USA – CALIFORNIA Law and Practice Contributed by: Nora Sheriff, Gwenneth O’Hara, Samir Hafez, Antonio Carrejo and Timothy Lee, Buchalter LLP
While major IOUs (such as PG&E and SCE) own a sub- stantial portion of transmission facilities, the system itself is operated and managed by CAISO, an inde- pendent, federally regulated entity. California also does not grant incumbent utilities a “right of first refusal” for new transmission develop- ment. As a result, when CAISO identifies the need for major new regional transmission projects, those pro- jects may be opened to competitive solicitation, allow- ing independent developers to compete with incum- bent utilities to build, own, and operate the facilities. In contrast, POUs generally retain exclusive control over the planning, ownership, and operation of trans- mission facilities within their service territories. 4.6 Transmission Charges and Terms of Service California’s transmission service charges and terms of service are established and overseen by FERC and CAISO. FERC’s oversight focuses on rates, terms and condi- tions of transmission service. CAISO requires transmission owners to file open- access transmission tariffs. These tariffs govern trans- mission service terms, eligibility and interconnection, scheduling and congestion management, and charg- es for using the transmission system. 4.7 Open-Access and Non-Discriminatory Transmission The FPA requires all public utilities that own, control or operate transmission lines to provide open-access and non-discriminatory access to their system. In California, this federal open-access requirement is principally administered and enforced by CAISO for facilities under its operational control. Under CAISO’s FERC-approved tariff, all market par- ticipants have equal rights to submit energy schedules and access the grid. This framework decouples trans- mission ownership from grid operations, preventing incumbent utilities from utilising their physical infra- structure to grant competitive advantages to their own generation affiliates. Instead, transmission capacity is
allocated and congestion is managed through auto- mated, market-based mechanisms rather than bilat- eral discrimination. 5. Distribution 5.1 Constructing and Operating Electricity Distribution Facilities The construction and operation of electric distribution facilities in California are governed by a combination of the California Public Utilities Code, CPUC GOs, and municipal utility ordinances. For IOUs, the principal legal frameworks include the following. • Statutory Authority and Safety Standards: The CPUC exercises broad regulatory authority under the California Public Utilities Code (including Sections 451, 701, and 768) to ensure the safety and reliability of electric systems. This authority is implemented through binding GOs including GO 95 (overhead line design and construction), GO 128 (underground facility standards), GO 131-D (planning and construction of transmission/power/ distribution line facilities and substations) and GO 165 (inspection and maintenance requirements for electric distribution systems). • Wildfire Mitigation and Grid Hardening: Public Utilities Code Sections 8386 et seq. require IOUs to prepare and submit annual Wildfire Mitigation Plans (WMPs) to the Office of Energy Infrastruc- ture Safety (OEIS) for review and approval. These requirements include detailed obligations relating to vegetation management, public safety power shutoffs (PSPS), and system hardening to reduce wildfire risk. • Distribution-Level Interconnection: The intercon- nection of distributed energy resources (DERs) – including behind-the-meter solar, energy stor- age, and microgrids – to IOU distribution systems is governed by CPUC Electric Rule 21. This tariff establishes the technical, engineering, and cost- allocation framework for non-FERC jurisdictional interconnections. • Storage and Microgrid Mandates: State legisla- tion and CPUC rule-making have played a central
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