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CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 1 15April2016
Stakeholder Comments Template Submitted by Company Date Submitted
[email protected](702)274-721716PalmCourtMenloPark,CA94025
CleanCoalition April18,2016
TheCleanCoalitionisanonprofitorganizationwhosemissionistoacceleratethetransitiontorenewableenergyandamoderngridthroughtechnical,policy,andprojectdevelopmentexpertise.TheCleanCoalitiondrivespolicyinnovationtoremovebarrierstoprocurementandinterconnectionofdistributedenergyresources(“DER”)—suchaslocalrenewables,advancedinverters,demandresponse,andenergystorage—andweestablishmarketmechanismsthatrealizethefullpotentialofintegratingthesesolutions.TheCleanCoalitionalsocollaborateswithutilitiesandmunicipalitiestocreatenear-termdeploymentopportunitiesthatprovethetechnicalandfinancialviabilityoflocalrenewablesandotherDER.
ThefollowingorganizationshavereviewedandendorsedthesecommentssubmittedbytheCleanCoalition:
CenterforSustainableEnergyStephanieWangSeniorPolicyAttorneystephanie.wang@energycenter.org415-659-9958
MarinCleanEnergyCCSongRegulatoryAnalystcsong@mcecleanenergy.org888-632-3674
EnvironmentCaliforniaMichelleKinmanCleanEnergyAdvocatemichelle@environmentcalifornia.org310-621-8935
CaliforniaAllianceforCommunityEnergyAlWeinrubCoordinatorcoordinator@cacommunityenergy.org501-912-3549
CaliforniaConsumersAllianceRonDickersonAdvocacyCoordinatorcalconsumersalliance@gmail.com559-392-5413
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 2 15April2016
ThefollowingorganizationsandindividualstakeholdersareingeneralsupportoftheCleanCoalition’sTACcampaignandproposedapproach.Theyreceivedthesecommentsinadvanceandhadtheopportunitytosubmitindividualcomments,butmaynothavereviewedthesecommentsorspecificrecommendationsindetail:
SolarCity
CaliforniaSolarEnergyIndustriesAssociation(Cal-SEIA)
EnvironmentalDefenseFund
SierraClub
LocalEnergyAggregationNetwork
350BayArea
Enphase
CenterforBiologicalDiversity
CenterforClimateProtection
LocalCleanEnergyAlliance
SustainableSiliconValley
3fficient
BBLSolarDesign&Consulting
CaliforniaConsumersAlliance
CaliforniansforEnergyChoice
CarbonFreeMountainView
Carbon-FreePaloAlto
BerkeleyClimateActionCommittee
CommercialSolarDesign
CommunityChoicePartners
CommunityRenewableSolutionsLLC
DynamicGridCouncil
EastBayCleanPowerAlliance
EnergyandPolicyInstitute
InstituteforLocalSelf-Reliance
IntegratedResourcesNetwork
MenloSpark
MicrogridMedia
MicrogridresourcesCoalition
MirasolDevelopmentLLC
NutterConsulting
PreserveWildSantee
PristineSun
SanDiegoEnergyDistrict
SimplySolarSLOCleanEnergy
SolarLandPartners
Sustaenable
VoltaicCapitalMarketsLLC
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 3 15April2016
ReviewallocationoftransmissionaccesschargetoloadservedbyDER
TheCAISOisproposingtoreviewtherulesfordeterminingloadsubjecttothetransmissionaccesscharge(TAC)toreflecttheeffectsofutility-sidedistributedgeneration,asproposedbyCleanCoalition.
TheCAISOisrequestingstakeholdersprovidecommentsonthistopicarea.Inparticular,pleasecommentonthethreeconcernstheCAISOraisedintheissuepaper,andifpossibleofferexamplestohelpilluminatetheseconcerns.
1. Transmissioninvestmentismainlydrivenbypeakloadconditions,whichmaynotbereducedbyaddingdistributedgeneration(DG).
2. NewDGdoesnotoffsetthecostoftransmissionthatwaspreviouslyapprovedandiscurrentlyinservice.
3. ExemptingsomeloadfromTACchargeswouldnotdecreasePTOrevenuerequirements,sosomecostswouldbeshiftedtoothercustomers.
Comments:
I. TheCurrentTACSystem....................................................................................................6
II. TheCleanCoalitionProposal............................................................................................7
III. PuttingtheProposalintoAction:AccountingChangesandtheTransmissionCostCorrection.............................................................................................................................14
IV. AddressingCAISOConcerns...........................................................................................15
V. Conclusion.....................................................................................................................21
Summary
TransmissionAccessCharges(TAC)areperkWhfeesfortransmissionusageassessedbytheCaliforniaIndependentSystemOperator(CAISO)onLoadServingEntities(LSEs).1TACpayfortheCAISO-balancedtransmissionsystem,basedontheTransmissionRevenueRequirements(TRRs)associatedwiththeamortizationofhistorictransmissioninvestments,return-on-equityforthetransmissionowners,andoperationsandmaintenanceofthetransmissiongrid.Thesechargesincludeauniversalhighvoltage(HV)TACforCAISOtransmissionfacilitiesoperatingatorabove200kV,andalowvoltage(LV)TACfortransmissionfacilitiesoperatedbyCAISOat
1ALoadServingEntity(LSE)isanyentitythatsellselectricitytoend-usecustomers.LSEsincludeutilities,CommunityChoiceEnergy(CCE)providers,DirectAccessproviders,andEnergyServiceProviders.Generally,customersservedbyaLSEarewithinaserviceterritoryofaParticipatingTransmissionOwner(PTO)utilitythatoperatesthedistributionsystemanddeliverstheenergytoallLSEcustomers—theutility’sandtheotherLSEs’customers,too.CAISOcurrentlyassessesTACbyPTOutilityserviceterritory,allocatingTACtoeachLSEbasedonpro-rataGrossLoaddataprovidedbythePTOutilitymanagingtheserviceterritory.
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voltageslowerthan200kV.TheLVTACrateisspecifictoeachutilityserviceterritorybasedontheTRRassociatedwiththeLVtransmissioninfrastructureservingeachutilityserviceterritory.
Forutilitiesthatarenotparticipatingtransmissionowners(non-PTOutilities),TACisbasedontheTransmissionEnergyDownflow(TED)measuredatthetransmissioninterfacesubstationswhereenergyisdeliveredfromhighertransmissionvoltagestolowerdistributionvoltages;thesesubstationsmarktheboundarybetweenCAISOoperationsandutilitydistributionserviceareas.2
InPTOutilityserviceterritories,however,TACarenotmeasuredatthetransmission-distributioninterface,butinsteadtheyaremeasuredatcustomermetersbasedonGrossLoad.ThegraphicbelowshowstheTACmeteringpointsfornon-PTOutilities,whichtheCleanCoalitionisproposingforallLSEs,andthemarketdistortingmeteringpoints(customermeters)thatarecurrentlyusedinPTOutilityserviceterritories.
ThemarketdistortingapproachtometeringTACatcustomermetersinPTOutilityserviceterritoriescausesseveralproblems,includingthefollowing:
• AssessingTACregardlessofwhethertheenergyislocallysourcedordeliveredthroughtransmission,effectivelyforcesWholesaleDistributedGeneration(WDG)andnetenergymetering(NEM)exportstosubsidizethetransmissionsystemthroughchargesonlocallysourcedenergy.Thisartificiallymakesthepriceoftransmission-dependentenergyappearcheaperandcreatesamajormarketdistortionthatresultsinmore
2Technically,CAISOrequiresutilitiestooperateasameteredsubsystem(MSS)inordertobeassessedTACbasedonTED.Allnon-PTOutilitiesinCaliforniaoperateasMSSs,andtotheCleanCoalition’sknowledge,noPTOutilitiesoperateasMSSs.Assuch,non-PTOutilitiesandMMSsaresynonymous.
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transmission-dependentenergybeingcontracted.Furthermore,thisapproachexacerbatesacyclethatdrivestransmissionusageandtheneedforadditionaltransmissioncapacity–thecostsforwhichfallonunknowingratepayersthroughincreasedTransmissionRevenueRequirements(TRR).
• LSEsutilizingWDGandNEMexport(collectivelyreferredtoaslocalDG)toservetheircustomersarenotcreditedwiththevalueofreduceduseofthetransmissionsystem.
• ThecurrentapproachtoTACassessmentresultsininconsistentanddisproportionateallocationoftransmissioncostsbetweenratepayersofPTOandnon-PTOserviceareas.Ratepayersinnon-PTOutilityserviceareasonlypayTAConthetransmission-dependentportionoftheirtotalenergyuse,asallLSEsshould,buttheinconsistencyeffectivelygivesnon-PTOutilitiesalowertransmissioncostassessmentthanwhatisassessedonPTOutilitiesandonotherLSEoperationsinthePTOutilityserviceterritories.
TheCleanCoalition’sproposalistoconsistentlyassessTACacrossallutilityserviceterritories,suchthatallratepayersreceivethesameTACtreatmentasthenon-PTOutilityserviceterritoriesreceivetoday:TACshouldbeassessedonTransmissionEnergyDownflow(TED)measuredatthetransmission-to-distributionsubstationsforallLSEs,insteadofusingthemarketdistortingGrossLoad(measuredatcustomermeters)asabasisforLSEsoperatinginPTOutilityserviceterritories.
Theproposedsolutionwouldhaveanumberofpositiveimpacts,includingincreasedfairness,transparency,andconsistency.First,accuratevaluationofWDGandNEMexportsarenecessarytofairlycomparerenewableprocurementoptions,developDistributionResourcesPlans(DRPs)andappropriatelyavoidanddefertransmissionanddistributioninvestments.CurrentvaluationpracticesinPTOutilityserviceterritories,suchastheLeastCostBestFit(LCBF)methodology,ignorecostsassociatedwithexistingtransmissionbecauseCAISOassessesTAConallenergythatcrossesthecustomermeter,whethertheenergyistransmission-dependentornot.However,theactualcostofusingthetransmissionsystemissignificantandthevalueofavoidingtransmissionusageneedstobeconsideredwhenvaluingWDGandNEMexport.
TheTACrateisapproximately$0.03/kWhwhenlevelizedover20yearstomatchatypicalrenewablescontract.CorrectvaluationrequiresthatTACareonlyappliedtoenergythatisdeliveredthroughthetransmissionsystem.CorrectingthisdistortionwillsupportWDGandNEMinvestmentasacost-effectivealternativetotransmission-dependentgenerationthatdrivesaviciouscyclethatrequiresevermoretransmissioninvestment.
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Second,changingtheTACbasistoTEDwouldcreateaccuratealignmentofTACassessmentswithconsumptionoftransmission-dependentenergy,reflectingthe“usagepays”principle.3ThisapproachbetterconformstoFERCOrder1000costallocationprinciplesbyensuringthatpartiesbenefittingfromtransmissionusageincurthecharges.4ThisapproachalsoremovestheexistingmarketdistortionthatundervaluesWDGandNEMexports,byignoringthevalueofavoidedtransmissionusage;anddrivinginappropriatedemandfortransmission-dependentgeneration,whichsubsequentlydrivesinappropriateinvestmentsintransmission.InvestmentsinnewtransmissioninfrastructureincreasesTRRandTAC.RemovingTAC-relatedmarketdistortionswillresultinpropermarket-basedadditionsofWDGandNEMexportresultinginlowerTRRandTACforallratepayersovertime.
Third,correctingtheTACassessmentprocesswillestablishconsistencybetweennon-PTOandPTOutilityserviceterritorypracticesandcreateabright-linedistinctionforcostresponsibilitybetweenCAISOtransmissionfacilitiesandDistributionSystemOperator(DSO)facilities,providingafoundationforfutureDSOmanagementoflocalgridresourceswithacleaninterfacetoCAISO.
Below,wediscussthecurrentsystemandourproposalindetail,andweaddresseachofCAISO’sconcernsinturn.
I. TheCurrentTACSystem
Asnotedabove,TACareperkWhfeesfortransmissionusageassessedbytheCaliforniaIndependentSystemOperator(CAISO)onLoadServingEntities(LSEs)onaperMWhbasis.TACpayfortheCAISO-balancedtransmissionsystem,basedontheTransmissionRevenueRequirements(TRRs)associatedwiththeamortizationofhistorictransmissioninvestments,
3ThecurrentTACassessmentpracticeinPTOutilityserviceterritoriesisthattransmissionpaymentsarebasedonenergyconsumptionregardlessoftransmissionusage.Currently,morethan98%ofenergywithinCAISOissourcedthroughthetransmissionsystem,andonlyenergythatusesthetransmissiongridandonlythatenergyshouldincurTAC.Theproposed“usagepays”approachrecoups100%oftransmissioncostsfromenergythatactuallyusesthetransmissiongrid.4OrderNo.1000,TransmissionPlanningandCostAllocation,136FERC¶61,051,atp.585(2011).
$0
$20
$40
$60
$80
$100
$120
CentralGenera1onProject
WDGProjectservinglocalloads
LCBFunderDistortedTACAssessmentSystem
TACCosts
Genera1onCost
$0
$20
$40
$60
$80
$100
$120
CentralGenera1onProject
WDGProjectservinglocalloads
LCBFunderCorrectedTACAssessmentSystem
TACCosts
Genera1onCost
Winningcontractprice
WinningcontractpriceCo
stin$/M
Wh
Costin$/M
Wh
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return-on-equityforthetransmissionowners,andoperationsandmaintenanceofthetransmissiongrid.
TherearetwodistinctTAC:auniversalhighvoltage(HV)TACtorecovercostsofCAISO’shighvoltagetransmissionfacilities,whichoperateatorabove200kV,andautilityserviceterritory-specificlowvoltage(LV)TACtorecovercostsoftheLVtransmissionfacilities,withvoltageslowerthan200kV,thatCAISOoperateswithineachutilityserviceterritory.Currently,thehighvoltageTACis1.05¢/kWh,andthelowvoltageTACvariesbetweenutilitiesandisashighas1.4¢/kWh.BothTACrateshavebeenrisingfastandareprojectedtorisemuchfurther,addingabout3¢/kWhtothelevelizedcostofenergyovera20-yearcontract5andrepresentingmorethan30%ofthewholesalecostofenergyinCalifornia.
CAISOassessestheTACindifferentways,dependingonwhetherautilityisaParticipatingTransmissionOwner(PTO)ornot.Forexample,allnon-PTOutilitiesareassessedTACbasedonTransmissionEnergyDownflow(TED),meteredatthepointwhereenergyisdown-convertedfromthetransmissiongridtothenon-PTOutility’sdistributiongrid.CAISOmetersatallapplicablesubstations–meaningnon-PTOutilitiesappropriatelypayTAConeachkWhofenergydeliveredthroughCAISO’stransmissionsystem.
Incontrast,PTOutilities,andLSEoperationsinPTOutilityserviceterritories,areassessedTACbasedonGrossLoad,whichismeasuredatcustomermeters.GrossLoadisbasedoncustomerenergydownflowmeasuredatthecustomermeters,andincludesenergythatwasgeneratedonthedistributiongridforlocaluse;andimportantly,GrossLoadisnotreversedbyNEMexports.Asaresult,PTOutilitiesandtheirclientLSEspayTAConeverykWhdeliveredatthecustomerlevel,evenifthatenergydidnotusethetransmissionsystem.
MeteringTACatcustomermeterscreatesamajormarketdistortionthatdisadvantagesdistributedgeneration(DG).WhenallenergypaysTAC,DGisnotrecognizedforavoidingtransmissionuse,denyingfairmarketcompetition,anddenyingcommunitiesofthemanybenefitsoflocalenergydevelopment,includingtheeconomic,environmental,andresiliencebenefits.6ThismarketdistortionhasledtheCleanCoalitiontoproposeastraightforwardsolution.
II. TheCleanCoalitionProposal
Toaligncostsandbenefits,TACshouldonlyapplytoenergythatisdeliveredthroughthetransmissionsystem,inthesamemannerasisbeingdonetodayfornon-PTOutilities.Therefore,theCleanCoalitionproposestoassessTAConallLSEsbasedonTEDmeasuredatthe
5SeeCAISOMemorandumfromKeithCasey,VicePresidentofMarket&InfrastructureDevelopment,BriefingonLong-termForecastofTransmissionAccessCharge(October25,2012),availableathttp://www.caiso.com/Documents/BriefingLong-TermForecastTransmissionAccessCharge-Memo-Nov2012.pdf.6See,e.g.,ThePotentialBenefitsofDistributedGenerationandRate-RelatedIssuesThatMayImpedeTheirExpansion:astudypursuanttoSection1817oftheEnergyPolicyActof2005,U.S.DepartmentofEnergy(February2007),availableathttps://www.ferc.gov/legal/fed-sta/exp-study.pdf.
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transmission-to-distributionsubstations.7Thisapproachisalreadyinpracticeforallnon-PTOutilities,allofwhichoperateasameteredsubsystem(MSS),andthemeteringinfrastructureisalreadyinplaceatallsubstations.
ThetreatmentofallutilitiesinthismannerwouldeliminatethemassiveTACmarketdistortionandalignTACtreatmentwithFERCprinciplesacrossallutilityserviceterritories,whetherPTOornon-PTO.Importantly,theunifiedapproachwillalsoproperlyvaluewholesaledistributedgeneration(WDG)andNEMexportsthatservelocalloadsbyproperlyreflectingthevalueofavoidingcostsassociatedwithtransmission.
UndertheCleanCoalition’sproposedapproach,CAISOwillalwaysassessTACatitsinterfacewithdistributiongridswhereenergyisdeliveredfromCAISOtransmissionvoltagestodistributionutilities’lowerdistributionvoltages.8Anyenergygeneratedbydistributedenergyresources(DER)andconsumedonthesamedistributiongridwouldnotbesubjecttotheTAC.Iflocalgenerationweretoeverbackfeedtothetransmissiongrid,whichwouldonlyhappenifthereisevenmorelocalgenerationbeingsuppliedthantotalenergyconsumptioninanentiretransmission-to-distributionsubstationgridarea,thenthatenergywouldincurTACwhenitbecomesTEDataneighboringsubstation.
TheCleanCoalitionproposalwouldnotchangeexistingTransmissionRevenueRequirements(TRRs)atallandwouldonlychangeTACratesinPTOutilityserviceterritoriesbyadjustingthedenominatorsintheTACrateformulas.ToestablishTACratesinPTOutilityserviceterritories,CAISOdividesthePTOutilityserviceterritory-specificTRRbythetotalGrossLoadacrosstheserviceterritory,whichisthetotalnumberofkWhofenergydeliveredtocustomersandisnotnettedbyNEMexports.WhilechangingthedenominatorfromGrossLoadtoTEDwoulddecreasethedenominatorintheTACratecalculationresultinginamarginallyincreasedTACrate,theTRRremainstheexactlythesameandtheaggregatedTACpaymentswouldremaintheexactlythesame;equalingtheunchangedTRR.TheonlydifferenceisthatthereisaclearmarketsignalintherelativevalueofWDGandNEMexportvstransmission-dependentgeneration.Overtime,theresultoftheentireCAISOmarketoperatinginamannerthatisfair,transparent,andconsistentisthattherewillbeamarket-basedboosttolocalrenewablesandotherDERthatwillreducetheneedforfuturetransmissioninvestments,whichyieldslowerTRRs,TACpayments,TACrates,andratepayerbills.
7TheCAISOIssuePapermentionedthattheCleanCoalitionisadvocatingassessingTACbasedonnetload.Becausetheterm“netload”hasdifferentmeaningsinotherproceedings,weusethetermTransmissionEnergyDownflowheretobeaspreciseaspossible.Importantly,theCleanCoalition’sproposalensuresthatanydistribution-sourcedenergythatbackfeedstothetransmissionsystemwillbeassessedTACwhenitbecomesTEDataneighboringsubstation.8TheTEDapproachcaneasilybeextendedtoassessSuperHighVoltage(SHV)TACassociatedwithCAISOexpansionbymeteringenergyflowsfromtheseparatelyproposedSHVtransmissiongridtoCAISO’sexistingHVandLVtransmissiongrids.
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ValuationofDistributedGenerationandProcurementImpacts
ThepurposeandmostimportantresultoftheCleanCoalitionproposalisthatanLSEwouldnotincurTAConenergyprocuredfromWDGandNEMexportsthatservelocalloads,therebyaligningandrecoveringalltransmissioncostsaccordingtotransmissionuse.Reflectingfullvalueoflocalgeneration,includingavoidedTAC,ensuresthatallLSEwillhaveaccurateandtransparentmarketsignalswhenmakingenergyprocurementdecisions.
UtilitiesevaluatetherelativevalueofenergyprojectsthroughtheLeastCostBestFit(LCBF)methodology.However,whenPTOutilitieslikePG&E,SCE,andSDG&EapplyLCBF,theyonlycomparetherelativepriceofenergybids,adjustedbysystemlossesandfuturetransmissionupgrades,allofwhicharebornebyratepayersthatareblindtothesesubstantialcostswithmulti-decadeobligations.9Asaresult,LSEsinPTOutilityserviceterritoriescurrentlyignoreTACintheirLCBFmethodologies,becauseCAISOassessesTAConGrossLoadinthePTOutilityserviceterritories,regardlessofwhetherenergyisdeliveredthroughthetransmissionsystemornot.
TheCleanCoalition’sproposalwillresolvethisinappropriateandeasilyresolvedmarketdistortionbyapplyingequalTACtreatmenttoallutilitiesbasedonthecurrentTACtreatmentfornon-PTOutilities.TheexampledepictedintheLeastCostBestFit(LCBF)chartsintheSummarysectionillustrateshowaWDGprojectmayhavehighergenerationcosts,butlowertotaldeliveredcostwhentheavoideduseofthetransmissionsystemisproperlyconsidered.
ExampleofShiftingtheTACbasistoTEDfromGrossLoadinPTOutilityserviceterritories
ToillustratehowtheproposedchangewillimpactLSEsinPTOutilityserviceterritories,weprovidethefollowingexamples.Inthischart,wemodeledasinglePTOutilityserviceterritorythathascustomersservedbythreeLSEs:thePTOinvestor-ownedutility(IOU),aCommunityChoiceAggregator(CCA),andanEnergyServiceProvider(ESP).
2016Scenario IOU CCA ESP Total Notes
LSEGrossLoad(GWh) 70 30 10 110 CurrentGrossLoadTACbasis
%ofGrossLoad 64% 27% 9% 100% ShareoftotalTACbasis(now)
TRR(inthousands) NA NA NA $1,650 TotalTransmissionRevenueRequired
TACRate(now)perMWh
$15.00 $15.00 $15.00 $15.00 TRR/GrossLoad
TACpayments(inthousands)
$1,050 $450 $150 $1,650 TACRatexGrossLoad
WDG(GWh) 1.4 0.6 0 2 2%isthehighestpercentageofwholesaleDGplusNEMexportsinanyPTOutility
9ItisworthnotingthatupgradesassociatedwithWDGarealwayspaidbytheprojectdevelopers,unliketransmissionupgradesthatareassociatedwithtransmission-interconnectedgeneration.Thetransmissionupgradesarealwayspaidbyratepayers,furtherdistortingthetruerelativevalueofWDGversuscentralgenerationtoratepayers.
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2016Scenario IOU CCA ESP Total Notes
serviceterritorytoday
TED(GWh) 68.6 29.4 10 108 ProposedTACbasis
%ofTED 64% 27% 9% 100% ShareoftotalTACbasis(proposed)
TRR(inthousands) NA NA NA $1,650 TRRisunchanged(achangeinTACbasisdoesnotaffectTRR)
NewTACRate(perMWh)
$15.28 $15.28 $15.28 $15.28 TRR/TED
NewTACpayments(inthousands)
$1,048 $449 $153 $1,650 NewTACRatexTED
%ofLSEGrossLoadsubjecttoTAC
98% 98% 100% 98%
ImmediateImpactsoftheCleanCoalitionProposal
ThisexamplehighlightsthreeimmediateresultsfromtheCleanCoalitionproposal.First,thechangeinTACbasisdoesnotaffecttheTRR.TheCleanCoalitionproposalcausesnoincreaseinthetotalTACrevenuerecoveredfromallLSEs.Regardlessofhowusageismeasured,theTACratewillalwaysresultinrecoveryoftheentireTRRfromLSEs.TheinitialtotalaggregatedTACwouldstillequalthesamecurrentTRR.Asalways,TRRsareguaranteedandwillcontinuetobefullyrecovered;thedifferenceovertime,however,isthatWDGandNEMexportsgrowfasterbyeliminatingthemarketdistortionsthatcurrentlydisadvantagethemandlesstransmissioninvestmentleadstolowerTRRandTACforallratepayersovertime.
Importantly,changinghowTACareassessedwouldnotcauseexistingtransmissionfacilitiestobeunderutilized.WDGandNEMexportstogethercurrentlyprovidelessthan2%oftheenergyprovidedbyutilities.Increasedrelianceonlocalgenerationwillserveloadgrowth,butlocalgenerationisunlikelytogrowfastenoughtogobeyondservingloadgrowth,resultinginthecontinuedneedforcentralgenerationandtransmissioninfrastructureatexistinglevels;andevenhigherlevelsbutgrowingataslowerpace.Sincetotaldemandforelectricitycontinuestoincrease,theCleanCoalition’sanalysesallshowWDGandNEMexportsgrowingataratethatneverexceedsCAISOloadgrowth,leavingtransmission-dependentcentralgenerationtoprovideforthecurrentloadandrepoweringrequirements,andforexistingtransmissiontocontinuetoberobustlyutilized.ThereisnoplausiblelocalgenerationgrowthscenarioinwhichthechangeinTACmeasurementwouldleadtostrandedtransmissionassetsorcosts.
Second,theTACrateincreases,butbarely.BychangingtheTACbasistoTED,thedenominatorintheTACrateformulawoulddecreasetotheextentthatthereisexistingWDGandNEMexports,andtheTACratewouldincreaseaccordingly,sincetheperkWhTACrateissetbydividingtheTRRbytotalkWhofusage.IfusagewereconsistentlymeasuredviaTEDastheCleanCoalitionproposes,theTRRnumeratorwouldremainunchanged,butinitially,wouldbe
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spreadacrossaslightlysmaller(lessthan2%10)denominator,sothattheTACratewouldincreasebyasimilarlyslightamount(lessthan2%).ThiscanbeseenintheexamplebycomparingtheoriginalTACrateof$15.00/MWhtothenewTACrateof$15.28/MWh.GiventhatmostLSEsaremeetingnegligiblelevelsoftheirGrossLoadsfromWDGandNEMexports,actualTACrateswouldincreasebysignificantlylessthan2%.Forexample,PG&EhasrobustReMATandNEMparticipation,butisprojectingtomeetonly1.8%ofitstotalelectricloadwithWDGandNEMexportbyyearend-2016.
ThechangeintotalTACpaymentsbetweenPTOutilitieswouldbenogreaterthanthecurrentdifferencebetweentheirsharesofloadsservedbyWDGandNEMexports,whichtheCleanCoalitionexpectstobeafractionofapercent.SomeLSEswillpaynegligiblymoreorlessinTAC,duetodifferencesinportfoliosofWDGandNEMexports.11ThiscanbeseenbycomparingcurrentTACpaymentstothenewlyproposedTACpayments.Inourexample,theLSEswithWDGresources(i.e.,theIOUandtheCCA)eachsawadecreaseinpaymentsoflessthan$2,000or0.8%,andtheESPsawanincreaseintotalpaymentsof$3,000or2%.Anyadjustment,nomatterhownegligible,simplycorrectscurrentinaccuraciesinaccountingforeachutility’scontributiontotransmissioncosts.Inthefuture,allutilitieswillhaveclearmarketsignalstoprocureenergybasedonlowesttotalcostofenergyplusdelivery–optingtoeitherprocuretransmission-dependentgenerationandpayTAC,ortopursueWDGandavoidTAC.
Third,theTACallocationbetweenratepayerswithinthesameLSEdoesnotchangeatall.InpassingtheTACpaymentthroughtoratepayers,LSEsdividetheirtotalTACliabilitybytheLSEGrossLoadtoproduceatransmissioncostrate,whichisthenchargedtocustomersbasedonanLSE’sself-determinedbasis.UnlessaLSEdecidestoallocatetransmissioncostsdifferently,likeprovidingcreditforcustomersthatparticipateinlocalrenewablesofferingsthatavoidtransmissioncosts,theninitiallyalloftheLSE’scustomerswillexperienceexactsametransmissioncosts.ItislikelythatasLSEsexpandprocurementoflocalrenewables,then
10AccordingtoDistributionResourcesPlanningfilings,thehighestpercentageofGrossLoadmetbyWDGplusNEMexportsinaPTOutilityserviceareaislessthana2%inCalifornia,sothemaximumprojectedchangeinTACratewouldbelessthan2%.Importantly,TRRs,whichequalaggregateTACpayments,donotchangeatall.11Themajorinvestor-ownedutilitieshavepublishedinformationcitingthefollowingcontractedReMATcapacityasofMarch1,2016:
• PacificGas&Electric:41.331MW(http://www.pge.com/en/b2b/energysupply/wholesaleelectricsuppliersolicitation/ReMAT/index.page)
• SouthernCaliforniaEdison:27.851MW(https://sceremat.accionpower.com/ReMAT/doccheck.asp?doc_link=ReMAT/docs/FIT/2013/documents/i.%20Capacity%20and%20Price%20Calculations/ReMAT%20Capacity%20Calculations%20Program%20Period%2015.pdf)
• SanDiegoGas&Electric:14.95MW(http://www.sdge.com/regulatory-filing/654/feed-tariffs-small-renewable-generation)
Additionally,theyhavesubmittedthefollowingprogresstowardsmeetingtheNEMprogramlimitsof5%ofaggregatedcustomerload:
• PG&E:1,952.56MW(http://www.pge.com/en/mybusiness/save/solar/nemtracking/index.page)• SCE:1,334.9MW(SCEAdviceLetter3391-E)• SDG&E:547.4MW(SDG&EAdviceLetter2879-E)
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customersparticipatinginlocalrenewablesprogramswillbenefitfromthevalueofthoselocalrenewablesinavoidingTAC.
LongTermImpactsoftheCleanCoalitionProposal
Thenextexampleusesprojected10%annualgrowthinlocalrenewableenergygenerationtohighlightpotentialimpactsoftheCleanCoalitionproposalaftertenyears.Forward-lookingimpactsarediscussedinmoredetailbelow.NotethattheTRRgrowthisreducedduetoWDGandNEMexportgrowthundertheTEDapproach,resultinginlowertotalTACpayments,allocatedinproportiontoeachLSE’stransmissionuseandlocalgenerationprocurement.Importantly,almostallLSEsexperiencesignificantsavingsduetothesubstantiallyreducedTRR.
2026Scenario IOU CCA ESP Total Notes
LSEGrossLoad(GWh) 70 30 10 110 CurrentGrossLoadTACbasis
%ofGrossLoad 64% 27% 9% 100% ShareoftotalTAC(now)
TRR(inthousands) NA NA NA $2,640 TotalTransmissionRevenueRequired
TACRateperMWh(2026projected)
$24.00 $24.00 $24.00 $24.00 TRR/GrossLoad;reflectsCAISO’sprojected7%annualTACincrease
TACpayments(inthousands)
$1,680 $720 $240 $2,640 TACRatexGrossLoad
WDG(GWh) 4 6 0 10 9%energysourcedbelowT-Dinterface(10%DGgrowthrate)
TED(GWh) 66 24 10 100 ProposedTACbasis
%ofTED 66% 24% 10% 100% ShareoftotalTAC(proposed)
TRR(inthousands) NA NA NA $2,420 Reduced(duetodeferredneedfornewcapacity)
TED-basedTACRate2026
$24.20 $24.20 $24.20 $24.20 TRR/TED;TRRisreducedduetoDGmeetingshareofloadgrowth
NewTACpayments(inthousands)
$1,597 $581 $242 $2,420 NewTACRatexTED
%LSEGrossLoadsubjecttoTAC
94% 80% 100% 91%
Thekeylong-termimpactoftheCleanCoalitionproposalisthatboththeTRRandtheTACratewoulddeclinesignificantlyovertime.ChangingtheTACassessmentpointeliminatestheTACmarketdistortionthatcurrentlyundervaluesWDGandNEMexportsinPTOutilityserviceterritoriesandresultsinincreaseddeploymentoflocalrenewables.Inaddition,moreWDGandNEMexportsslowtheneedforadditionalinvestmentsintransmissioninfrastructureandresultinsubstantialavoidedtransmissioncostsforallratepayersovertime;significantlyslowingthealarminggrowthinTACratesandevenshrinkingthem.CleanCoalitionanalysesshowthatCaliforniaratepayerswillsaveatleast$35billioninavoidedtransmissioncostsover20years,whichisillustratedintheTACcurvesbelow.Thefirstchartbelowshowsthelargereductionsin
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 13 15April2016
TACratesachievedover20yearsbyeliminatingtheTACmarketdistortion,therebyincreasinguseofWDGandNEMexports.
Inthesecondchart,theareabetweenthebluecurveandtheothercurvesrepresentsavoidedratepayertransmissioncostsoverthe20-yearperiod.
OtherImpacts
Inadditiontotheratepayerandprocurementbenefits,theCleanCoalitionproposalwouldalignTACassessmentwithFERCOrder1000.12FERCOrder1000requiresallregionaltransmissionoperatorstouseaprinciples-basedapproachtoallocatingtransmissioncosts,ensuringthatcostsareroughlycommensuratewithestimatedbenefits,andthatcostsarenotallocated
12OrderNo.1000,TransmissionPlanningandCostAllocationbyTransmissionOwningandOperatingPublicUtilities,136F.E.R.C.¶61,051,atP585(2011).
$0.010
$0.015
$0.020
$0.025
$0.030
$0.035
$0.040
$0.045
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
BusinessAsUsual(BAU):260MWaddedWDGinYear2(2017)
Post-TACfixScenario1:10%WDGannualgrowth
Post-TACfixScenario2:25%WDGannualgrowth
Post-TACfixScenario3:50%WDGannualgrowth
YearAPerTACFix
$/kW
h
PG&EForecastedTACRate
Year20shareoftotalGrossLoadservedbyWDG
4.6%
22.2%
28.1%29.9%
Notes&Assump7ons• WDG=WholesaleDG+NEMexports• All3scenariosassume:o Year2BusinessAsUsual(BAU)260MWWDGplus100MWaddi_onalWDG
o Growthratecitedinscenarionameisyears’3-20growthinshareofPTOs’newGrossLoadservedbynewWDGgenera_on
o NewWDGgenera_onneverexceedsnewGrossLoad
$0.03/kWhwhenlevelizedover20years
$0.010
$0.015
$0.020
$0.025
$0.030
$0.035
$0.040
$0.045
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
YearA3erTACFix
$/kW
h
$0.03/kWhwhenlevelizedover20years
RatepayeravoidedTACcostsover20yearperiod
$35billion
$20billionaddi.onal
$8billionaddi.onal
PG&EForecastedTACRate
$0.010
$0.015
$0.020
$0.025
$0.030
$0.035
$0.040
$0.045
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
BusinessAsUsual(BAU):260MWaddedWDGinYear2(2017)
Post-TACfixScenario1:10%WDGannualgrowth
Post-TACfixScenario2:25%WDGannualgrowth
Post-TACfixScenario3:50%WDGannualgrowth
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 14 15April2016
involuntarilytoratepayerswhodonotbenefit.Undertheseprinciples,itisreasonableandappropriateforsharedtransmissioncoststobeassessedinproportiontomeasuredusageofthetransmissionsystem(i.e.,the“usagepays”principle).ThisisespeciallytruesincetheexistingCAISOtransmissiongridandassociatedTRRsareanticipatedtocontinuetoserveCAISO’sexistingGrossLoad;thegrowthinWDGandNEMexportsisanticipatedtoonlyoffsetloadgrowthoverthecoming20years,neverreducingtheexistingCAISOGrossLoad.
TheCleanCoalition’sproposalwouldalignCAISO’sTACtreatmentwithFERCOrder1000principlesbyensuringthatonlyactualusageofthetransmissionsystemisassessedTAC.FERCOrder1000principlesarealreadyappropriatelyappliedinnon-PTOutilityserviceterritories,butthecurrentmethodofassessingTACforinPTOutilityserviceterritories,basedonGrossLoadmeasuredatthecustomermeter,improperlycreatesaTACliabilityforenergyproducedbyWDGandNEMexportsthatdonotusethetransmissionsystem.
III. PuttingtheProposalintoAction:AccountingChangesandtheTransmissionCostCorrection
BecausemultipleLSEscanfunctionbeneaththesamedistributionsubstationandTEDmeasurement,someaccountingadjustmentswillbeneededinordertoensurethateachLSEisproperlycreditedforitsWDGandNEMexportscontribution;payingonlytruepro-ratasharesoftransmissionusage.TheCleanCoalitionproposesthefollowingadjustmentstomanagetheseissues.
First,theCleanCoalitionsuggestschangingCAISOTACbillingfromtheLSEtothedistributionprovider.CAISOcurrentlycollectsTACfromtheindividualLSEsratherthanthePTOutilitydistributionproviderthatmanagesbillingandreceivespaymentsfromallcustomersofLSEsconnectedtoitsdistributionsystem.BecausetotalTACassessmentforallLSEsinautilitydistributionserviceareawillequalthemeasuredTEDofthatdistributionservicearea,andthefundsarecollectedfromallcustomersbythedistributionutility,theCleanCoalitionsuggestschangingCAISOTACbillingfromtheLSEtothedistributionutility.TheproposedTEDTACassessmentprocesswillestablishconsistencybetweennon-PTOandPTOutilityareapractices.Italsocreatesabright-linedistinctionforcostresponsibilitybetweenCAISOtransmissionfacilitiesanddistributionfacilities–removingCAISOresponsibilityforaccountingforindividualLSEsharesoftotalTACbilling.Thiswouldalsobeconsistentwith,andprovideafoundationfor,futureDistributionSystemOperator(DSO)managementoflocalgridresourcesandprovideasimpleandcleaninterfaceforcoordinationwithCAISO.
Second,thedistributionproviderwouldneedtoproperlyallocatetransmissioncoststoeachLSEwithintheirserviceterritoryinproportiontothetransmissionusageofLSEenergyportfolios.Todothis,theCleanCoalitionrecommendsapplyingaTransmissionCostCorrection(TCC),anaccountingadjustmentthatwouldenabledistributionproviderstoreimburseunwarrantedtransmissionchargestoanLSEorcustomerclassthatprocuresWDGand/orNEMexports.TheTCCforeachLSEwouldequalthatLSE’srelativemeteredGrossLoadminusWDG
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 15 15April2016
andNEMexportsplusdistributionlosses.Thischangeisstraightforwardtoimplementbecausedistributionutilitiesalreadyhavethemetereddataforallthecomponents,includingtheTED,whichisalreadymeteredatalltransmission-to-distributionsubstations.
Forexample,asillustratedintheearlier2026Scenariotable,wesee110GWhofGrossLoad,withtheIOUcustomersconsuming64%oftheGrossLoadandtheCCAcustomersconsuming27%.However,wealsoseethatthattheIOUsupplied6%(4GWh)ofitsGrossLoadthroughmeteredWDG(includingNEMexports),whereastheCCAsupplied20%(6GWh)ofitsGrossLoadthroughWDG.DividingtheTED-basedTACbetweenthesetwoLSEs,weseethattheIOUisresponsiblefor66%ofthetotalTAC,andtheCCA24%.EachLSEwouldbedebitedorcreditedbythedistributionutilityforthedifferencebetweentheproportionatecustomer-meteredconsumptioncomparedwiththeshareofTEDafteradjustingforWDGcredits.Inthisinstance,theIOUwouldbedebiteda2%surcharge(64–66%)andtheCCAcrediteda3%rebate(24–27%).AteachLSEsoption,TCCscanbepassedtocustomersthatparticipateinlocalrenewablesprograms,etc.
IV. AddressingCAISOConcerns
TheCAISOIssuePaperhighlightedthreecentralconcerns,whichweaddressinturnbelow.
A. CAISOnotesthatadditionalDERmaynotoffsetpeakloadconditions,butdistributedsolarresourcestypicallycontributetopeakloadreductionsintothelateevening.
TheTACratesarebasedontotalenergyconsumption,notpeakusage,andTACisnotintendedtopenalizepeakusage.Congestioncharges,time-of-use(TOU)rates,andothermechanismsservethepurposeofdisincentivizingpeakusage,andaretheappropriatetoolstomeetthisgoal.TACtakenoaccountwhatsoeverofpeakdemand,andassuch,itisappropriatetodifferentiatebetweenenergythatisdeliveredthroughtransmissionfromenergythatisnot.
Regardless,additionallocalrenewablesdoreducepeakusageofthetransmissiongrid.Inthecaseoflocalsolar,morethan30%ofthesolarnameplatepowerproductioncontributestoreducingpeaktransmissionusage,whichoccursduringthelaterpartofdaylighthours.Increasingdeploymentoflocalsolarthereforeslowsoravoidstheneedforadditionaltransmissioncapacityinvestment.Forexample,CAISO’speakloadfor2015wasSeptember10at4:53pm,andthoughnotoperatingatpeakcapacity,localsolarresourceswereproducingenergytohelpmeetthepeakTransmissionEnergyDownflow,orTED.Forexample,atypical1MWDCwest-facingrooftopsolarinstallationinBurbank,Californiawouldstillproduce354kWAC
13at5pmonatypicalSeptember10thday.PeakloadstypicallyoccurduringthemonthsofJulyandAugustwhensolargenerationwouldbeevengreaterinthelateevening,butWDGandNEMsystemssubstantiallyreducepeakTEDatallseasonsinwhichpeakTEDmightoccurin
13BasedonNRELSystemAdvisorModel,standardPVWattsconfiguration,TMY3solarirradiance8760hourlydata.Outputvariesbydate,location,andorientation.
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 16 15April2016
California.Thechartbelowdisplaystherelationshipbetweenthesolargenerationprofileandthe2015peaknetload.
HourlyLoadon2015PeakDay–September10
AsCaliforniadevelopsanewIntegratedResourcesPlan,TOUcustomerbilling,andIntegratedDistributedEnergyResources(DER)programs,thestatewillincreasinglyrealizeopportunitiestoalignloadswiththegenerationprofilesofsolarresources.Theseincentivesarelikelytohighlightwestfacingsolarasaparticularlyusefultooltoaddresspeakloadconditionswithdistributedresources.Westfacingsolarwilltypicallygeneratelesselectricityoverall,butwillgeneratemoreenergylaterinthedaythatmaximizessolarproductionatannualpeakloadperiods.ThenewTOUratesapplyingtoNEMcustomerswillfurtherincentivizewest-facingsolarinstallations,aswillTime-of-Deliverypaymentschedulesforsolarprocurementcontracts,furtherincentivizinglocalrenewablestoreducepeakTED.
Also,itisworthnotingthatthecurrentTACstructuredoesnotincludeanydemand-relatedcomponentsassociatedwithpeakload.Rather,TACareentirelybasedonperkWhfeesfortransmissionusage,regardlessofwhethertheusageoccursduringpeakdemandornot.Forexample,twoseparateutilitieswithverydifferentGrossLoadprofileswillpaythesameamountoftotalTAC,evenifoneusesallitsenergyduringoff-peakhours.WhilechangingtheTACassessmentpointalonedoesnotincentivizeutilitiestomodifytheircustomers’loadprofiles,itdoesreducepeakTED.Ofcourse,removingtheexistingTACdistortiononlocalrenewableswillmakethemmorecompetitiveinprocurementdecisions,andaslocalrenewablesdeploymentsproliferate,therewillbefurtherreductionofpeakTED.
Assumes&10,000&MW&solar&in&Los&Angeles&facing&SW,&fixed;&&Sep&10&@&5pm,&solar&generates&&46%&of&maximum&daily&capacity&at&that&day’s&peak&load&hour&
Peak&load&Sep&10&5pm&47,252&MW&
MW&
&25,000&&
&30,000&&
&35,000&&
&40,000&&
&45,000&&
&50,000&&Sep&10J1&
Sep&10J2&
Sep&10J3&
Sep&10J4&
Sep&10J5&
Sep&10J6&
Sep&10J7&
Sep&10J8&
Sep&10J9&
Sep&10J10&
Sep&10J11&
Sep&10J12&
Sep&10J13&
Sep&10J14&
Sep&10J15&
Sep&10J16&
Sep&10J17&
Sep&10J18&
Sep&10J19&
Sep&10J20&
Sep&10J21&
Sep&10J22&
Sep&10J23&
Sep&10J24&
Net&Load&(Gross&Load&J&WDG)&
Load&
Peak&Net&Load&Sep&10&6pm&45,700&MW&(J3%)&
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 17 15April2016
B. Localgenerationdoesnotoffsetthecostoftransmissionthatisalreadyinservice,butitdoesreducefuturetransmissionrequirements,yieldinglowerTRRandTACratesforratepayers.
ThemostsignificanteconomicbenefitoftheproposedTACsolutionisinthelong-termsavingsforratepayersthatwillbeachievedthroughreducedtransmissioninvestment.IncreaseddeploymentofDERreducesrequiredinvestmentsinnewtransmission,whichreducestheTRRandslowstherateofincreaseoftheTACrateandpossiblyevenyieldsTACratereductions.TheTACrateiscurrentlyprojectedtoclimbsignificantlyoverthenext20years,meaningthattheprojectedcombinedHVandLVTACratelevelizedover20yearsisnearly$0.03/kWhinPG&Eterritory.Asnotedabove,additionalDGreducespeaktransmissionusageandpostponestheneedforadditionaltransmissioninvestment.IftheTACproposalisenacted,ratepayerswillsavebillionsofdollarsoverthenext20yearsinavoidedorpostponedtransmissioncosts.(Note:thisfuturetransmissionsavingsarecoveredindepthinthe“LongTermImpactsoftheCleanCoalitionProposal”sectionabove.)IflocalgenerationisnolongersubjecttoTAC,itwillbeamorecost-effectiveoptionforcontributingtodistributionsystemupgradealternativesevaluatedunderDistributionResourcePlans,resultinginadditionalratepayersavingsbecausedevelopersofWDGprojectsbear100%ofthedistributiongridupgradesassociatedwithWDGprojects.Inotherwords,WDGprojectsprovidefreedistributiongridupgradestoratepayers.
Inadditiontothelong-termsavings,ratepayerswillbenefitfromlocalgenerationprocurementintheformofincreasedlocalresilience,localeconomicinvestment,andreducedlanduseimpacts.Thebenefitsofadditionalappropriatelocalgenerationaresignificantineconomic,social,andenvironmentalanalyses.14
ItisalsoworthnotingthatachangeinhowTACisassessedwouldnotresultinstrandedtransmissioncostsfortransmissionowners,becauseCAISOguaranteesthattransmissioninvestmentsarerecoupedatadefinedreturn-on-equitythroughtheTRR.TheTACrateissetbydividingtheTRRbytotalkWhofusage.IfusagewereconsistentlymeasuredviaTransmissionEnergyDownflowastheCleanCoalitionproposes,theTRRnumeratorwouldremainunchanged,andthetotalaggregatedTACwouldstillequaltheTRR,whichdoesnotchange.TheTRRwouldthereforebefullyrecovered.ThereisnoscenarioinwhichthechangeinTACmeasurementwouldleadtostrandedtransmissioninvestments.
Also,changinghowTACisassessedwouldnotcauseexistingtransmissionfacilitiestobeabandonedorunderutilized.WDGandNEMexportstogethercurrentlyprovidelessthan2%ofCAISO’saggregatedGrossLoad.Increasedrelianceonlocalgenerationwillreducetherateatwhichnewtransmissioninvestmentsareneeded,butbecausetotaldemandforelectricitycontinuestoincrease,thegrowthinWDGandNEMexportsarenotexpectedtoexceedload
14See,e.g.,ThePotentialBenefitsofDistributedGenerationandRate-RelatedIssuesThatMayImpedeTheirExpansion:astudypursuanttoSection1817oftheEnergyPolicyActof2005,U.S.DepartmentofEnergy(February2007),availableathttps://www.ferc.gov/legal/fed-sta/exp-study.pdf.
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 18 15April2016
growth—leavingtransmission-dependentcentralgenerationtoprovideforcurrentloadandrepoweringrequirementswiththeexistingtransmissioncontinuingtoberobustlyutilized.ThereisnoplausiblelocalgenerationgrowthscenarioinwhichthechangeinTACmeasurementwouldleadtoexistingtransmissionfacilitiesnotbeingutilized.
C. ExemptinglocalgenerationfromTACchargeswouldincreasetheTACratebutnottheTRR,whichequalsthetotalofTACpayments,andwouldcorrectanexistingcostshift.
TheCAISOIssuePaperhighlightsaconcernthatanincreasedTACratewouldresultinacostshifttoLSEsthatdonothavesignificantlocalgenerationresources.Initially,basingtheTAConTEDmightresultinanegligibleadjustmentinTACpaymentsbetweenLSEstotheextentthattheyhavedifferentproportionsoflocalgenerationresources,butimportantly,themotivationforassessingTACbasedonTEDistocorrectamajor,existingcostshiftfromtransmission-dependentenergytolocalgeneration.Currently,localgenerationincursacosttosupportatransmissionsystemthatitdoesnotuse.BychangingtheTACassessmentbasistoTED,CAISOcouldensurethattransmission-dependentenergyproperlybearsthefullcostofthetransmissiongrid.
TACRateAdjustmentsundertheCleanCoalitionProposal
AnyadjustmentinTACpaymentsbetweenLSEswillbenegligible.CurrentlythemajorutilityLSEseachhavearoughlycomparableshareoftheircustomerloadservedbylocalgeneration,and,assuch,convertingtoaTED-basedTACwillnotchangetheirrelativeshareoftotalTACpayments.Becausethislocalgenerationshareisapproximately1.8%ofannualload,anLSEwithzeroDGresourceswouldnotseeachangeinpaymentsgreaterthan1.8%.Goingforward,eachLSEwillselecttheportfolioofresourcesthatprovidethebestvaluetotheircustomersafterconsideringthechangesinTACassociatedwithlocalgenerationandassociatedDER.AnLSErelyingmoreontransmissiontorealizenetratepayerbenefitswillonlycontributeproportionatelytorecoupingthecostofthosetransmissionfacilities.
TheTACrateiscomprisedoftwoparts:ahighvoltage(HV)TAC,aswellasalowvoltage(LV)TAC.Currently,theHVTACis1.05¢perkWhandassessedona“postage-stamp”basiswhereallLSEspaytheHVTACrate.TheLVTACisashighas1.4¢/kWhandvariesbetweenLSEsona“licenseplate”basis,dependingonthetotalnon-depreciatedLVTRRservingautilityserviceterritory.
ToillustratehowtheproposalwouldimpacttheHVTAC,weseebelowthatthetotalTACpayments(i.e.,theTRR)remainexactlythesamebeforeandafterthechangeintheTACassessmentpoint.Becauselocalgenerationmeetsapproximately1.8%ofload,thedifferenceintheloadbasisfortheTACwouldbeareductionof1.8%,or3,870GWh.ThiswouldresultinanincreaseintheTACrateof$.00019/kWh,or1.8%.ThetotalHVTACpaymentswouldremainunchangedat$2.22billion.
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 19 15April2016
ToillustratehowLVTACmightadjustbetweenLSEs,considertheexamplefromSectionII.InordertoproperlyaccountforavoidedtransmissioncostsbetweenLSEsinthesamedistributionutilityserviceterritory,thedistributionutilitywillmetertheconsumptionofeachLSEandreimburseforavoidedTACcostsbymeansoftheTransmissionCostCorrection.EachLSEwouldbedebitedorcreditedbythedistributionutilitytoaccountfortheirproportionatetransmissioncostsbasedoncustomer-meteredconsumptionadjustedforlocalgenerationcredits.ThisaccountingwouldresultinactualchargestoeachLSEaccordingtoitsproportionalTACliability.Foranexampleofhowthiswouldapplyinpractice,seethesubsectiontitled“PuttingtheProposalintoAction:AccountingChanges,andtheTransmissionCostCorrection”inSectionIIabove.
AnyTACadjustment,nomatterhownegligibleorwhetheritimpactstheHVTACand/orLVTAC,simplycorrectscurrentinaccuraciesinaccountingforeachLSE’scontributiontotransmissioncostsinPTOutilityserviceterritories.
WhatdoesnotchangeundertheCleanCoalitionProposal
ItisalsoimportanttonotewhatdoesnotchangeundertheCleanCoalitionproposal.
• TransmissionRevenueRequirements(TRRs)willcontinuetobefullymet.• TotalTACpaymentstoPTOutilitiesthroughCAISOwouldnotincrease.• TherewouldbenocostshiftbetweenratepayerswithinanLSE.
Asnotedabove,LSEsspreadtransmissioncostsatanequalrateamongtheircustomerbase,soitcurrentlymakesnodifferencewhattypeofenergyanindividualratepayerisconsuming.Instead,allratepayerswithinoneLSEbenefitequallywhenlocalgenerationispartoftheLSE’s
NOTE:TocalculatethefullTACrate,LVTACmustalsobeconsidered.LVTACisspecifictoeachserviceterritory.ThetotalLVTACcoststoratepayers,andwithineachserviceterritory,alsodonotchangea@ertheTACfix.TotheextentthatPTOsservedifferentsharesoftheirGrossLoadwithWDGandNEMexports(whichiscurrentlyminorforallPTOs–1.8%forPG&Ein2016),fixingtheTACwillresultinnegligiblecostshi@sbetweenPTOs.
CAISOHVTRR
LoadBasisforTAC
HVTACRate
TotalHVTACCoststo
Ratepayers
BeforeTACFix
$2.22billion(Total2016PTOfilings)
211,341GWh(GrossLoad)
$0.01049/kWh(HVTACrate=CAISOHVTRR÷GrossLoad)
$2.22billion(HVTACRate×GrossLoad)
A>erTACFix
Sameasabove
207,471GWh(TransmissionEnergyDownflow)=3,870GWhlessthanGrossLoadduetolocalWDG(1.8%)
$0.01068/kWh($0.00019/kWhincrease,1.8%)
Sameasabove(NewHVTACRate×TransmissionEnergyDownflow)Transmissionusagenowpays100.0%ofTRR,notjust98.2%
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 20 15April2016
energyportfolio.Inthefuture,LSEsmightbemotivatedtoofferlocalrenewablesprogramsandsharethefinancialbenefitsofavoidingtransmissioncostswithparticipatingratepayers.
CaliforniaCAISO ESDERPhase2–IssuePaper
CAISO/M&IP/JC 21 15April2016
V. Conclusion
AssessingTAConthebasisofTransmissionEnergyDownflowwouldstartavirtuouscycleofencouragingLSEstoinvestinmorelocalrenewablestoreducetheirTACpayments.Overtime,thisassessmentpracticewouldleadtosubstantiallylowerTRRbecauselesstransmissioninvestmentwouldberequired.Additionally,localgenerationtranslatestoreducedtransmissionusageduringpeakloadconditions.TheproposalthereforeresultsinlowerTACratesforallutilitiesandlowertotaltransmissioncostsforallratepayers.Forthesereasons,theCleanCoalitionrespectfullyurgesCAISOtoadoptitsproposalforassessingTACbasedonTransmissionEnergyDownflowinPTOutilityserviceterritories,exactlyasisalreadydoneinnon-PTOutilityserviceterritories.