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Power & Pipes

FERC, CFTC, and State Energy Law Developments

Interest in microgrids is on the rise in the United States as over half of states explore ways to modernize the grid and promote distributed energy resources (DER), including innovative renewable energy, storage, and demand response technologies. However, microgrids are not defined by law or regulation in most states and are more complex than other types of DER because they involve both the generation and distribution of energy. This raises several policy questions, including who should pay for microgrid development and use and whether microgrid operators that technically distribute energy to retail customers should be classified as public utilities and subject to regulations ordinarily imposed on such entities. California is currently exploring the potential benefits of microgrids and the role of state regulation.

In September 2018, California enacted a new law, Senate Bill (SB) 1339, that requires the California Public Utilities Commission (CPUC) to develop regulations, standards, and guidelines by December 1, 2020, to facilitate the commercialization of microgrids for customers of large electric utilities. To that end, SB 1339 directs the CPUC to address the following key issues: (1) how microgrids operate and their value; (2) improving the electrical grid with microgrids; (3) how microgrids can play a role in implementing policy goals; (4) how microgrids can support California’s policies to integrate a high concentration of distributed energy resources on the electrical grid; (5) how microgrids operate in the current California regulatory framework; and (6) microgrid technical challenges. SB 1339 builds on years of stakeholder research on whether microgrids may help California meet its future energy goals and increase the resilience of the energy grid, in part due to the increasing potential for extended outages/grid denergization due to extreme weather events and wildfires.

On September 19, the CPUC initiated a rulemaking to implement SB 1339. The CPUC invited comments on the regulatory actions prescribed by SB 1339, including development of guidelines to determine what impact studies are necessary for microgrids to connect to the distribution system operated by California electric utilities and separate rates and tariffs to support microgrids. The preliminary scoping memo for the rulemaking also solicits comments on how to ensure that actions taken by the CPUC to fulfill the requirements of SB 1339 do not discourage development of utility microgrids and are consistent with relevant state policy goals and existing CPUC responsibilities and policies. Comments and reply comments on the preliminary scoping memo must be submitted by October 21, 2019, and November 4, 2019, respectively. The approach California ultimately develops through the CPUC rulemaking may inform other states seeking to explore the potential for microgrids to increase renewable energy integration and provide opportunities for greater grid resiliency.