DOER issues simplified draft Distribution Circuit Multiplier Guideline

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More than a year after DOER released its initial Distribution Circuit Multiplier (DCM) proposed structure and held a series of stakeholder sessions, and more than 8 months after it received comments on a subsequent straw proposal, DOER has issued a draft DCM Guideline, accompanied by a proposed set of eligible circuits. The deadline for submitting comments on the draft Guideline is Friday, November 18, 2022 by 5pm. Written comments should be submitted to DOER[email protected] with “DCM Guideline Comments” in the subject line.

In contrast to the complexity of the Clean Peak Energy Standard (CPS) as a whole, the draft Guideline represents a substantial simplification in design relative to previous proposals issued by DOER. Some key changes relative to previous guidance include:

• Resource eligibility. The draft Guideline does not include any eligibility limitations for participating resources, other than being a CPS-eligible resource. Previous guidelines had considered different eligible technologies depending on whether a circuit was load- or DG (Distributed Generation)-constrained.
• Circuit eligibility. Criteria for determining eligible circuits is remarkably simplified. Circuits are evaluated based on a three-year average of their Peak to Normal Percent rating (peak demand divided by rated capacity). In descending order, eligible circuits for a given electric distribution company (EDC) start with the first circuit with a three-year Peak to Normal Percentage of 85% and include the following set of circuits that comprise 10% of the EDC’s total circuits. Resources that trigger a capacity upgrade on a circuit would be ineligible for the DCM, and the total capacity eligible for the DCM per circuit would be 1 MW (DC vs. AC not specified, though we assume AC). This change may exclude projects that might have hoped or planned to secure the DCM. Previous DOER proposals had contemplated criteria including number of customers served, circuit capacity, environmental justice criteria, and trends in Peak to Normal Percent ratings. Furthermore, DOER had considered including some circuits based on Peak to Normal Percent ratings (demand-based) and others based on connected PV MW relative to a circuit’s rating (solar-saturated).
• Multiplier.  The draft Guideline sets the DCM multiplier to 2X for the 10 years following a unit’s effective date, and 1.5X for years 11 through 15. Previous proposals had contemplated various multipliers, with effective periods from 8 years to the resource’s full life.
• Securing the DCM. The draft Guideline allows resources to apply and reserve capacity on a circuit before submitting a CPS Statement of Qualifications Application (SQA). These resources would have up to one year following their DCM application to file their SQA. DOER would maintain a waiting list should some resources fail to meet the one-year deadline. If a circuit that had been eligible for the DCM becomes ineligible, DOER would honor the DCM for resources that had already reserved capacity on that circuit, although no waitlist reservations would be honored. DOER had explored various approaches to reserving DCM capacity in previous discussions.

Taken together, DOER’s draft DCM Guideline could be construed as effectively a pilot. Our take is that while a more nuanced DCM design may have made it somewhat more effective in achieving its policy goal (to defer or avoid T&D upgrades), finalizing and implementing such a design would likely have significantly delayed the implementation of the DCM. Introducing a streamlined DCM approach will yield a (modest) increase in overall CPEC supply relative to a market without access to the DCM (whether by increasing CPEC production by incentivizing more directed development activities or by increasing the output from resources that are already operating or would have been developed anyway) in a market that has been consistently undersupplied since its inception.

The issuance of the draft DCM Guideline provides an opportunity for CPS market participants, current and future. For those already operating or developing dispatchable resources on eligible circuits, the 2X DCM multiplier could influence how their resource is operated.  For others still making decisions about where to develop certain types of projects, the DCM could lead to focusing development activities in specified areas.