[BETA] Fortnightly

The wires business goes up for grabs as California opens its landmark case on distributed generation.

Jay Morse has studied distributed generation for the past seven years. Today, as an engineer and policy analyst on regulatory transition and market development issues for the California PUC's Office of Ratepayer Advocates, he sits in the eye of the storm. Technology is busting out all over, says Morse, who calls himself the "godfather" of DG in California's electric restructuring.

"A lot of microturbine products are going to hit the market in the next few quarters," he told me in early February. "The future isn't the future any more."

In California, the future is March 17, the deadline for filing the first round of comments in Rulemaking 98-12-015, launched late last year by the PUC to solicit proposals on DG and competition in the electric utility distribution sector.

Why would the PUC revisit electric restructuring so soon after winning brickbats for its retail choice plan? And then there's the "Green Book," the PUC's gambit to restructure the natural gas industry. Lawmakers shot that down last summer, in Senate Bill 1602, when they left the PUC free to "discuss" gas industry reform, but told regulators not to do anything major until year 2000.

Michael Shames, executive director of UCAN, the Utility Consumers Action Network, sees tough sledding in Sacramento: "They don't want to deal with this issue, but if the PUC acts, they'll feel they have to.

"The new heads of the legislative oversight committees are active, ambitious and worried that California deregulation is not working as promised. I don't bet on the horses, but I'd bet on some new round of legislation on energy this session."

CONTRARY TO WHAT MANY THINK, distributed generation is much more than customers making their own electricity, bypassing the grid. Yes, that can happen, but it's integration - not bypass - that makes DG so interesting. Should utilities integrate their own DG with distribution functions they already perform? Could utility-owned DG distort energy retailing, if utilities serve as default providers of bundled sales and wires services?

Attorney Ralph Cavanagh, at the Natural Resources Defense Council, sees some integration as desirable: "The technologies are grid enhancements, not grid replacements. [But] that does not imply that utilities should hold title to the technologies themselves. The role I envision is integration."

In short, DG opens to scrutiny the full spectrum of operations conducted by the utility distribution company, or UDC. That is evident from the Magna Carta of DG, the so-called "Statement of the Signatories," a letter sent to California PUC President Richard Bilas on June 5 urging the PUC to study DG. That letter was drafted in large part by Morse. It was signed by the ORA, UCAN, TURN, NRDC and other renewable energy advocates, plus potential DG manufacturers and energy marketers, such as Allied Signal, Enron and New Energy Ventures. It sets out clearly why DG policy may need to address network integration as much as grid bypass:

"Distributed generation products such as small gas turbines, microturbines, fuel cells and photovoltaics [PV]