California Public Utilities Commission Research Articles

California Gas: A Brief History and Recent Events

The author discusses recent developments and ongoing issues related to regulatory authorities, contracts and pipeline matters affecting the gas industry in California, in comparison to elsewhere in the United States and Canada. Included is a review of some of the more important decisions of the Federal Energy Regulatory Commission, the California Public Utilities Commission and the National Energy Board. This paper is solely the work of the author. The views expressed herein do not necessarily represent the views of the author's firm or any client of that firm.

Options for change: Restructuring California’s residential inclining rates for a better electricity future

Local distribution companies (LDCs) regulated by the California Public Utilities Commission use mandatory inclining rates (MIR) to bill their residential electricity customers. However, MIR hinder the California electricity industry’s provision of clean and reliable service at affordable rates. Hence, we consider the following options to restructure MIR: (1) adopting a flat energy rate and revised customer charges; (2) replacing the flat rate in (1) with time-of-use (TOU) rates; (3) replacing the TOU rates in (2) with real-time pricing; (4) replacing (3) with a Hopkinson tariff with reliability differentiation. Our assessment of these options recommends sequential implementation (1), (2) and (4), thus lessening the potentially large and adverse bill impacts on some residential end-users caused by a drastic rate design change. Our recommended implementation sequence is (2) and (4) when the potentially large bill impacts of TOU pricing on the small and poor end-users with relatively high peak kWh consumption are to be mitigated by income-based customer charges.

The Economics of Residential Solar and Battery Storage: Analyzing the California Public Utilities Commission Decision of December 2022

The Economics of Residential Solar and Battery Storage: Analyzing the California Public Utilities Commission Decision of December 2022

How to Measure the Network Vulnerability of Cities to Wildfires: Cases in California, U.S.A.

This paper proposes a framework to evaluate the network vulnerability of cities to wildfires. Three cities are selected from the California Public Utilities Commission (CPUC), U.S., fire-threat regions: Orinda, Paradise, and Atascadero. For each city, four different network connectivity measures are calculated, and agent-based evacuation simulations are performed by the Monte Carlo method. In the simulations, the number of isolated vehicles and evacuation time estimates are measured for the following scenarios: (i) no wildfire case with original network; and (ii) wildfire cases with randomly damaged networks that are reduced by 1%, 3%, 5%, 7%, and 10% from the original network. A city-to-city comparison is conducted in relation to network connectivity measures and evacuation simulation results. It is shown that Paradise has the worst network connectivity, and the simulation results reveal that Paradise also has the most sensitive network in relation to random roadway closures caused by wildfire propagation. Thus, among the three cities, Paradise has the most vulnerable network to wildfires as determined through the two analysis results concerning the worst network measures and the simulation results. It is expected that the proposed analysis framework can be generally applied to any city located in a fire-threat region.

Advancing Equity in Access to Distributed Energy Resources in California

The widespread adoption of distributed energy resources (DERs) such as household solar panels and electric vehicles is a key component of California’s plan to dramatically reduce greenhouse gas emissions. Unfortunately, DER uptake and thus the benefits it provides are disproportionately concentrated among wealthy, white households and communities in the state. Here, we propose that the California State Legislature address this inequity through two distinct mechanisms: 1) requiring the California Public Utilities Commission (CPUC) to prioritize DER programs that maximize non-energy benefits (e.g., reduced emissions, comfort, and safety, as proposed in 2021’s Senate Bill 345) and 2) directing the CPUC to prioritize infrastructure updates in disadvantaged communities. These changes would help transform sustainable technologies from a force that exacerbates existing inequality gaps into a mechanism for promoting public health and economic well-being in poor communities and communities of color.

Climate Adaption for Energy Utilities: Lessons Learned From California's Pioneering Regulatory Actions

This Policy Brief provides lessons learned from regulation of climate adaptation by energy utilities. The regulatory bodies responsible for oversight of investor-owned energy utilities are ill-equipped to regulate climate adaptation in the energy sector; but they may be the only institutions with authority to do so. In 2018, the California Public Utilities Commission initiated the first quasi-legislative procedure to regulate investor owned energy utilities' climate adaptation activities. The Commission's new rules for climate adaptation offer some general guidance on climate adaptation, and require investor owned utilities to conduct and submit climate vulnerability studies. Structural limitations, including conflicting interest, capacity of staff, and scope of the problem hampered the success of adaptation regulation, which failed to address fundamental questions about what constitutes adaptive measures.

Who gets access to fast broadband? Evidence from Los Angeles County

Regulatory and market changes in residential (fixed) broadband have raised concerns about Internet Service Providers (ISPs) prioritizing investments in the most profitable areas, thus relegating low-income and minority communities to fewer broadband options and legacy networks. This study examines these concerns for Los Angeles (LA) County during the 2014–18 period. The analysis uses rollout data collected by the California Public Utilities Commission (CPUC) in combination with demographic information from the American Community Survey (ACS). Because the spatial distribution of broadband investments cannot be directly observed, competition and the availability of FTTH services are used as proxies. The findings indicate that competition and fiber-based services are less likely in low-income areas and minority communities, with the most severe deficits observed in census block groups that combine poverty and a large share of Black residents. We outline alternative policy tools to address intracity inequalities in broadband investments in the conclusion.

Lost Hills Solar Project: Powering an Oil and Gas Field with California Sunshine

Summary This paper outlines one of the first efforts by a major oil and gas company to build a net-exporting, behind-the-meter solar photovoltaic (PV) plant to lower the operating costs and carbon intensity of a large, mature oil and gas field. The 29 MWAC (35 MWDC) Lost Hills solar plant in Lost Hills, California, USA, commissioned in April 2020, covers approximately 220 acres on land adjacent to the oil field and is designed to provide more than 1.4 TWh of solar energy over 20 years to the field’s oil and gas production and processing facilities. The upgrades to the electrical infrastructure in the field also include new technology to reduce the risk of sulfur hexafluoride emissions, another potent greenhouse gas (GHG). Before the solar project, the Lost Hills field was importing all its electricity from the grid. With the introduction of the Innovative Crude Program as part of California’s Low Carbon Fuel Standard (LCFS) and revisions to the California Public Utilities Commission Net Energy Metering program, Lost Hills was presented with a unique opportunity to reduce its imported electricity expenses and reduce its carbon intensity, while also generating LCFS credits. The solar plant was designed to power the field during the day and export excess power to the grid to help offset nighttime electricity purchases. It operates under a power purchase agreement (PPA) with the solar PV provider and, initially, will meet approximately 80% of the oil field’s energy needs. Future plans include incorporating 20 MWh of lithium-ion batteries, direct current (DC)–coupled with the solar inverters. This energy storage system will increase the amount of solar electricity fed directly into the field and reduce costs by controlling when the site uses stored solar electricity rather than electricity from the grid. The battery system will also increase the number of LCFS credits by 15% over credits generated by solar alone. Together, solar power and energy storage provide a robust renewable energy solution. This project will generate multiple cobenefits for the Lost Hills oil field by lowering the cost of power, reducing GHG emissions, generating state LCFS credits and federal Renewable Energy Certificates, and demonstrating a commitment to energy transition by investing in renewable technology. Conceivably, the Lost Hills solar project can be a model for similar future projects in other oil fields, not only in California, but across the globe.

The Economics of Residential Solar and Battery Storage: Analyzing the Impact of the Joint IOU Proposal for Net Metering 3.0 in California

The California Public Utilities Commission (CPUC) is currently deciding on the structure of the next net metering program, which will determine how customers who install solar panels (and battery storage) under this new program will be compensated for excess energy that they export to the grid, and the additional fees that these solar customers will have to pay. The major investor-owned utility (IOU) companies in the state and some legislators have argued that the current net metering programs are far too generous to the customers and that they create an inequity by favoring the wealthy and causing a cost shift to the poorer non-solar customers. The IOUs have jointly proposed a set of regulations to the CPUC. In this paper, we examine the financial implications to residential customers who go solar under the new net metering program if the joint IOU proposal were to be adopted. We examine the case of a hypothetical southern California home that consumes the average amount of electricity (for that region) and estimate its electricity bills for various load profiles, assuming no solar or battery storage, with solar alone, and with solar and battery storage. For the two latter scenarios, we determine the ideal system configuration that will maximize the customer’s financial returns. In all cases, we determine that the joint IOU proposal for net metering will make residential solar panel and battery storage installations financially unattractive even in the best-case scenarios. In short, if the CPUC adopts the joint IOU proposal then residential solar installations in the state would likely come to an abrupt stop. We also analyze the economics of going off-grid (where a customer completely cuts himself off from the electrical grid) and find that it does not make sense for customers to go off-grid without being willing to cut consumption or make other compromises.

Trends in the Installation of Residential Solar Panelsin California

This paper examines some trends in residential solar panel installations in California. First, we look at the growth in residential solar panel installations in the state and changes in consumption per account. Next, we examine aspects of the proposed changes to the net metering program in the state. Politicians, the California Public Utilities Commission (CPUC), investor owned utility (IOU) companies and other public interest groups are currently involved in a contentious debate on the future of residential solar panel installations in the state of California. The major California IOUs, Pacific Gas and Electric (PG&E), Southern California Edison (SCE), San Diego Gas and Electric (SDGE), and others have argued that solar panel installations favor wealthier residential customers at the expense of less wealthy customers. The basis of the argument is that under the current rate structure those with the financial resources to install solar panels are able to avoid paying their share of the fixed costs incurred by utility companies which results in a disproportionate burden on less wealthy customers. IOUs have asked for permission to charge solar customers large additional monthly fees. Some have even called for all the grandfathering protections granted to early solar adopters under the previous and current net metering programs (NEM 1.0 and NEM 2.0) to be withdrawn. Solar companies and residential solar customers have maintained that such moves would destroy the solar industry in the state, cause thousands of job losses, and most importantly, prevent the state from making progress towards its stated carbon neutrality goals. Given this ongoing debate, it is important to examine whether there exists a wealth difference between residential customers in California who have and have not installed solar panels. As an extension of this research, we also went about determining whether climatic conditions impact the solar panel adoption rates. While California is a huge state with varied climatic zones and several utility companies, we focus our analysis on residential customers of SCE who reside in Orange County. The findings and conclusions are generalizable to residential customers throughout the state.

Trends in the Installation of Residential Solar Panelsin California

This paper examines some trends in residential solar panel installations in California. First, we look at the growth in residential solar panel installations in the state and changes in consumption per account. Next, we examine aspects of the proposed changes to the net metering program in the state. Politicians, the California Public Utilities Commission (CPUC), investor owned utility (IOU) companies and other public interest groups are currently involved in a contentious debate on the future of residential solar panel installations in the state of California. The major California IOUs, Pacific Gas and Electric (PG&E), Southern California Edison (SCE), San Diego Gas and Electric (SDGE), and others have argued that solar panel installations favor wealthier residential customers at the expense of less wealthy customers. The basis of the argument is that under the current rate structure those with the financial resources to install solar panels are able to avoid paying their share of the fixed costs incurred by utility companies which results in a disproportionate burden on less wealthy customers. IOUs have asked for permission to charge solar customers large additional monthly fees. Some have even called for all the grandfathering protections granted to early solar adopters under the previous and current net metering programs (NEM 1.0 and NEM 2.0) to be withdrawn. Solar companies and residential solar customers have maintained that such moves would destroy the solar industry in the state, cause thousands of job losses, and most importantly, prevent the state from making progress towards its stated carbon neutrality goals. Given this ongoing debate, it is important to examine whether there exists a wealth difference between residential customers in California who have and have not installed solar panels. As an extension of this research, we also went about determining whether climatic conditions impact the solar panel adoption rates. While California is a huge state with varied climatic zones and several utility companies, we focus our analysis on residential customers of SCE who reside in Orange County. The findings and conclusions are generalizable to residential customers throughout the state.

Toward a political economy of public safety power shutoff: Politics, ideology, and the limits of regulatory choice in California

California utilities have chosen to shut off electricity delivery to consumers by employing a “Public Safety Power Shutoff” (PSPS) strategy when gusty winds and dry conditions heighten the risk of wild fires, which pose a major threat to life, property, and public health and safety. This paper examines the public policy rationale underlying the PSPS strategy within the context of the policy framework for advancing the commercialization of microgrids as a means of mitigating the effects wildfires and PSPS events. The analysis centers on a case study of the outcome of the first phase of the California Public Utilities Commission’s (CPUC) microgrid rulemaking proceeding, pursuant to Senate Bill 1339. The theory of structural interests is used to explain how political and ideological conflict among key stakeholders, including developers, environmentalists and social justice advocates, and the clash between investor-owned utilities (IOUs) and community choice aggregators (CCAs) over market share, fought in the regulatory arena, reveal contrasting visions about the future of energy delivery, and expose the limitations of policy choices faced by regulators in adjudicating disputes. Qualitative content and documentary analysis, supplemented with participant observation, were the principal research methods used to support the analysis and the interpretative narrative presentation. This case study provides some cautionary lessons for the nation’s public utility regulators to avoid “regulatory inertia” in their decision-making process, and to confront practical tradeoffs when balancing legitimate interests in serving the public good against the desire to promote long-term environmental goals.

A perspective on the use of ammonia as a clean fuel: Challenges and solutions

A perspective on the use of ammonia as a clean fuel: Challenges and solutions

Regulatory Challenges Facing Renewable Natural Gas

Natural gas is coming increasingly under attack by policymakers and elected officials who are embracing “electrification only” as a means of reaching state clean energy and climate‐mitigation goals. Achieving these goals may mean reducing the use of natural gas as a residential and industrial fuel. Earlier this year, the California Public Utilities Commission (CPUC) launched a new rulemaking to address the state's transition away from natural gas. The commission will address issues related to stranded assets and cost recovery, and unfair shifting of costs among different customer classes. Other state public utility commissions in New Jersey and New York may follow shortly, given their increasing opposition to interstate natural gas pipelines that would serve their residents and businesses.

Closing Diablo Canyon Nuclear Power Plant, 2009–2018: Decision-Making on Energy Investments Relevant to Climate Change

Modern economies cannot function without electricity, and production of electric power affects citizens in many ways, including climate change. Production of electricity requires investments that easily reach billions of dollars, and streams of investment capital must be perpetual to procure fuel, build and maintain plants, and transmit electricity to customers. This case study addresses whether a California decision relevant to investments about generating electricity adequately considered competing concerns. In 2009, Pacific Gas and Electric (PG&E, a private, investor-owned utility) applied to renew the operating licenses of its two nuclear reactors at the Diablo Canyon Nuclear Power Plant (the “plant”). By 2016, PG&E had decided not to seek license renewal and asked the California Public Utilities Commission (CPUC) to approve a price increase for its electricity to pay for specified expenses in closing the plant, which generated 24% of PG&E’s electricity. Four environmental groups and two labor organizations supported PG&E, and CPUC approved most elements of PG&E’s plan in 2018. PG&E’s application generated considerable debate during the CPUC process, and multiple organizations argued that PG&E’s plan was flawed. Two of the protests were from environmental groups favoring nuclear power as mitigation for climate change. Nuclear reactors generate electricity with uranium and have low emissions of carbon dioxide, the key source of climate change. This case study summarizes the competing arguments relevant to energy investments and climate change. Was the decision to close the plant in the best interest of the PG&E customers and the residents and taxpayers of California?

Rate design for a decarbonizing grid

The Western U.S. electric grid has undergone vast changes since the pre-renewables era. For example, renewables now comprise nearly 30% of California’s electric supply portfolio, and recent CA legislation mandates 50% renewables by 2030. As a consequence, intra-day variation in hourly net loads is rapidly steepening, as shown by the California Independent System Operator (CAISO)’s now famous ‘Duck Curve”. In 2015, CAISO recommended a four-season TOU pricing period design, with peak hours between 4 PM and 9 PM on summer weekdays, and a “super-off-peak” period in spring mid-day hours. We present an aggressive four-season time-of-use (TOU) rate design based on CAISO’s recommended TOU periods, and some illustrative impacts of implementing such TOU rates.In Western U.S. energy markets, high wholesale prices generally correspond to high marginal carbon emissions, and conversely. Properly designed TOU rates can help reduce GHG emissions by discouraging energy use during times of high marginal carbon emissions. However, demand charges, a feature of many commercial rate designs, can negate the benefits of TOU rates if applied during off-peak hours. We show that overuse of non-coincident demand charges can discourage customer investments that would benefit both the customer and the grid if rates were correctly aligned with cost. We recommend the following pricing strategies to support long-term efforts toward decarbonization of the electric grid: (1) More widespread use of aggressive 3- or 4-season TOU rates (or RTP where feasible); and (2) Reduced dependence on demand charges that apply during off-peak hours. Widespread utilization of retail rates that are aligned with temporal variation in carbon intensity, by both residential and nonresidential customers, is essential, for achievement of decarbonization goals. DisclaimerOpinions and recommendations stated herein should be attributed to the author alone, and not to the California Public Utilities Commission or its Staff.

Profiling Transport Network Company Activity using Big Data

Transportation network companies (TNCs) provide vehicle-for-hire services. They are distinguished from taxis primarily by the presumption that vehicles are privately owned by drivers. Unlike taxis, which must hold one of approximately 1,800 medallions licensed by the San Francisco Municipal Transportation Agency (SFMTA) to operate in San Francisco, there is no regulatory limit on the supply of TNCs. TNCs have an increasingly visible presence in San Francisco. However, there has been little or no objective data available on TNCs to allow planners to understand the number of trips they provide, the amount of vehicle miles traveled they generate, or their effects on congestion, transit ridership, transit operations, or safety. Without this type of data it is difficult to make informed planning and policy decisions. Discussions with Uber, Lyft, and the California Public Utilities Commission, which collects trip-level data from TNCs in California, requesting information on TNC trips have not resulted in any data being shared. Under increasing pressure from policymakers for objective data to inform policy decisions, the San Francisco County Transportation Authority (SFCTA) partnered with researchers from Northeastern University who developed a methodology for collecting data through Uber’s and Lyft’s application programming interfaces (APIs) with high spatial and temporal resolution. This paper provides a brief literature review on transport network company (TNC) data, and goes one to describe the methodology used to collect data, summarizes the process for converting the raw data into estimated TNC trips, and presents an analysis of the results of the TNC trip estimates. This study determined that TNCs serve a substantial number of trips in San Francisco, over 170,000 on a typical weekday, that these trips follow traditional time of day distributions, and that they tend to take place in the busiest parts of the City.

The Eye of the Beholder: Participation and Impact in Telecommunications (De)Regulation

The California Public Utilities Commission addressed both pricing deregulation and universal service in telecommunications during the last decade. Both decisions had a similar cast of characters, and similarly elaborate processes. In relation to price deregulation, the utilities positions were accepted on every issue addressed; in relation to universal service, consumer organizations’ positions were accepted in about 60% of the issues. This article tells the story of how those decisions were made, and examines the reasons for the difference in impact. The article examines and reject an explanation of capture; accepts in part a focus on the influence of the commissioner in charge of the decision; and suggests that the most important factor in determining impact was the perceptions and expectations of CPUC Commissioners and staff, reminding us of the importance of agency personal and their profound impact on regulatory results.

Raising the stakes for energy efficiency: A qualitative case study of California's risk/reward incentive mechanism

This article examines California's experience implementing the Risk/Reward Incentive Mechanism (RRIM) between 2007 and 2012. RRIM is a system of financial rewards and penalties designed to motivate California's investor-owned utilities to expand their energy efficiency programs and meet ambitious energy-savings targets. The RRIM is credited with achieving a substantial amount of cost-effective energy savings. Nevertheless, a dispute over the savings attained and the subsequent impact on ratepayers led the California Public Utilities Commission (CPUC) to pause halfway through the implementation period and overhaul the incentive system. The following policy recommendations flow from the analysis. First, in terms of incentive design, avoid sharp payment distinctions that do not reflect meaningful differences in program performance and do not expect an incentive to single-handedly shift the balance between investment in new electricity generation and investment in programs to reduce energy consumption. Second, in terms of institutional factors, expect that incentives will put pressure on evaluation processes and engender new disputes, and implement a high-stakes incentive only if institutional arrangements for savings measurement and dispute resolution are in place and accepted by all parties. Third, in terms of implementation, put incentives in place before utility energy efficiency programs are designed and implemented and design incentives to be as predictable and repeatable as possible.

Contemporary Evidence from California: Who Gains When Evidentiary Hearings Are Held?

Traditionally, evidentiary hearings were held during almost all of the energy ratemaking proceedings of the California Public Utilities Commission (CPUC). This is often referred to as the “litigation model” of regulation. In recent years, the CPUC has often used a “collaborative model” of regulation, in which proceedings are dominated by workshops and by several rounds of comments from practitioners (representatives of parties). My research reviews a number of CPUC energy regulatory proceedings, and compares the results of litigation proceedings with collaborative proceedings.I review the literature concerning both the collaborative and the litigation models of regulation, and interview CPUC practitioners (attorneys and advocates) to determine their views on regulatory processes. I briefly discuss the arguments of the proponents of the collaborative and the litigation models.