20020722_213.pdf

TO:
FROM:
DATE:
RE:
DECISION MEMORANDUM
COMMISSIONER KJELLANDER
CO MMISSI 0 NER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
BILL EASTLAKE
TONY A CLARK
DON HOWELL
DAVE SCHUNKE
RICK STERLING
RANDY LOBB
BEV BARKER
GENE FADNESS
WORKING FILE
SCOTT WOODBURY
JULY 19, 2002
CASE NO. IPC-02-4 (Idaho Power)
SCHEDULE 84-NET METERING--AMENDMENTS
On February 13 , 2002 in Order No. 28951 in Case No. IPC-01-, the Commission
approved a Schedule 84 net metering tariff for the Company s Schedule I-Residential and
Schedule 7-Small Commercial Customers. The Commission in its Order directed the Company
to 1) file a net metering proposal for the Company s remaining customers; 2) include provisions
to allow larger generating facilities, between 100 kW and 125 kW, to offset their load and energy
requirements under a net metering arrangement; 3) propose solutions to any safety, service
quality and grid reliability concerns created by the required expansion of the net metering option;
and 4) make specific proposals for monitoring program cost, cost recovery and related issues of
subsidization.
On March 29, 2002, Idaho Power, by way of compliance with Commission Order
No. 28951 , filed an Application in Case No. IPC-02-4 that presents a net metering proposal for
the Company s other customer classes. Under the Company s proposed amendments, the
Schedule 84 net metering tariff will:
DECISION MEMORANDUM
(a)Allow customers receiving retail service under schedules other than Schedule
or Schedule 7 to connect a generating resource they own or operate to the Company s system to
offset all or part of their electric consumption by means of a financial credit on their retail
billing;
(b) Allow the Company to continue to charge the net-metering customer with a
demand component in its retail rates for the electrical demand its load places on Idaho Power
system;
(c) Impose only those monthly charges provided for in the Company s standard
service schedule applicable to the net-metering customer;
(d)Credit all energy provided in excess of the customer s consumption at a price
that does not result in a subsidy from other customers;
(e)Permit generating projects with a capacity up to 100 kW to interconnect to the
Company s system in a safe and reliable manner;
(f) Provide for broad-based access to customers to participate in net metering.
By proposing the above amendments to Schedule 84, Idaho Power states that it is
making the net metering option available to customers taking service under all service schedules
who own and/or operate a generation facility that is fueled by solar, wind, biomass or
hydropower, or represents fuel cell technology, is rated at 100 kW of nameplate capacity or less
and is interconnected to the Company s system at the same interconnection point where the
customer s retail load is connected.
Under the proposed revisions to Schedule 84, customers taking servIce under
schedules other than Schedule 1 and 7 will continue to utilize a standard utility meter that
measures the customer s demand and energy and a second meter will be installed to measure the
energy provided by the customer s generating facility. The Company will read both meters on a
monthly basis and credit the energy generated by the customer s generation facility against the
customer s energy consumption for retail billing purposes. In other words, the Company states
a customer will pay its normal demand and customer charges each month but all of the
customer s retail energy consumption could be offset by the customer s generation.
If the customer s energy generation exceeds its consumption, Idaho Power will pay
the customer for such excess generation an amount per kWh equal to eighty-five percent (85%)
DECISION MEMORANDUM
of the market price for non-firm energy in the Pacific Northwest. By purchasing excess energy
at market prices, Idaho Power states that it reduces the subsidy that otherwise might be paid
under Schedule 84 if excess energy was purchased at full retail rate prices.
Idaho Power is proposing to make net metering service available under the amended
Schedule 84 on a first-come, first-serve basis until the cumulative generation nameplate capacity
of net metering systems for all customer classes connected to the Company s system equals 2.
MW. The Company is also proposing that no single customer be permitted to connect generation
in excess of 580 kW (20% of the 2.9 MW cumulative nameplate capacity limit), and no more
than 100 kW nameplate capacity can be installed at each meter point. This, the Company states
will ensure that the net metering option will be available to a wider spectrum of potential
customers. If demand for net metering service exceeds the 2.9 MW limit, Idaho Power states
that it will advise the Commission and the Commission can take such steps as it deems
reasonable and in the public interest.
The Company s Application is supported by direct testimony.
The Company s Application in Case No. IPC-02-04 was processed pursuant to
Modified Procedure, i., by written submission rather than by hearing. Reference Rules of
Procedure, IDAPA 31.01.01.201-204. The deadline for filing written comments was May 10
2002. Comments were filed by Idaho Rivers United, Northwest Energy Coalition, Northwest
Sustainable Energy for Economic Development, Climate Solutions, and American Wind Energy
Association (collectively "Renewable Energy Advocates ), Idaho Farm Bureau Federation
(Farm Bureau), Idaho Rural Council (IRC), Motive Power, Inc. (MPI), and Commission Staff
Dan Hennis and Maureen Boling. On May 24, 2002, the Company filed Reply Comments.
Comments on specific features of the Company s proposal can be summarized as follows:
MW Cumulative Cap on Net-Metering Purchases
Under the Company s amended Schedule 84 proposal, net metering service will be
available on a first-come, first-serve basis until the cumulative generation nameplate capacity of
net metering systems for all customer classes connected to the Company s system equals 2.
MW (1110 of 1 % of retail peak demand).
The Idaho Rural Council urges the Commission, if a limit is needed, to set the limit
at 10% ofIdaho Power s load, i., 290 MW. Net metering, it states, presents an opportunity for
Idaho Power customers to invest their energy dollars, not merely spend them. These
DECISION MEMORANDUM
investments, the IRC contends, are not merely economIC investment opportunities, but
environmental and security opportunities as well.There is a need, it states, to encourage
distributed electrical production along with conservation and energy efficiency.
The Idaho Farm Bureau contends that a more reasonable cap would be 1 % of retail
peak demand or 29 MW, with no single customer being allowed to connect generation in excess
of 1 MW. Idaho Power s current normal load demand fluctuation system-wide, the Farm Bureau
contends, varies more than the Company proposed 2.9 MW cap (1/l0th of 1 % of retail peak
demand) on a daily basis. Increasing the cap to 29 MW, the Farm Bureau contends, will allow
consumers to offset loads and generate clean renewable power in a safe and effective way and
should not compromise the Company s ability to continue to provide reliable consistent power.
The Renewable Energy Advocates dispute the Company s claim that net metering in
excess of 2.9 MW can "adversely impact system reliability." They point to a Department of
Energy Report on the consumer-side and grid-side benefits of distributed generation. See
Comments p.
100 kW Nameplate Capacity
Idaho Power proposed that no more than 100 kW nameplate capacity be installed at
each customer meter point.
The Farm Bureau contends that the better approach would be not to restrict the
nameplate capacity, but to allow generation up to a certain percentage over consumption at each
meter-say 3 to 5% on an annualized basis. That way, it contends, farmers could take advantage
of economies of scale and more cost effective equipment. Accord: MPI, Idaho Rural Council
and Dan Hennis. The Renewable Energy Advocates, while supporting the proposed 100 kW
limit note that such limit will prove too small for some customers, i., wind generation and
anaerobic digesters (methane). The Commission Staff notes that the proposed limit falls within
the 100-125 kW range identified in the Commission s Order No. 28951.
580 kW Customer Cap
Idaho Power is proposing that no single customer be permitted to connect generation
in excess of 580 kW (20% of the 2.9 MW cumulative nameplate capacity limit).
Staff believes that the proposed limit will adequately accommodate most net
metering projects. Larger projects, Staff contends, might be more appropriate for Schedule 86 or
a PURP A contract.
DECISION MEMORANDUM
Metering
A dual meter arrangement is proposed by Idaho Power to accurately measure a
customer s demand, kilowatt hour usage and generation. Only energy usage and generation will
be netted against each other. There will be no netting of demand.
Commission Staff supports the Company s proposal including the requirement that
customers pay the cost of installing a new meter base and second meter. Demand charges, Staff
contends, are intended to allow the utility to recover its cost of maintaining the capability and
necessary infrastructure to serve a particular customer.
The Renewable Energy Advocates recommend single metering for all net metering
customers (including large customers). Idaho Power s two-meter approach, they contend
eliminates the demand component benefit that net metering customers are entitled to if their
generation is coincident with their demand. If a second meter is required, the Renewable Energy
Advocates contend that Idaho Power should pay for such meter.
Billing Methodology-Avoided Cost
Idaho Power proposes to credit customers' monthly excess generation at a rate per
kWh equal to 85% of the Mid-C market price for non-firm energy. Excess energy, it contends, is
a textbook example of non-firm energy. It is only made available if, and when the net-metered
customer desires to make it available.
The Idaho Farm Bureau contends that the discounted price reflects only variable
costs and should reflect full actual avoided costs. It characterizes the 15% reduction as a penalty.
They also note that the Dow Jones Mid-C non-firm index price is currently less than half of the
retail rate for irrigators. Excess generation, they contend, should be credited at the full Dow
Jones Mid-C price.
The Commission Staff agrees with the Company s proposed pricing method. The
fact that excess generation is non-firm, Staff notes, greatly decreases its value. With excess
energy, Staff contends, that the Company avoids only the generation component of the rate.
Market price, Staff contends, represents the value of energy that Idaho Power could acquire from
another source or sell as surplus. Therefore, Staff contends that the Mid-C non-firm index is a
fair proxy for avoided costs. The 15% discount, Staff contends, takes into account transmission
costs of the Company should the excess energy be sold on the market.
DECISION MEMORANDUM
Regarding the Mid-C market price index, Staff notes that the index is no longer
widely published. The index prices are still compiled by Dow Jones, but Dow Jones and nearly
all other secondary publishers of the index now charge a high subscription fee for access to the
index. However, despite restrictions on its availability Staff notes that the Mid-C index remains
particularly indicative of the market in which Idaho Power most often participates. Staff
therefore agrees that the Mid-C index should continue to be used as the reference for market
pnces.
Alternative sources to the Mid-C index, Staff notes, are still available for free via the
internet. While not giving firm, non-firm, on-peak and off-peak prices like Dow Jones, Staff
states that they still give a reasonable indication of Mid-C prices. One source used by Staff is
www.enerfax.com.Another free source for weekly summarIes
www.newsdata.company/cem/pricesindex.htmi.In addition, the Wall Street Journal still
publishes the COB (California-Oregon border) index which gives a general indication of regional
market prices. While prices at Mid-C and COB , Staff notes, will always be different, Staff
contends that the differences are usually small. These alternative sources, Staff contends, should
be able to provide customers a satisfactory reference for verifying the accuracy of payments or
credits to be made by Idaho Power.
Financial Credit Versus "Banking" of Energy
Idaho Power proposes to financially credit net-metering customers on a monthly
basis for the excess kilowatt hours they generate during that month.
The Idaho Rural Council recommends an indefinite carry-over of excess energy.
Alternatively, it contends that the true-up should be annual, not monthly. The Farm Bureau
agrees, proposing an additional alternative that excess generation not offset by consumption by
the end of the year be not paid for but given to the Company.
Renewable Energy Advocates contend that net metering customers should be allowed
to bank kilowatt hours over an annual period with a year end purchase of excess generation at the
non-firm avoided cost rate.Alternatively, they support an indefinite carry-over of excess
generation with no opportunity to receive cash payment or credit. This method, they contend
would reduce the Company s administrative costs and would closely match the current treatment
of Schedule 1 and 7 customers under Schedule 84 (i., Schedule 1 and 7 customers are credited
for excess generation at full retail rate).
DECISION MEMORANDUM
Staff agrees with the Company s proposal to calculate a financial credit for excess
kWh on a monthly basis, rather than "banking" excess kilowatt hours. This procedure, Staff
contends, more accurately represents the worth of energy closer to the time it is actually
generated. Staff notes, however, that the financial credit that is proposed by the Company is
computed on a monthly basis, not at an hourly or daily basis. To the extent that such method can
be further refined, Staff contends that it will more accurately represent the real value of energy.
Because there is a marked difference in the value of energy depending on the timing of when it is
used or generated, Staff agrees with the Company s financial credit proposal.
PCA Accounting
Idaho Power proposes to track payments made for power delivered in excess of
consumption and treat those costs as purchase power expenses to be recovered through the
Company s Power Cost Adjustment (PCA) mechanism. Staff agrees that this proposed treatment
is appropriate and recommends that payments made for excess power purchases be booked in a
new, separately identified sub-account to Account 555.
Interconnection Costs
Idaho Power s proposal maintains the existing policy that net metered customers are
responsible for the costs of all interconnection equipment, system additions, upgrades or
modification necessary to accommodate their net metering system.
The Idaho Rural Council states that there is a need for clear, consistent and fair
interconnection standards. Net metering customers, it states, need to know what interconnection
will cost. Accord: Renewable Energy Advocates. A simple and streamlined interconnection
process, the Renewable Energy Advocates contend, is critical with few or no unknown costs to
customers. The Company in Reply Comments notes that if the upgrade required by net metering
requests is found to provide betterment to the Company and its non-net metered customers, the
Company will calculate the appropriate cost to be shared by the net metered customer and Idaho
Power. Should the net metered customer dispute the equity of the cost-sharing proposal, the
Company notes, that the Commission provides an experienced forum to resolve such disputes.
Commission Decision
In Order No. 28951 , Case No. IPC-01-, the Commission approved a Schedule
84 net metering tariff for the Company s Schedule 1 residential and Schedule 7 small
commercial customers. The Commission in its Order directed the Company to (1) file a net
DECISION MEMORANDUM
metering proposal for the Company s remaining customers; (2) include provisions to allow larger
generating facilities, between 100 KW and 125 KW, to offset their load and energy requirements
under a net metering arrangement; (3) propose solutions to any safety, service quality and grid
reliability concerns created by the required expansion of the net metering options; and (4) make
specific proposals for monitoring program costs, cost recovery and related issues of
subsidization.
Idaho Power contends that its filing meets the requirements of the Commission
Order. Does the Commission find it reasonable to approve the Company s Application? With or
without modification?
Scott Woodbury
vldlM:IPCEO204 sw2
DECISION MEMORANDUM