On Aug. 30, the California Public Utilities Commission (CPUC) released “Decision Adopting Guidance for Future Demand Response Portfolios and Modifying Decision 14-12-024,” designed to phase out involvement from the state’s three largest investor-owned, fuel-fired utilities—Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison—in the state’s future demand-response (DR) strategies.

The current utility-centered model is expected to make way for a more open and competitive market focusing on growing involvement from third-party energy services by the end of this decade.

Triggering the proposed decision, the CPUC perceives a lagging state performance in DR efforts. The current DR program is primarily controlled by the state’s three investor-owned utilities, managing individual programs that have been in place for a number of years.

Given the state’s aggressive commitment and goals for more green energy, the CPUC believes the current model limits the ability of newer distributed energy resource (DER) technologies—such as microgrids, solar photovoltaics, energy efficiency and energy storage—to play active roles in DR. The CPUC’s goal is to open the grid to both these larger-scale DER technologies and other smaller-scale, building-specific technologies, such as building automation systems, plug-in electric vehicles and even smart thermostats.

In fact, in its written decision, the CPUC noted, “Commission-regulated demand-response programs shall assist the state in meeting its environmental objectives, cost-effectively meet the needs of the grid, and enable customers to meet their energy needs at a reduced cost.”

The proposed decision is set up to prohibit certain generation resources from being used during a demand-response event, such as diesel, natural gas, gasoline, propane or liquefied petroleum gas. The CPUC, in a previous statement, noted that fossil-fueled backup generation is “antithetical to the efforts of the Commission’s Energy Action Plan.”

By 2020, it is expected that smaller third-party energy generators will begin to implement and manage DR programs in the state. 

The state’s utilities are not happy with the proposed decision.

Pacific Gas & Electric, in comments filed before the decision, stated that, “Customers should be allowed a choice in whether they participate in a DR through their utility or a third party. A customer’s familiarity with their utility may make them more likely to participate in demand-response, as opposed to a third party.”