Microgrids - Storage

Judge recommends that California regulators reject Sunnova’s micro utility bid

Judge recommends that California regulators reject Sunnova’s micro utility bid
(Sunnova aims to become a micro-utility in California. Credit: Sunnova)

Sunnova's novel bid to develop, construct, and operate a solar and storage-focused micro utility in California could soon be squashed by regulators.

Colin Rizzo, the administrative law judge presiding over the case for the California Public Utilities Commission, issued a recommendation on Feb. 14 to grant a motion to dismiss Sunnova's proposal, which could challenge the state's incumbent investor-owned utilities.

The motion to dismiss was filed by the Public Advocates Office, an independent division of the CPUC.

In his proposed ruling, Rizzo said the exemptions sought by Sunnova were unauthorized and that the company failed to provide the information required for a Certificate of Public Convenience and Necessity.

The CPUC must now vote on whether to accept the proposed ruling.

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Background

Sunnova first submitted its application to build and manage a micro utility and establish rates for service on Sept. 6. The company's goal was to develop largely self-sustaining micro-utilities by equipping communities of 500-2,000 new homes with solar and storage.

The venture intended to focus on new homes, allowing the company to work with developers to design and implement distributed solar-powered microgrids that would be known as Sunnova Adaptive Communities. Homebuilder Lennar reportedly said it would consider using a microgrid if regulators approved the plan.

The state's three investor-owned utilities -- San Diego Gas & Electric, Southern California Edison, and Pacific Gas & Electric -- were among those that called on the CPUC to reject Sunnova's application.

In its response, Southern California Edison claimed the application contained "numerous, unknown, unspecified and important elements" regarding the proposed microgrids, including the timeframe for development; the number of customers served; proposed rate structures; the company's financial resources; locations of the proposed microgrids; associated reliability and resiliency needs at each location; the type and size of the projects that may be islanded; and interconnection locations.

Judge's legal perspective

Sunnova said that the motion to dismiss its micro utility proposal was a "drastic" step.

Rizzo wrote in his proposed ruling that "this may be true in the abstract, (Sunnova's) argument would be more persuasive were there not already an ongoing rulemaking specifically intended to ensure the orderly adoption of microgrids in California."

He wrote that the CPUC "does not accept as true" Sunnova's position that granting the application would be in the public interest. The issue at hand is whether the application is properly before the Commission.

Additionally, Rizzo said Sunnova failed to justify itself as an "electric micro utility" under California statute in its pursuit of various exemptions to rules that govern the state's electric corporations.

California defines an electric micro utility as an "electrical corporation that is regulated by the commission and organized for the purpose of providing sole-source generation, distribution, and sale of electricity exclusively to a customer base of fewer than 2,000 customers."

Sunnova aimed to negotiate rates and terms and conditions directly with customers within the micro utility, which would also require exemption from the CPUC's oversight of electricity rates. The company would then provide cost, rate, and tariff data through subsequent informational filings.

"To grant Sunnova this authority, the Commission would have to abdicate its responsibility to ensure just and reasonable rates" under state statute, Rizzo said.

Sunnova's last-ditch plea

While the judge's ruling doesn't suggest a positive development for Sunnova, the company isn't giving up hope on its micro utility push just yet.

Adam Miller, Sunnova's vice president of microgrids, said in a phone call with Renewable Energy World that the company will form its response to the proposed ruling over the next few weeks. The technical aspect of the proposal warrants a hearing, Miller said, and Sunnova will urge commissioners to grant that request.

Miller believes the Public Advocates Office should be on Sunnova's side— the company wants to bring resilient and sustainable energy to areas that don't have any service yet.

"We're not trying to go around regulation," Miller said. "We're trying to become part of it. The door could be opened wider for us and others to do that if the construct was given approval."

Even if the CPUC ultimately rejects the proposal, Sunnova still intends to bring forward project-by-project applications, though that will increase costs and extend timelines. Smaller companies without the financial strength of Sunnova will likely be excluded from the market, Miller said.

Sunnova believes there are legal precedents regarding new market entrants in the telecommunications and transportation industries for the CPUC to evaluate.