20061013Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895
RECEIVED
200& OCT I 3 PH 12: 58
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Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR REVISION
OF SCHEDULE 84 - NET METERING
CASE NO. IPC-O6-
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice of Comment /Protest Deadline issued on
August 31 , 2006, submits the following comments.
BACKGROUND
On August 17, 2006, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting authority to
revise net metering requirements in the Company s Schedule 84 - Net Metering tariff. Net
metering for residential (Schedule 1; R1) and Small General Service (Schedule 7; R7) customers
was first authorized by the Commission on February 13 , 2002 (Order No. 29851). Net metering
for all other retail customers was authorized approximately six months later (Order No. 29094).
STAFF COMMENTS OCTOBER 13 , 2006
Idaho Power has now had the opportunity to examine over the last four years how its
customers have actually utilized the net metering option. As a result, the Company is proposing
some modifications to its net metering program to provide what it contends is a more equitable
result for its customers.
ANALYSIS
Idaho Power s View of the Net-Metering Problem
Idaho Power s current net metering program credits residential and small general service
customers at full retail rates for all kilowatt-hours (kWh) generated. This pricing, the Company
contends, pays customers more than the actual value of the generation itself because net metering
allows Idaho Power to avoid some generation costs and perhaps some transmission costs, but
few, if any, other costs. Furthermore, the Company contends, energy offered to customers by
Idaho Power is firm, whereas energy provided to the Company by net metering customers is non-
firm. The difference in value between firm and non-firm energy is not recognized under the
Company s current net metering tariffs for Schedule I and Schedule 7 customers. For these
reasons, Idaho Power does not believe that it 'recovers its full costs of providing service from net
metering customers.
In its initial program offering in 2002, the Company recognized that its net metering
proposal would result in some subsidy to those residential and small general service customers
that chose to develop net-metered generation projects. However, the Company reasoned that as
long as the eligibility for net metering was limited to small projects and that as long as system
wide participation was capped at a reasonable level, the subsidy would be small and would be
partially offset by savings resulting from simplification of the net metering program.
In its Application, Idaho Power cited examples of one residential customer who averaged
excess generation of 12 076 kWh every month in 2005, and one small general service customer
who averaged excess generation of 15 913 kWh each month. In both cases, there was never a
month when either customer registered positive net energy usage. Under current net metering
provisions, these customers received full retail rates, both for their generation that offset their
consumption and for their generation that was in excess of their consumption.
Idaho Power believes the primary purpose of net metering is to allow customers to
realize the value of their generation by directly and immediately offsetting part or all of their
STAFF COMMENTS OCTOBER 13, 2006
energy consumption. The net metering program s current provisions immediately compensate
customers for their generation. However, the Company contends that net metering is not
intended to encourage generation in excess of consumption and believes that excess generation
should not be priced at full retail rates.
Staff's View of Excess Generation by Net Metering Customers
Staff has always agreed that by paying or crediting net metering customers at full retail
rates, the utility is compensating customers for more than the actual value of the generation, at
least over the long term. Arguments in support of this position have been made on various
occasions throughout the course of proceedings related to introduction of net metering programs
and will not be repeated here.
Staff also acknowledges that some net metering customers are more than merely
offsetting their usage, but instead are likely generating many times more than their actual
consumption. However, Staff believes that it is important to keep the size of the problem in fair
perspective. In the four years that net metering has been available, 27 Idaho Power customers
are now participating. According to the Company s website, an additional 13 customers have
pending requests for net metering generator interconnections. Attachment A is a summary
showing the amount of montWy generation in excess of the customers' usage for each existing
net metering project. The total cumulative capacity of the existing net metering projects is
approximately 336 kW, and the total amount paid by Idaho Power for the projects' excess
generation over the past 12 months was $23 102. As shown on Attachment A, three customers
had excess generation in every month, and in two of those cases, the excess generation greatly
exceeded what would be expected for a typical residential or small commercial customer.
While the data support Idaho Power s contention that a problem exists, the facts also
reveal that the problem seems to be caused by only two customers. Furthermore, from the
Company and its ratepayers' perspectives , the problem is small given that a mere $23 102 for
excess generation was paid to all net metering customers in the past 12 months. Nevertheless
Staff agrees that the issue should be addressed since it is significant to those customers who
choose to participate in net metering.
STAFF COMMENTS OCTOBER 13 , 2006
Idaho Power s Proposed Modifications to Pricing
Under Idaho Power s current net metering tariff, residential and small commercial
customers who generate more than they consume are paid or credited full retail rates for the
excess generation. Net metering customers in all other customer classes are paid or credited an
amount per kWh equal to 85% of the most recently calculated monthly per kWh Avoided Energy
Cost as defined in Schedule 84 (i., 85% of Mid-C). In its Application, Idaho Power proposes to
pay customers in all classes the same 85% of Mid-C rate for excess generation. Coincidentally,
the Company s Schedule 86, a tariff designed for purchase of non-firm generation from
independent power projects, prices all generation at the same 85% of Mid-C price. Thus, for
projects in which generation is the primary objective, there would be no incentive to try to
disguise them as net metering projects in order to obtain higher rates.
Staff's Proposed Modifications to Pricing
Staff believes that the pricing modifications proposed by Idaho Power are reasonable
and recommends that they be approved. Net metering customers who do not generate more than
they consume will be unaffected by the proposed change in pricing. Only the few net metering
customers who generate far more than their consumption would be significantly impacted by the
proposed pricing change. Customers who only generate small amounts more than their
consumption will see only minor changes in their bills because 85% ofMid-C prices, on average
are not too much different than retail rates. In fact, Idaho Power calculated that it would pay
923 less per year to its net metering customers collectively under its proposed pricing than
under its existing pricing. Over 80 percent of that reduction in payment would be realized by
only two customers.
Although Staff supports the proposed pricing change, Staff recommends an additional
modification not proposed by Idaho Power. As stated earlier, Idaho Power believes that the
primary purpose of net metering is to allow customers to realize the value of their generation by
directly and immediately offsetting part or all of their energy consumption. Staff agrees that
offsetting consumption should be the primary objective of net metering, but Staff maintains that
the offsetting of energy consumption does not necessarily have to be immediate. Most net
metering projects are either intermittent or seasonal or both, and the customer s generation
pattern often does not match well with the customer s consumption pattern. Solar projects, for
STAFF COMMENTS OCTOBER 13, 2006
example, might not be able to fully offset generation in winter months, but may be able to more
than offset consumption in summer months. Similarly, wind projects may more than offset
consumption in some seasons, but not in others. Because of this, Staff proposes that Schedule 84
be modified so that generation that exceeds consumption be measured on an annual, rather than a
monthly, basis for all net metering customers in all customer classes. If, at the end of each year
a net metering customer has recorded more generation than consumption, Staff proposes that the
excess generation be priced at 85% of the average annual Mid-C rate for non-firm energy.
Some utilities, Avista is the only example in Idaho, credit net metering customers' excess
generation at full retail rates on the customers ' next monthly bill , but customers forfeit all unused
credits at the end of the 12-month billing cycle. This approach accommodates projects with
seasonal and intermittent generation, but discourages them from installing systems much larger
than needed to offset their usage on an annual basis.The approach proposed by Staff
accomplishes a similar objective, but does not require excess kWhs to essentially be given to the
utility for free at the end of the year. Under Staffs proposal, all kWhs are presumed to have
value.
Alternatives to Net Metering
Idaho Power notes in its Application, and Staff believes it is worth repeating, that net
metering customers with significant generation in excess of usage have other alternatives
available under the Company s tariffs to develop small-renewable energy projects. For non-firm
energy generation, customers have the option to participate under Schedule 86, Cogeneration and
Small Power Production Non-Firm Energy. For firm energy generation, qualifying facilities
(QFs) are entitled to published avoided cost rates under the Public Utility Regulatory Policies
Act of 1978 (PURPA). Therefore, if customers are not satisfied with a credit they receive
through the net metering tariff, they could apply to be a firm or non-firm PURP A QF project.
Staff believes it is also worth noting that Idaho Power s Schedule 84 is a net metering
tariff, not a contract. As such, there is no guarantee to customers that the rates, terms and other
conditions it now contains will remain unchanged forever, or even that the tariff itself will
remain in place. It is unrealistic to expect tariffs to never change. Schedule 84 customers who
desire a commitment with certain fixed rates and terms and who can provide a firm product can
STAFF COMMENTS OCTOBER 13 , 2006
sign a PURP A contract as an alternative to net metering under Schedule 84 or non-firm energy
sales under Schedule 86.
Proposed Ratemaking Treatment
Idaho Power proposes that excess generation provided by Schedule 1 and Schedule 7 net
metering customers be considered an energy resource with the cost to be spread to all retail
customers through the PCA mechanism, the same treatment as is currently afforded excess
generation provided by non-RlIR7 customers. Staff has no objection to this proposed
ratemaking treatment, provided the Commission approves the proposed change in pricing.
Modifications to Metering Requirements
Currently, non-R1/R7 customers are required to have a meter that is separate from the
retail load metering at the point of delivery. Some of these customers, the Company contends
find the requirement for a separate meter to be a financial barrier to installing a small net
metering system. To eliminate this barrier, the Company is proposing that all energy received
and delivered by the Company could be through the single existing retail meter if a non-R1/R7
customer s generation facility has a total nameplate capacity rating which is no more than 2% of
their Basic Load Capacity (BLC) and the system is 25 kW or smaller. (Basic Load Capacity is
the average of the two greatest non-zero monthly billing demands established during the 12-
month period which includes and ends with the current billing period.). This one-meter option
the Company contends, would make the installation of small net metering systems much easier
for non-RlIR7 customers. Because one of the criteria is that the generation facility s capacity
cannot be more than 2% of the customer s BLC, Idaho Power contends that it is unlikely that a
customer exercising this option would ever have excess net generation. However, if such were
the case, under the Company s proposal excess energy would not receive any net metering
program financial credits because non-R1/R7 customers require demand meters that do not have
the bi-directional capability needed for single meter net metering installations. In order to
participate in net metering, these customers would need to have two separate meters installed.
Staff has no objection to eliminating the requirement for a separate meter for all non-
R1/R7 customers. Staff believes that a single meter should be used for net metering whenever
reasonably possible.
STAFF COMMENTS OCTOBER 13, 2006
RECOMMENDATIONS
Staff recommends that Idaho Power s request to price excess net metering generation at
85% ofMid-C for all customers classes be approved. Staff recommends, however, that excess
generation be measured on an annual, rather than a monthly basis for all net metering customers.
Under this approach, monthly excess generation would be credited at the full retail rate to the
customers' next bill , and that at the end of each year, excess generation would be purchased at
85% of the average annual non-firm Mid-C rate.
Staff also recommends approval ofldaho Power s proposal to spread to all retail
customers through the PCA mechanism all costs of excess generation provided by Schedule
and Schedule 7 net metering customers. In addition, Staff recommends approval ofldaho
Power s proposal to revise metering requirements for non-R1/R7 customers.
Dated at Boise, Idaho, this frt,/3 day of October 2006.
~;y. U-~A"A
Scott Woodbury
Deputy Attorney General
Technical Staff: Rick Sterling
i :/umisc/commentslipceO6.17 swrps
STAFF COMMENTS OCTOBER 13 2006
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 13TH DAY OF OCTOBER 2006
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. IPC-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID, TO
THE FOLLOWING:
BARTON L KLINE
MONICA MOEN
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
MAGGIE BRILZ
DIRECTOR, PRICING
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
f3~-SECRET AR
CERTIFICATE OF SERVICE