Chapter 4: Prying Open the Black Box of Distribution Planning

If there is one thing that virtually all the players in California’s Distributed Resource Planning (DRP) process can agree on it is that when the process began in 2014 virtually no one outside of the electric utilities really understood how planning at the distribution level was accomplished or how utility operations dictated investment requests in rate cases.

“The problem was that costs were completely black box, nobody had transparency. The rate case process was a black box,” said Ted Ko of STEM.  Few parties, except some long-time ratepayer and customer advocates like The Utility Reform Network (TURN) could devote resources to participate in complex general rate cases (GRCs). As Ko observed, “Even TURN didn’t have access to information. All they saw was a number. Whatever number the utilities came up with in the rate case was just a number settled on. There was no accountability. Nobody asked, ‘Are you installing according to a plan?’” 

Merrian Borgeson, a Senior Scientist at the Natural Resources Defense Council (NRDC), said her group was aware that GRCs were where billions of dollars in utility infrastructure were determined, and those investments had a huge influence on policy decisions.  “NRDC was interested in making sure that all DER that we cared about were reflected in planning, to better reflect the real cost of electricity and enable integration of renewable energy and energy efficiency,” she said.  There were unresolved questions about whether electric utilities were really taking those resources into full account.  “Are they counting it in ways that value those resources so they go where they are needed on the system.”

Sky Stanfield, who represented the Interstate Renewable Energy Council, echoed the concern that more energy stakeholders, including clean energy advocates and distribution resource developers needed improved transparency in the process. “The utilities had the information but they didn’t look at it in a holistic way,” she said.

Utility operators and planners also were coming to recognize that changes in the system were forcing a need to be more open.  Bill Peter, manager of Renewable Energy Policy for Pacific Gas & Electric (PG&E) believes transparency is a positive. “There was a lot of growth occurring in DERs, matched by a desire by PG&E to enable new technologies. So, there was an alignment and opportunity to update the distribution planning tools, and to enable transparency into the distribution planning process.”

Peter agreed that a more open distribution planning process would enable “the utility to provide transparent grid needs assessments and explain to stakeholders how we plan and forecast for the drivers of investment on the grid.”

One of the most valuable lessons for everyone would be to understand that utility system “needs” have changed from classic planning based on meeting peak loads to enabling more flexibility on the grid.

Lorenzo Kristov, who has retired from the CAISO, sees this same challenge across the country.  He is participating in a US Department of Energy initiative to integrate DRP efforts with resource planning, with the participation of 16 state commissions.  “Integrating DRP and IRP has emerged as a general issue as state commissions are grappling with how to prepare for growth of distributed resources. Distribution planning is a black box for most state commissions, there’s not a lot of transparency when the utility simply submits its proposed distribution plan and asks for money in a general rate case. If you are going to advance non-wires alternatives, there needs to be more openness. 

The question, he said, is: “Can we institute a distribution planning process by IOUs that is open to participants and allows alternative solutions to come into the system and be evaluated?”

After five years of the DRP process in California, at least some participants expressed optimism that this is coming to fruition. 

Historically, distribution planning has largely been a black box. The California experience provides useful tools to pry open that black box and introduce transparency.

IREC’s Stanfield cites the involved stakeholder working group process as a valuable key to prying open the utility black box of planning, as well as the specific tools that the working groups spent years developing: Integrated Capacity Analysis (ICA) and utility Grid Needs Analysis (GNA).  Even planning tools that have not panned out as well as hoped, including Locational Net Benefit Analysis (LNBA) and demonstration resource solicitations, have provided insights not otherwise available to stakeholders. (Chapter 5 of the DRP Retrospective provides further introduction to these planning tools).

Generally, we have to appreciate how much people have learned from this process about the distribution system.  There was virtually no visibility in GRCs, no comprehensive planning, and no understanding of the distribution system.  Now we have a much better understanding about which pieces we have to change,” Stanfield said.