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SoCalGas Gets OK For Distributed Resources Tariff

California regulators recently approved a new tariff for Sempra Energy's Southern California Gas Co. (SoCalGas) to enter the distributed generation sector, which is growing in the state.

The California Public Utilities Commission (CPUC) in one of its October meetings approved SoCalGas's new distributed energy resources services tariff under which the nation's largest gas-only utility can build and operate combined heat/power (CHP) facilities on commercial and industrial customer premises (see Daily GPIAug. 18).

In taking its action unanimously, the five-member CPUC said the new tariff will make more widely available "a service that reduces the health and environmental impacts from air pollution, reduces greenhouse gas (GHG) emissions, and provides operational efficiencies consistent with current [state] environmental goals."

The approval of the tariff included a denial of an agreement the utility had entered into with the CPUC independent consumer protection unit, the Division of Ratepayer Advocates (DRA). The regulators also modified the tariff to include a cost-based pricing methodology, enhanced market mitigation measure and added reporting/accounting requirements.

SoCalGas can now offer the distributed energy resources services (DERS) tariff for a 10-year period.

Dating back to the summer of 2014, SoCalGas proposed the DERS tariff as a means of spurring the adoption and use of "advanced energy systems," including CHP, fuel cells, waste heat-to-power (WHP) and mechanical drive technology applications. The systems are all fueled in whole or part by natural gas, biogas or other gaseous fuels.

All of the systems are geared to produce onsite electricity, except for the mechanical drives that produce horsepower for water-pumping, gas compression or other applications.

SoCalGas industrial and commercial customers typically can't deal with high upfront equipment costs, limited internal expertise, ongoing operation and maintenance needs or the added technological risks inherent in onsite energy systems, the utility stressed to the CPUC. The DERS tariff is supposed to allow these customers to get the benefits of onsite energy needs through advanced systems.

Nevertheless, regulators generally are concerned when there is proposed utility ownership of energy equipment on the customer's side of the meter. Further, in California it is unclear how CHP fits in the governor's approach for curbing GHG emissions (see Daily GPI, April 30) and the push for more distributed generation.

Last year, the CPUC agreed to allow SoCalGas to file a proposal in this area, but the assigned commissioner, Carla Peterman, at the time expressed concerns about the utility's application and an administrative law judge's "soft" proposed recommendation supporting it that raised important policy questions, one dealing with the controversial utility-affiliate transaction rules.

"What's appropriate [to do] under the affiliate transaction rules versus the regulated utility on its own?" Peterman said. "Specifically where do you draw the line, and what is a logical extension of utility activities?" She pointed out that in the past, third-party consultants have concluded that there were some major ambiguities in the CPUC's affiliate transaction guidelines.

With the additional mitigation steps and tariff requirements, the regulators are now allowing SoCalGas to design, install, own, operate and maintain advanced energy systems on or adjacent to customer premises.

SoCalGas recognized that the DERS tariff isn't feasible for all of its commercial/industrial customers. The feasibility of CHP and distributed energy resources solutions depends on a number factors, including the size of a customer, its unique gas and electric demand profile, existing equipment and expansion plans and many other factors, including the business's desire to increase its overall operating efficiency.

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