20020201Decision Memo.PDF

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DECISION MEMORANDUM
TO:COMMISSIONER KJELLA1’DER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOUANN WESTERFIELD
BILL EASTLAKE
TONYA CLARK
DON HOWELL
DAVE SCHUNKE
RANDY LOBB
LYNN ANDERSON
GENE FADNESS
WORKING FILE
FROM:SCOTT WOODBURY
DATE:FEBRUARY 1,2002
RE:CASE NO.IPC-E-01-39 (Idaho Power)
SCHEDULE 84—NET METERING
On November 9,2001,Idaho Power Company (Idaho Power;Company)filed an
Application with the Idaho Public Utilities Commission (Commission)requesting approval of a
new tariff Schedule 84-Customer Energy Production—Net Metering.Concurrent with this
filing the Company has requested the deletion of net metering option language in Schedule 86.
Reference Case No.IPC-E-0l-40.
BACKGROUND
On January 22,1997,the Commission issued Order No.26750 authorizing Idaho
Power to implement net metering as a pricing option in the Company’s Tariff Schedule 86-—
Cogeneration and Small Power Production—Non-Firm Energy.Net metering was identified as
Option B in the purchase price section of Schedule 86 and described as “offset to retail sales.”In
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
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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.
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.
3.The cumulative capacity for net metering,if any,should be set at 1%of the
previous year’s peak demand,and after such limit is reached,any restriction on net metering be
imposed only after the Commission’s consideration of economic,environmental,and other
benefits of net metering.
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 by
generating sonie of their own electricity,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 reduced
demand,increased grid reliability and efficiency,and environmental and economic benefits—all
through private investment.
The Company’s simplified proposed billing system for net metering,with the
opportunity for customers to carry over financial credits from month to month for excess
kilowatt hours generated,is commended as a significant improvement from the complex billing
formula now in place.
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100 kW or larger.These include:Arkansas (25 kW residential,100 kW commercial and
agricultural);Georgia (10 kW residential,100 kW commercial);Montana (50 kW);Maryland
(80 kW);North Dakota (100 kW);Maine (100 kW);Arizona (100 kW);California (1 MW);
Indiana (1 MW);and Iowa (no limit).
Idaho Power’s existing Schedule 86 allows for net metered systems up to 100 kW in
size.Renewable Energy Advocates request that the Commission retain the existing 100 kW
capacity limit in order to provide meaningful options for high demand customers to offset some
of their electricity purchases.It is also requested that the Commission provide for further review
of this 100 kW limitation one year from issuing its final Order,so that customer response and
market availability of renewable energy systems can be evaluated in deciding whether such
limitation is appropriate.
Idaho Power in its Application seeks to restrict net metering after a cumulative
generating capacity of 2.9 MW (0.1%)of peak demand has been reached,and cites this 0.1%
figure as an “industry standard.”While Avista’s net metering tariffs in Northern Idaho and
Washington provide for a 0.1%cumulative capacity limit,consistent with R.C.W.Section 80.60,
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
further provides that net metering may be restricted by regulatory authorities once that limit is
reached.ORS §757.300.Arizona,California,Colorado,Montana,and Wyoming each impose
no cumulative capacity limitation on net metering availability.
Should the Commission approve a cumulative capacity limit on net metering
availability,it is recommended that the Commission provide that net metering may be restricted
after the limit is reached.As with Oregon’s net metering system,the Commission would review
the environmental,economic,and other public policy benefits of net metering in evaluating
whether to restrict its availability.ORS §75 7.300(6).The Renewable Energy Advocates
recommend that the cumulative capacity limit for net metering,if any,be set at 1%of the
previous year’s peak demand,and that once such limit is reached,any restriction on net metering
be imposed only after a consideration of economic,environmental,and other benefits of net
metering.The Renewable Energy Advocates urge the Commission to avoid placing artificial
barriers to the growth of net metering,and add a minimum to provide for later procedures to
evaluate the public benefits of net metering before limiting its availability.
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months and less productive months to be accounted on a yearly basis.The results for Idaho
Power,the Farm Bureau contends,would be the same,but the end result to the generator would
eliminate the fluctuations of winter non-use,summer high level of irrigation demand and windy
versus non-windy fluctuations.Many states,it contends,have net yearly metering as a part of
their regulated industry and the Farm Bureau would recommend that Idaho adopt such a
program.
Commission Staff
The 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 customer classes.
2.Staff recommends that demand metered customers desiring to participate in net
metering (irrigation,large commercial and industrial)be required to pay any
additional costs associated with installing additional metering equipment
necessary for net metering.
3.Staff recommends that demand metered customers,if allowed to participate in net
metering,be credited for the energy they produce at the energy rate applicable to
the tariff under which the customer is currently served.
Staff contends 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,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 4.9Ø/lcWh (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
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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 Enerv Resources
The Department of Energy Resources recommends modification of the proposed net
metering tariff in three areas:1)Eligible customer classes,2)individual project size limit and 3)
total Idaho Power system limit.
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 an aerobic digestion system 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 tariff eligibility.
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.
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other benefits are not lost to the people of Idaho.The IRC notes that one of the areas of rural
economy that would benefit the most from a viable net metering program would be the irrigators.
Other Customer Comments
Other comments received from Idaho Power customers address areas reflected by the
following excerpts:
•I would like to net meter and install a solar system from my private house and the
hoops one has to jump through are silly.
•I think that the cap of 2.9 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
electricity that 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 powerful.
Idaho Power Reply Comments
Idaho Power contends that its Schedule 84 Application should be approved without
modification.The Company opposes (1)expansion of eligible customer classes,(2)increasing
the size of eligible generating facilities and (3)increasing the cumulative generating capacity
limit.The Company offers the following arguments.
1.Eligible Customer Classes.
Idaho Power prefaces its remarks by noting that the Company is currently purchasing
approximately 100 aMW of energy from 67 small QF generating facilities.Developers of
renewable generation resources have the present ability to obtain firm or non-firm energy
purchase contracts.No customer is precluded for offsetting its load with its own generation,
even if net metering is not involved.
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to be modified andlor replaced to record any excess generation delivered to Idaho Power.It
makes no sense,the Company contends,to increase the net metering subsidy and pay full retail
rates for what clearly is separately metered and can be paid at Schedule 86 or negotiated contract
rates.Including customers with demand meters and with facilities greater than 25 kW in net
metering programs,the Company contends,would require modification of the Company’s billing
system and the expenditure of additional programming costs to allow the Company to bill for the
energy consumed,the energy generated and delivered to Idaho Power,and the computed
difference.Requiring these additional expenditures,the Company maintains,is inconsistent with
the idea of net metering as a simple,cost-effective program that directly and immediately
compensates customers for their generation but does not impose additional costs on customers
that do not choose to develop generation facilities.
In addition to the potential for increasing non-generating customer costs,the
Company contends that expanding eligibility for net metering to generating facilities greater than
25 kW will require that net metering projects be subject to individual analysis of interconnection
requirements to avoid adverse impacts on system safety and service quality.
3.Cumulative Generation Capacity Limit
Idaho Power proposed a generation capacity limit of 2.9 MW.Recognizing that the
magnitude of cost shifting will increase with the increase in the level of net metering generation
purchases,Idaho Power urges the Commission to retain its proposed 2.9 MW limit.
Commission Decision
Idaho Power proposes a net metering tariff available to customers taking service
under tariff Schedules 1 and 7 who own andlor operate a generation facility that is fueled by
solar,wind,biomass,or hydropower,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.The Company proposes limiting the cumulative generation
nameplate capacity of net metering systems to 2.9 MW.
Commentors recommend (1)that tariff eligibility be extended to all customers,(2)
that the proposed nameplate capacity of the customer-owned generation facility be increased
beyond the proposed 25 kW (to capture,for example,economies of scale for wind power
generation),(3)that the cumulative generation nameplate capacity be increased beyond 2.9 MW
(for example,1%of the previous year’s peak demand),(4)that the cumulative capacity limit (if
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