non-wire alternatives for consideration in the TPP and select those non-wire alternatives if they are the most-cost effective options or provide net benefits (undefined) compared with traditional transmission solutions.
3. Defines non-wire alternatives as network optimization with specified advanced technologies, or those non-transmission alternatives that reduce the need for new capacity including demand response, storage, energy efficiency, storage and load management.

EXISTING LAW:

1. Requires electrical IOUs to operate the electric distribution grid in its service territory and do so in a safe, reliable, efficient, and cost-effective manner. (Public Utilities Code §399.2)
2. Recognizes that new and modified electric transmission facilities may be required to facilitate the state achieving renewables portfolio standard targets. (Public Utilities Code §399.11)
3. Requires every IOU to prepare an annual report for submission to the CPUC, as part of the Federal Energy Regulatory Commission (FERC) Order 890 process. The report must identify any electrical transmission facility, upgrade, or enhancement that is reasonably necessary to achieve renewables portfolio standard procurement requirements; look forward at least five years; and to ensure that adequate investments are made in a timely manner for any electrical transmission facility identified as being reasonably necessary to achieve the renewable energy resources procurement requirements. (Public Utilities Code § 399.13 [a] [2])
4. Requires the ISO to ensure the efficient use and reliable operation of the transmission grid consistent with achievement of planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council and the North American Electric Reliability Council. (Public Utilities Code §345)
5. Requires IOUs to submit to the CPUC distribution resources plan proposals to identify optimal locations for the deployment of distributed resources which can avoid the need for increased distribution grid investments, and other purposes. (Public Utilities Code §769)
6. Federal law establishes the Federal Energy Regulatory Commission to regulate the transmission and wholesale sale of electricity in interstate commerce and specifically regulates independent system operators and regional transmission organizations as one way for existing power pools to satisfy the federal requirement of providing non-discriminatory access to transmission.

FISCAL EFFECT: This bill is keyed fiscal and will be referred to the Appropriations Committee for its review of the fiscal effect of this bill.

BACKGROUND:

Independent System Operator – The ISO is a regional transmission organization and was created as part of the state's failed effort to deregulate the sale and delivery of electricity. Although many features of deregulation scheme have long since been eliminated, the ISO remains but without oversight features originally intended by creation of the Electricity Oversight Board which was intended to oversee the electricity market and the activities of the ISO. Consequently, a nonprofit entity which is subject to federal law and the jurisdiction of the Federal Energy Regulatory Commission, remains in control of much of the state's transmission grid, the dispatch of electricity, and some procurement decisions. The state's oversight of the ISO is limited to the Senate's confirmation of the five ISO board members which are appointed by the Governor.

ISO Transmission Planning Process (TPP) – The ISO uses an annual TPP to develop a transmission plan and approve transmission solutions following a three phase process. In phase one, the ISO develops and completes unified planning assumptions and a study plan incorporating input from the CPUC and CEC. The plan relies on load (demand), energy efficiency savings, and demand response forecasts, renewable and conventional generation additions and retirements, and input from stakeholders.

At phase two, the ISO completes a draft transmission plan and presents it to its governing board for approval. This includes technical studies of reliability analysis, renewable delivery analysis, and economic analysis.

At phase three, the ISO evaluates proposals to construct and own certain regional transmission facilities specified in the transmission plan that are subject to competitive solicitation, receives proposals to build identified reliability, policy and economic transmission projects and evaluates proposals to meet qualification for consideration.

FERC Orders – Two of the primary mechanisms used by FERC to regulate transmission organizations are orders (issued by FERC) and tariffs (filed by independent system operators and regional organizations and approved by FERC). Two orders are key to consideration of AB 914: 890 and 1000.

Among the provisions of Order 890 is the requirement that ISO planning and markets operate in an open, coordinated and transparent manner on both a local and regional level. The order includes a suite of principles which require transparency, stakeholder involvement, and full access to the data and analyses underlying each transmission plan. The requirements also apply to transmission owners. FERC Order 1000 reformed the electric transmission planning and cost allocation requirements for public utility transmission providers. The rule builds on the reforms of Order 890 and requires consideration of non-wires alternatives but does not authorize the ISO, nor does its tariff which is approved by FERC, to make non-transmission procurement decisions as part of the transmission planning process.

CPUC Procurement Decisions & Priorities – Any generation procurement or distribution system changes will impact the ISO’s TPP. These regulatory and utility decisions all affect forecasting and feed directly into the ISO’s TPP. Of significance is the CPUC’s adoption of a Distributed Energy Resources (DER) Action Plan last fall. DERs are resources behind the customer’s meter (e.g. rooftop solar, energy efficiency, demand response, storage) that offset the needs for distribution upgrades and therefore offset needs for increased transmission. The Plan’s explicit purpose is to:

1. Provide a long-term vision for DERs and supporting policies;
2. Identify continuing efforts in support of the long-term vision;
3. Assess direct further near-term action needed to support the long-term vision; and
4. Establish a DER steering committee responsible for sustained coordination of activities across proceedings.

To accomplish the above purposes, a strategic scope and structure were also endorsed. The scope includes three groups or “tracks” of related proceedings or initiatives:

1. Rates and tariffs;
2. Distribution grid infrastructure, planning, interconnection and procurement; and
3. Wholesale DER Market Integration and Interconnection.

COMMENTS:

1. Author’s Statement. There are multiple technologies that can address the needs of California’s transmission grid, including traditional transmission wires as well as non-transmission, or non-wires, alternatives. Each should be given comparable consideration in the ISO’s transmission planning process in order to ensure that the most cost effective option or the option providing the greatest net benefits to the state’s consumers is selected. AB 914 directs the PUC to ensure that this takes place.
2. Primary Issue Presented. The author and supporters want to ensure that all viable procurement decisions are considered which could avoid the need for transmission, before it is ordered and constructed. Although transmission planning is an ongoing process, it is fundamentally based on prior procurement decisions by regulatory agencies, utilities, and other retail sellers of electricity. The consideration, mandate and inclusion of “nonwires alternatives” as defined by this bill (demand response, storage, energy efficiency and other resources on the customer’s side of the meter) has become a driver in the planning and procurement decisions of regulatory agencies and utilities. This is evidenced by the CPUC’s adoption of its DER Action Plan and other legislative mandates and procurement decisions.
   
3. Consideration of Non-wires Alternatives. The author argues that the ISO TPP is not in compliance with FERC Order 1000 which specifically requires that “[t]hrough the regional transmission planning process, public utility transmission providers will be required to evaluate, in consultation with stakeholders, alternative transmission solutions that might meet the needs of the transmission planning region more efficiently or cost-effectively than solutions identified by individual public utility transmission providers in their local transmission planning process.”

FERC Order 1000 is broad in its terms. Given the extensive consideration of distributed resources in utility procurement processes and that these resources are included in demand and other forecasts submitted to the ISO (which they could reject from consideration if deemed unreliable), these alternatives are arguably already “considered” per the requirements of Order 1000. However, there appears to be opportunities in the ISO’s TPP where the additional consideration of these alternatives can be bootstrapped to ensure that the procurement process has effectively captured and considered every viable non-transmission alternative.

1. Implementation Issues. Although the end goal of the bill is consistent with FERC Order 1000 and state law, the approach outlined in the bill is not aligned with the ISO’s planning process and may be overly complex and unclear in its application. The implementation issues identified in this bill include:
   
   1. The CPUC has no onoing jurisdiction over “transmission operators” (unless they are regulated IOUs) which would include any private entity which owns transmission (a merchant operator);
   2. Requires the CPUC to order the IOUs to act, which could trigger a lengthy, and duplicative procurement proceeding. The task can be accomplished by directing the mandate on the IOUs in the participation in the TPP;
   3. Not clear at what point in the ISO process that the IOUs are required to submit nonwires alternatives;
   4. The definition of “nonwires alternatives” includes “network optimization with advanced technologies” (page 3, lines 29-24) which the ISO advises are currently considered and funded through the transmission process as “transmission” not alternatives to transmission;
   5. There is an overly broad and unnecessary requirement that the CPUC separately consider nonwires alternatives which are already prominent in statutory mandates on the CPUC and in its procurement processes;
   6. At page 3, lines 9-13, the publication of operational requirements data is mandated which are unrelated to the reliability planning studies done as part of the TPP; and
   7. Meshes the TPP of the ISO with the CPUC procurement process by requiring the CPUC to ensure that the IOUs select nonwires alternatives in lieu of transmission. If the ISO determines that nonwires alternatives meet reliability needs, the ISO has no authority for cost recovery of these options and would therefore have to report back to the CPUC to pursue those options.
      
2. Align Bill with TPP. The ISO’s transmission planning process has two clear points that are outlined in its Business Practice Manual (which is based on its FERC tariff) at which time the IOUs put forward transmission solutions, if any. At these two points, it would be consistent and appropriate for the IOUs to also put forward nonwires alternatives as intended by the author and publicize those alternatives to stakeholders participating in the ISO TPP. The committee may wish to consider amendments which align the bill with the existing TPP and specifically require the IOUs to submit for consideration nonwires alternatives and analysis of viability including consistency with the provisions of SB 350.
   
3. Related Legislation. SB 692 (Allen) requires the ISO to adopt transmission energy down flow, as specified, as the billing determinant for the transmission access charge throughout its service territory. Status: Referred to Senate Committee on Energy, Utilities & Communications.

REGISTERED SUPPORT / OPPOSITION:

SUPPORT

California Energy Storage Alliance
Environmental Defense Fund

OPPOSE AS AMENDED 

Coalition of California Utility Employees
State Association of Electrical Workers

OPPOSE

Coalition of California Utility Employees
Independent Energy Producers Association
Southern California Edison

State Association of Electrical Workers

Analysis Prepared by: Kellie Smith / U. & E. /