Utilities Balk at Los Angeles County Plan for a Regional Microgrid Agency

Oct. 11, 2021
A proposal by the County of Los Angeles to create a regional microgrid agency has drawn the ire of utilities in the state. Are they off target?

A proposal by the County of Los Angeles to create a regional microgrid agency has drawn the ire of California’s investor-owned utilities. But the county says the utility criticism is off target. 

The county last month proposed a $41 million program that includes a regional microgrid agency to serve an area that encompasses roughly half of California’s population. 

Called the Regional Public Agency Microgrid Program, the entity would create a centralized resource to help local governments and public agencies implement microgrids. It also would immediately construct three microgrids, totaling 15.95 MW.

In a joint filing, the state’s three major investor-owned utilities — Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison (SCE) — criticized the idea, describing it as speculative and saying it could lead to cost-shifting.

“It appears that the county is simply requesting that customers across the state contribute financially to the county’s preferred resource plan, without demonstrating the specific need, benefit or cost-effectiveness of that investment,” the utilities said in the filing before the California Public Utilities Commission (CPUC).

Who pays what

The utilities’ argument centers around the idea that the microgrids might be located in the service area of one utility while ratepayers from another utility foot the bill for it. As proposed, the agency would receive part of its funding through SCE. The utilities postulated that the agency might build microgrids in the area served by a different utility, the Los Angeles Department of Water and Power, a municipal utility. If that were the case, ratepayers of the municipal utility would benefit from the microgrid without paying for it, the utilities argued.

But Los Angeles County countered that the utilities mischaracterized its proposal.

The microgrids would, in fact, be located within the service territory of SCE, the county said. And they would be paid for not only through SCE ratepayer funds, but also by leveraging power purchase agreements, energy service company financing and incentives, such as the state’s Self Generation Incentive Program. The first three microgrids built by the agency would leverage $51,500,000 of non-ratepayer funds (65% of project costs), according to the county.

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In all, Los Angeles County is asking the commission to authorize $23 million in funding over two years for the agency, with the remaining $18 million to build the three initial microgrids.

To mitigate the risk to ratepayers, the county plans to attach 84% of the agency’s annual budget to performance-based incentives that would require verification of incremental installed capacity.

The overall strategy not only empowers public agencies to pursue clean energy “but also fuels market development exponentially faster than previously approved approaches,” the county said.

SCE would act as fiscal administrator of the microgrid agency, while the county would act as program administrator. The utility would disperse funds to the county and conduct general management and monitoring of the microgrid agency.

Roots in Obama-era stimulus

The county wants the program to be set up and funded like a unique entity created by the CPUC in 2012 to foster energy efficiency. Known as a regional energy network, or REN, the program creates a partnership between local governments and utilities. The CPUC directs the budget and decides on programs. (See D.12-11-015, issued 11/15/2012 by the CPUC.)

The specific REN the county wants to model is called the Southern California Regional Energy Network (SoCalREN). It offers energy efficiency services to a region that encompasses 700 public agencies and 20 million people. The microgrid agency would cover most of the same territory.

In approving the energy efficiency REN in 2012, the commission said the concept emerged after Obama-era stimulus funds injected money into local governments for clean energy programs. Before that, energy efficiency programs were largely handled by utilities. But the federal funding started local governments on the path to building their own programs.

After “several years of hearing increasingly vocal complaints from local governments” about the utilities’ energy efficiency programs, the commission decided to approve the REN. “Had the utilities been proactive over the past several years and reached out to the local governments to create true partnerships that took advantage of the expertise and viewpoints of the local governments, perhaps the commission would not have felt the need to step in to allow the REN proposals to be submitted,” the commission said in the 2012 decision.

Source: Management structure for Regional Microgrid Agency: Credit: County of Los Angeles, CPUC, Rulemaking 19-09-009

The more recent Los Angeles County microgrid proposal came in response to Governor Newsom’s July 30 emergency climate proclamation, where he warned that the state faces an electric capacity shortfall this summer and next. The CPUC asked the microgrid community for ideas on how the technology might address the governor’s concerns.

The county said that none of the proposals submitted to the CPUC thus far matches its own for “the magnitude of scale and deep access to customers that own and operate large portfolios of sites with substantial energy savings and dispatch potential.”

Can the regional microgrid agency move fast enough?

The utilities questioned if the microgrid agency could get microgrids in place in time to respond to Newsom’s warning — by summer 2022. The county responded that it already has three shovel ready projects — for its health department, a detention center and an emergency public safety center. Detailed proposals, timelines and technical analysis are in place for the three microgrids, the county said. An additional 17 microgrids are in the pipeline for 2023.

Be bold or blackout

Demand for microgrids is on the rise in California because of wildfire-related power outages, last year’s grid blackout, climate concerns and a desire to reduce what are among the nation’s highest electricity rates. While wealthy communities like Santa Barbara are finding ways to move forward with microgrids, poorer areas have fewer options to ward off power outages.

The microgrid agency would be a unique government approach to supporting microgrids. And how the CPUC responds to the proposal could have far-reaching impact, given that California, the US’ fourth largest producer of electricity and, as of 2019, the largest importer, tends to be a bellwether state.

The county said the time has come to innovate.

“The state can no longer rely on status quo models to meet the current state of emergency our communities are currently facing. If collectively we continue not to advance new models or pilots, we will fall further behind in addressing this climate emergency,” the county said, adding that if utilities continue “to push back on models that would provide green alternatives, the current inequities of environmental justice faced by rural, disadvantaged communities and low-income communities will be amplified.”

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded RealEnergyWriters.com, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

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