UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION California Independent System Operator Corporation ) ) ) ) Docket No. ER11-1830-000 JOINT REPLY OF SOUTHERN CALIFORNIA EDISON COMPANY, PACIFIC GAS AND ELECTRIC COMPANY, AND SAN DIEGO GAS & ELECTRIC COMPANY Pursuant to Rule 213 of the Rules and Regulations of the Federal Energy Regulatory Commission ( Commission or FERC ), Southern California Edison Company ( SCE ), Pacific Gas and Electric Company ( PG&E ) and San Diego Gas & Electric Company ( SDG&E ) (together Joint Parties ) hereby respectfully respond to certain issues raised in Motions to Intervene, Comments, and Protests in the abovecaptioned proceeding regarding the California Independent System Operator Corporation s ( CAISO ) amendments relating to the Small Generator Interconnection Procedures found in its Tariff ( SGIP Reform Filing ). 1 1 Rule 213(a)(2) of the Commission s regulations normally prohibits responses to protests. However, the Commission has made it clear that it will waive this rule and allow responses when they ensure a complete and accurate record in the case. See, e.g., Delmarva Power & Light Co., 93 FERC 61,098 at 61,259 (2000); Northern Natural Gas Co., 91 FERC 61,212 at 61,767 n.10 (2000). The Commission also will waive application of this rule when an answer will assist the Commission in addressing the issues raised by a protest. See, e.g., Carolina Power & Light Co., 93 FERC 61,032 at 61,068 (2000). Joint Parties' Reply achieves both of these goals.
I. CLARIFICATION OF STATE JURISDICTION OVER BOTH TRANSMISSION-LEVEL AND DISTRIBUTION-LEVEL INTERCONECTIONS OF QFS IS NECESSARY The Joint Solar Parties, on pages 20-21 of their Motion, 2 request clarification regarding an important jurisdictional issue. They correctly explain that FERC has repeatedly stated that states have jurisdiction over the interconnection of QFs where the QF sells its total output to an interconnected utility or to an on-site customer. Indeed, in Order No. 2003, the Commission explained that QF sales, and the resulting transmission, to third-parties determine the jurisdictional issue: When an electric utility is obligated to interconnect under Section 292.303 of the Commission s Regulations, that is, when it must purchase the QF s total output, the relevant state authority exercises authority over the interconnection and the allocation of interconnection costs. But when an electric utility interconnecting with a QF does not purchase all of the QF s output and instead transmits the QF power in interstate commerce, the Commission exercises jurisdiction over the rates, terms, and conditions affecting or related to such service, such as interconnections. 3 2 Motion to Intervene and Protest of the Interstate Renewable Energy Council (IREC), the California Solar Energy Industries Association (CalSEIA), and the Vote Solar Initiative ( Joint Solar Parties Motion ). 3 Order No. 2003, FERC Stats. & Regs. 31,146 at P 813 (2003), Order No. 2003-A, FERC Stats. & Regs. 31,160, order on reh g, Order No. 2003-B, FERC Stats. & Regs. 31,171 (2004), order on reh g, Order No. 2003-C, FERC Stats. & Regs. 31,190 (2005), aff d sub nom. NARUC v. FERC, 475 F.3d 1277 (D.C. Cir 2007); see also Order No. 2006, FERC Stats. & Regs. 31,180 at P 516 (2005) ( When an electric utility is required to interconnect under section 292.303 of the Commission s regulations, that is, when it purchases the QF s total output, the state has authority over the interconnection and the allocation of interconnection costs ), order on reh g, Order No. 2006-A, FERC Stats. & Regs. 31,196 (2005), order on reh g, Order No. 2006-B, 116 FERC 61,046 (2006). See also Niagara Mohawk Power Corp., 121 FERC 61,183 at P 13 (2007), order denying reh g, 123 FERC 61,061 (2008); Midwest Independent Transmission System Operator, Inc., 132 FERC 61,241 at P 24 (2010). - 2 -
The Joint Solar Parties note that there has been confusion over whether this principle applies to QF sales that are not at avoided cost and ask FERC to clarify in the affirmative that states may assert jurisdiction over the interconnection of a QF to a distribution system, whether or not the sale is at avoided cost. Joint Parties support this request for clarification, although they note that the clarification is needed with regard to QFs interconnected to either transmission or distribution. Specifically, there is confusion as to whether the sale by a QF to the interconnected utility must be made pursuant to PURPA for state jurisdiction to attach. 4 PG&E, for example, believes that the interconnection of QF renewable generators not selling under PURPA, but that are nonetheless committed to selling their full output to the host utility, should fall under the FERC rules, and that to hold otherwise would substantially diminish the role and importance of the FERC interconnection rules. PG&E recently commented that while the CPUC does have jurisdiction over QF interconnections, it is equally clear that the [CPUC] does not have jurisdiction over interconnections associated with non-purpa programs. 5 PG&E and many other 4 SCE notes that not all QF sales are at avoided cost; rather, an avoided cost rate is an indicia that a sale is made pursuant to a contract entered into due to the mandatory purchase obligation. Under 18 C.F.R. Section 292.303 of the Commission s regulations, utilities generally are required to purchase from QFs. Under 18 CFR Section 292.304, the utility may pay any just and reasonable rate but cannot be compelled to pay a rate greater than avoided cost. (Alternatively, purchases from sellers with QF status may be entirely voluntary and outside of the obligations of Section 292.303.) Thus, the relevant clarification needed is not whether a full output sale by a QF to its host utility must be at avoided cost for the interconnection to be state-jurisdictional, but rather whether such a sale to the host must be pursuant to the PURPA obligation to purchase under Section 292.303 for the interconnection to be state-jurisdictional. 5 PG&E s Reply Comments on CPUC Draft Resolution E-4368 at 3 (issued October 20, 2010). - 3 -
utilities have interconnected large numbers of renewable and large merchant generators under the FERC interconnection rules, even if the projects happen to have been certified as QFs, when the power purchase agreements were between the QF and host but not made pursuant to state implementation of PURPA. Indeed, utilities may not even know whether a proposed generator will be a QF, let alone to whom it will sell, when it applies for interconnection service and thus interconnection under FERC-authorized procedures is appropriate. In contrast to PG&E, IREC has stated in the same CPUC proceeding that FERC precedent does not require that a QF sale be priced at a utility s avoided cost (i.e., under PURPA) in order for states to assert jurisdiction over the interconnection. 6 Clarification is, therefore, necessary to ensure that Transmission Providers are treating QF interconnections in an appropriate and consistent manner going forward. II. THE COMMISSION SHOULD NOT CEDE JURISDICTION OVER DISTRIBUTION INTERCONNECTIONS Two parties, the CPUC and Joint Solar Parties, are requesting in this case that the Commission cede its jurisdiction to the states over all distribution-level interconnections. For example, the Joint Solar Parties state that FERC should consider applying state interconnection procedures to FERC-jurisdictional distribution system interconnections if petitioned by a state commission. 7 The CPUC believes the best path forward is for the 6 Letter from Kevin T, Fox (attorney for IREC) to Julie Fitch (Director CPUC Energy Division) at 4 (Nov. 9, 2010). 7 Joint Solar Parties Motion at 21. - 4 -
CPUC to process all distribution level interconnections through the CPUC s Rule 21 tariffs. 8 Indeed, in two recent proposed decisions, 9 the CPUC has asserted that it has jurisdiction over all distribution level interconnections. As FERC will recall, this argument was rejected both in Order Nos. 2003 and 2006 10 and in National Ass n of Regulatory Utility Commissioners v. FERC, 475 F.3d 1277, 1282 (D.C. Cir. 2007). However, in its recent FERC pleading in this docket, the CPUC did not repeat this argument, and instead argued that as a matter of policy, FERC should leave interconnection to distribution facilities to the states. The Joint Parties understand that these suggestions are motivated by the desire of the CPUC and the other parties to expedite the interconnection of renewable generators. 11 The CPUC s comments, however, appear to be inconsistent with the State s renewable 8 CPUC Staff Comments at 7. 9 CPUC Draft Resolution E-4368 at 3 (issued Oct. 20, 2010) and Proposed Decision Adopting Net Surplus Compensation Rate Pursuant to Assembly Bill 920, Nov. 3, 201013. 10 See Order No. 2003 at PP 795-809; Order No. 2003-A at PP 713-744; Order No. 2003-B at PP 12-14; Order No. 2003-C at 51-53; Order No. 2006 at PP 466-490, and Order No. 2006-A at PP 88-99. 11 One party s stated preference for Rule 21 may be based on the erroneous notion that generators interconnecting under Rule 21 can somehow avoid taking distribution service under the WDAT and transmission service from the CAISO. For example, the FIT Coalition states that 20 megawatt and smaller renewable energy projects interconnected to the distribution grid (wholesale distributed generation)... will not require payment of transmission access fees (which amount to about 1.5 c/kwh). See Feed-In Tariff Coalition Protest to CAISO Request for Approval of GIP Proposal at 7. This statement is erroneous. Pacific Gas and Electric Co., 88 FERC 63,007 (1999), aff d Opinion No. 458, 100 FERC 61,156, reh g denied, Opinion No. 458-A, 101 FERC 61,151 (2002), subsequent history omitted. Indeed, one problem with Rule 21 interconnections is that the generator may not recognize that wholesale distribution service is needed to transport its energy to the CAISO Grid and the request for that service comes months after the interconnection is studied. - 5 -
energy policy direction, as generators interconnecting under Rule 21 unlike the WDAT may only sell energy to the interconnected utility and the RPS program allows for generators to sell to any retail seller. The Joint Parties support speedy renewable integration and agree that the overall interconnection process needs to be reformed. The Joint Parties, however, are concerned that FERC ceding its jurisdiction will have quite the opposite result, and will cause additional uncertainties, complications, and delays in interconnecting generators. Jurisdiction does not change the underlying engineering studies that must be done in order to safely and reliably interconnect generators to the distribution system while safeguarding the CAISO Grid and other Affected Systems. Requiring that all distribution-level interconnection 12 requests be processed under CPUC s Rule 21 will neither eliminate the need for such studies, nor expedite their completion beyond the time that is, from a technical point of view, necessary to safely and reliably study the interconnecting generator, understand its impacts on the system, and determine any necessary reliability upgrades and safeguards. Moreover, the interconnection study process for Small Generators whether under Rule 21, the WDAT, or the CAISO Tariff has recently become log-jammed because of the differences in the interconnection study processes for Large Generators (clustered) and Small Generators (serial). This problem has only been exacerbated by the large volume of interconnection requests, from both a number of applications to be processed - 6 -
standpoint and a MW standpoint. This logjam has led to the CAISO filing in this docket. The Joint Parties are currently in the process of revising their respective WDATs to coordinate with the CAISO s methodology proposed in the filing at bar, and plan to file these WDAT reforms with the Commission in early 2011. The goal is to assure that there is appropriate level of coordination and consistency between Joint Parties WDAT and the reformed CAISO Tariff so that the interconnection study process can move along as expeditiously and as safely as possible. This approach also recognizes that with the extraordinary increase in interconnection requests, many of the distribution-level interconnections are affected by network upgrades contemplated or required on the transmission system and thus, it is critical that the overall interconnection planning process be coordinated (other than small projects that are screened to be fasttracked because they are not as interrelated with the larger system planning). Such coordination, in the Joint Parties view, is absolutely crucial to expediting the interconnection process, and is an important reason to allow the Joint Parties to continue processing their distribution interconnections under their respective WDATs. It will be important that the processing of Rule 21 interconnections does not negatively impact or otherwise interfere with the overall planning of the FERC-jurisdictional interconnections, both at the transmission and distribution levels. Abandoning the ongoing WDAT reform process, or at least throwing that reform into confusion because of jurisdictional uncertainties, could only complicate interconnecting Small Generators. As such, the Joint Parties respectfully urge the Commission to clarify that it will not cede jurisdiction over distribution generator - 7 -
interconnections to the CPUC, and that such interconnections (with the exception of certain QF interconnections as noted above) will continue to be processed under WDAT. III. CONCLUSION For all of the foregoing reasons, the Joint Parties respectfully request that the Commission accept the SGIP Reform Filing, clarify the issue of QF interconnection jurisdiction, and affirm its jurisdiction over interconnection requests to distribution facilities as set forth above. Respectfully submitted, /s/ Anna J. Valdberg By: Anna J. Valdberg Attorney for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770 Telephone (626) 302-1058 E-mail:Anna.Valdberg@sce.com MARK D. PATRIZIO KEITH T. SAMPSON By: /s/ KEITH T. SAMPSON KEITH T. SAMPSON Pacific Gas and Electric Company Law Department 77 Beale Street, B30A Post Office Box 7442 San Francisco, CA 94120 Telephone: (415) 973-5443 Facsimile: (415) 973-5520 E-mail: kts1@pge.com - 8 -
Attorneys for PACIFIC GAS AND ELECTRIC COMPANY By: /s/ Jonathan J. Newlander Jonathan J. Newlander Senior Counsel San Diego Gas & Electric Company 101 Ash Street, HQ12 San Diego, CA 92101 Phone: 619-699-5047 Fax: 619-699-5027 E-mail: JNewlander@semprautilities.com Dated: November 24, 2010 ATTORNEY FOR SAN DIEGO GAS & ELECTRIC COMPANY - 9 -
CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Rosemead, California, this 24th day of November, 2010. /s/ Laura Placencia Laura Placencia SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770