BEFORE THE PUBLIC UTILITIES COMMISSION OF THE ... - …



Decision 17-06-031 June 29, 2017

Before The Public Utilities Commission Of The State Of California

|ORDER INSTITUTING RULEMAKING TO CREATE A CONSISTENT REGULATORY | |

|FRAMEWORK FOR THE GUIDANCE, PLANNING AND EVALUATION OF INTEGRATED |Rulemaking 14-10-003 |

|DISTRIBUTED ENERGY RESOURCES. |(Filed October 2, 2014) |

ORDER DENYING rehearing of Decision (D.) 16-12-036

INTRODUCTION

In this Order, we dispose of the Application for Rehearing of Decision

(D.) 16-12-036 (or “Decision”) filed by Sierra Club.

In 2014, the Commission opened this Rulemaking (“OIR”) to provide policy consistency regarding the direction, planning and evaluation of integrated “demand-side resource programs.”[1] The OIR is now called the Integrated Distributed Energy Resources OIR (“IDER OIR”).[2]

The IDER OIR overlaps with several Commission proceedings and processes,[3] but none more closely than the Distribution Resources Plan (“DRP”) OIR (R.14-08-013).[4] That OIR was opened to establish policies, procedures, and rules to guide the energy utilities in developing electric Distribution Resources Plans required by Public Utilities Code Section 769.[5]

Together, the two OIRs work to ensure that cost-effective distributed energy resources are integrated into the utilities’ electric system distribution planning, operations, and systems as an alternative to investments in traditional forms of electric generation.[6]

To acquire the resources needed to fill electric reliability needs identified in the DRP OIR, our Decision adopted a Competitive Solicitation Framework (“Framework”) for distributed energy resources. The adopted Framework was based the on consensus recommendations developed by a Working Group established specifically for this purpose.[7] We also approved a regulatory Incentive Mechanism Pilot (“Incentive Pilot”),[8] and re-established the Working Group to develop a technology-neutral proforma contract for future use based on the Incentive Pilot experience.[9]

Sierra Club challenges the Decision alleging that it violated section 769 by allowing natural gas-fueled (or fossil-fueled) distributed energy resources to participate in the Incentive Pilot.[10]

We have reviewed each and every issue raised by the Sierra Club and are of the opinion that good cause has not been established to grant rehearing. Accordingly, the Application for Rehearing of D.16-12-036 is denied because no legal error was shown.

DISCUSSION

1 Public Utilities Code Section 769

Section 769 requires electrical utilities to submit Distribution Resources Plans (“Plans”) to the Commission that identify optimal locations for the deployment of distributed resources.[11] Among other things, the Plans must evaluate locational costs and benefits based on the impact to local generation capacity needs, safety benefits, reliability benefits, savings, and net ratepayer benefits.[12]

The statute also provides:

For purposes of this section, “distributed resources” means distributed renewable generation resources, energy efficiency, energy storage, electric vehicles, and demand response technologies.

(Pub. Util. Code, § 769, subd. (a).)

1 Preliminary Issues

In determining what types of resources the Commission would consider in the Incentive Pilot, the Decision stated we would use the same categories of distributed resources identified by Guidance Rulings issued in the DRP OIR.[13] Those Rulings stated:

For purposes of the DRPs, PUC § 769 defined distributed resources as “distributed renewable generation resources, energy efficiency, energy storage, electric vehicle, and demand response technologies.” Given that these are somewhat broad categories, the DRPs should, at minimum, consider the following categories of DERs…Distributed Renewable Generation…Energy Efficiency…Energy storage…Electric Vehicles…Demand Response….[14]

The Rulings went on to provide:

Other DER…These three categories of DG have the potential to be fueled by renewables, but to date most deployments have been natural gas-fueled. Given that the statute defines distributed resources as having to be “renewable,” the DRPs must first focus on the analysis of Fuel Cells, CHP and Internal Combustion engines that are fueled by renewables. That said, natural gas-fueled stationary Fuel Cells, CHP and stationary I-C engines have the potential to reduce GHG emissions, and so the utilities are encouraged to expand the scope of their DRPs to include any distributed generation that can produce GHG emissions reductions over its lifecycle.[15]

Sierra Club suggests we erred in relying on the Guidance Rulings from the DRP OIR for purposes of determining the resources allowed in the Incentive Pilot. We disagree.

No law bars the Commission from looking to rulings, decisions, and pleadings from other Commission proceedings to inform the decisionmaking process. In this particular instance, the interplay between the IDER and DRP OIRs is well established. And this proceeding was specifically intended to build off of the outcomes, rules, guidance, and other information developed in the DRP OIR.[16]

Maintaining consistency in distributed resource rules, requirements, and policies is essential to effectively integrate cost-effective resources and meet the State’s statutory and environmental objectives. Had we rejected the instruction from the Guidance Rulings, we may have undermined those goals.[17]

Second, Sierra Club suggests that D.16-12-036 is the first decision to utilize a scope of distributed resources that includes natural gas-fueled resources. That is incorrect. In D.15-09-022, the Commission also determined that this proceeding would use the same categories of distributed resources used in the DRP OIR.[18] D.15-09-022 was never challenged and is now final. Thus, Sierra Club’s challenge is untimely and barred by section 1709 and 1731(b).[19]

2 Statutory Interpretation Principles

Sierra Club states that because section 769(a) lists only renewable, energy efficiency, energy storage, electric vehicle, and demand response resources as “distributed resources,” it violated the plain language of the statute to allow fossil-fueled resources to participate in the Incentive Pilot. (Rhg. App., at pp. 6-8.)

We are aware that statutory interpretation principles generally provide that where the language of a statute is clear and unambiguous, there is no need to look further than the plain language, giving words their ordinary meaning.[20] And here, section 769 does not identify natural gas-fueled resources as among its list of distributed resources. However, Sierra Club’s interpretation of section 769(a) is overly restrictive.

We generally have broad authority to act unless the Legislature places a specific statutory limit on its power.[21] The Legislature did not put language in section 769 that would bar or limit our consideration of natural gas-fueled distributed resources. Nor does the statute limit our ability to implement the statute to best meet the goals of increasing deployment of cost-effective distributed generation.[22]

Rather, section 769 explicitly vests the Commission with discretion to modify utility Distributed Resources Plans as needed to accomplish those goals.[23] To the extent natural gas-fueled resources could further the statutory goals, it was lawful to allow them to participate in the solicitation process, and consider them within the meaning of section 769.

Sierra Club argues we must apply the maxim expressio unius est exclusio alterius, i.e., the inclusion of one term means the exclusion of another. Applied here, that would mean the express inclusion of the term “renewable” in section 769(a) means the exclusion of any fossil-fueled resources. (Rhg. App., at p. 6, citing Southern California Gas Company v. Public Utilities Commission (“SoCalGas”) (1979) 24 Cal.3d 653, 659.)

Our review suggests Sierra Club’s reliance on SoCalGas is flawed. That case involved interpretation of the word “permit” in the context of authorizing a home assistance and financing program. The Court found that the word “permit,” plus legislative analyses clearly showing an intent to create a permissive only program, meant we could not impose a mandatory program. (Id. at pp. 657-659.)

SoCalGas might be relevant here if section 769 stated that distributed resources “means only”, or “is limited to” renewables, energy efficiency, energy storage, electric vehicles and demand response. But it does not. And there is nothing in the statute’s legislative history that evidences a clear intent to exclude natural gas-fueled technologies. Therefore, SoCalGas is not controlling in this instance.

Indeed, the Commission is not always bound by the literal wording of a statute. Statutory interpretation principles instruct that the literal interpretation of a statute should not prevail if it is counter to the overall purpose and intent of the statute.[24]

Section 769 states that its purpose is to: increase deployment of cost-effective distributed resources to satisfy local energy capacity needs; provide electric system safety and reliability benefits: and yield net benefits to ratepayers.[25] It would be contrary to this purpose to exclude natural gas-fueled resources if doing could impede achieving these outcomes.

There are also policy considerations which weigh toward the inclusion of certain natural gas-fueled resources. Some parties advocated for that result if such

resources could provide environmental or economic benefits.[26]

Sierra Club urges us to reject such considerations. (Rhg. App., at p. 8.) But practicality and necessity suggest such a view is short-sighted. We must often implement statutory directives in a manner that balances multiple State policies and goals. A balancing was necessary here. We agree that on the one hand it is the policy of this State to promote reliance on cost-effective energy efficiency, demand response and renewable technologies whenever possible to meet the State’s energy needs. These are definitely our “preferred resources.”[27]

At the same time, our fundamental statutory obligation is to ensure safe and reliable electric service at reasonable costs to ratepayers.[28] To that end, absent explicit language stating otherwise, we do not view a preference for some resources as a prohibition against others. And here, no statute explicitly prohibits the consideration

natural gas-fueled generation resources where they are needed to achieve our

fundamental statutory objective.[29]

Sierra Club next compares section 769 with section 379.6, arguing that where the Legislature uses materially different language in related statutes, it can be inferred that the Legislature intended different things.[30] Sierra Club contends section 769 limits distributed resources to renewable resources, while SGIP defines eligible resources more broadly.[31] (Rhg. App., at pp. 7-8, citing Lockyer v. R.J. Reynolds Tobacco Company (2005) 37 Cal.4th 707, 716-717.)

The principle Sierra Club articulates is valid. But the comparison in this instance is faulty. Section 769 and 379.6 do not use materially different language to define “distributed resources.” Section 379.6 does not define the term at all. Its provisions speak strictly to the policy goals and outcomes intended by the Legislature.[32] Thus, it offers no meaningful comparison here.

Finally, Sierra Club contends that even if a reviewing Court were to consider our interpretation of section 769, it is not bound by that interpretation. (Rhg. App., at p. 7, citing Yamaha Corporation of America v. State Board of Equalization (“Yamaha”) (1998) 19 Cal.4th 1.)

Generally, an agency’s interpretation of a statute within its jurisdiction is entitled to great weight unless it fails to bear a reasonable relation to the purpose of the statute.[33] Courts may also look to the nature of the decisionmaking, and apply certain situational factors to determine the appropriate standard of review. For example, they may look to: (1) the agency’s expertise and technical knowledge in a particular subject matter; (2) whether a statute is complex, open-ended, or entwined with issues of fact, policy, and discretion; and (2) whether the agency has been consistent in its view.[34]

In addition, the Courts recognize that Commission actions are not always strictly quasi-legislative or interpretive. Some instances are more hybrid in nature, having characteristics of both. In such cases, the Commission may be allowed certain gap-filling authority, i.e., authority and discretion to fill in the details of somewhat open-ended statutory language.[35]

Adoption of the Competitive Solicitation Framework (and Incentive Pilot) took place in Phase 1 of this proceeding which was originally designated as quasi-legislative.[36] Although the categorization was ultimately changed to ratesetting to consider the incentive level for the proposed regulatory Incentive Pilot,[37] the proceeding was still mainly quasi-legislative in nature and due heightened deference. Yet even if the situational factors were applied, there is sound basis to support our Decision.

Broadly speaking, this matter involves issues related to: the safe and reliable operation of utility distribution and transmission systems; utility resource planning; Commission authorization of utility Distributed Resources Plans; and related distributed resources solicitations. These issues fall squarely within our unique expertise and technical knowledge.

As also noted in the Guidance Rulings, the relevant statute (section 769) is somewhat open-ended.[38] Given our authority to modify Distributed Resources Plans as needed, it follows that implementation of the statute is entwined with issues of fact, policy, and discretion. We have also been consistent in the view that natural gas-fueled distributed resources may warrant consideration to fulfill the goals of section 769. Thus, we do not find legal error.

2 Request for Oral Argument

Sierra Club requests that the Commission grant oral argument to consider whether fossil-fueled distributed resources are permissible under section 769. Sierra Club argues this question will have precedential effect due to the importance of section 769 in distribution planning. (Rhg. App., at p. 9.)

Such requests are governed by Rule of Practice and Procedure 16.3, which provides:

(a) If the applicant for rehearing seeks oral argument, it should request it in the application for rehearing and explain how oral argument will materially assist the Commission in resolving the application, and demonstrate that the application raises issues of major significance for the Commission because the challenged order or decision:

(1) adopts new Commission precedent or departs from existing Commission precedent without adequate explanation;

(2) changes or refines existing Commission precedent;

(3) presents legal issues of exceptional controversy, complexity, or public importance; and/or

(4) raises questions of first impression that are likely to have significant precedential impact.

(See also Cal. Code of Regs., tit. 20, Rule 16.3.)

We deny Sierra Club’s request. This issue is not precedential. As previously discussed, the Commission first addressed this issue in the DRP OIR.[39] Again in D.15-09-022, we incorporated that guidance for purposes of moving forward with the Competitive Solicitation Framework adopted here.[40] And apart from Sierra Club’s objections, this was not a controversial issue in this proceeding.

Because D.15-09-022 is final Sierra Club’s continued challenge is barred under sections 1709 and 1731(b).[41] And even if it were not, Sierra Club fails to explain how oral argument would be useful.

CONCLUSION

For the reasons stated above, the Application for Rehearing of D.16-12-036 is denied because no legal error was established.

THEREFORE, IT IS ORDERED that:

1. The Application for Rehearing of D.16-12-036 is denied.

2. This proceeding, Rulemaking (R.) 14-10-003 remains open.

This order is effective today.

Dated June 29, 2017, at San Francisco, California.

MICHAEL PICKER

President

CARLA J. PETERMAN

LIANE M. RANDOLPH

CLIFFORD RECHTSCHAFFEN

Commissioners

I dissent.

/s/ MARTHA GUZMAN ACEVES

Commissioner

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[1] Order Instituting Rulemaking to Create a Consistent Regulatory Framework for the Guidance, Planning, and Evaluation of Integrated Demand-Side Resource Programs (“IDER OIR”) [R.14-10-003], dated October 2, 2014 [Subsequently renamed Order Instituting Rulemaking to Create a Consistent Regulatory Framework for the Guidance, Planning and Evaluation of Integrated Distributed Energy Resources.].

[2] Order Instituting Rulemaking to Create a Consistent Regulatory Framework for the Guidance, Planning, and Evaluation of Integrated Demand-Side Resource Programs (“Decision Adopting and Expanded Scope, a Definition, and a Goal for the Integration of Distributed Energy Resources”)

[D.15-09-022] (2015) at p. 2 (slip op.). All citations to Commission decisions are to the official pdf versions which are available on the Commission’s website at: .

[3] Other related proceedings include: Demand Response [R.13-11-007]; Energy Efficiency [R.13-11-005]; Renewable Portfolio Standard [R.11-05-005]; and Long-Term Procurement Planning [R.13-12-010]. (See, e.g., Assigned Commissioner’s Ruling on Guidance for Public Utilities Code Section 769 – Distribution Resource Planning [R.14-08-013], dated February 6, 2015, at p. 10.)

[4] D.15-09-022, supra, at p. 2 (slip op.).

[5] Order Instituting Rulemaking Regarding Policies, Procedures and Rules for Development of Distribution Resources Plans Pursuant to Public Utilities Code Section 769 (“DRP OIR”) [R.14-08-013], dated August 20, 2014. All subsequent section references are to the Public Utilities Code, unless otherwise stated.

[6] See. D.16-12-036, at p. 4, fn. 6.

[7] See Administrative Law Judge’s Ruling Establishing a Working Group to Develop the Competitive Solicitation Framework [R.14-10-003], dated March 24, 2016. (See also D.16-12-036, at pp. 2, 76-81 [Ordering Paragraph Numbers 1-9]; Joint Assigned Commissioner and Administrative Law Judge Ruling and Amended Scoping Memo [R.14-10-003], dated February 26, 2016, at pp. 1-6 [Describing the interplay between the DRP OIR and the IDER OIR].) The Working Group was comprised of over 40 stakeholders. (See Competitive Solicitation Framework Working Group Final Report Filed by Southern California Edison Company, Pacific Gas and Electric Company, San Diego Gas and Electric Company, and Southern California Gas Company (“Working Group Report”), dated August 1, 2016.).

[8] D.16-12-036, at p. 2. (See also Assigned Commissioner’s Ruling Introducing a Draft Regulatory Incentives Proposal for Discussion and Comment [R.14-10-003], dated April 4, 2016; Amended Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judge [R.14-10-003], dated September 1, 2016.)

[9] D.16-12-036, at p. 2.

[10] The Natural Resources Defense Council, Clean Coalition, and the Environmental Defense Fund (the “Joint Environmental Parties”) filed a response to the application for rehearing. The response was a cursory “me too” response, attempting to piggyback on Sierra Club’s arguments and allegations. The Commission has previously rejected similar attempts to join rehearing applications where a party does not submit a document that can independently stand-alone and satisfy the requirements of section 1732. (See Application of Southern California Edison Company for Approval of the Results of Its 2013 Local Capacity Requirements Request for Offers for the Moorpark Sub-Area [D.16-12-030] (2016) at pp. 3-4 (slip op.).) The Joint Environmental Parties’ response is not a stand-alone document that supports its allegation of error with relevant law, explanation, or analysis. Thus, we give the response no weight here.

[11] Pub. Util. Code, § 769, subd. (b). The terms “distributed energy resources” and “distributed resources” are used interchangeably.

[12] Pub. Util. Code, § 769, subd. (b)(1) & (4).

[13] D.16-12-036, at p. 3, fn. 5, referring to Assigned Commissioner’s Ruling re Draft Guidance for Use in Utility AB 327 (2013) Distribution Resource Plans [R.14-08-013], dated November 17, 2014; Assigned Commissioner’s Ruling on Guidance for Public Utilities Code Section 769 – Distribution Resource Planning (together, “Guidance Rulings”) [R.14-08-013], dated February 6, 2015.

[14] Assigned Commissioner’s Ruling on Guidance for Public Utilities Code Section 769 – Distribution Resource Planning, dated February 6, 2016, Attachment, at pp. 14-15.

[15] Assigned Commissioner’s Ruling on Guidance for Public Utilities Code Section 769 – Distribution Resource Planning, dated February 6, 2016, Attachment, at pp. 14-15.

[16] See, e.g., DRP OIR, supra, dated August 20, 2014; IDER OIR, supra, dated October 8, 2014; Preliminary Draft Guidance ACR [R.14-08-013], dated November 17, 2014; Final Guidance ACR [R.14-08-013], dated February 6, 2015; D.15-09-022, supra, at pp. 2, 8-11, 13, 17, 25 [Finding of Fact Numbers 1-4], & p. 28 [Ordering Paragraph Number 1] (slip op.); Joint Assigned Commissioner and Administrative Law Judge Ruling and Amended Scoping Memo [R.14-10-003], dated February 26, 2016.

[17] The DRP OIR also afforded parties adequate due process in developing the principles articulated in the Final Guidance ACR. That ACR was based on the record, including, input from the parties / stakeholders, and parties did not raise statutory or policy concerns with the proposed inclusion of qualifying natural gas-fueled DG. (See December 12, 2014 Comments on Preliminary Draft Guidance ACR in [R.14-08-013].)

[18] D.15-09-022, supra, at p. p. 2, fn. 1 (slip op.)

[19] See also Coast truck Line v. Asbury Truck Company (1933) 218 Cal. 337, 340.

[20] See, e.g., People v. Canty (2004) 32 Cal.4th 1266, 1276.

[21] See, e.g., Southern California Edison Company v. Peevey (2003) 31 Cal.4th 781, 792; PG&E Corporation v. Public Utilities Commission (2004) 118 Cal.App.4th 1174, 1199-1200.

[22] Pub. Util. Code, § 769, subds. (b)(1) & (4).

[23] Pub. Util. Code, § 769, subd. (c).

[24] See, e.g., People v. Belton (1979) 23 Cal.3d 516, 523-526; Goodman v. Lozano (2010) 47 Cal.4th 1327, 1332.

[25] Pub. Util. Code, § 769, subd. (b)(1), (2) & (4).

[26] Opening Comments of Southern California Gas Company on the Assigned Commissioner’s Ruling Introducing a Draft Regulatory Incentives Proposal for Discussion and Comment, dated May 9, 2016, at p. 2 [Noting the potential of such resources to meet the State’s energy efficiency and GHG reduction goals]; Reply Comments of the National Fuel Cell Research Center on the Proposed Decision Addressing Competitive Solicitation Framework and Utility Regulatory Incentive Pilot, dated December 5, 2016, at p. 4; Reply Comments of the National Fuel Cell Research Center on the Amended Scoping memo and Ruling of Assigned Commissioner and Administrative Law Judge, dated September 22, 2016, at p. 4. Other parties offered no comment on this issue. Only Sierra Club and the Natural Resources Defense Council appeared to oppose the inclusion of natural gas-fueled resources. (See Comments of the Natural Resources Defense Council and Sierra Club on the Competitive Solicitation Framework Working Group Final Report, dated August 22, 2016, at pp. 8-10.)

[27] Energy Action Plan II (“EAP II”), dated October 2005, at pp. 1-2. (EAP II can be located at: .) See also Pub. Util. Code, § 454.5, subd. (b)(9)(C); Executive Order S-3-05 (located at ); Executive Order S-21-09 (located at: ); Executive Order S-14-08 (located at: ).

[28] See, e.g., Pub. Util. Code § 379.6, subd. (a)(1); § 399.11, subd. (b)(5) & (8); § 399.13, subd. (a)(8);

§ 451; § 454.5, subd. (b)(9)(C); § 768; § 769, subd. (b)(1).

[29] See, e,g, EAP II, at p. 2 stating:

“Our overarching goal is for California’s energy to be adequate, affordable, technologically advanced, and environmentally sound. Energy must be reliable – provided when and where needed and with minimal environmental risks and impacts….Our actions must be taken with clear recognition of cost considerations and trade-offs to ensure reasonably priced energy for all Californians….The loading order identifies energy efficiency and demand response as the State’s preferred means of meeting growing energy needs. After cost-effective energy efficiency and demand response, we rely on renewable sources of power and distributed generation, such as combined heat and power applications. To the extent efficiency, demand response, renewable resources, and distributed generation are unable to satisfy increasing energy and capacity needs, we support clean and efficient fossil-fired generation…. (emphasis added.)

[30] Section 379.6 established the Self-Generation Incentive Program (“SGIP”). The statute’s goal is to increase deployment of distributed generation and energy storage resources into the electric grid. (Pub. Util. Code, § 379.6, subd. (a)(1).)

[31] Pub. Util. Code, § 379.6, subd. (b)(1).

[32] Pub. Util. Code, § 379.6, subd. (a)(1) [Integrating distributed generation and energy storage systems into the electric grid, improving efficiency and reliability of the distribution and transmission system, and reducing GHG emissions, peak demand, and ratepayer costs.]; & subd. (b)(1) [Reducing GHG emissions.].

[33] Greyhound Lines, Inc. v. Public Utilities Commission (1968) 68 Cal.2d 406, 410-411.

[34] Id.

[35] See, e.g., New Cingular Wireless PCS, LLC v. Public Utilities Commission (2016) 246 Cal.App.4th 784, 808-812.

[36] D.16-12-036, at p. 2-7; Joint Assigned Commissioner and Administrative Law Judge Ruling and Amended Scoping Memo [R.14-10-003], dated February 26, 2016, at p. 9.

[37] Amended Scoping Memo and Ruling of Assigned Commissioner and Administrative Law Judge, dated September 1, 2016, at p. 3.

[38] Assigned Commissioner’s Ruling on Guidance for Public Utilities Code Section 769 – Distribution Resource Planning [R.14-08-013], dated February 6, 2015, Attachment, at

pp. 14-15.

[39] Assigned Commissioner’s Ruling Re Draft Guidance for Use in Utility AB 327 (2013) Section 769 Distribution Resource Plans, dated November 17, 2014, at p. 28; Assigned Commissioner’s Ruling on Guidance for Public Utilities Code Section 769 – Distribution Resource Planning, dated February 2, 2015, Attachment, at p. 14.

[40] D.15-09-022, supra, at pp. 2-3, fn. 1 (slip op.).

[41] Coast Truck Line v. Asbury Truck Co. (1933) 218 Cal. 337, 340.

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