On January 28, 2022, FERC issued Opinion 577 involving Pacific Gas and Electric (PG&E) and the City of San Francisco (City). The City requested additional service at a King Street Substation, the interconnection point with PG&E. PG&E performed a system impact study and determined the facility additions needed to provide the service the City requested. PG&E treated the facilities as direct assignment facilities and the City objected, saying they were upgrades.
The Initial Decision addressed four disputed issues: (1) whether the facilities at issue are properly categorized as direct assignment facilities under the WDT (Issue One); (2) if the facilities are not direct assignment facilities, then whether the facilities are “upgrades” under the WDT Interconnection Agreement (Issue Two); (3) whether PG&E is permitted, under the WDT and Commission policy, to directly assign San Francisco the full cost of facilities at issue where PG&E also requires San Francisco to pay the WDT distribution service charge (Issue Three); and (4) whether PG&E should be required to provide more detailed support for cost estimates in the WDT application process (Issue Four).
On Issue One, FERC found that the facilities were properly classified as direct assignment facilities, as they are for the sole use and benefit of the City. FERC also found that that since the facilities are properly classified as direct assignment facilities, it was not necessary to address the issues concerning whether the facilities are “upgrades” under the WDT Interconnection Agreement. Regarding Issue Three, FERC found that PG&E is permitted by Commission policy and the WDT to directly assign the costs of the King Street Substation facilities to San Francisco and require San Francisco to pay the WDT distribution service charge. As to Issue Four, FERC found that PG&E needs to provide a more detailed cost estimate to the City in connection with the King Street Project.
Further Information on Two Items
As to charging the City for the direct assignment facilities and for its charge under the tariff, FERC found this to be consistent with its Transmission Pricing Policy. FERC found that because direct assignment facility costs are netted out and excluded from PG&E’s revenue requirement that is used to calculate the distribution service charge, direct assignment facility costs are not included in the distribution service charge and the City is not paying twice for the same service. That is, because there is no cost overlap between the direct assignment facilities that the City pays for and the costs included in the distribution service charge, PG&E is not violating the “and” pricing policy.
FERC disagreed with the Presiding Judge’s finding that it is unjust and unreasonable “that the design of a distribution system to provide a customer electric service is within the sole discretion of the Distribution Provider.” Rather, distribution providers maintain discretion over their own systems. Each distribution utility, including the City, retains sole discretion over the provision of electric service to its own retail customers, and when two distribution utilities with a utility-to-utility relationship like here interconnect their systems at a point of interconnection, such as the City ’s WDT points of delivery, each distribution provider retains sole discretion over the management of the distribution system on its own side of the interconnection. Just as the City retains sole discretion over the provision of power to the SFMTA as its retail customer on its side of the interconnection at the King Street Project, PG&E retains discretion over the distribution facilities on its side of the interconnection.
Dr. Paul Dumais
CEO of Dumais Consulting with expertise in FERC regulatory matters, including transmission formula rates, reactive power and more.