Transmission Access Charges (TAC) CAISO is avoiding a fix to a massive market distortion that harms local renewables and California ratepayers Katie Ramsey Staff Attorney Clean Coalition 202-709-8063 mobile katie@clean-coalition.org Daryl Michalik Executive Director Dynamic Grid Council 415-305-0202 mobile daryl@dynamicgridcouncil.com December 1, 2016

Today’s presenter Katie Ramsey Staff Attorney Clean Coalition

TAC distortion overview and our proposed solution Agenda TAC distortion overview and our proposed solution Who benefits from the fix? Why resolve the TAC before CAISO expansion? CAISO’s delays to date Next steps & how to get involved

Distributed Generation (DG) = Wholesale DG and Retail DG export (often referred to as NEM export) Project Size Central Generation Serves Remote Loads 50+ MW Wholesale DG Serves Local Loads 500 kW Retail DG Serves Onsite Loads 5 kW Behind the Meter Distribution Grid Transmission Grid

TAC are growing fast to ~4.5 cents/kWh over 20 years Forecasted PG&E Total TAC Rate $0.03/kWh when levelized over 20 years $/kWh The 20-year levelized TAC is about 3 cents/kWh, which is roughly 50% of the current wholesale cost of new energy contracts in California! 2016 - 2035

TAC metering fix is needed Proper interface for metering all High Voltage TAC (based on TED, as is already done in non-PTO utility service territories) Proper interface for metering all Low Voltage TAC (based on TED as is already done in non-PTO utility service territories) Current interface for metering TAC in PTO utility service territories (at customer meters based on Customer Energy Downflow)

California TAC before and after TAC fix Before TAC Fix After TAC Fix Change California HV TAC based on CED (PTO) and TED (non-PTO) California HV TAC based on HV-LV TED High Voltage (HV) TAC PTOs adopt non-PTO TAC methodology; consistent TAC treatment throughout CAISO territory 200 kV PG&E-specific LV TAC SCE-specific LV TAC SDG&E-specific LV TAC Other utility-specific LV TAC PG&E-specific LV TAC on TED SCE-specific LV TAC on TED SDG&E-specific LV TAC on TED Other utility LV TAC on TED Low Voltage (LV) TAC 69 kV Distribution

CAISO expansion means regional governance & investments CAISO is currently addressing whether and how to expand its balancing authority area; it is likely to introduce relevant legislation in January 2017 CAISO’s expansion is expected to include large investments in Super- High Voltage (SHV) transmission between states Key issues: creating a multi-state governance structure, adjusting TAC, SHV cost allocation between sub- regions Image source: CAISO

Clean Coalition’s TED-based SHV allocation proposal is better than CAISO’s current TAC Straw Proposal Regionalized ISO SHV TAC socialized across the regionalized ISO based on SHV-HV TED ONLY if new, 300+kV projects with interties in multiple sub-regions Super High Voltage (SHV) TAC The SHV-HV firewall protects each sub-region from HV & LV transmission investments that serve other sub-regions. Similarly, the HV-LV firewall currently protects each utility service territory in CAISO from LV transmission investments that serve other utility service territories. 300 kV California sub-region HV TAC based on HV-LV TED Sub-region 1 HV TAC does not need to change Sub-region X HV TAC does not need to change High Voltage (HV) TAC 200 kV PG&E-specific LV TAC SCE-specific LV TAC SDG&E-specific LV TAC Other utility-specific LV TAC LV TAC does not need to change LV TAC does not need to change Low Voltage (LV) TAC 69 kV Distribution California retains control of its HV & LV TAC

TED-based TAC: simple & objective

Agenda TAC distortion overview and our proposed solution Who benefits from the fix? Why resolve the TAC before CAISO expansion? CAISO’s delays to date Next steps & how to get involved

Ratepayers benefit through avoided transmission costs Forecasted PG&E Total TAC Rate $0.03/kWh when levelized over 20 years TAC rate ($/kWh) 2016 - 2035

Ratepayers benefit through avoided transmission costs Forecasted PG&E Total TAC Rate Notes & Assumptions All 3 scenarios assume generation from new DG never exceeds new CED 11.0% 15.2% $0.03/kWh when levelized over 20 years Year 20 share of total load served by DG 19.5% 27.6% TAC rate ($/kWh) Year after TAC Fix implementation

Ratepayers benefit through avoided transmission costs Forecasted PG&E Total TAC Rate $6.7 billion TAC savings vs. BAU $0.03/kWh when levelized over 20 years $13.5 billion TAC savings vs. BAU TAC rate ($/kWh) $26.3 billion TAC savings vs. BAU Ratepayer avoided TAC costs over 20-year period in the 1.5x, 2x, and 3x BAU DG scenarios Year after TAC Fix implementation

DG Developers benefit from full valuation of DG resources Cost in $/MWh Cost in $/MWh Winning contract price Winning contract price Current TAC assessment unfairly increases the cost of local distributed generation (DG) even though it almost never uses the transmission system Fixing the TAC market distortion makes local generation more competitive Over time, more local generation will be built, decreasing the need for transmission upgrades, and decreasing overall system costs

NEM customers benefit from higher values for exports Alameda Municipal Power (AMP) released their plan to credit their customers with DG resources for avoided transmission charges, meaning participating customers will see higher payouts for their exported energy. $0.07 Avoided transmission charges $0.05 Capacity & REC value Capacity & REC value Cost $/kWh $0.03 Generation AMP’s Previous Net Energy Metering (NEM) Export Value AMP’s Current NEM Export Value

Marin Clean Energy (MCE) 2016 service offerings LSEs with significant DG resources benefit from more competitive pricing Marin Clean Energy (MCE) 2016 service offerings MCE defines local as “located in an MCE member community” Based on a typical usage of 463 kWh at current PG&E rates and MCE rates effective September 1, 2016 under the Res-1/E-1 rate schedule. Actual differences may vary depending on usage, rate schedule, and other factors. Estimate is an average of seasonal rates.

Potential Marin Clean Energy savings for 100% local solar LSEs with significant DG resources benefit from more competitive pricing Potential Marin Clean Energy savings for 100% local solar $0.06 premium now $0.04 premium after TAC fix $/kWh TAC fix

Agenda TAC distortion overview and our proposed solution Who benefits from the fix? Why resolve the TAC before CAISO expansion? CAISO’s delays to date Next steps & how to get involved

Why fix TAC before regionalization? SIMPLICITY: The Clean Coalition’s SHV proposal simplifies cost allocation for regionalization. Our proposal is more straightforward than CAISO’s current proposal. PRESERVES CALIFORNIA POLICY PRIORITIES: The SHV proposal resolves the TAC question and preserves California’s policy priorities and commitment to renewable energy, including DG resources. HEDGES AGAINST DILUTED GOVERNANCE: Our proposal fixes the cost allocation mechanisms for all levels of TAC hedges against diluted governance. In a regionalized ISO, California will not have as much control over the market signals for energy resources.

Agenda TAC distortion overview and our proposed solution Who benefits from the fix? Why resolve the TAC before CAISO expansion? CAISO’s delays to date Next steps & how to get involved

Timeline of key events shows CAISO avoiding fix May: CAISO announces will address TAC market distortion in Wholesale Billing determinant (WBD) initiative CAISO admits DG reduces transmission investment Apr: CAISO agrees with CC on basic facts of TAC market distortion Jan: CAISO regionalization legislation, including SHV TAC Sep: CAISO closes WBD initiative, does not address factual disputes Mar: CAISO announces will address TAC market distortion in ESDER Phase 2 initiative Nov: CAISO announces 2017 Review TAC Structure initiative 2015 2016 2017 Aug: CA legislative session ends Nov: CC testifies in front of CAISO BoG about the TAC market distortion in TAC Options initiative Jun: CC files detailed TAC fix proposal in WBD initiative. CLECA files comments disputing info provided by CAISO: TAC facts cited in CC proposal, details of TAC billing process Sep: scheduled end of TAC Structure initiative Apr: CC files TAC fix proposal in ESDER Phase 2 initiative Nov: CC testifies in front of CAISO BoG about the TAC market distortion, urging action and highlighting delays

Agenda TAC distortion overview and our proposed solution Who benefits from the fix? Why resolve the TAC before CAISO expansion? CAISO’s delays to date Next steps & how to get involved

Recruit other stakeholders to support the TAC Campaign How you can help Write a letter to CAISO & Governor Brown stating you would like the TAC market distortion resolved before CAISO regionalization (template available) Formally support the TAC Campaign by authorizing use of your logo on the TAC Campaign Supporters web page Recruit other stakeholders to support the TAC Campaign

The TAC Fix is backed by a broad range of organizations

Endorse the TAC Campaign Getting involved For more information on the TAC Campaign, visit www.clean-coalition.org/tac or email katie@clean-coalition.org Endorse the TAC Campaign Contact Daryl Michalik, Executive Director of the Dynamic Grid Council daryl@dynamicgridcouncil.com Add your voice directly by filing your own comments to CAISO and key influencers

Thank you for attending! For more information on the Clean Coalition’s TAC Campaign, go to: www.clean-coalition.org/our-work/tac If you’re interested in supporting the campaign, email Daryl Michalik at daryl@dynamicgridcouncil.com.