STATE OF CALIFORNIA
ENERGY RESOURCES CONSERVATION
AND DEVELOPMENT COMMISSION

In the Matter of:	)	Docket No.04-DIST-GEN-1,
Exploring Issues Associated with	)
Implementation And Distribution Planning	)	03-IEP-1
of Distributed Generation )	)
________________________________________	)

COMMITTEE ORDER REGARDING SCOPE OF PROCEEDING
(PHASE 2)

On April 21, 2004, the California Energy Commission (Energy Commission) initiated an investigation (04-DIST-GEN-1) to explore issues associated with the costs and benefits of distributed generation (DG) deployment, interconnection issues, and research and development efforts related to the technical, economic, and regulatory feasibility of future DG technologies. The first phase of this proceeding was completed on February 2, 2005, when the report, Recommended Changes to Interconnection Rules, was adopted The California Public Utilities Commission (CPUC) is now considering the reports recommendations in R.04-03-017.

Phase 2 of this investigation will address issues surrounding two areas of DG policy: 1) combined heat and power and 2) distribution system planning. Much of this effort is designed to support the Energy Commission's 2005 Energy Report proceeding and provide potential support to the CPUC in its Order Instituting Rulemaking (OIR). Details surrounding the scope of this effort follow below.

PROCEEDING ISSUES FOR PHASE 2


Combined Heat and Power

Today, California has only nine gigawatts of installed combined heating, cooling, and power (CCHP) and cogeneration capacity. In 1999, the Energy Commission identified that over 12 gigawatts of additional technical potential existed. This technical poetential, however, has been delayed because of regulatory uncertainty, natural gas prices, utility tariffs, emissions standards and other drivers, resulting in wasting of valuable resources through inefficiency.

The benefits of DG in CCHP applications have been touted in several key reports and legislation including the Energy Commission's 2003 Energy Report and its 2002 DG Strategic Plan, the Energy Action Plan (EAP, and numerous legislative bills). These benefits include more efficient use of fuel resources, greater choices for consumers to control energy costs resulting in an improved business climate, reduced environmental impacts from energy production, support to utility Transmission and Distribution systems, improved reliability and power quality, and others. To this end, the principal energy agencies adopted a specific goal in the EAP to promote customer and utility-owned distributed generation.

The Energy Commission's focus on CHP began several months ago with the funding of a study by EPRI Solutions to evaluate the market potential for CHP in California and the implications that specific DG policy directions will have on future deployment of CHP. The workshop scheduled for April 28, 2005 will feature this study, with a draft report to be distributed to stakeholders in early April. The workshop will focus on understanding the current market and policy situation, share end-user experiences with CHP deployment, and discuss policy options and their impact on CHP deployment.

Distribution System Planning

Distribution systems in California are becoming more constrained as system enhancements have been delayed due to financial constraints on utilities, slow or uncertain load growth, fallout from the 2001 energy crisis and other drivers. Traditional utility distribution planning processes have been adequate in the past, but new alternatives such as DG and Demand Response (DR) require a reassessment on how utilities conduct distribution planning and investment decisions. New research has developed tools to quantify utility system benefits and the Commission wants to see how these tools can improve the planning process.

The 2003 Integrated Energy Policy Report (IEPR) recommended that California needed to develop a more transparent distribution planning process so that policy makers can ensure cost-effective and reliable distribution services and costs for ratepayers. Phase 2 will directly address this issue. In this regard, the Committee will hold a workshop to: 1) investigate DG & DR's role in distribution planning, 2) understand typical distribution planning processes and new approaches, and 3) develop steps that will help the utilities maximize their ability to optimize future distribution planning activities. Where possible, research undertaken in the Public Interest Energy Research (PIER) program will be highlighted.

Process and Procedural Schedule

Work in Phase 2 will run consistent with the schedule being used in the 2005 IEPR process. As such, all work under Phase 2 of this proceeding will be complete by November 2005. Regarding the CHP assessment, a consultant report will be released by April, serving as the foundation to address the issue. As described above the Committee will commence the process by holding two workshops in late April. A formal notice of the workshops is anticipated to be available by March 21.

The following table details general milestones for Phase 2 activities.

CHP Market Assessment Workshop	April 28, 2005
Distribution System Planning Workshop	April 29, 2005
Staff Recommendations on CHP Issues and Distribution Planning publicly released in IEPR White Paper on achieving the Preferred loading order	June 2005
IEPR Committee Hearing on White Paper on achieving the Preferred loading order	July 2005
IEPR Committee Draft Recommendation on Loading Order Issues publicly released in Draft IEPR Policy Paper	August 2005
IEPR Committee Final Recommendation on Loading Order Issues publicly released in Final IEPR Policy Paper	October 2005

Date online: March 17, 2005
JOHN L. GEESMAN Commissioner and Presiding Member Integrated Energy Policy Report Committee	JAMES D. BOYD Commissioner and Associate Member Integrated Energy Policy Report Committee

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