Maine PUC Proposed Net Metering Rule: Worthington Sawtelle Comments

Robust growth in distributed generation DG in Maine, and particularly solar DG, has been stalled by the inability of the legislature, the Governor’s office and the Maine Public Utility Commission to agree on a comprehensive plan for moving the state forward. The legislation would have, among other things, replaced net metering with a market based compensation system from owners of solar DG. Such legislation was vetoed by the Governor in April, a veto the legislature was not able to override.  This situation was further exacerbated by the Governor’s energy office recommending to the MPUC that net metering be discontinued. Recently the MPUC published a proposed rule that would alter but not end the net metering rule, increase the maximum capacity of a net metered facility and remove a limit on community/shared DG that would also benefit from net metering. The following are excerpted comments from Worthington Sawtelle LLC regarding the proposed rule changes.

The fact that the regulator now steps forward and takes the initiative to begin to resolve that portion of the problem over which it has jurisdiction is to be applauded. The MPUC’s proposed amendments to the net metering rules provide a near term resolution to restore market uncertainty. Amending these rules now also provides an opportunity to delineate a process through which to arrive at a comprehensive distributed generation rate regulatory scheme, an opportunity we believe the MPUC cannot afford to miss.

Net Metering, Social Equity and Market Value

Unlike many other net metering schemes, the MPUC’s proposed rule makes an important distinction between to the two broad categories of customer costs – energy and delivery – and how local distributed generation (DG) is credited against these costs. Separating the two is vitally important as a matter of social equity. Delivery cost recovery considers the utility’s total cost of delivery across an entire customer class and prorates those charges by usage. While there are a number of very real benefits of distributed generation to the distribution system, none can be valued or monetized within the current rate recovery system.[1] The net result is that we have a situation where those with the financial resources to install DG systems do not pay their true pro rata share of delivery costs. Since this is a zero sum game, other customers, including low income customers, pick up the balance. Phasing out any crediting of DG from delivery costs is therefore a matter of restoring social equity.

We do, however, take issue with the continuation of using full retail price to supply costs.  While perhaps simple to implement, it fails to attribute the true market value to a kWh of DG.  Any DG generation should be priced at the locational marginal price of the Independent System Operator – New England (ISO-NE) at the hour of generation.  Correlating the amount of local generation at any hour with the then prevailing LMP is quite feasible with most smart metering networks. Establishing market valuation of DG kWh should be one of the major consideration in future MPUC actions regarding DG regulation.

System Sizing and Community Sharing

Raising the maximum system size from 660 kW to 1,000 kW and eliminating the cap on the number of accounts that can be aggregated within a community are measures that should accelerate market growth and perhaps spur innovative approaches to community based distributed generation.

Long Term Action Plan

As mentioned above, the proposed amendments to the net metering rule are important to eliminate the current uncertainty in the market as to DG system valuation and as well as assure compensation that is more socially just; but they do not go far enough.  These amendments must also lay out a plan for a comprehensive reassessment of how DG systems are to be valued in the future, and especially address how the supply side of costs are to be credited as well as possible ways to revise the regulatory framework such that some of the unmonetizable benefits provided by DG to the distribution network can be valued. A review of the draft Manual on Distributed Energy Resources Compensation just published by the Staff Subcommittee on Rate Design of the National Association of Regulatory Utility Commissioners is highly recommended.

Note we have assiduously not used the term “solar” in our comments.  Although certainly in the near term the dominant DG technology deployed in the state has been and will be solar photovoltaic, other DG technologies with different operating characteristics will begin appearing within Maine distribution networks and will need to be incorporated into the rate regulatory framework. A good example of the other kinds of DG systems that will need to be addressed are found in the generation and efficiency portfolio of the Boothbay pilot plan to evaluate the ability of Non-Transmission Alternatives (Docket No. 2011-138, April 30, 2012). The MPUC’s long term plan needs to look beyond solar and consider these and other DG systems.

Conclusion

The proposed amendments to the net metering rule represent a welcome and important first step in restoring market confidence to future investments in DG systems and allow Maine’s citizens to make far more use of its abundant renewable and distributed energy sources.  We laud the higher maximum system sizes, greater numbers of systems shared within communities and the manner by which the amendments correct the disproportionate social equity in the current system. However, the proposed rules must also include provisions that lay out a regulatory process that takes a far more comprehensive look at how DG systems will be addressed by the regulatory framework, including how the regulatory framework itself might be amended to better accommodate DG.

[1] The valuation of solar DG within a distribution network presented in the MPUC report “Maine Distributed Solar Valuation Study” April 14, 2014, is frequently cited and, more often than not, misinterpreted, overstating a realistic value for DG benefits. While the report does, indeed, calculate a 25-year benefit value of 33.7 cents/kWh for solar DG, 19.9 cents of that number are for benefits the authors acknowledge are” … external to what present market mechanics monetize; as such they do not monetarily accrue to any market participants (distribution utility, transmission provider, third party generators, etc.).” The benefits associated solely with the delivery costs are but a fraction of this estimate.

 

 

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