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California Proposes Regulatory Framework for the Integration of Demand-Side and Distributed Energy Resources

On August 13, 2015, the California Public Utilities Commission (CPUC) issued a proposed decision (R.14-10-003), which seeks for the first time to create a regulatory framework to provide consistency for the integration of demand-side and distributed energy resources (DERs).The intention of the rulemaking is to consider how to best enable the integration of these resources in a holistic way that includes not only what the utilities offer customers (demand-side management) but also what customers offer utilities (demand-side resources). The proposed framework will consider the impact and interaction of demand-side resources on an individual customer’s energy usage as well as the electric distribution system as a whole. In addition, the proposed framework will include relevant valuation methodologies and sourcing mechanisms for DERs and enable customers to effectively and efficiently choose from an array of demand-side and DERs.

Key Details

  • Current integration efforts of demand-side and DERs fail to maximize energy savings and minimize costs of program delivery
  • This proceeding will consider DERs located at both the customer side (behind the meter) and utility side of the distribution system
  • Development of the final ruling is divided into two phases. Phase I will develop the framework for integrating demand-side resources, including relevant valuation methodologies and sourcing mechanisms, and Phase II will consider the use of pilot projects to explore promising DER sourcing mechanisms
  • This proceeding provides clarity between the concepts of integration of demand-side resources and demand-side management with the following definitions being adopted:
    • Integration of demand-side management is the policy and program framework that the Commission, the utilities, and others offer to customers
    • The integration of demand-side resources is the collective actions of the customers, the Commission, the utilities, and the CAISO to optimize demand-side resources to the extent possible
  • Part of the framework will determine how to implement the tariffs, contracts, or other sourcing mechanisms for the deployment of cost-effective DERs proposed by regulated utilities in their Distributed Energy Resource Plan (R.14-18-013) filings with the Commission. In addition, this proceeding is expanded to consider the adoption of localized incentives and the methodology that should be used in determining such incentives


The current proceeding addresses some of the same issues as the Distributed Energy Resources Plan proceeding (R.14-08-013), which required regulated utilities to file distribution resources plan proposals that identify optimal locations for the deployment of distributed resources; however, this proposal is significantly broader. In R.14-08-013, the Commission seeks to determine the value of the DERs that may meet system needs and the identification of tariffs, contracts, or other mechanisms for their cost-effective deployment. The purpose of this proceeding (R.14-10-003) is to create the framework for the sourcing of the resources identified in R.14-08-013 and determine how to implement the tariffs, contracts and other mechanisms identified in R.14-08-013. According to the commission, the two proceedings (R.14-10-003 and 14-08-013) will work together to create an end-to-end framework that will enable utilities to move toward a fuller integration of demand-side and DERs into its distribution system planning process, operations, and investment strategy.

As the penetration of demand-side and DERs grows and expands across the United States, utilities and other service providers need to plan and prepare to operate a distribution grid that interconnects hundreds of intelligent devices with optimally located DERs and other forms of generation. The distribution planning process will require greater visibility and collaboration with customers in order to facilitate the safe and reliable operation of the distribution system. As state regulators and other key stakeholders finalize the strategy and framework by which these resources will be implemented and valued, it will be critical to ensure system reliability is maintained and that the right regulatory construct is established to determine the value of DERs to the grid.

More Information

CPUC proposal:

Utility Dive: California regulators propose framework to put a value on DERs

CPUC website:

This report is part of the Grid Edge Minute series. To view all featured Minutes, please click here.

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Contributing Authors

Gerardo Morales Director

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