MTS Working Group San Francisco F2F Agenda Mar. 23, 2015

2 2 Agenda Morning (9a-12n) Opening & Introductions - Paul De Martini DRP Methodology - Mark Esquerra DPP Alignment - Lorenzo Kristov 12n - 1p Lunch Afternoon (1-3:30p) 2015 Plan - Paul De Martini CA Proceedings (Technical Alignment) - All Next Steps Morning & afternoon breaks as needed

Optimal Location Values & Methodology

4 4 Subgroup Objective Develop a unified locational net benefits methodology for the values identified in CPUC final guidance consistent across all three Utilities. Discuss interpretations of final guidance Discuss quantification method for each DER benefit category Gain alignment on overall locational benefits methodology Subgroup included representatives from the three CA IOUs (PG&E, SCE, SDG&E), SolarCity and Kevala Analytics.

Not Required for “Walk” Phase

7 7 MTS Identified Value Components

8 8 MTS Recommendations for Initial DRP

9 9 Final Guidance from Commission on Optimal Location Benefit Analysis IOU Unified Locational Net Benefits methodology ‒Based on E3 Cost-Effectiveness Calculator, but enhanced to include following location-specific values (minimum):

10 Comparison of Final Guidance and MTS Recommendations

11 E3 Cost Effectiveness Methodology Utilize Distributed Energy Resources Avoided Cost Model (DERAC) Current DERAC model has system values that may need to be modified/replaced with locational specific values. Avoided Cost Components in DERAC

12 Proposed Locational Benefits Methodology

13 Discussion of Valuation Method from 3/12 Mtg E3 DERACT MTS Recommendations No Change

14 Avoided Sub-transmission, Substation and Feeder Capital & Operating Expenses Definition Avoidable costs incurred to increase capacity on sub- transmission, substation and/or distribution feeders to ensure system can accommodate forecast load growth Cost Calculation Approach Use existing utility capacity 10-year plans by substation and/or Perform load forecasting vs. capacity analysis to forecast needed capacity upgrades Benefit/Avoided Cost is value of deferring capacity work Examples Substation upgrades Transformer upgrades Distribution feeder reconductoring/reconfiguration

15 Avoided Distribution Voltage and Power Quality Capital and Operating Expenses Definition Avoidable costs incurred to ensure power delivered is within required operating specifications (i.e. voltage, flicker, etc.) Cost Calculation Approach Use existing utility power quality investment plan by substation, or Perform load forecasting vs. voltage/power quality analysis to forecast needed voltage/power quality upgrades Benefit/Avoided Cost is value of deferring voltage/power quality work Examples Voltage regulation investments

16 Avoided Distribution Reliability and Resiliency Capital and Operating Expenses Definition Avoidable costs incurred to proactively prevent/mitigate routine outages (reliability) and major outages (resiliency) Avoidable costs incurred in responding to routine outages (reliability) and major outages (resiliency) Distribution Resiliency costs defined as spending needed to meet reliability expectations that are above/beyond distribution planning criteria to address major outage events. Cost Calculation Approach Use existing utility reliability investment plan by substation, or Allocate systemwide reliability investment plan according to reliability statistics (i.e. SAIDI, CAIDI, SAIFI) by substation/local area Benefit/Avoided Cost is value of deferring reliability/resiliency work Examples Investments / expenses New/Upgraded Distribution feeders Microgrids

17 Avoided Transmission Capital and Operating Expenses Definition Avoidable costs incurred to increase capacity on transmission line and/or substations to ensure system can accommodate forecast load growth Cost Calculation Approach Use existing CAISO TPP plan by substation and/or Perform load forecasting vs. capacity analysis to forecast needed capacity upgrades Benefit/Avoided Cost is value of deferring transmission capacity work Examples Substation upgrades Transformer upgrades Transmission line reconductoring/reconfiguration Voltage regulation investments

18 Avoided Flexible Resource Adequacy Procurement Flexible RA determined at system level. Instead of Flexible RA, recommend using Local RA. Alternate Definition (Avoided Local RA Procurement) Avoidable incremental costs incurred to procure Resource Adequacy (RA) in CAISO-identified local areas (e.g. LCR) Cost Calculation Approach Use latest CAISO local capacity requirements to identify incremental capacity needs beyond current generation and identify deficient sub-areas. Benefit/Avoided Cost is value of deferred Local Capacity or transmission Examples Local RA Procurement PG&E: Needs to purchase Bay Area Local RA at a premium in area to fulfill Local RA requirements

19 Avoided Renewable Integration Costs Renewable Integration determined at system level. Not location specific Definition Avoidable incremental costs to integrate renewables onto electric system. Cost Calculation Approach Current cost calculation is an interim method for calculating renewable integration costs at a system level, which is to be replaced in Utilities to coordinate efforts with development of the updated RPS Calculator and Renewables Integration Charge to factor in locational specific values

20 Societal Avoided Costs Definition Avoidable incremental costs that are borne by the public, as well as environmental benefits (improvements in air and water quality and land impacts) that can be clearly linked to deployment of DERs. Cost Calculation Approach Until more data is available in this area, qualitatively describe the Societal Avoided Costs – Potentially use CalEnviro Screening tool In some cases, DERs impose costs on society, such as increased taxes for those not participating with DERs Examples Criteria Pollutant Emissions/Local Air Assessments/ Health Impacts

21 Avoided Public Safety Costs Definition Avoidable incremental public safety related costs that can be clearly linked to deployment of DERs. Cost Calculation Approach Until more data is available in this area, qualitatively describe the Public Safety Benefits In some cases DER could potentially increase costs and hazards for safety related items

22 Recommendations Utilize E3’s DERACT as starting point Review and compare T&D deferral benefit calculations among the IOUs Develop criteria/service terms for DERs regarding deferring T&D Projects Flexible RA will be incorporated in methodology as a system value Generation related integration costs incorporated using interim integration adder adopted by CPUC – System value Locational RA will be included to the extent a DER solution can address this requirement Societal & Public Safety will be included as qualitative factors unless quantitative data is available. For all categories, DERs will sometimes increase cost. Net Benefit will account for any increased costs.

Distribution Planning Process Alignment w/State Planning & Regulatory Processes

24 Potential DPP Alignment Map w/CA Planning Refer to Lorenzo’s Handout

25 Potential DPP Alignment w/GRCs Refer to Lorenzo’s Handout

2015 MTS WG Scope

Activity Support utility development of July filings related to DRP, data, demonstrations and state planning alignment as requested Define services (incl. functional requirements) for deferred capital, voltage/reactive power management and reliability/resilience. Plus identify procurement methods (e.g., RFPs, tariffs, other) related to these services Define incremental operational functions to integrate and optimize DER related to the values identified in the CPUC final guidance. This includes identifying technology and new processes leveraging industry practices and CA developments (incl. measurement, information protocols, etc.) Facilitate dialog with California EE/DR community to discuss methods and practice to align utility program design with operational needs