Transmission Access Charges

Wasteful electricity transmission spending is hurting California communities. Our reforms will fix this.

The problem with Transmission Access Charges (TAC)

You don’t need to have deep knowledge of the electricity system to understand the issue with TAC — and how we can fix it.

What’s wrong with TAC

Why this hurts California

How we can fix TAC

Growing transmission costs threaten to become a crisis

Today, Transmission Access Charges create a massive market distortion that could cost Californians billions of dollars in unneeded electricity transmission spending.

If we don’t fix this problem, soon it could cost more to deliver energy than to generate it. This will only worsen as California transitions to more clean energy, electric vehicles, and building electrification.

Consequences for ratepayers

Paying a toll doesn’t make sense if you don’t cross the bridge, but this is how we are charged for electricity transmission infrastructure in much of California. Currently, all ratepayers pay the same charge for “using” the transmission system, whether or not the energy they use travels across that system.

This inherent inequity has huge consequences for ratepayers, because it causes community choice aggregators (CCAs) and investor-owned utilities (IOUs) to ignore the transmission costs when they buy energy for customers — so they often end up buying energy from distant sources that require billions of dollars of transmission wires to reach customers. The more utilities buy remotely generated energy, the more transmission infrastructure has to be built to deliver it, needlessly driving up California’s energy bills. In other words, utilities buy energy that’s cheaper for them, but more expensive for all of us.

The real value of locally generated electricity

Unlike remotely generated electricity, locally generated electricity does not require construction of a massive transmission network to move electricity from source to customer. In fact, the closer a generation source is located next to where that energy is used, the less infrastructure is needed, and the less expense is incurred.

When this major advantage is priced into the total cost of energy, clean local energy is much more competitive — and actually less expensive in many cases:

Existing transmission costs, assessed as TAC and currently averaging 2¢/kWh, should be added to the cost of remote generation that requires use of the transmission grid to get energy from where it is generated to where it is used, which is almost always on the distribution grid where people live and work.  Future transmission investments, currently averaging 2.5¢/kWh in the evenings, can be avoided via dispatchable local generation, and that value should reduce the evaluated cost of local generation. When correctly considering ratepayer impacts of transmission costs, dispatchable local generation provides an average of 4.5¢/kWh of better value to ratepayers than is currently assumed in the majority of instances.

TAC currently steal 2¢/kWh from clean local energy projects — artificially inflating the cost of this energy and needlessly crippling an industry that has the potential to drive economic development for every community in the state.

TAC pay for existing transmission infrastructure, which clean local energy does not use, but clean local energy projects also provide value by avoiding future transmission needs. This value is partly reflected in the Avoided Cost Calculator (ACC) used by the California Public Utilities Commission (CPUC) to value clean local energy projects. Based on an April 2020 CPUC decision, at least a portion of transmission costs will finally be accurately assessed to reflect their true exorbitant costs to ratepayers — specifically, the elements in yellow in the charts above that represent avoided future costs of transmission that would be needed to accommodate forecasted load growth on the transmission grid (measured in MW of peak load).

There is still no plan to correct the TAC distortion, nor to value the savings from avoiding future transmission investments for needs due to other reasons, such as avoiding new transmission lines to facilitate new renewable energy projects in the middle of pristine lands, avoiding transmission lines that would be needed to meet Renewable Portfolio Standard (RPS) requirements, and more. Including all the proper values in the ACC could potentially double the value of avoided transmission.

How TAC reform can contain exploding transmission costs

We can save Californians over $60 billion in unnecessary spending over the next 20 years by reforming TAC.

Fixing TAC will make clean local energy cheaper, so more of these projects will be deployed. That means less transmission infrastructure will be built — and it will be built only to the extent is it paid for by energy using the system.

We know our solution works; already in 2017-2018, Californians saved $2.6 billion in avoided transmission costs, in large part because of increased energy efficiency and clean local energy. Fixing TAC to make transmission charges equitable will increase these savings by encouraging more clean local energy.

The bottom line

The current way of charging for transmission infrastructure is outdated now that clean local energy provides an efficient alternative to remotely generated energy. This outdated method unfairly impedes the development of clean local energy as an efficient, resilient alternative to remotely generated energy.

Our reform

Charge for electricity transmission infrastructure based on actual use of the transmission grid.

Change the way TAC are metered and assessed in California Independent System Operator (CAISO) territory so that all charges are consistently based on actual use of the transmission grid, across all utility service territories. This method is already being implemented correctly for non-participating transmission owner (non-PTO) utilities, such as California’s many municipal utilities.

This sounds good in theory, but does it work in practice?

Yes!

Most of California’s independent municipal utilities have been saving ratepayers money for decades because they are assessed transmission charges based on actual use of the transmission system. These cost savings make clean local energy projects much more price-competitive and help these municipal utilities limit their impacts on the transmission system.

Now, the big private investor-owned utilities (PG&E, SCE, and SDG&E) need to follow suit.

Our reform will put California on a path to sensible, equitable transmission spending

Our suggested reform will make it state policy for the cost of electricity to include both the cost of generating energy AND the cost of delivering that energy to consumers.

By correctly pricing in the delivery cost for remotely generated energy, our reform will result in utilities buying the energy that is truly most cost-effective for customers. By aligning pricing with reality, this reform will correct the existing market distortion that has led to explosive, superfluous growth in transmission spending and needlessly depressed the development of clean local energy.

More clean local energy means savings in transmission spending — a fact acknowledged by CAISO and the California Public Utilities Commission (CPUC) and supported by irrefutable evidence.

Benefits from this fix

  • Reduce the clean local energy costs by 2¢/kWh (3¢/kWh levelized over 20 years).
  • Save Californians billions of dollars in unnecessary transmission costs over 20 years.
  • Keep energy dollars in local communities by spurring investment in local renewables.
  • Improve resilience by building more clean local energy resources near actual use.
  • Reduce emissions from electricity loss on long transmission lines.
  • Protect Californians from unfair transmission costs under a regional electric grid.

How to unleash distributed energy resources in CA by fixing transmission costs allocations

Doug Karpa, Policy Director with the Clean Coalition, presented on the TAC Campaign in this webinar on May 10, 2018.

Previous webinars are available here.

 

The Clean Coalition's TAC proposal ensures that the transmission grid is consistently paid for by energy that actually uses it. Importantly, this approach accurately values all local renewables and other distributed energy resources for avoiding transmission use. Bravo to this effort, which I am pleased to support.

Dan Kammen
Professor of Energy, University of California, Berkeley & Energy and Climate Partnership of the Americas Fellow, supporting the US Secretary of State

This is a question of equity, environmental justice, and fundamental fairness. Ratepayers are being extorted by utilities profiting from excess transmission investment, and regulators have failed to make simple reforms to limit excessive transmission growth. This “business as usual” situation is no longer acceptable.

Today, CAISO has recognized this is a genuine issue, but is deferring to stakeholders with vested interests in ever more transmission spending. This means that the state of California must step in through the legislature and the CPUC to develop a comprehensive roadmap for transmission cost recovery that will stop penalizing utilities and CCEs that are doing their part to make the transmission system cheaper for everyone.

Please add your voice to those of our elected officials and regulators demanding that this expensive system be fixed.

Key documents

Draft 2020 TAC bill language (January 2020)
Draft 2019 TAC bill language (December 2018)
SB 692, our previous TAC bill (2017)
Two-page TAC overview (October 2018)
White paper on TAC rate design (February 2018)
Distribution System Operator (DSO) Future presentation (June 2017); download PPT and PDF

Key regulatory filings

November 22, 2019 comments on the CAISO stakeholder process for Extended Day Ahead Markets (EDAM): Recommending a reform on measuring TAC.
October 9, 2018 comments on Transmission Access Charge Structure Enhancements: Draft Final Proposal: Addressing the CAISO draft final proposal that was published on September 17, 2018.
July 18, 2018 revised comments on CAISO’s second TAC structure straw proposal: Addressing the concerns and issues raised by CAISO with respect to its second straw proposal on the TAC structure.
April 25, 2018 comments on CAISO’s second TAC structure straw proposal: Addressing the concerns and issues raised by CAISO with respect to its second straw proposal on the TAC structure.
February 15, 2018 Clean Coalition white paper on TAC rate design: Outlining the specific cost-shifting impacts, relationship to cost-causation, legal requirements, and specific technical aspects of TAC rate design.

Key media coverage

How Two Simple Fixes Can Fairly Compensate the True Value of DERs in California | T&D World (2 June 2020)
How to protect California ratepayers, expand clean local energy and avoid bailing out PG&E | Utility Dive (May 13, 2019)
Making Energy Transmission Charges Fair To Solar Generators | CleanTechnica (October 30, 2018)
CAISO Developing Transmission Access Charge Proposal | California Energy Markets (October 5, 2018)
California’s Alternative to Grid Regionalization: Expanding the Energy Imbalance Market | GTM Squared (September 7, 2018)
Exploding transmission costs are the missing story in California’s regionalization debate | Utility Dive (July 5, 2018)
Expanding the Energy Imbalance Market Is the Right Way to Regionalize California’s Grid | Greentech Media (March 13, 2018)

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