Fixing a major market distortion that disadvantages local renewables
On this page
- What are TAC?
- How we can create a level playing field for clean local energy
- Get involved
- Timeline of key events
- Learn more: webinars, regulatory filings, media coverage
- Contact us
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), the California Public Utilities Commission (CPUC), and utilities to change how California charges for transmission services, and with the CPUC, utilities, and Community Choice Aggregators (CCAs) to ensure that local renewables face fair competition in energy markets.
Transmission Access Charges (TAC) are fees designed to pay for the state’s transmission system, including operations and maintenance, amortization of invested 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. Although TAC are about 1.9 cents per kWh today, with the current trends in TAC, this will climb to 4.5 cents per kWh in coming years. TAC may become more expensive than the cost of the energy itself.
A key solution to this growing problem is to align costs of the system with its use. To ensure that the users of the transmission system pay for it, TAC should apply only 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 distorting the market and making ratepayers buy more expensive energy
The current TAC charge on all energy consumed by customers instead on just energy using the transmission grid creates a major market distortion. 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 at the end of the transmission grid. As a result, PTOs pay TAC on every kWh delivered at the customer level, whether or not that energy was delivered through the transmission system. As a result, local resources that do not rely on the transmission grid to reach customers or increase flows on the transmission grid pay for those services anyway.
As a result, the Load Serving Entities (LSEs) that purchase energy for their customers never see the delivery costs of their energy and therefore ignore them. Since the LSEs buying energy pay the same transmission charges regardless of how much that energy relies on the transmission grid, LSEs end up buying more expensive energy than they need to, driving up costs for all ratepayers. That means that the transmission cost savings of local distributed generation are denied to ratepayers, local generation is denied fair market competition, and communities lose the benefits of local energy development.
The Clean Coalition’s campaign seeks to reform the TAC to use Transmission Energy Downflow as the measurement of the use of the transmission grid.
This conceptually straightforward reform would reshape how the benefits of local power are captured for ratepayers.
Today, local power is far more cost-effective than most LSEs recognize, because the costs of the transmission delivery are ignored. PTO utilities and other LSEs typically 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. However, LCBF does not currently capture TAC because CAISO assesses TAC regardless of whether energy is delivered through the transmission system.
As shown in the example below, a local distributed generation project may have higher generation costs, but lower total delivered cost — if recognized for avoiding use of transmission capacity.
TAC reform will appropriately avoid more expensive energy and stimulate distributed energy projects
Removing a 3 cents per kWh distortion means that more distributed energy projects will win bids than they would with the current TAC distortion. TAC reform would mean LSEs include both generation and delivery costs in their evaluation of projects. Including transmission costs in the costs of transmission-connected energy means that Distributed Generation projects that are within 3 cents per kWh in generation costs would correctly be scored as cheaper than the transmission-connected generation that requires hundreds of miles of expensive transmission wires to reach customers.
With the most cost-effective projects winning bids, whether transmission or distribution-connected, the proportion of energy from local sources would be higher going forward. Today, only 4% of California’s energy comes from local sources. If that proportion were to increase, California could realize massive savings in avoided transmission costs.
Ratepayers save over time when less transmission is needed to deliver energy
The Clean Coalition has modeled the amount of new transmission construction could be avoided if California were to increase its reliance on local sources. As a result of these savings, 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.
Cost of implementation is negligible compared to benefits
Implementing the Clean Coalition’s proposed TAC fix will require installing revenue-grade meters at some substations, at a total cost of less than $20 million. An average meter upgrade costs 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.
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 Matt Renner at firstname.lastname@example.org or Doug Karpa at email@example.com.
February 2018: The Clean Coalition submits a white paper demonstrating that the existing TAC shifts costs onto customers of the load-serving entities that have done the most to reduce transmission charges. Twenty-nine DER developers, energy organizations, and experts join the Clean Coalition in calling for removing the market distortion against distributed renewables.
January 2018: CAISO releases its first Straw Proposal, which proposes continuing to charge distributed energy resources for using the transmission grid, rather than reforming the TAC.
September 2017: The Clean Coalition leads a daylong Stakeholder Workshop on the Clean Coalition proposal.
August 2017: CAISO holds its first Stakeholder Workshop on the Clean Coalition proposal to fix the way TAC are assessed.
June 2017: CAISO releases Issues Paper to review the structure of TAC.
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 closes the TAC Wholesale Billing Determinant initiative and allows the factual inaccuracies to perpetuate. The Clean Coalition continues to advocate for a timely resolution to the TAC market distortion by working with the California Public Utilities Commission (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)
February 15, 2018 sign-on letter calling for TAC structural change: Submitted by the Clean Coalition; 29 distributed energy resource developers, environmental groups, and energy experts calling for a change in the TAC structure to charge transmission use charges for energy using the transmission grid.
February 15, 2018 Clean Coalition white paper developed on TAC rate design: Outlining the specific cost-shifting impacts, relationship to cost-causation, legal requirements, and specific technical aspects of TAC rate design.
February 15, 2018 comments on CAISO’s first TAC structure straw proposal: Addressing the concerns and issues raised by CAISO with respect to its first straw proposal on the TAC structure.
October 13, 2017 comments to the CAISO containing official Clean Coalition TAC proposal: Using the CAISO template based on the most recent stakeholder sessions.
September 27, 2017 comments to the CAISO proposing refinements to the flawed TAC estimating model: Pointing out that consideration of only approved projects will fail to account for projects that will be planned as new energy needs arise and therefore greatly underestimate future costs.
September 1, 2017 reply comments on Renewable Portfolio Standard (RPS) procurement plans from Load Serving Entities: Encouraging a steady market for distributed renewables and optimal usage of federal Production and Investment Tax Credits, and reiterating the importance of the TAC market distortion on distributed energy resources (DER) in any CPUC approved RPS procurement.
July 26, 2017 comments on CAISO’s “Review TAC Structure” stakeholder initiative: Proposing to change the TAC billing determinant to the transmission energy downflow. This would result in more accurate market signals for the cost of delivering energy, the deployment of more distributed energy resources, and massive ratepayer savings in avoided transmission costs.
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.
Let solar-roof savings shine on all ratepayers | Los Angeles Daily News (June 23, 2017)
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 Doug Karpa at firstname.lastname@example.org.