California regulator opens proceeding to revise interconnection rules for distributed generation

The OIR does not discuss at length the reasons why the CPUC believes Rule 21 needs to be updated. Nationwide, however, DERs are making up an increasing proportion of the generation mix, particularly with respect to “large loads” such as data centers. A data center wishing to enter operation quickly can generally not rely on the local utility to be able to provide sufficient generation, or to have the transmission and/or distribution capacity to bring in power from elsewhere. Thus, many of these facilities construct their own DERs, solving both the need for power and accounting for the risk that grid power might become unavailable due to blackouts. This last risk is of particular concern in California, where power may be shut off due to wildfire risk. The same factors have driven the adoption of DERs, in particular microgrids, by a wide range of entities seeking reliable power.

Interconnection rules – both respect to the distribution as well as the transmission grids -- are by their very nature highly technical, as their primary purpose is to ensure safety and stability of the electric grid. The OIR released by the CPUC during its August 14, 2025 meeting proposed a number of areas for consideration, including:

• Electrical Interdependence Screens: Because flows of electricity on the grid move based on the laws of physics and the configuration of the grid, screens are required to determine whether the interconnection of a DER will require upgrades to the distribution or transmission system. The OIR seeks comments on whether these provisions should be reformed.
• Interconnection Process Compliance: Rule 21 sets out specific processes and timelines for connecting a DER. The OIR asks what the most common areas of dispute are between DER developers and utilities, and whether dispute resolution processes need to be updated. It also looks at utility compliance with established times, and the use of heatmap data to establish capacity.
• Interconnection Pathways and Standards: Different types and sizes of equipment require different processes for interconnection. Certain newer technologies, such as the use of electric vehicles as grid storage or smart inverters, may not be fully accounted for by the existing Rule 21. The OIR asks for comment on updates to these processes.
• Upgrade Cost Sharing: When system upgrades are required to incorporate a DER into the grid, the question of who pays for those upgrades can be complicated, as multiple parties can benefit. The OIR asks if those costs should be allocated among multiple beneficiaries rather than the responsibility of the DER developer. The DER also asks for input on other costs, such as fees and costs that are passed on to customers.
• Net-Metering: Net-metering has been a significant driver of DER technology, but has also been controversial as it can transfer costs to other ratepayers. Here the CPUC is looking at changes to the definition of “system size” and changes to the requirements for non-exporting additions to net-metering sites.
• Communications and interoperability of DERs: The CPUC is looking at changes to operational communications between the utility and DERs, as well as asking for input on the allocation of costs related to communications.
• WDAT and Rule 21 Consistency: A utility’s Wholesale Distribution Access Tariff (“WDAT”) applies when a DER seeks to sell into (or buy from) the transmission grid operated by the California Independent System Operator, Inc. (“CAISO”). It differs from Rule 21 in that the energy transactions do not occur solely behind the distribution meter, but instead involve interactions with the transmission grid overseen by the Federal Energy Regulatory Commission. However, like Rule 21, the WDAT involves the interconnection of a DER with the distribution grid. The CPUC asks in what ways should these two constructs be consistent with each other, and why.

The CPUC asks for comments on these issues, as well as any other matters related to the OIR, including procedural matters. The preliminary schedule seeks comments October 20, 2025. Reply comments will be due 20 days after initial comments, which will be November 10, 2025. A prehearing conference will be held 30 days after reply comments are received on December 10, 2025, and a scoping memo will be issued 60 days after reply comments, or on January 9, 2026. All of the dates after the initial comment date are subject to change by the administrative law judge assigned to the proceeding.

Authored by J. Porter Wiseman and Chip Cannon.