Substation Upgrade Planning DERUtility Cost Sharing ProposalDRAFT 2

Substation Upgrade Planning DER/Utility Cost Sharing Proposal--DRAFT

2 Cost Sharing Concerns • Current mechanism is inefficient – it requires utilities to ramp up for each DER-related substation upgrade independently of other system work • Upgrade costs may deter potentially viable projects • First mover liable for full upgrade cost • Utility construction resources are limited • Queue management order requires stakeholders to revisit the existing SIR cost sharing mechanism • Can we do better?

3 High Level Principles • An improved cost sharing mechanism would • Reduce costs to developers • Minimize ratepayer risk • Support market development

4 An Integrated Planning Process • Proposal: coordinate utility capital planning and construction with DER development • Design and construct substation upgrades as integrated projects • Likely to offer significant cost savings

5 Possible Process • Release of a utility’s 5 -year capital plan opens “window” for DERs interested in connecting to stations where work is planned for Year 2 • Available to both new and pending applications • Duration of window period TBD • Once “window” closes, utility identifies the upgrades those DERs will need • Utility designs substation work as an integrated project, including the DER upgrades • Utility publishes cost estimate, cost shares, and project schedule • “Window” re-opens for the next cycle in the following year

6 Possible Process • Developers commit to paying their share of the upgrades or drop out • Form of commitment TBD • Work proceeds once a designated cost threshold contribution is met • Participating DERs may opt to raise their contributions to hit the threshold, if there is a shortfall • Shortfall is collected from subsequent projects and redistributed to first participants • Threshold must protect ratepayers

7 Integrated Construction • Utility does the substation work according to plan • Construction schedules are shared with the participating developers • Utility provides reconciliation to actual costs (DERs pay only their allocated share) • Utility connects the DERs in order of readiness

8 Next Steps • Initial discussions with Grid and Borrego suggest there is interest in exploring this approach • Many details need to be developed • Kick off in September?