Proposed California PUC Decision Could Scuttle Sunnova’s Microgrid Plans

In a proposed decision, a California Public Utilities Commission administrative law judge recommended granting a challenge that would deny Sunnova Energy’s plans to build community microgrids in California.

In September Sunnova Community Microgrid California, a wholly owned subsidiary of Sunnova Energy, applied to the CPUC for a Certificate of Public Convenience and Necessity for authorization to build and operate public utility microgrids and to set electric service rates for the microgrid customers.

In the application (22-09-002), SCMC laid out plans for the microgrids that would be built as part of new master planned residential communities of between 500 to 2,000 homes, as well as and select non-residential facilities that would be co-located in or an essential part of each community.

SCMC also requested the CPUC’s approval to provide bundled retail service under Section 2780 of the Public Utilities Code and requested authority to establish market-based rates for service and requested exemption from several CPUC general orders and rules, including its general order regarding advice letters and customer notice requirements and affiliate transaction rules.

In October, the Public Advocates Office (Cal Advocates), an independent unit of the CPUC, filed a motion to dismiss SCMC’s application. In the petition, Cal Advocates argued that SCMC’s requests are based on “unsubstantiated claims and lack the basic information” required for a CPCN. Cal Advocates also said SCMC did not demonstrate that its proposals would ensure rates are just, reasonable, and necessary.

Cal Advocates also contended that the CPUC should not consider SCMC’s application before a regulatory framework for multi-customer microgrids is developed in the commission’s ongoing Rulemaking 19-09-0091 and noted that the commission “rejected the same proposal to rely on the microutility statute that SCMC proposes.”

The Utility Reform Network, Southern California Edison, Pacific Gas and Electric, and San Diego Gas and Electric also filed protests with the CPUC seeking dismissal of SCMC’s application.

In the proposed decision, Administrative Law Judge Colin Rizzo granted Cal Advocates’ motion to dismiss because the motion is not improper, the exemptions SCMC seeks are unauthorized, and SCMC fails to provide the information required for a CPCN.

The proposed decision has no legal effect until and unless the CPUC hears the item (Agenda ID #21361) and votes to approve it. At the earliest, the item may be heard at the CPUC’s April 6 business meeting.

California does, under Section 2780, provide for an “electric microutility” to be the sole-source of generation, distribution, and exclusive electricity sales to a customer base of fewer than 2,000 customers, but in the proposed decision Rizzo noted that SCMC was seeking “numerous exemptions from statutory requirements for electrical corporations based on its proposed characterization as an ‘electric microutility’ under Section 2780.”

However, the statute defines an “electric microutility” as an electrical corporation that is regulated by the commission, thus, “by the express terms of the statute, an ‘electrical microutility’ must also meet the definition of an ‘electrical corporation,’” a conclusion already affirmed in the commission’s microgrid rulemaking, which rejected “the assertion that under Section 2780, we can exempt ‘microutilities’ from the requirements applicable to electrical corporations,” Rizzo wrote in the proposed decision.

And while SCMC argued that granting Cal Advocates’ motion to dismiss would be a “drastic” remedy that “may be true in the abstract,” the argument “would be more persuasive were there not already an ongoing rulemaking,” Rizzo said. Further, rather than seeking modification of a prior commission decision, SCMC instead was seeking “a divergent, contrary ruling in a totally new proceeding.”

“SCMC is seeking to be exempt from the Commission’s statutorily required function of conducting oversight of electricity rates to ensure that they are just and reasonable,” Rizzo wrote. To grant “SCMC this authority, the Commission would have to abdicate its responsibility to ensure just and reasonable rates,” Rizzo said.

“It is curious and concerning that the PAO, a presumably independent division of the CPUC who is charged with representing the public interest, is seeking to dismiss our microgrid application before it gets any opportunity to be heard through a public hearing,” said Meghan Nutting, Executive Vice President for Government and Regulatory Affairs, at Sunnova.

“Our application clearly outlines the reliability, rate, environmental, and other public interest benefits that community microgrids can provide. This proposed decision is troubling and disappointing for a state that has set such bold climate targets yet is struggling with making steady progress on them,” she said.