Net Metering Gives Consumers Needed Incentive to Invest in Renewable Energy

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Comments Regarding HB 1212, Net Metering
Submitted January 27, 2004

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Policy Testimony in Regards to IURC Proposed Net Metering Rule IURC RM #03-05
Submitted May 20, 2004

Net metering is a kilowatt hour swap between a customer and an electric utility company - there is no "payment"1 and no checks are sent to the customer-generator. The customer-generator still pays "customer charges", the costs of administrative overhead such as billing and meter reading. However, the customer receives a retail rate credit for kilowatt hours he/she generates to be used against the customer's future consumption. In other words the customer "banks" kilowatt hours to be used later.

As in HB 1212, net metering generally applies to "non-dispatchable" resources such as wind and solar power.

These renewable facilities are grid-intertied. That is, the customer is still connected to the distribution system and the net metered solar or wind technology operates in conjunction with the grid by means of inverter technology. Inverters work to ensure that power quality is maintained and that power is not transferred to the grid during blackouts.

DSIRE (Database of State Incentives for Renewable Energy) lists 38 states that have various forms of net metering programs in statute, regulations, or provided by individual utilities. In Indiana, Cinergy, Vectren and IPL have net metering tariffs for up to 10 kilowatts for homes and small businesses. They also allow schools to net meter. Each tariff allows solar, wind and small hydro facilities to be net metered. The Indiana Utility Regulatory Commission has a net metering regulation pending for facilities up to 10 kilowatts. This regulation would extend net metering to the state and apply to electric utilities under IURC jurisdiction.

HB 1212 takes the state one step further. It allows for net metering facilities to be up to 2 megawatts in size. This is technologically feasible and safe and is being considered in other states (NJ and WA) [The NJ utility regulator will issue 2MW rule in Mid-March. WA state has introduced legislation based on IREC model-2MW]].

Safety
Fears of safety concerns, such as backfeeding to the grid, are unfounded. For instance, the American Solar Energy Society stated, "Small-grid connected intertied renewable energy systems have been installed in the United States since the enactment of the federal PURPA (Public Utility Regulatory Policies Act) law in 1978. These systems cumulatively have over half a billion operating hours, apparently without any reported personal injury or property damage claims attributed to their interconnection operation."2

Similarly, a coalition of small generators formed to work with the Federal Energy Regulatory Commission on interconnection standards for up to 20 megawatts told FERC staff in submitted comments, "The Commission (FERC) can... confidently ignore the interconnection providers' (utility companies) claims that only by their retaining unbridled discretion to impose additional requirements (in the form of "good utility practices" or otherwise) will the safety and reliability of existing systems be protected from adverse small generator impacts. No documented incidents of problems have ever been brought forward, despite existing interconnections of thousands of smaller units, and none will result from the adoption of the (SGC) Small Generator Coalition positions."3

Of note is the fact that NiSource, Inc. signed onto the comments.4

The technical standards and testing procedures for grid-intertied inverter technology are developed by the Institute of Electrical and Electronics Engineers (IEEE) and Underwriters Laboratories, Inc. (UL) respectfully. IEEE and UL standards allow for pre-certified equipment packages that do not require further testing and operate safely with the grid.

In May of 2000 IEEE published Standard 929-2000, Recommended Practice for Utility Interface of Residential and Intermediate Photovoltaic (PV) Systems. In May 1999, UL published Standard 1741, Standard for Static Inverters and Charge Controllers for Use in Photovoltaic Power Systems. (1741 has been expanded to address inverters for wind, fuel cells and other technologies.)

At that time, the Solar Electric Power Association (SEPA)5, formerly the Utility Photo Voltaic Group, published a "Position Statement on Photovoltaic Interconnection" in October of 2000. According to SEPA, "[I]nverters that pass UL 1741 tests are guaranteed to meet IEEE 929-2000; such inverters do not need additional protective equipment to prevent islanding or filters to maintain power quality."6

Finally, SEPA stated, "Substantial field experience confirms that these standards ensure safe operation of PV systems connected to the grid... These standards address all legitimate technical concerns, such as safety and power quality, and thus clear the way for simplified interconnection on a technical level. IEEE 929-2000 is a standard to which PV interconnection hardware can be designed, removing a costly and inefficient situation where different utilities and jurisdictions require different and specialized hardware."7

In July 2003, IEEE published IEEE Standard 1547, Standard for Interconnecting Distributed Resources with Electric Power Systems for up to 10 megawatts. It "provides a uniform standard for interconnection of distributed resources (solar, wind, fuel cells, etc.) with electric power systems. It provides requirements relevant to the performance, operation, testing, safety considerations, and maintenance of the Interconnection."8 UL is currently updating its Standard 1741 to keep pace with IEEE.

Among those belonging to the IEEE Work Group for developing and critiquing the standards were representatives from Indiana utility companies (or their subsidiaries) and the IBEW. From Cinergy-PSI, Larry Conrad, James Lemke, and Alfred Pattman took part. From AEP, Stephen Early, Dale Krummen, and Harry Vollkommen participated. Jason Richards represented NiSource Energy Technologies, Inc. The IBEW Utility Department was represented by Jim Tomaseski.9

Suffice is to say that the IEEE and UL standards are painstakingly developed and adopted and involve hundreds of experts. Any IEEE and UL pre-certified inverter equipment will operate safely with the grid and experience reflects that.

Utility Revenue Issues
Utility claims of lost revenue or other customers subsidizing a customer-generator are unfounded.

First, HB 1212 establishes a cap on the net metering program of 1% of a utility's most recent summer peak load. The 1% cap has nothing to do with technical issues. It is imposed to allay any fears of lost revenue.

Secondly, distributed resources are investments in the distribution system which benefit the utility and other customers. The system benefits of distributed generation identified by utility-sponsored studies include "reduced energy losses in transmission and distribution lines, voltage support, deferred substation upgrades, deferred transmission capacity, and reduced demand for spinning reserve capacity" as well as "increased peak shaving" in terms of PV.10

Indeed the Regulatory Assistance Project ( a research group dedicated to rate design and incentives which promote wise electric system investments) states, "Remarkably, in ten of 11 utility studies, the value of distributed resources that flowed from reduced investment in T&D (transmission and distribution) and from enhanced system reliability exceeded the capacity and energy savings of these resources."11

Moreover, in terms of these system benefits, distributed generation is superior to central-station power plants. Although these benefits may be "highly site-dependent," "customer-sited generation will almost always provide more system benefits than an equivalent amount of generation from a central-station facility."12

Another issue that arises with respect to distributed generation is the attempt of utility companies to assess excessive standby charges for larger facilities. The utilities argue that they have incurred costs to serve a customer and that the installation of these units reduces anticipated revenues from the customer.

However, if a large customer were to invest in efficiency measures that reduced their demand by one megawatt instead of installing a megawatt of wind turbines, there would be no such charge assessed. Similarly, if a downturn in the economy forces layoffs and the shutdown of a process or two at a plant, the utility doesn't punish the customer by assessing an additional charge because the customer's electricity demand has dropped. In the same vein, if a manufacturer transfers a portion of production from a plant in Indiana to Mexico, the utility doesn't assess additional charges on the customer.

Fourth, Cinergy, NIPSCO and Vectren are seeking or will seek capacity additions for their systems in the near future. Cinergy has asked the IURC for preapproval to purchase two or three merchant power plants. NIPSCO recently announced that it would pursue power contracts to cover summer peak demand. Vectren may seek to build another peaking plant within the next few years. IPL recently installed a peaking unit. What this means is that other than not investing enough in energy efficiency, utilities are experiencing a growth in their customer base. It is highly unlikely that distributed power installations will every come near the rate of customer growth. In other words, utility revenue will continue to clime despite HB 1212.

The most important issue with respect to the utility company and distributed generation is the operation of the distributed facility during peak demand in the summer. If the system is not operating, the customer's demand will increase. This may have an impact on the local distribution network in terms of reliability and overloading the system. This issue can be addressed on a case-by-case basis by means of a contractual relationship between the utility and the customer. Similar to interruptible rates, the customer could agree to shutdown a portion of their plant during periods of high demand to avert disrupting the system.

If the utility is depending on the facility to run during periods of peak demand and it doesn't, the utility and customer could work out a rate that the customer would be charged for failing to keep the distributed power facility operating.

Local Grid Impacts
Inverters ensure that the generating unit works in conjunction (parallel) to the grid. With respect to facilities up to 10 kilowatt, no additional action must be taken by a utility other than that the inverter is IEEE and UL approved.

However, 1 or 2 megawatt facilities require additional screening with respect to the site-specific issues relating to the local circuit. The required screening is not elaborate, nor does it require extensive engineering studies conducted by the host utility. Examples of the extent of the engineering screens required can be found at the Interstate Renewable Energy Council Web site (www.irecusa.org) and at the National Association of Regulatory Utility Commissioners Web site (www.naruc.org.) The State of Texas has promulgated an interconnection rule which would also be helpful in developing rules in Indiana. These approaches may be slightly different but convey how little impact 2 MW facilities have on the local distribution network.

Liability Insurance
As alluded to before the committee by Cinergy representative, Jim Lemke, there should be no insurance requirements beyond those of a standard homeowners or commercial policy.


1In a case presented to the Federal Energy Regulatory Commission by Mid-American Power Company, the utility characterized the net metering arrangement as a payment above their avoided cost. The FERC rejected this argument and said no payment occurs under a netting arrangement. See MidAmerican Energy Company, Docket No. EL99-3-000, 94 FERC ¶ 61,340.

2Allocating Risks: An Analysis of Insurance Requirements for Small-Scale PV Systems, June 2000, pg. 6.

3"Joint Comments of the Small Generator Coalition on Small Generator Interconnections ANOPR Consensus Documents and Annotations," Standardization of Small Generator Interconnection Agreements and Procedures. Docket No. RM02-12-000, December 2002

4Appendix A Organizations Joining the Small Generation Coalition JOINT COMMENTS

5Solar Electric Power Association membership includes (included in 200) a broad spectrum of the PV electricity industry: more than 130 members representing investor-owned utilities and their subsidiaries, public power systems, rural electric cooperatives, and the PV industry (PV and component manufacturers, distributors, and system integrators.) Solar Electric Power Association members account for nearly 50 % of total U.S. electricity sales (in 1998) and have some 40 million customers. Stakeholder members include 25 research organizations, educational institutions, and state and local organizations (Solar Electric Power Association, Position Statement on PV Interconnection.)

6Solar Electric Power Association "Position Statement on Photovoltaic Interconnection", October 2000, pg. 5.

7Ibid., pg. 5.

8IEEE Web site.

9Ibid.

10"Barriers and Solutions to Interconnection Issues for Solar Photovoltaic Systems," Tom Starrs, Kelso Starrs and Associates, LLC. Prepared for the Solar Electric Power Association, pg. 8.

11Issuesletter, Regulatory Assistance Project. February 2000.

12Starrs Kelso and Associates, pg. 8.

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