PG&E drops $192 million transmission project

Clean distributed energy resources translate into a reduced utility investment in infrastructure and savings for consumers.
Published: Wed 15 Jun 2016

Distributed energy resources and energy efficiency have led to Pacific Gas & Electric (PG&E) cancelling their 13 low-voltage transmission and distribution upgrades which were going to cost the utility over US$190 million. Load forecast where the projects were planned has fallen.

The expansion of rooftop solar specifically has saved PG&E’s customers a fortune in transmission costs, according to solar advocates who say that this is proof that rooftop PV is a net-positive for homeowners and the grid at large.

Vote Solar's Jim Baak says of the news: “This is really proof of what we and other energy advocates have been saying for some time—that solar, along with other clean distributed energy resources, such as energy storage, electric vehicles and demand response, will mean less utility investment in infrastructure and savings for consumers.”

Creating shareholder incentives for distributed resources growth

The news comes at a good time as California is currently considering a proposal that would create shareholder incentives for supporting distributed resources, a proceeding which could resemble the market reforms being undertaken in New York's Reforming the Energy Vision docket. [New York Energy Vision Reform A Step Closer]

Under New York’s Reforming the Energy Vision, utilities acting as distributed system platform (DSP) providers will enable the reformed electric system, which will be driven by consumers and non-utility providers. The utilities acting in concert will constitute a statewide platform that will provide uniform market access to customers and DER providers. Individual utilities will serve as the platform for interface among their customers, aggregators and the distribution system. Technology innovators and third party aggregators (i.e. energy service companies, retail suppliers and demand management companies) will develop products and services that enable full customer engagement. [Distributed Energy Resource Markets Coming To New York.]

Recently, New York approved reforms that deal with how utilities profit, including allowing utilities to make money through traditional cost-of-service investments, earnings tied to the deferment of capital investments, earnings from market-based platform activities and market-based performance measures.

In April, California Public Utilities Commission Michael Florio proposed pilot reforms that would achieve similar ends on the West Coast, examining the need for shareholder incentives.

Florio proposed an interim pilot offering regulatory incentives to the three large California investor-owned utilities for the deployment of cost-effective DERs. In some circumstances, the utility's incentives could include system level costs for the procurement of energy, capacity and ancillary services, as well as the cost of greenhouse gas emissions avoided by the choice of the distributed resources.

Under Florio's proposal, the incentive would take the form of an additional payment to the utility of 3.5% of the payments made to the DER provider. This percentage can be altered later.

Florio's proposal stressed that "the offering of shareholder incentives for utility deployment of cost-effective [distributed energy resources] should not come at the expense of ratepayers." But he went on to note that as long as the amount paid to the DER provider, plus the cost of the utility incentive, is less than the cost of the avoided or deferred utility capital investment, "ratepayers should always be better off paying the incentive than if the utility had just gone ahead with the planned investment."

The forward-thinking utility’s future is bright

While there is no doubt that energy efficiency and distributed generation can avoid the need for costly transmission upgrades, very few utilities are able to meet the goals they set.   

PG&E is one utility that seems to be getting it right.

PG&E is a leader in the US when it comes to taking a customer-centric approach around meeting energy efficiency goals. Last year, we wrote about the utility’s smart meter rollout which involved the upgrade of approximately 10 million customer meters. The project, one of the largest smart meter initiatives in the US, cost the utility approximately US$2.3 billion and was aimed at achieving ambitious energy efficiency goals. The rollout’s success was due largely to the fact that the utility knew it had to drive demonstrable customer value. PG&E’s approach to customers is summed up by Christopher Johns, the utility’s president, who said: “We thought we were undertaking an infrastructure project but it turned out to be a customer project.” [PG&E’s Smart Meter Rollout - A Customer Project and Smart Meter Data Throws Light On Energy Saving Behaviours].

PG&E has also been a frontrunner in the development of distributed generation. PG&E have already embraced the move to distributed generation and are finding ways to make a profit from generating their own electricity through their unregulated subsidiaries. No longer mandated passive players, solar gives them chance to compete.

PG&E is a good example of how utilities can really embrace the opportunities in a sector that demands customer-centricity and innovation.[Opportunities Growing For Forward-Looking Utilities].