20020213Order_28951.PDF

O Office ofthe Secretar3()
Service Date
February 13,2002
BEFORE TIlE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )OF IDAHO POWER COMPANY FOR )CASE NO.IPC-E-O1-39APPROVALOFANEWSCHEDULE84—)NET METERING TARIFF.)ORDER NO.28951
__________________________________________________________________________
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On November 9,2001,Idaho Power Company (Idaho Power;Company)filed anApplicationwiththeIdahoPublicUtilitiesCommission(Commission)requesting approval of anewtariffSchedule84—Customer Energy Production—Net Metering.Concurrent with thisfilingtheCompanyhasrequestedthedeletionofnetmeteringoptionlanguageinSchedule86.Reference Case No.IPC-E-01-40.
By this Order the Commission approves the Company’s proposed Schedule 84—NetMeteringTariffavailabletocustomerstakingserviceunderTariffSchedules1(residential)and 7(small general)who own and/or operate a generation facility that is fueled by solar,wind,biomass,or hyciro power,or represents fuel cell technology,is rated at 25 kW of nameplatecapacityorless,and is interconnected to the customer’s individual electric system on thecustomer’s side of the meter.We also approve setting the initial cap for the cumulativegenerationnameplatecapacityofnetmeteringsystems(Schedules 1,7 and future eligibleschedules)at 2.9 MW.
The Commission in this Order,however,also directs the Company to make anadditionalfilingwithinsixweeksextendingnetmeteringeligibilitytotheCompany’s remainingcustomerclasses.As discussed in our findings,we will expect the Company’s application forthoseotherschedulestoincludehighercapacityallowancesforcustomer-owned generationfacilitiesandspecificproposalsformonitoringprogramcost,cost recovery and related issues ofsubsidization.
BACKGROUND
On January 22,1997,the Commission issued Order No.26750 authorizing IdahoPowertoimplementnetmeteringasapricingoptionintheCompany’s Tariff Schedule 86—Cogeneration and Small Power Production—Non-Firm Energy.Net metering was identified asOptionBinthepurchasepricesectionofSchedule86anddescribedas“offset to retail sales.”In
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recent months,the Company states it has received input from potential net metering customers
indicating that the current net metering provision of Schedule 86—Option B—is difficult to
understand and cumbersome to implement.In response to those comments and in an effort to
reduce the administrative requirements of computing individual monthly charges for different
generating facilities and multiple customers,the Company is requesting authorization to revise
its net metering provisions.
Description of Proposal
The Company is requesting approval of a net metering option that:
a.allows the Company to use its existing billing system;
b.allows customers to use a single meter to register the energy supplied bytheCompanyandtheenergydeliveredbythecustomers;c.charges customers the rate consistent with their class of service while themeterisrunningforward;
d.pays customers the retail rate consistent with their class of service whilethemeterisrunningbackward;and
e.does not impose any monthly charges other than those provided for onthecustomers’standard service schedule.
Idaho Power is proposing that its net metering option,the proposed Schedule 84,be
available to customers taking service under Schedule 1 or Schedule 7 who own and/or operate a
generation facility that is fueled by solar,wind,biomass,or hydro power,or represents fuel cell
technology,is rated at 25 kW of nameplate capacity or less,and is interconnected to the
customer’s individual electric system on the customer’s side of the meter.A single meter will be
utilized for the net metering service.All energy supplied by the Company to the customer will
cause the meter to run forward;all energy delivered by the customer to the Company will cause
the meter to run backward.If the energy supplied by the Company exceeds the energy generated
by the customer during the billing period,the customer will be billed for the net amount of
energy recorded on the meter at the standard Schedule 1 or Schedule 7 tariff rate,as applicable.
If the energy generated by the customer exceeds the energy supplied by the Company during the
billing period,the customer will be credited for the net amount of energy delivered to the
Company at the standard Schedule 1 or Schedule 7 tariff rate,as applicable.
The Company is proposing to make the net metering service under Schedule 84
available on a first come,first serve basis until the cumulative generation nameplate capacity of
net metering systems connected to the Company’s system equals 2.9 MW.The 2.9 MW limit
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represents 1110th of 1%of the Company’s retail peak demand for year 2000.The 1110th of 1%
limit,the Company contends,is considered to be an industry standard and is identical to the limit
on net metering capacity the Commission previously approved for Avista Utilities.
On November 23,2001,the Commission issued Notices of Application and Modified
Procedure in Case No.IPC-E-01-39.The deadline for filing written comments was
December 21,2001.Joint comments were filed by Renewable Northwest Project,Idaho Rivers
United,the Northwest Energy Coalition,Northwest Sustainable Energy for Economic
Development,Climate Solutions and American Wind Energy Association (“Renewable Energy
Advocates”).Comments were also filed by Commission Staff,the Idaho Farm Bureau,the Idaho
Department of Water Resources,the Idaho Rural Council and a number of the Company’s
customers.The comments can be summarized as follows:
Renewable Energy Advocates
The Renewable Energy Advocates request approval of the Company’s Application
with the following changes:
1.All customers should be eligible for net metering,not just residential and small
commercial customers.The Company’s proposal to restrict net metering to only small general
and residential customers,they contend,is not grounded upon any cost,safety,or grid reliability
justification;nor they state is there any technological or rational basis for excluding irrigation
and other customers utilizing three-phase power and demand meters.Any concerns regarding
metering for customers using three-phase power and demand meters,they contend,can be
resolved easily through meter upgrades and interconnection reviews.
2.The single-system generating capacity limitation should be maintained at the
existing 100 kW size in order to provide all customers opportunity to meaningfully offset their
demand for utility-provided electricity.While the 25 kW capacity limit should be adequate for
most residential and small general customers,systems of that size,they contend,will not
meaningfhlly offset the high electric demands of irrigation and large general customers.It is
requested that the Commission provide for further review of this 100 kW limitation one year
from issuing its final Order to evaluate whether such limitation is appropriate.
3.The cumulative capacity for net metering,if any,should be set at 1%of the
previous year ‘s retail peak demand,and after such limit is reached,any restriction on net
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metering be imposed only after the Commission ‘s consideration ofeconomic,environmental,andotherbenefitsofnetmetering.While Avista’s net metering tariffs in Northern Idaho andWashingtonprovidefora0.1%cumulative capacity limit,the Renewable Energy Advocates
contend that other neighboring states differ.For example,Oregon places a cumulative capacity
limit of 0.5%of the utility single-hour peak load,and Arizona,California,Colorado,Montana,and Wyoming each impose no cumulative capacity limitation on net metering availability.
In this time of relatively high electric prices,the Renewable Energy Advocates
contend that customers should be given as many options as possible to reduce demand bygeneratingsomeoftheirownelectricity,while providing some energy to the grid.Successful
implementation of a net metering program for Idaho Power,they maintain,would help to achieve
many of the same benefits as increased demand side management programs—including reduceddemand,increased grid reliability and efficiency,and environmental and economic benefits—all
through private investment.
Idaho Farm Bureau Federation
The Farm Bureau does not understand the 2.9 MW limit the Company is seeking andrepresentingtobetheindustrystandard.Farm Bureau also does not understand why Irrigation
Schedule 24 was omitted from eligibility.If the purpose of net metering is to allow Idaho Powercustomerstomakeuseoftheirownrenewableenergyresources,the Farm Bureau contends thattheCompany’s filing is too limiting.Many irrigation customers use more than 25 kW which isthelimitforcustomersproposedinthisrule.The Farm Bureau requests that there not be anupperlimit,for most of the large irrigators exceed the 25 kW limit and almost all dairies have1,000 cows or more and will exceed the limit if they go to bio-generation.
Idaho,the Farm Bureau states,is a rapidly growing state with dairies now the largestagriculturalindustryinthestate.Environmentally,large dairies,it contends,are having troublehandlingwasteandareunderimmensepressuretoimprovewastemanagement.One of theinnovativewaystheycanhandlewasteandmostlyeliminatelagoonodorsistodivertthewastetobio-generators that convert the waste to methane that is burned and drives turbines thatgenerateelectricity.Net metering,the Farm Bureau contends,would drive this process and isseverelyneeded.
The Idaho Farm Bureau also recommends that the Commission establish guidelinesandrulestosupportnetmeteringonayearlybasis.It is noted that Idaho Power only discusses
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monthly net metering,but most cogeneration facilities need consideration for both the productive
months and less productive months to be accounted on a yearly basis.
Commission Staff
Staff recommends that the Commission approve Idaho Power’s proposed new
Schedule 84 with the following changes:
1.Staff recommends that net metering be made available to all customerclasses.
2.Staff recommends that demand metered customers desiring to participateinnetmetering(inigation,large commercial and industrial)be requiredtopayanyadditionalcostsassociatedwithinstallingadditionalmeteringequipmentnecessaryfornetmetering.
3.Staff recommends that demand metered customers,if allowed toparticipateinnetmetering,be credited for the energy they produce at theenergyrateapplicabletothetariffunderwhichthecustomeriscurrentlyserved.
Staffcontends that the Company’s proposal to credit customer generators at full retail
rates will pay customers more than the actual value of the generation.Consider,for example,it
states,an instance in which a residential net metering customer completely offsets his entire
usage during the month.The customer would pay only a basic customer charge ($2.51).Idaho
Power would collect no revenue from the sale of kilowatt hours.With only the revenue from the
customer charge,Idaho Power cannot recover its full cost of providing service.To provide
service,Idaho Power must still have distribution plant in place (poles,wires,transformers,etc.),
they must still read meters and send bills,and they still have administrative costs.According to
Idaho Power’s unbundling report for 1999,of the approximately 4.90/kWh (exclusive of PCA
surcharge)total cost for residential and small customers,generation costs account for
2.470/kWh,transmission 0.290/kWh,distribution facilities 1.380/kWh,and the remaining
0.80/kWh is for meter reading,billing,and other general and administrative costs.Net metering
allows Idaho Power to avoid some generation costs and perhaps some transmission costs,but
few,if any,other costs.Under Idaho Power’s current Schedule 86 net metering tariff,the credit
allowed for customer generation is discounted to account for this.However,under the proposed
simplified new Schedule 84 tariff,customer generation is not credited based on the avoided cost
of generation and transmission,but at the full retail rate.
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Staff also notes that energy offered to customers by Idaho Power is firm.Net
generation,on the other hand,is provided by customers to Idaho Power on a non-firm basis.
While there has always been a difference in the value of firm versus non-firm energy,Staffnotes
that this difference is not recognized under Idaho Power’s Schedule 84 proposal.
Despite Staff’s concerns that some of the costs to serve net metering customers will
be subsidized by other customers,the overall dollar impacts of net metering,Staff contends,will
be small if participation levels are restricted.Staff believes that Idaho Power’s proposal to limit
the maximum size of individual installations to a capacity of 25 kW and the maximum collective
capacity of net metering generation on the Company’s system to 2.9 MW is reasonable.These
participation limits,Staff notes,are the same as the limits approved for Avista’s net metering
tariff.
Staff notes that under Idaho Power’s existing Schedule 86 net metering rules,which
have been in place since 1983,the Company has attracted only three net metering customers,two
of which were connected in the past six months.Staff believes that if and when there is 2.9 MW
of net metering on Idaho Power’s system,a more accurate cost based rate should be established.
Under Idaho Power’s proposal,net metering will be restricted to Schedule 1 and
Schedule 7 customers only (residential and small commercial).While it is true,Staff concedes,
that a second meter or a more sophisticated meter may be required for demand metered
customers,Staff believes that demand metered customers should be allowed to participate in net
metering.Staff contends that it would be reasonable to require such customers to pay additional
costs to cover necessary meter modifications or additions.Staff proposes that demand meter
customers be only credited for generation at the energy rate of the schedule under which the
customer is served.
While critical of some aspects of the Company’s proposal,Staff generally supports
net metering.Net metering,it states,helps support the continuing development of renewable
energy resources.It also helps to advance energy generation technology and may offer
environmental benefits.
Department of Water Resources —Energy Division
The Department of Water Resources Energy Division recommends modification of
the proposed Schedule 84 net metering tariff in three areas:1)Eligible customer classes,2)
individual project size limit and 3)total Idaho Power system limit.
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1.Eligible Customers
Idaho Power’s net metering tariff proposal is only available to Schedule 1
(residential)and Schedule 7 (small general service)customers.The Department of Water
Resources notes that net metering also has potential application for the agricultural sector.Dairy
operations with anaerobic digestion systems can potentially produce power from methane.There
are also wind power opportunities.Typically,these agricultural users,the Department notes,fall
under Idaho Power’s Schedule 9 (large general service)and Schedule 24 (irrigation service).
The net metering proposal excludes these classes.The Department recommends inclusion of
these customer classes for Schedule 84 tariffeligibility.
2.System Size Limitation
For residential (Schedule 1)and small commercial sectors (Schedule 7)the
Department believes the 25 kW nameplate capacity size limitation to be appropriate.
For other tariffs (e.g.,irrigation),the Department believes it should be set higher than
25 kW.For example,it states,some aggregated irrigation loads could be as high as 8,000 kW.
The average size of irrigation pump tested by Idaho Energy Division in previous years within the
Idaho Power service area is approximately 150 horsepower (112 kW).
Additionally,the Department contends that the size limit of 25 kW has no relevance
to economies of scale for wind power generation.The cost per unit of rated output for a 25 kW
turbine can be as much as three times the cost for a 660 kW turbine.Wind power generation at
the larger scales compatible with electricity loads of Idaho irrigators,the Company contends,are
more likely to be cost effective.The Department recommends that consideration of a larger size
limit for customers not in Schedules I and 7 be investigated.
3.Limit on Overall Enrollment
Idaho Power is proposing a net metering service available on a first-come,first-serve
basis until the cumulative generation nameplate capacity connected equals 2.9 MW.The
Department recommends that the Commission stipulate that when this limit is reached,it should
be reviewed to determine if it should be raised.
Idaho Rural Council
The Idaho Rural Council (IRC)supports a viable net metering program for all Idaho
utilities.Such a program,it contends,will promote distributed and sustainable alternative forms
of electrical production such as small-scale wind,photovoltaic and small-scale hydro and will be
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the size of eligible generating
facilities and (3)increasing the cumulative
generating capacil
limit.The Companyoffers the following arguments.1.Eligible Customer Classes.Expanding
access to net metering as proposed by many commenter
s
,
the Company
contends,would result in additional
costs being shifted to non-partici
p
a
n
t
s
and—could result in
unacceptabl
e
levels of subsidy The Company notes that in its Application
it is attempting
to
eliminate some of the calculation
net metering charge complexity
existing under Schedule 86
Option B.The Company recognizes—
tliatlh simplifying
the computation
of charges to net
metering customers,
some subsidy will result.However,the Company contends that so long as
the eligibility for net metering is limited to small (25 kW and less)projects,projects utilizing
watt-hour meters and is capped at a reasonable
level (2.9 MW),this subsidy would be limited to
a reasonable
level and would be partially offset by savings resulting from the simplificati
o
n
of
the net meteringprogram.
Increasing
program eligibility should not be done,the Company maintains,without
considering
the potential differential
between a net metering purchase price at a retail sales rate
and the wholesale cost ofalternative
power supplies.Also to be considered
the Company notes,
is that power purchased
under net metering is non-firm energy and is of less value for meeting
system loads than would be an alternative wholesale purchase offirm energy.
2.Size ofEligible Generating Facilities.
Idaho Power recommend
s
that the net metering be limited to Schedules
1 and 7 and
generators smallerthan 25 kW.Idaho Power believes that the primarypurpose ofnet metering is
to allow customers
to realize the value oftheir generation
by directly and immediatel
y
offsetting
their energy consumptio
n
,
with any excess generation
delivered to Idaho Power causing the
inexpensive
watt-hour
meter already in place to run backwards
or “net”their recorded
consumptio
n
against theirexcess generation.Demand metered customers,
the Company contends,will also be able to directly and
immediatel
y
offset their consumption
with their own generation
if they so choose.However,
because the existing meters and meter bases of demand metered customers
cannot “run
backwards”
,
they would have to be modified and/or replaced to record any excess generation
delivered to Idaho Power.It makes no sense,the Company contends,to increase the net
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ofsignificant economic benefit to the rural economies of Idaho.Beyond that,it contends,there
are environmental benefits to all Idaho citizens that come from reducing the need for and
demand on centralized electrical production.The Idaho Rural Council is opposed to a system-wide net metering capacity limit.
There should be no limit,it contends.Distributed/alterna
t
i
v
e
production,it states,should be
encouraged not inhibitecL.
Other Customer Comments
Other comments received from Idaho Power customers address areas reflected by the
following excerpts
•Iwouki like to net meter and install a solar system from my pnvate house
and the hoops one has tojump through are silly.•I think that the cap of2.9 MW is way too low,and that the reconciliation
should take place on an annual basis rather than monthly so that irrigators
may benefit from the program.
•Please do not let Idaho Power put these kinds of limits on the amount of
electricitythat can be produced by alternative energy sources.•I strongly object to the “.1%”rule of thumb.I believe we as Idahoans
need to set the standard to which others can look.Idaho has a vast
natural resource of wind,water,and solar energy just wasting away
because of restrictions.My humble little wind farm is a classic example.
The utility company (Idaho Power)wants so much to hook up that I am
forced to “dump”my excess,or “shut down”,rather than offer it to the
other power users in our area.Perhaps the powers that be could consider
reaching out to us,the private and/or remote power providers to help each
other to live more economically and powerfiul.Idaho Power Reply Comments
Idaho Power prefaces its remarks by noting that the Company is currently purchasing
approximately 100 aMW of energy from 67 small generating facilities pursuant to the Public
Utility Regulatory Policies Act of 1978 (PURPA).Developers of renewable generation
resources,it states,have the present ability to obtain firm or non-firm energy purchase contracts.
No customer,it contends,is precluded for offsetting its load by its own generation,even if net
metering is not involved.
Idaho Power contends that its Schedule 84 Application should be approved without
modification.The Company opposes (1)expansion of eligible customer classes,(2)increasing
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metering subsidy and pay full retail rates for what clearly is separately metered and can be paidatnon-firm Schedule 86 rates or negotiated firm contract rates.Including customers withdemandmetersandwithfacilitiesgreaterthan25kWinnetmeteringprograms,the Companycontends,would require modification of the Company’s billing system and the expenditure ofadditionalprogrammingcoststoallowtheCompanytobillfortheenergyconsumed,the energygeneratedanddeliveredtoIdahoPower,and the computed difference.Requiring theseadditionalexpenditures,the Company maintains,is inconsistent with the idea of net metering asasimple,cost-effective program that directly and immediately compensates customers for theirgenerationbutdoesnotimposeadditionalcostsoncustomersthatdonotchoosetodevelopgenerationfacilities.
In addition to the potential for increasing non-generating customer costs,theCompanycontendsthatexpandingeligibilityfornetmeteringtogeneratingfacilitiesgreaterthan25kWwillrequirethatnetmeteringprojectsbesubjecttoindividualanalysisofinterconnectionrequirementstoavoidadverseimpactsonsystemsafetyandservicequality.
3.Cumulative Generation Capacity Limit
Recognizing that the magnitude of cost shifting will increase with the increase in thelevelofnetmeteringgenerationpurchases,Idaho Power urges the Commission to retain itsproposed2.9 MW generation capacity limit.
COMMISSION FINDINGS
Idaho Power in this case is requesting approval of a new net metering tariff—Schedule 84.The more controversial features of the proposal are (1)limiting eligibility toSchedules1and7,(2)limiting the size of a customer’s generation facility to 25 kilowattnameplatecapacity,and (3)setting a cap on cüinulative purchases at 2.9 MW.The CommissionhasreviewedthecommentsfiledbyRenewableEnergyAdvocates,a group of six organizations,the Idaho Farm Bureau,the Idaho Department of Water Resources,the Idaho Rural Council,Commission Staff and a number of interested customers.The Commission continues to find itreasonabletoprocessthiscasepursuanttoModifiedProcedure.Reference IDAPA31.01.01.204.
All commenters and this Commission support increased opportunities fordistributed/alternative and renewable electric energy production.The Company is to be
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commended for its proposal to simplify its current Schedule 86 net metering procedures.Commenters recommend the following changes to the Company’s proposed tariff:
1.That tariff eligibility be extended to all customers,including Schedule 24IrrigatorsandSchedule9LargeGeneralServiceCustomers.
We Find:The Commission finds the Company’s Schedule 84 proposal to be a goodfirststep.The Commission finds,however,that all customers should be provided theopportunitytoparticipateinnetmetering,including three-phase systems and demand meteredcustomers.The Company notes that developers of renewable generation resources have thepresentabilityunderPURPAtoobtainfirmornon-firm energy purchase contracts.While weacknowledgethatopportunity,we believe that the primary thrust of net metering is to providecustomerstheopportunitytooffsettheirownloadandenergyrequirements.We find thatcustomersshouldbepermittedtheopportunitytoparticipateinnetmeteringinadditiontoavailablefirmornon-firm contract options.The Company also notes that the meters and meterbasesofdemandmeteredcustomerscannotrunbackwards.Extending the program to suchcustomerswillentailadditionalcosts.We request that the Company present a net meteringproposalforitsothercustomerclasseswithinsixweeks.It is reasonable that such a programrequiredemandmeteredcustomerstopaythecostofanyadditionalequipmentnecessaryfortheirparticipation.
2.That the proposed nameplate capacity of the customer-owned generation facilitybeincreasedbeyondtheproposed25kW.
We Find:The Commission notes that the Company raises potential safety,servicequalityandgridreliabilityconcernsarisingfromanincreaseinfacilitysizebeyond25kWnameplatecapacity.We find that the proposed 25 kW limit is a reasonable size for Schedule IresidentialandSchedule7smallgeneralservicecustomers.We find that the 25 kW capacitylimit,however,is unreasonably low should net metering be extended to those customer classeswithgreaterenergydemands.Based on the comments filed,we find a more reasonable limit forirrigators,dairies and other customer classes is in the range between 100 to 125 kW.We notethatintheCompany’s present Schedule 86 tariff,the capacity size limit is 100 kW.In the filingwehaverequested,we expect the Company to address its safety,service quality and gridreliabilityconcernsandtoofferproposedsolutions.The Company may find it useful to
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investigate how these concerns are addressed in other states with larger net metering capacity
limits for customer-owned generation.As part of its filing we ask the Company to make specific
proposals for monitoring program cost,cost recovery and related issues of subsidization.
3.That the cumulative generation nameplate capacity of net metering systems be
increased beyond 2.9 MW or one-tenth of 1%of prior year’s retail peak demand.
We find:The Commission finds that the proposed 2.9 MW cap for cumulative
generation nameplate capacity is a reasonable initial cap for net metering for Schedules 1,7 and
all future eligible schedules.We also find it reasonable that the cumulative capacity limit be
reviewed after that limit is reached.As part of that review,we expect a report regarding the
required level of subsidization by non-participants.The Commission recognizes that in the
program we approve today for Schedules 1 and 7 customers,the full cost of the program may not
be born by participants.Raising the cap,we realize,increases the level of subsidization.As part
of its report,the Company should provide the differential between the net metering purchase
price it pays at retail sales rates and the wholesale cost of alternative power supplies.We also
expect further information regarding cost shifting and the Company’s ability to recover customer
costs from program participants.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over this Application and
Idaho Power Company,an electric utility,pursuant to Title 61 of the Idaho Code and the
Commission’s Rules of Procedure,IDAPA 3 1.01.01.000 etseq.
ORDER
In consideration of the foregoing and as more particularly described and qualified
above,IT IS HEREBY ORDERED and the Commission does hereby approve the Company
proposed Schedule 84—Customer Energy Production—Net Metering Tariff for Schedule 1
(residential)and Schedule 7 (small commercial)customers effective the date of this Order.
IT IS FURTHER ORDERED and the Commission directs Idaho Power Company to
file an Application on or prior to Friday,March 29,2002,with a net metering proposal for the
Company’s other tariff schedule classes and specific proposals for monitoring program cost,cost
recovery and related issues of subsidization.
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THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this order with regard to any
matter decided in this Order.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
/3 day ofFebruary 2002.
erPAKJELLER,PRESIDENT
7q’&‘J2J
SHA H.SMITH,COMMISSIONER
ENNIS S.}NS C MMISSIONER
ATTEST:
D.JewelJfJ
Cefrimission Secretary
vIdIO:IPCEOI 39_sw
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