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Judge recommends that California regulators reject Sunnova’s micro utility bid

In his proposed ruling, Rizzo said the exemptions sought by Sunnova are unauthorized and the company failed to provide the information required for a Certificate of Public Convenience and Necessity.
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Sunnova's novel bid to develop, construct, and operate a solar and storage-focused micro utility in California could soon be squashed by regulators.

Colin Rizzo, the administrative law judge presiding over the case for the California Public Utilities Commission, issued a recommendation on Feb. 14 to grant a motion to dismiss Sunnova's proposal, which could challenge the state's incumbent investor-owned utilities.

The motion to dismiss was filed by the Public Advocates Office, an independent division of the CPUC.

In his proposed ruling, Rizzo said the exemptions sought by Sunnova were unauthorized and that the company failed to provide the information required for a Certificate of Public Convenience and Necessity.

The CPUC must now vote on whether to accept the proposed ruling.

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Sunnova first submitted its application to build and manage a micro utility and establish rates for service on Sept. 6. The company's goal was to develop largely self-sustaining micro-utilities by equipping communities of 500-2,000 new homes with solar and storage.

The venture intended to focus on new homes, allowing the company to work with developers to design and implement distributed solar-powered microgrids that would be known as Sunnova Adaptive Communities. Homebuilder Lennar reportedly said it would consider using a microgrid if regulators approved the plan.

The state's three investor-owned utilities -- San Diego Gas & Electric, Southern California Edison, and Pacific Gas & Electric -- were among those that called on the CPUC to reject Sunnova's application.

In its response, Southern California Edison claimed the application contained "numerous, unknown, unspecified and important elements" regarding the proposed microgrids, including the timeframe for development; the number of customers served; proposed rate structures; the company's financial resources; locations of the proposed microgrids; associated reliability and resiliency needs at each location; the type and size of the projects that may be islanded; and interconnection locations.

Judge's legal perspective

Sunnova said that the motion to dismiss its micro utility proposal was a "drastic" step.

Rizzo wrote in his proposed ruling that "this may be true in the abstract, (Sunnova's) argument would be more persuasive were there not already an ongoing rulemaking specifically intended to ensure the orderly adoption of microgrids in California."

He wrote that the CPUC "does not accept as true" Sunnova's position that granting the application would be in the public interest. The issue at hand is whether the application is properly before the Commission.

Additionally, Rizzo said Sunnova failed to justify itself as an "electric micro utility" under California statute in its pursuit of various exemptions to rules that govern the state's electric corporations.

California defines an electric micro utility as an "electrical corporation that is regulated by the commission and organized for the purpose of providing sole-source generation, distribution, and sale of electricity exclusively to a customer base of fewer than 2,000 customers."

Sunnova aimed to negotiate rates and terms and conditions directly with customers within the micro utility, which would also require exemption from the CPUC's oversight of electricity rates. The company would then provide cost, rate, and tariff data through subsequent informational filings.

"To grant Sunnova this authority, the Commission would have to abdicate its responsibility to ensure just and reasonable rates" under state statute, Rizzo said.

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