The current cost-sharing mechanism first incorporated in the January 2017 SIR and still in place today in the December 2019 SIR allows first-moving interconnection projects that bear 100 percent of the cost for substation upgrades (e.g., transformer bank upgrades or replacements) to be reimbursed by subsequent projects interconnected on the same substation and benefitting from such upgrades.

However, this mechanism provides no certainty for the first-moving interconnection project that subsequent interconnection projects will materialize and result in any reimbursement of expenditures. Moreover, the costs of upgrading a substation can be daunting for a single project. Project financiers are not willing to take on the risk that subsequent projects fail to materialize on the same substation or the uncertainty as to when subsequent projects may materialize that interconnect on the same substation so as to provide cost reimbursement to the first-moving project.

The current cost-sharing mechanism has not resulted in any DG/ESS projects taking on the first-mover cost impact and paying for substation upgrades and as such, no DG/ESS projects have been sited in distribution-saturated areas of the Joint Utilities’ respective service territories.

Replacing the current cost-sharing mechanism with the Cost-Sharing 2.0 Proposal will enable cost-effective siting of DG/ESS projects on distribution-saturated or otherwise encumbered circuits and substations by removing the cost obstacle imposed on the first-mover interconnection project.

The sections that follow in this petition summarize the salient components of the Cost- Sharing 2.0 Proposal.