California Public Utilities Commission

Supplemental Scenarios

13. Consider in your answer to Question 12 the following three additional scenarios, and any other scenarios you might compose.

Scenario 5 is similar to Scenario 3 except that UDCs function as IDOs. To mitigate market power, retail sales and DG are functionally separated from distribution operation and planning.

Scenario 6 uses the vesting of distribution in one or more independent wires companies (Wireco) to address vertical market power. All ancillary services and T&D-level impacts are unbundled. The Wirecos evaluate congestion conditions for purposes of devising incentives or distribution congestion prices, or offering must-run agreements for ancillary services. The former UDC and its affiliates may own DG on Wireco sites if regulators are assured that all providers have equal access to Wireco siting.

Scenario 7 permits competition in local distribution as means of addressing vertical market power. The UDC continues to be regulated as the dominant carrier. In areas where effective distribution competition does not exist, Scenario 2 prevails.

14. Under what scenarios (1 through 7) or situations might DG lead to underutilization or standing of existing T&D? Do you see a distinction between T&D underutilization and stranding? Who should pay for underutilization or stranded T&D? How?

Questions About The Role of the UDC/LDC

15. What changes are needed in natural gas rules, tariffs, interconnection practices and market structure to facilitate DG?

16. The above examination of DG raises many questions about the UDC role, especially in the areas of procurement, power quality, and pricing. Please provide your vision of the long run future vision of the structure of the UDC, and where applicable, the gas LDC including a discussion of the following:

• procurement, including the role of the default supplier
• service area boundaries
• distribution planning
• management of residual generation (e.g: nuclear, QFs)
• PBR and pricing of distribution services
• power quality and reliability, especially with respect to the similar responsibilities of the ISOs
• service quality
• franchise fees and user taxes
• dual and multiple commodity distribution utilities
• provision of energy information
• interaction with public purpose program providers
• relationship with ESPs
• consumer protection

Please define "long run" for purposes of your answer. How does your vision affect the feasibility of unbundling distributed energy services? How does your vision shape your preferred role for the UDC in distributed resources?

Questions About How Distribution Ratemaking Affects DG

16. ESPs and consumers pay distribution rates that are identical for each member of a rate class. Taking into account your answers to questions above about market power issues, should distribution rates charged to ESPs be geographically differentiated to incent ESPs to locate DG in areas that need distribution upgrades? If so, how? How would the benefits of geographic price signals compare to any equity issues that might arise? How do your answers compare to the geographic price signals that exist at the transmission level?

18. Could the tools of congestion pricing (being applied at the transmission level by the ISO) be applied to distribution pricing to optimize use of the distribution grid and to incent DG? How? How would the efficiency benefits of congestion pricing compare with any equity issues that might arise?

19. Can and should PBR be used to allocate decongestion benefits of DG among UDCs, ESPs, ESCOs and end users? If so, how? If not, what changes are needed in PBR for this to be possible?

Questions About the Relationship Between DG and the Transmission ISO

20. To UDCs and to the ISO, can DG or storage be a viable substitute for expanding transmission capacity? How? Does this vary with the ownership of the DG?

21. What could be the impact of the UDC planning or dispatch of DG on the ISO's role in planning transmission and placing transmission congestion in the competitive market? What interface between the UDC, IDO(s) or distribution Wireco(s) will be needed with the transmission ISO?

Questions About Vertical Market Power Associated With DG

22. To ESPs, does it matter whether the entity that plans/avoids distribution expansion is also a retail competitor? Why? What does your answer imply?

23. To electricity customers, does it matter in terms of access to competing ESPs whether distribution expansion is avoided by your provider's DG or by another provider's DG? Why?

24. Given your answers to the above, and keeping in mind that T&D is a common carrier, should the UDC be able to defer or avoid T&D expansion by planning or dispatching DG, whether owned by itself or by others? Why?

25. Given your answers to the above, should the UDC have an affirmative obligation to expand distribution to relieve distribution congestion? Why?

Questions About the Role of UDCs in Planning, Owning or Dispatching DGs

Questions About UDC Interactions With Affiliates

27. Taking into account the decision governing affiliate standards of conduct, D.97-12-088, should UDC affiliates or holding companies be able to install DG on distribution facilities? If so, under what conditions? What are the assumptions about the structure of the electricity services industry that support your answer?

28. Does the Affiliate Decision cover the transfer of T&D system benefits from the UDC to an affiliate that installs DG? How should the Commission make such benefits equally open to all?