Fixing a major market distortion that disadvantages local renewables
The Clean Coalition, backed by a broad range of organizations, is leading a campaign to remedy an unfair charge on local renewable energy in California. The campaign involves working with the California Independent System Operator (CAISO) to change its tariff language, and with legislators to pass SB 692, the Leveling the Playing Field for Distributed Generation Act of 2017.
What are TAC?
Transmission Access Charges (TAC) are fees designed to pay for the state’s transmission system, including operations and maintenance, amortization of capital, and return-on-equity. TAC add about $0.03 per kilowatt-hour (kWh) to the levelized cost of energy over a 20-year contract, which is about 30% of the wholesale value of energy in California. To align costs and benefits, TAC should only apply to energy that is delivered through the transmission system. Therefore, TAC should be calculated based on the metered Transmission Energy Downflow as measured at the transmission substation and distribution substation, where energy down-converts from transmission grid voltages to distribution grid voltages.
TAC are being misapplied
Currently, any California utility that owns part of California’s transmission grid (known as a Participating Transmission Owner or PTO) applies TAC based on the metered load of its customers, or Customer Energy Downflow (CED) — not the utility’s metered Transmission Energy Downflow. As a result, PTOs pay TAC on every kWh delivered at the customer level, even if that energy was not delivered through the transmission system.
The current TAC assessment on every kWh of metered customer electric usage, instead of on metered Transmission Energy Downflow, creates a major market distortion. The transmission cost savings of local distributed generation (DG)* are denied to ratepayers, local generation is denied fair market competition, and communities lose the benefits of local energy development.
Creating a level playing field for local renewable energy
The Clean Coalition’s campaign seeks to change PTOs’ TAC assessment methodology to calculate TAC based on metered Transmission Energy Downflow, aligning charges with cost causation and creating a consistent TAC assessment methodology throughout California. Through this campaign, we seek to correct the CAISO tariff language to assess TAC on a PTO’s Transmission Energy Downflow. This fix will ensure proper valuation of local renewable generation, including the avoided use of transmission. Local energy should not continue to subsidize transmission infrastructure when these resources are actually reducing the need for future investments into the transmission system.
Leveling the playing field helps WDG win utility procurement bids
PTO utilities evaluate energy project bids through the Least Cost Best Fit (LCBF) analysis. Using LCBF, a project is evaluated by its cost of generation plus the cost of any system losses or upgrades required to deliver the project’s energy to consumers. LCBF does not currently consider TAC because CAISO assesses TAC regardless of whether energy is delivered through the transmission system. As shown in the example below, a local DG* project may have higher generation costs, but lower total delivered cost — if recognized for avoiding use of transmission capacity.
Ratepayers save over time when less transmission is needed to deliver energy
Eliminating the TAC market distortion will result in increased deployments of local generation, which reduces required investments in new transmission. As a result, TAC will not grow as quickly and can even decline as existing assets depreciate, saving ratepayers enormously: up to $64 billion over 20 years for all California ratepayers. The first chart below shows drastically reduced TAC rates over 20 years by eliminating the TAC market distortion. In the second chart, the area between the blue curve and the other curves represents avoided ratepayer transmission costs over the 20-year period.
Cost of implementation is negligible compared to benefits
Implementing the Clean Coalition’s proposed TAC fix will require installing revenue-grade meters at substations, at a total cost of less than $20 million: an average meter upgrade cost of less than $10,000 per substation, and fewer than 2000 substations need a meter upgrade. This implementation cost is negligible compared to the tens of billions of dollars in TAC savings for ratepayers over the next 20 years. Furthermore, the communications solutions are already in place for use with the existing non-revenue grade metering hardware.
Want to get involved?
Your support will help ensure CAISO and legislators resolve the TAC market distortion by eliminating TAC charges on local renewable generation. To learn more or join the TAC Campaign, contact Katie Ramsey at email@example.com.
Timeline of key events
February 2017: Senator Ben Allen introduces SB 692 the Leveling the Playing Field for Distributed Generation Act of 2017, co-authored by Assemblyman Marc Berman, which will require CAISO to implement the Clean Coalition’s proposed TAC fix.
December 2016: The Clean Coalition delivers a second TAC Campaign webinar discussing CAISO’s failure to address the TAC market distortion issue on a timely basis, and a straightforward fix that could be implemented immediately to reduce the substantial risks associated with CAISO expanding into a regionalized Independent System Operator.
November 2016: CAISO announces a 2017 Review TAC Structure stakeholder initiative to comprehensively review the TAC structure, including the billing determinant. This new initiative is scheduled to start midyear and end in September. Before this new initiative starts, CAISO will release a white paper detailing the TAC billing process.
September 2016: The Clean Coalition, UCLA, SolarCity, and Sierra Club join forces to deliver a webinar discussing how a simple fix will benefit local renewables, ratepayers, and the environment by eliminating the TAC market distortion. Subsequently, CAISO closed the TAC Wholesale Billing Determinant initiative and allowed the factual inaccuracies to perpetuate. The Clean Coalition continues to advocate for a timely resolution to the TAC market distortion by working with the CPUC and state legislators, as well as with CAISO.
June 2016: CAISO releases a TAC issue paper to serve as the basis for a new, TAC-focused stakeholder initiative, the TAC Wholesale Billing Determinant initiative. Stakeholders submitted comments to CAISO about the issue paper on June 30, including the Clean Coalition. Other parties submitted comments with factual inaccuracies that CAISO staff ignored, and thereby seemingly accepted as accurate.
May 2016: CAISO announces it will open a separate TAC-focused stakeholder initiative because, “…TAC billing determinant changes will be of interest and importance to many stakeholders… who might inadvertently miss this important topic due to its reduced visibility within ESDER 2.”
April 2016: The Clean Coalition files in ESDER a detailed proposal for changing PTOs’ TAC assessment methodology.
March 2016: CAISO announces it will address the TAC issue in Phase 2 of its Energy Storage and Distributed Energy Resources (ESDER) stakeholder initiative.
November 2015: The Clean Coalition submits a filing to CAISO about the TAC market distortion.
California’s transmission costs are exorbitant and growing fast, but the fix is easy (March 30, 2017)
CAISO avoiding fix to massive market distortion that harms local renewables and California ratepayers (December 1, 2016)
Local renewables are being robbed: Simple fix to massive market distortion caused by erroneous treatment of Transmission Access Charges (September 1, 2016)
Transmission Access Charges (TAC): Fixing a major market distortion (November 11, 2015)
January 10, 2017 comments to the California Energy Commission (CEC) on Renewable Energy Transmission Initiative 2.0: emphasizing that California’s transmission needs to meet Renewable Portfolio Standards and greenhouse gas targets will require consideration of the growth of DG resources and paying close attention to the TAC issue.
January 9, 2017 comments on CAISO’s Stakeholder Initiative Roadmap: reviewing the TAC Structure stakeholder for inclusion in initiatives for January 2017.
September 29, 2016 comments in CAISO’s 2017 catalog of initiatives: updating CAISO’s review of the TAC wholesale billing determinant and ensuring stakeholders are aware of the expanded scope and opportunity to participate in 2017.
August 25, 2016 comments in CAISO’s TAC Options initiative: reviewing the working group proposals on how to assess TAC for new transmission projects under an expanded CAISO jurisdiction.
June 30, 2016 comments in CAISO’s TAC billing determinant initiative: detailing the Clean Coalition’s proposal to fix the TAC market distortion by changing the billing determinant and responding to initial questions from CAISO staff.
June 10, 2016 comments in CAISO’s TAC Options initiative: explaining how the Clean Coalition’s proposed TAC fix might apply in an expanded CAISO jurisdiction.
June 9, 2016 comments in CAISO’s ESDER initiative: reacting to the creation of a separate stakeholder initiative and requesting a prompt review of the Clean Coalition proposal.
April 18, 2016 comments in CAISO’s ESDER initiative: detailing the Clean Coalition’s proposal to fix the TAC market distortion by changing the TAC billing determinant.
February 10, 2016 comments in CAISO’s TAC Options initiative: proposing a change in TAC billing determinant to resolve both the existing market distortion for distributed energy resources and assessing TAC in an expanded CAISO jurisdiction.
November 20, 2015 comments in CAISO’s TAC Options initiative: identifying the distortive market impact of the current TAC assessment process on DER and highlighting ratepayer savings if the problem is fixed.
September 24, 2015 comments to the CEC: raising awareness of the TAC market distortion.
California transmission fee overhaul could set a new deal for distributed solar | pv magazine (May 5, 2017)
Level the playing field for clean energy | The Sacramento Bee (March 6, 2017)
CAISO Ignores Massive Market Distortion that Harms Local Renewables | California Current (October 13, 2016)
Finding Equal Footing for Small Renewable Wholesalers | California Current (September 8, 2016)
California Weighs Fair Pricing for Distributed, Centralized Energy | Institute for Local Self-Reliance (July 18, 2016)
California local renewables are getting robbed, but CAISO can help | Utility Dive (June 16, 2016)
The Perils of Wholesale Distributed Generation: Can California Live Up to Its Promise? | Greentech Media (March 9, 2016)
Transmission Charges Penalize Local Clean Power in California | Microgrid Media (November 25, 2015)
In California, a Campaign to Take Transmission Charges Out of Distributed Energy | Greentech Media (November 17, 2015)
To learn more or join the TAC Campaign, contact Katie Ramsey at firstname.lastname@example.org.
*DG includes (i) wholesale DG, or small energy resources that interconnect to the distribution grid to serve local load, and (ii) BTM generation exports to the distribution grid, for example NEM customer exports.