Regulatory Roundup: Grid Modernization, Electric Transportation, Cloud Computing, and More Continue – Remotely

Posted by Ryan Katofsky on Apr 15, 2020 1:13:05 PM

Regulatory Roundup 2-730

I’m sure you don’t need another blog telling you how COVID-19 has changed everything. While I won’t be able to fully avoid some of that here, read on if you want to know what is still happening at some of the state utility commissions around the country where AEE is actively engaged. My colleagues and I are used to traveling to state capitals to engage in regulatory proceedings, and while that obviously isn’t possible, commissions have transitioned much of their work online. There’s some good news here, and if you are like me, you can use all the good news you can get.

While commissions are correctly focused on making sure that customers are protected during these tough economic times (such as by suspending service shut-offs or delaying planned rate increases) and ensuring that utilities can continue to provide safe and reliable service, there is important work continuing on a host of issues that may not be top of mind these days, but that are nonetheless critical to the ongoing energy transition. Arguably, that transition will be more important than ever as we emerge from this crisis, since advanced energy employed more than 3.6 million people at the end of last year. Many of these jobs are in jeopardy – indeed, more than 100,000 advanced energy workers lost their jobs in March – but could come back quickly if we lay the groundwork for that now. Advanced energy can also help keep energy costs affordable as the economy gets going again.

Here, we’ll cover some of what we’ve been up to in six states (in no particular order). And since it’s important to express gratitude these days, I’m grateful to my colleagues who are doing this work and helped pull this information together: Danny Waggoner, Coley Girouard, Erica Glenn, and Prusha Hasan.

California continues to lead the country on transportation electrification (TE), with about half of the nation’s electric car sales originating in the Golden State. At the beginning of 2019, the California Public Utilities Commission (CPUC) initiated a rulemaking, referred to as the DRIVE OIR, to provide more structure and guidance on future TE investments and to streamline the application process. AEE has been involved throughout the rulemaking, advocating for an acceleration of the TE market, a streamlined application review process, and more efficient and effective program implementation and development (see our opening and reply comments from February 2019). Fast forward to this February, when the CPUC released staff's proposal for a draft TE framework. AEE submitted comments in response, expressing serious concerns with the proposed timeline and prolonged application process, which we believe has the potential to freeze the California TE market for the next four to five years. In addition, we signed onto a joint motion (along with 30 other parties) to stay the framework and allow parties to propose alternative frameworks that would accelerate the proposed timeline. On March 23, the CPUC held a virtual workshop to discuss stakeholder feedback and to lay out next steps, which in the near term is an April 21 deadline to submit reply comments and alternative framework proposals. 

AEE and the Advanced Energy Buyers Group (ABEG) have also been actively involved in the CPUC’s direct access (DA) proceeding over the past year. Last March, the CPUC opened a rulemaking to implement SB 237, reopening the state’s direct access program to additional customers (see our joint opening comments and reply comments). The DA program, which has been limited to about 11% of peak load since 2010, allows retail nonresidential customers to purchase electricity service directly from competitive providers. Last June, the CPUC issued a Phase 1 order to expand the DA cap by 4 TWh, or an additional 2-3% of peak load, allocated proportionally to the investor-owned utilities' service territories (see joint comments). Since then the Commission has been focused on Phase 2 and the second requirement of SB 237, issuing recommendations to the legislature on a full expansion of the DA cap to nonresidential customers by June 1, 2020 (see joint opening comments on Phase 2). AEE and AEBG have been actively advocating for a DA reopening schedule that provides a reasonable path while ensuring reliability and compliance with California's GHG and clean energy goals. (See jointly filed informal comments in response to Phase 2 kick-off workshop in January and a joint letter that proposes a Direct Access reopening schedule). Despite a slight delay in the original schedule, we still expect it to wrap up by this summer.

Texas also has been looking at transportation electrification. Regulatory activities at the Public Utility Commission of Texas (PUCT) are continuing with agency employees working from home. Project 49125 is intended to help the PUCT understand current EV market trends, how EVs will impact the electricity grid in Texas, and how EVs can eventually become grid resources and be able to participate in the wholesale electricity market. The PUCT will use the information gathered in this project to inform an analysis which they are required to complete pursuant to SB 604, as well as to provide insight for the biennial Scope of Competition Report that is due to the Legislature by January 15, 2021. 

On February 3, 2020, TAEBA (AEE’s organization in the Lone Star State) submitted comments highlighting that the number of EVs on the road in Texas is currently small, and so the impacts on the grid will be minimal in the near to medium term. The PUCT and utilities will therefore have enough time to thoughtfully plan for EV adoption. TAEBA also discussed the benefits to the grid that TE will bring to all Texans. This first round of comments focused on potential grid impacts, whereas we expect the second round of comments to be more policy-focused to address questions related to how EVs fit into the competitive wholesale and retail markets in the regions of the state located within ERCOT. Since the COVID crisis arrived in Texas, there have been no notices issued by the PUCT regarding changes to the schedule or process for this project, and at this point, we do not expect COVID-19 to create any significant disruptions to the original timeline. TAEBA will stay engaged and help inform the process, which will conclude with PUCT recommendations to be addressed in the 2021 legislative session.

Michigan’s initiative to tackle a host of interrelated regulatory reform topics is continuing but at a slower pace. In October of last year, AEE issued a statement applauding Michigan’s Public Service Commission (MPSC) and Governor Whitmer’s grid modernization initiative, called MI Power Grid. The multi-year effort aims to modernize Michigan’s electric system and pave the way for a cleaner, more distributed system. MI Power Grid serves as a central location for information, stakeholder engagement, and the numerous workgroups focused on regulatory changes and utility programs. This includes the Energy Programs and Technology Pilots workgroup, which was one of the first new workstreams to commence. AEE staff attended the kick-off workshop in February 2020, where AEE members Oracle and Ecobee presented on their experience with pilots and the challenges that innovative technologies face in the pilot process. The next stakeholder meeting will be held via teleconference on April 16. 

Another important workstream in MI Power Grid is the distribution system planning proceeding. AEE has been heavily involved in this work since 2016, pushing for increased transparency and other priorities via multiple rounds of comments and presentations (see most recent comments here). This process has seen no delays so far. On April 1, staff released a report summarizing input from various stakeholders and making recommendations on requirements for future utility distribution plans. The next step is a MPSC order laying out those requirements. Michigan’s two largest utilities (DTE and Consumers Energy) are then set to file the next round of their distribution plans on June 30, 2021. 

AEE plans to continue engaging in the MI Power Grid process and advocate for the regulatory changes needed to support the advanced energy industry. 

Colorado has been a recent focus for our regulatory engagement. Over the past year, AEE Institute has continued to serve as an active resource to Governor Polis and his administration on several critical elements of the Governor's roadmap for achieving a 100% clean grid by 2040. Last fall, the PUC opened three proceedings in order to implement its obligations stemming from the 2019 legislative session, covering western regionalization, distribution system planning, and performance based-regulation. AEE Institute has been directly engaged in all three starting in late 2019, and has been coordinating with like-minded organizations on the ground.

The regional markets proceeding has been investigating the costs and benefits from electric utility participation in various regional market constructs (see our initial and reply comments). Next steps in this proceeding are currently uncertain, but will likely include a series of workshops to dive into specific issues with a determination by the end of 2021 on whether regional market participation is in the public interest, as we believe it is. 

AEE Institute has also been an active participant in the PUC’s miscellaneous docket to gather information on distribution system planning (DSP) and non-wires alternatives, ahead of an expected rulemaking for utility-specific DSP filings later this year (see our initial and reply comments). In addition, the PUC opened another miscellaneous docket to gather information and explore performance-based regulation (PBR) in order to submit a report to the Legislature by November 2020 on PBR options, a potential timeline to transition to a PBR regulatory model, and concrete actions to implement. AEE Institute has been advocating for the Commission to take a more holistic approach to its investigation (see our initial comments and reply comments submitted in January). AEE Institute also submitted a second round of comments on how PBR can promote cost-efficiency and encouraged the Commission to adopt a four-step approach for next steps (see our comments here and here). The next workshop scheduled for late April has been suspended but AEE Institute will continue to engage with stakeholders and the Commission whenever and wherever possible to keep the ball rolling. 

Even though it has been hit hard by the coronavirus, New York has continued its existing work with only minor delays. AEE Institute has been pushing for revisions to how utilities develop fixed charges (known as contract demand charges) for customers with stand-alone storage and distributed generation not eligible for net metering, such as combined heat and power. While these customers should pay a fair contribution for the use of the distribution grid, utilities (especially those downstate) have inflated their contract demand charges with costs that don’t belong there. AEE Institute filed initial and reply comments on the utilities’ cost allocation methodologies, adding to the momentum at the Commission for fixing this impediment to DER deployment in the state. Separately, earlier this year, the Department of Public Service released a proposal to significantly increase support for EV charging in the state with a $580 million 5-year make-ready infrastructure program. AEE Institute is currently preparing initial comments on the program, which are due April 27 (pushed back from earlier in the month). 

New York has also started a multi-agency effort to help the clean energy industry during the coronavirus. State agencies have begun proactively reaching out to the clean energy industry to gather ideas for decreasing the financial hardship imposed by measures necessary to deal with the pandemic. Five state agencies co-authored an open letter to the clean energy industry announcing listening sessions and pledging to work with the industry to help it through these difficult times. 

We were also pleased to see the PSC open a comprehensive proceeding on the strategic use of energy-related data. In New York and elsewhere, we have long advocated for improved access to timely, actionable customer and system data, and this proceeding pulls together efforts within New York that have been spread across various other proceedings. Two Staff white papers are expected in May to kick off this proceeding.

In Illinois, AEE Institute continues to engage in a rulemaking at the Illinois Commerce Commission on proposed changes to the regulatory treatment of cloud computing services. The rule, which was resurrected by the ICC last year after being pulled back for reconsideration, aims to provide equitable financial treatment between cloud-based and on-premises computing solutions. Currently, there is a financial disincentive inherent in the cost-of-service business model that discourages utilities from using cloud-based solutions, even though they offer a range of benefits. This rulemaking would address this and open up the potential for similar regulatory treatment of other service-based solutions. The ICC has continued apace with this proceeding, with final approval expected later this year.

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Topics: PUCs, 21st Century Electricity System, Regulatory