Distributed Energy Resources (DER)
Utility Shareholder Incentives 

 

Background 

Distributed Energy Resources (DER) are derived from a variety of small, decentralized grid-connected technologies such as renewables, energy efficiency, energy storage, electric vehicles, and demand response. DER systems can be managed and integrated with utilities’ conventional energy resources using smart grid technologies. In September 2015, the CPUC issued a Decision expanding the scope of an existing demand-side Rulemaking in order to create an Integrated Distributed Energy Resources (IDER) framework. This new framework will look at the entire energy production and delivery system and determine how best to source DER based on the plans developed in the Distribution Resources Plan.  

 

DER Utility Incentives Proposal

On April 4, 2016, Commissioner Florio issued an Assigned Commissioner Ruling in the IDER proceeding proposing a pilot shareholder incentive mechanism for the purpose of encouraging investor owned utilities to invest in DER. The proposed DER shareholder incentive mechanism would include:  

  • Utility profit based on a percentage of DER procurement costs, set at approximately the same level as shareholder earnings on infrastructure deployments.  
      
  • A cost-effectiveness requirement that DER solutions be less expensive than deferred/displaced infrastructure, including the shareholder incentive.  
      
  • A new review body, the Distribution Planning Review Group, to review incentive mechanism process.      

 

 Incentives Pilot Workshop

On May 18, 2016, the CPUC issued a Ruling calling for a June 13, 2016 DER Incentives pilot Workshop to discuss:   

  • Educating stakeholders on proposal’s basis for setting the incentive level  
  • Understanding utilities’ perspectives  
  • Determining next steps   

   

A CPUC Proposed Decision is anticipated for summer 2016. 
 


 

ORA Position 

ORA recognizes that the proposed pilot is intended to align utility interests with state goals, which may support increased deployment of DERs to meet distribution grid needs. The CPUC should ensure that ratepayer interests align with utility and DER provider interests. ORA recommends that the CPUC should:   

  • Make sufficient resources available to verify distribution upgrade needs and costs. 
     
     
  • Clarify the sequencing of and relationship between DER pilot projects and requests for distribution infrastructure upgrades through the utilities’ General Rate Case proceedings.  
      
  • Clarify DER pilot contracts should have a verified pay-for-performance basis, with DER providers.   
      
  • Modify the pilot proposal to ensure ratepayer protections, as well as safety and reliability impacts, in the event of DER nonperformance.  
      
  • Set limits on pilot timeframe and cap the budget.  
      
  • Use pilots to inform future program planning and designs based on independent assessment.  
      
  • Focus on efforts to make distribution systems needs and DER benefits more transparent.  
      
  • Determine the implications of pilot on state goals, related proceedings, energy savings, and cost allocation and accounting.  

    

See:   

ORA’s May 9, 2016 Comments on the Assigned Commissioner’s Ruling  

   

 

CPUC Proceeding Docket 

See the Proceeding docket for DER Incentives.  

 

 

Resources

CPUC Webpage for Integrated Distributed Energy Resources (IDER)