DER Cost-Effectiveness

Avoided Cost Calculator (ACC)

The primary benefits of demand-side resources are the avoided costs related to generation and distribution of energy.  The avoided costs of electricity are modeled based on the following components: generation energy, generation capacity, ancillary services, transmission and distribution capacity, and decarbonization policy compliance.  The Avoided Cost Calculator was established in 2005 and is updated biennially to improve the accuracy of how the benefits of demand-side resources are calculated.  The current ACC update was completed in 2024:

Current Adopted (2024) ACC

2024 ACC Update (R.22-11-013, Track 1)

On 8 August 2023, a ruling was issued which included CPUC Energy Division's Staff Proposal for 2024 updates to the Avoided Cost Calculator.  On 16 August 2023, Energy Division hosted a public workshop on the staff proposal.  Here you can find the slides, a recording, Q&A function text, and a transcript from the workshop.  Documents relevant to this proceeding can be found on the R.22-11-013 docket.

The CPUC Energy Division's responses to all data requests regarding the 2024 Avoided Cost Calculator Update were served on the R.22-11-013 and R.14-10-003 Service Lists have been posted below, along with all supporting files.

  • Public Advocates Office on 23 August 2023: Energy Division's response and supporting files
  • Solar Energy Industries Association (SEIA) on 25 August 2023: Energy Division's response and supporting files
  • Joint IOUs on 28 August 2023: Energy Division's response and supporting files
  • Joint IOUs on 25 September 2023: Energy Division's response and supporting files
  • Protect Our Communities Foundation (PCF) on 2 October 2023:
    • With the exception of Question 5 and 10, all other questions in the data request are beyond the scope of what was outlined in ALJ Lau's 8 August 2023 ruling.  They go far beyond the staff proposal and would require Energy Division staff to opine on policy issues.  For these reasons, Energy Division staff declines to respond.  Additionally, Question 5 and Question 10 refer to response to data request which are confidential and thus we are not able to provide this information.
    • Energy Division's supplemental response
  • Coalition of California Utility Employees (CUE) on 29 September 2023: Energy Division's partial response, follow-up response and supporting files.

On 26 June 2024, a Proposed Decision was published.  On August 1 2024, the Proposed Decision was approved by the Commission and the Final Decision was issued as D.24-08-007.

On 23 July 2024, the ACC Draft Calculator Workshop was held.

Previous (2022) ACC 

Societal Cost Test

In February 2017, a ruling within R.14-10-003 introduced a staff proposal recommending the adoption of a Societal Cost Test.  D.19-05-019 directed the testing of specific societal cost values within the IRP proceeding (R.16-02-007).  In January 2022, the "Societal Cost Test Impact Evalution" was published.  In February 2023, a ruling within R.22-11-013 proceeding seeking comments on the adoption of a Societal Cost Test was published.  On 11 July 2024, the Societal Cost Test was adopted by the Commission in D.24-07-015. 

Air Quality Adder

In March 2018, a ruling in R.14-10-003 issued a Staff Proposal entitled "Distributed Energy Resource Cost-Effectiveness Evaluation: Further Recommendation on the Societal Cost Test."  The data used to determine the Interim Air Quality Adder discussed in this Staff Proposal can be found here.

In January 2022, the "Quantifying the Air Quality impacts of Decarbonization and Distributed Energy Programs in California" report was published.

Standard Practice Manual 

The foundation of cost-effectiveness analysis for all demand-side resources is based in the Standard Practice Manual.  The Standard Practice Manual contains the Commission’s method of evaluating energy saving investments using various cost-effectiveness tests. The four tests described in the Standard Practice Manual (i.e., the Total Resource Cost (TRC), Program Administrator Cost (PAC), Ratepayer Impact Measure (RIM), and Participant Cost Test (PCT)) assess the costs and benefits of demand-side resource programs from different stakeholder perspectives, including participants and non-participants.  The specific tests and the applications of those tests varies among the resources.

All demand-side resources undergo a cost-effectiveness analysis

For additional background on cost-effectiveness:

Prior ACC Updates and Documentation

2021 ACC 

2020 ACC

  • 6-8 May 2020 Webinar

2019 ACC

  • The 2019 updates to the ACC were adopted in Resolution E-5014 in accordance with D.19-15-019 in the R.14-10-003 proceeding.

2018 ACC

  • The 2018 updates to the ACC were adopted in Resolution E-4942 in accordance with D.16-06-007 in the R.14-10-003 proceeding.

2017 ACC

  • Per D.17-08-022, the only update to the ACC in 2017 was the interim greenhouse gas adder.

2016 ACC

  • The 2016 updates to the ACC were adopted in Resolution E-4801 in accordance with D.16-06-007 in the R.14-10-003 proceeding.

2005-2015

  • The avoided cost model was adopted in 2005 in D.05-04-024 in the R.04-04-025 proceeding and was originally used to measure Energy Efficiency (EE) cost-effectiveness.  The assumptions used in the ACC methodology required periodic updates to stay current with market conditions, prices, and trends.  Thus, semi-regular improvements to the ACC modeling and data inputs were adopted in D.06-06-063, D.09-09-047, and D.12-05-015.