Incentive Pilots

On December 22, 2016, the Commission issued Decision (D.) 16-12-036 which addressed the competitive solicitation framework (CSF) and approved a utility regulatory incentive pilot program. It directed the utilities to each identify one project where the deployment of DERs on the system would displace or defer the need for capital expenditures on traditional distribution infrastructure. To test the incentive mechanism, the Utilities are encouraged to select up to three additional projects. The Decision also established a four percent, pre-tax incentive for the Incentive Pilot and discussed parameters for recovery of incentive and procurement costs. A timeline outlined six steps for the utilities to take over a 17-month period for identifying and proposing deferral incentive pilots through advice letters. The Decision also directed the utilities to form a Distribution Planning Advisory Group (DPAG) to advise them on selection of distribution deferral opportunities and provide input on the development of competitive solicitations for DERs. Due to the complexity of issues in this proceeding, the assigned Commissioner has issued three scoping memos (1, 2, 3).

  • Key characteristics of the deferral pilot selection process:
  • DER solicitations should be technology neutral;
  • Four distribution services can be solicited from DER providers:
    • Distribution Capacity
    • Voltage Support
    • Reliability (Back-Tie)
    • Resiliency (Microgrid)

IOU Pilot Proposals

As required by D.16-12-036, the participating utilities submitted the following DER pilot proposals through advice letters:

PG&E

Advice Letter 5096-E

SCE

Advice Letter 3620-E (June 15, 2017)

Supplemental advice letters:

Advice 3620-E-A (July 28, 2017)
Advice 3620-E-B (September 11, 2017)

SDG&E

Advice Letter 3089-E (June 21, 2017)

ORA Position

ORA supported the competitive solicitation framework and incentive pilots. Through comments, ORA offered additional recommendations to increase transparency and oversight, including requiring the utilities to file Tier 3 Advice Letters (AL) for contract approval in line with CPUC industry rules. ORA also suggested that DER deferral projects be identified in the Tier 3 AL and reflected in a Utility’s General Rate Case (GRC) and Energy Resource Recovery Account (ERRA) applications to avoid duplicate recovery. Furthermore, ORA requested clarification of the scope and composition of the DPAG regarding participation during the DER solicitation and selection process, as well as clarification of the IOU’s pilot evaluation report. In terms of the incentive pilot evaluation process, ORA recommended that this be revised to be managed by Energy Division staff and the contents of the final report be clarified. Finally, ORA suggested any savings from lower utility spending on distribution infrastructure should be returned to ratepayers.

In response to the utility proposals, ORA protested the inclusion of two DER deferral projects that had already been approved or requested through other avenues. Specifically, both PG&E and SCE filed Tier 3 Advice Letters that included cost recovery requests to relieve distribution system constraints that overlap with funding requests made in their respective General Rate Cases.

Click here for ORA’s November 30, 2016 Comments on Proposed Decision

Click here for ORA’s December 5, 2016 Reply Comments on Proposed Decision

ORA Petition for Modification

On November 9, 2017, ORA filed a Petition for Modification (PFM) of D.16-12-036. ORA noted that although the Decision assumed that double-recovery of distribution investments was unlikely, double recovery could still result if the utilities propose the same measure to relieve distribution system constraints. Case in point were the requests filed by PG&E and SCE for project funding that overlapped with their General Rate Cases. As a remedy, ORA recommended that the Commission instruct the IOUs to apply GRC funds towards the IDER deferral projects and DER solutions if this funding had already been requested or authorized. GRC funds requested or authorized to meet the same distribution system needs of an IDER project should be used to fund the administrative, incentive and contract costs for the deferral project.

Resolution E-4889

On December 14, 2017, the Commission passed Resolution E-4889 which approved with modifications SCE’s Advice Letters 3620-E/3620-E-A/3620-E-B and SDG&E’s Advice Letter 3089-E to initiate the Competitive Solicitation Framework Incentive Pilot process. The Resolution also approved concepts that will apply to PG&E’s AL 5096-E, although issues specific to that AL will be resolved separately. In addition, it resolved and clarified services that may qualify as incremental resources for the purposes of the pilot as well as issues included in the Utilities’ Request for Offers (RFO) materials.