Net Metering Issues and The Impact of HB 1169

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Colorado Rural Electric Association
Net Metering Issues and The Impact of HB
1169 February 2007
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In the beginning.

In 1978, Congress passed the Public Utility
Regulatory Policy Act which among many other
provisions included requirements for utilities to
interconnect and purchase from qualifying small
power producers of 100 kW or less.
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Original Purposes of Net Metering

• Method for implementing requirements of PURPA to
  purchase output from small power producers
• Provides a simple, easily administered method for
  compensating small producers where demand and
  energy are not separately metered
• To promote and encourage the use and development
  of renewable energy technologies

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Energy Policy Act of 2005

• Subtitle E, Amendments to PURPA, of the EPAct
  of 2005 requires commissions and certain
  qualifying utilities to consider the
  implementation of five new federal standards
• Net Metering
• Fuel Sources
• Fossil Fuel Generation Efficiency
• Time-Based Metering
• Interconnection
• It is important to note that the EPAct of 2005
  represents the policy of the US Government

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Energy Policy Act of 2005

• Net Metering Each electric utility shall make
  available upon request net metering service to
  any electric consumer that the electric utility
  serves. For purposes of this paragraph, the term
  net metering service means service to an
  electric consumer under which electric energy
  generated by that electric consumer from an
  eligible on-site generating facility and
  delivered to the local distribution facilities
  may be used to offset the electric energy
  provided by the electric utility to the electric
  consumer during the applicable billing period.

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How Does Net Metering Work Under Existing Rules
in Colorado?

• Net Metering is only required for customers with
  generating capacity of 25 kW or less
• Cooperative may charge for equipment and costs
  associated with providing service
• Cooperative may charge a justifiable standby or
  back-up fee to avoid cost shifting

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How Does Net Metering Work Under Existing Rules
in Colorado?

• If power produced is less than on-site
  requirements in a billing period
• The Cooperative bills the member for energy
  supplied according to the Cooperatives
  applicable retail rate schedule.
• The member is compensated by the meter running in
  reverse

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How Does Net Metering Work Under Existing Rules
in Colorado?

• If power produced is more than on-site
  requirements in a billing period
• The member is compensated by the meter running in
  reverse
• The member pays the monthly charge and/or minimum
  bill plus any monthly metering charge, and excess
  energy produced is banked
• Banked excess energy can be used in the
  subsequent monthly billing period to offset
  consumption
• Excess energy banked at end of calendar year is
  purchased by cooperative at average power cost
  for previous calendar year

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The Problem With Net Metering

• The problem a sample customer
• Single Phase (Residential) Rate
• Customer Charge 15.00
• Energy Charge 0.100
• Purchased Power Demand 0.0440
• Energy/Fuel 0.0240
• Distribution wires 0.0320
• Assume 1,000 kWh generated/mo
• 1,000 kWh x 0.10/kWh 100

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The Problem With Net Metering

• Un-recovered Distribution Costs
• DG Customer with 1,000 kWh of on-site generation
• 1,000 kWh x 0.0320 32.00 per month
• Un-recovered Purchased Power Demand
• 1,000 kWh x 0.0440 per kWh 44.00 per month
• DG Customer Receives Subsidy
• Un-recovered Distribution Costs 32.00
• Un-recovered PP Demand Costs 44.00
• Total Subsidy
  76.00 per month

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The Problem With Net Metering

• DG Customer Receives Subsidy
• Un-recovered Distribution Costs 32.00
• Un-recovered PP Demand Costs 44.00
• Total Monthly Subsidy 76.00
• Annual (12 Months) 912.00
• 100 DG Customers 91,200.00
• If retail rate is not revised, the un-recovered
  costs (subsidy) is paid by other residential
  customers or by all other members

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Actual Avoided Cost

• Unless the DG customer can provide firm power by
  contract or a reasonable avoided capacity cost
  can be determined, no payment should be made for
  capacity purchases
• Wind turbines and PV systems are considered
  intermittent and can not be dispatched or
  scheduled in a reliable manner therefore the
  justifiable purchase rate from these systems is
  the avoided energy and fuel costs from the
  wholesale power supplier

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Design the Distribution Rate to Eliminate the Net
Metering Subsidy

• The problem
• Single Phase (Residential) Rate
• Customer Charge 15.00
• Energy Charge 0.100
• Purchased Power Demand 0.0440
• Energy/Fuel 0.0240
• Distribution wires 0.0320
• One solution
• Single Phase (Residential) Rate
• Customer Charge 55.80
• Energy Charge 0.0320
• Purchased Power Demand 0.000
• Energy/Fuel 0.0320
• Distribution wires 0.00

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Design the Distribution Rate to Eliminate the Net
Metering Subsidy

• Redesign to Cost Based Rates
• Reduce subsidy for net metered customers
• Increased customer/fixed charge will impact lower
  use and lower load factor loads
• Winners and Losers within the rate class
• Addresses issues for a small percentage of
  customers by implementing a change that affects
  all customers

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HB 1169

• Availability of net metering based on size of
  cooperative
• Under 10,000 meters 50 kW capacity
• 10,000 40,000 meters 1 MW capacity
• Over 40,000 meters 2 MW capacity
• No recovery of additional metering costs, no
  backup or standby charges
• Revised insurance requirements
• Over 100 kW capacity-300,000 maximum requirement
• Over 1 MW - 1,000,000 maximum requirement
• Over 2 MW - 2,000,000 maximum requirement

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HB 1169

• If power produced is more than on-site
  requirements in a billing period
• The member is compensated by the meter running in
  reverse
• The member pays the monthly charge and/or minimum
  bill plus any monthly metering charge, and excess
  energy produced is banked
• Banked excess energy can be used in the
  subsequent monthly billing periods to offset
  consumption
• Excess energy banked at end of calendar year is
  purchased by cooperative at incremental cost of
  electricity supply for previous calendar year

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The Problem With Net Metering as Proposed in HB
1169

• The problem a sample customer
• Irrigation Rate
• Customer Charge 0.00
• Annual Horsepower Charge 13.00
• Energy Charge 0.090
• Purchased Power Demand 0.0340
• Energy/Fuel 0.0240
• Distribution wires 0.0320

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The Problem With Net Metering as Proposed in HB
1169

• Un-recovered Distribution Costs
• 100 kW DG Customer generating 20,000 kWh monthly
• 20,000 kWh x 0.0320 640.00 per month
• Un-recovered Purchased Power Demand
• 20,000 kWh x 0.0340 per kWh 680.00 per month
• DG Customer Receives Subsidy
• Under Recovered Distribution Costs 640.00
• Under Recovered PP Demand Costs 680.00
• Total Subsidy
  1,320.00 per month

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The Problem With Net Metering as Proposed in HB
1169

• DG Customer Receives Subsidy
• Under Recovered Distribution Costs 640.00
• Under Recovered PP Demand Costs 680.00
• Total Monthly Subsidy
  1,320.00
• Annual (9 Months) 11,880.00
• 100 Customers 1,188,000.00
• If retail rate is not revised the subsidy
• Paid by Other Irrigation Customers
• Paid by All Members

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Design the Distribution Rate to Eliminate the Net
Metering Subsidy

• The problem
• Irrigation Rate
• Customer Charge 0.00
• Horsepower Charge 13.00
• Energy Charge 0.090
• Purchased Power Demand 0.0340
• Energy/Fuel
  0.0240
• Distribution wires
  0.0320
• One solution
• Irrigation Rate
• Monthly Customer Charge 65.00
• Annual Horsepower Charge 55.00
• Energy Charge 0.0240
• Purchased Power Demand 0.000
• Energy/Fuel 0.0240
• Distribution wires 0.000

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The Problem With Net Metering as Proposed in HB
1169

• The problem a sample customer
• Industrial Rate
• Customer Charge 150.00
• Demand Charge Charge 5.00
• Energy Charge 0.060
• Purchased Power Demand 0.0300
• Energy/Fuel 0.0240
• Distribution wires 0.0060

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The Problem With Net Metering as Proposed in HB
1169

• Under Recovery of Distribution Costs
• Assume a 1 MW DG Customer with 200,000 kWh of
  on-site generation monthly
• 200,000 kWh x 0.0060 1,200.00 per month
• Under Recovery of Purchased Power Demand
• 200,000 kWh x 0.0300 per kWh 6,000.00 per
  month
• DG Customer Receives Subsidy
• Under Recovered Distribution Costs 1,200.00
• Under Recovered PP Demand Costs 6,000.00
• Total Monthly Subsidy
  7,200.00
• Annual Subsidy 86,400

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The Problem With Net Metering as Proposed in HB
1169

• Under existing retail rates, HB 1169 will
  significantly increase the availability of net
  metering with a corresponding increase in the
  level of subsidy provided to customers with
  distributed generation
• Does not allow recovery of additional metering
  costs (AMR does not work)
• Is not fair and equitable
• Costs not recovered from distributed generation
  customers recovered by others

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Possible Cooperative Response

• Support changes that limit availability of net
  metering to smaller loads
• Support changes that limit the amount of capacity
  under net metering to a percent of total load
• Support changes that would provide for
  compensation for generation provided by larger
  distributed generation customers to be purchased
  at the actual avoided cost

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Possible Cooperative Response

• Should legislation be enacted
• Increase rate to recover subsidy from affected
  class
• Increase rates to recover subsidy from all
  customers
• Redesign rates to eliminate subsidy