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CaliforniaCAISO ESDERPhase2–IssuePaper

CAISO/M&IP/JC 1 15April2016

Stakeholder Comments Template Submitted by Company Date Submitted

KatherineRamseykatie@clean-coalition.org(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

TeMixEdwardG.CazaCEOed@temix.com408-621-2772

CaliforniaAllianceforCommunityEnergyAlWeinrubCoordinatorcoordinator@cacommunityenergy.org501-912-3549

CaliforniaConsumersAllianceRonDickersonAdvocacyCoordinatorcalconsumersalliance@gmail.com559-392-5413

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

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.

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.

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.

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).

CentralGenera1onProject

WDGProjectservinglocalloads

LCBFunderDistortedTACAssessmentSystem

TACCosts

Genera1onCost

CentralGenera1onProject

WDGProjectservinglocalloads

LCBFunderCorrectedTACAssessmentSystem

TACCosts

Genera1onCost

Winningcontractprice

WinningcontractpriceCo

stin$/M

Costin$/M

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.

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.

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.

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

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)

customersparticipatinginlocalrenewablesprogramswillbenefitfromthevalueofthoselocalrenewablesinavoidingTAC.

LongTermImpactsoftheCleanCoalitionProposal

Thenextexampleusesprojected10%annualgrowthinlocalrenewableenergygenerationtohighlightpotentialimpactsoftheCleanCoalitionproposalaftertenyears.Forward-lookingimpactsarediscussedinmoredetailbelow.NotethattheTRRgrowthisreducedduetoWDGandNEMexportgrowthundertheTEDapproach,resultinginlowertotalTACpayments,allocatedinproportiontoeachLSE’stransmissionuseandlocalgenerationprocurement.Importantly,almostallLSEsexperiencesignificantsavingsduetothesubstantiallyreducedTRR.

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

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

YearAPerTACFix

PG&EForecastedTACRate

Year20shareoftotalGrossLoadservedbyWDG

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

$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)

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

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.

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&

&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)&

Peak&Net&Load&Sep&10&6pm&45,700&MW&(J3%)&

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.

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.

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%

energyportfolio.Inthefuture,LSEsmightbemotivatedtoofferlocalrenewablesprogramsandsharethefinancialbenefitsofavoidingtransmissioncostswithparticipatingratepayers.

V. Conclusion

AssessingTAConthebasisofTransmissionEnergyDownflowwouldstartavirtuouscycleofencouragingLSEstoinvestinmorelocalrenewablestoreducetheirTACpayments.Overtime,thisassessmentpracticewouldleadtosubstantiallylowerTRRbecauselesstransmissioninvestmentwouldberequired.Additionally,localgenerationtranslatestoreducedtransmissionusageduringpeakloadconditions.TheproposalthereforeresultsinlowerTACratesforallutilitiesandlowertotaltransmissioncostsforallratepayers.Forthesereasons,theCleanCoalitionrespectfullyurgesCAISOtoadoptitsproposalforassessingTACbasedonTransmissionEnergyDownflowinPTOutilityserviceterritories,exactlyasisalreadydoneinnon-PTOutilityserviceterritories.

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