20020719Decision Memo.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
BILL EASTLAKE
TONYA CLARK
DON HOWELL
DAVE SCHUNKE
RICK STERLING
RANDY LOBB
BEV BARKER
GENE FADNESS
WORKING FILE

FROM:

DATE: JULY 19, 2002
RE: CASE NO. IPC-E-02-4 (Idaho Power)
SCHEDULE 84—NET METERING--AMENDMENTS

On February 13, 2002 in Order No. 28951 in Case No. IPC-E-01-39, 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 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-E-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:
Allow customers receiving retail service under schedules other than Schedule 1 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;
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‘s system;
Impose only those monthly charges provided for in the Company’s standard service schedule applicable to the net-metering customer;
Credit all energy provided in excess of the customer’s consumption at a price that does not result in a subsidy from other customers;
Permit generating projects with a capacity up to 100 kW to interconnect to the Company’s system in a safe and reliable manner;
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%) 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 2.9 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-E-02-04 was processed pursuant to Modified Procedure, i.e., 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:
2.9 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 2.9 MW (1/10 of 1% of retail peak demand).
The Idaho Rural Council urges the Commission, if a limit is needed, to set the limit at 10% of Idaho Power’s load, i.e., 290 MW. Net metering, it states, presents an opportunity for Idaho Power customers to invest their energy dollars, not merely spend them. These 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 (1/10th 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.5.
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.e., 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 PURPA contract.
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.
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 prices.
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 is www.newsdata.company/cem/pricesindex.html. 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.e., Schedule 1 and 7 customers are credited for excess generation at full retail rate).
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-E-01-39, 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 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’s Order. Does the Commission find it reasonable to approve the Company’s Application? With or without modification?

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DECISION MEMORANDUM 7