LAKELAND ELECTRIC Pricing to Meet Net Meter Rules APPA 2009 Business & Finance Conference Sept 14, 2009 Jeff Sprague Manager Pricing & Rates Disclaimer The thoughts expressed herein are those of the presenter only, intended to spark technical discussions among fellow rates professional and industry managers, and should not be taken as disclosing any pending or future decision by the City of Lakeland. 2 Florida Net Meter Rule • (2)(c) “Net metering” means a metering and billing methodology whereby customer-owned renewable generation is allowed to offset the customer's electricity consumption on-site. • (8)(h) …customer shall continue to pay the applicable customer charge and applicable demand charge. Rule 25-6.065, FL Administrative Code 3 From the utility perspective, lost revenues, cross-customer subsidies, grid-integration issues and other precedent-setting disruptions have been discussed, but the practical implication have been less than revolutionary. Mike Taylor, Solar Electric Power Association, “When Net Metering Goes Mainstream”, ELP July-August 2009 4 Utilities might begin to experience business model disruptions similar to those that occurred with cell phones. Mike Taylor, Solar Electric Power Association, “When Net Metering Goes Mainstream”, ELP July-August 2009 5 Renewable Generation • • • • • • Biomass Wind Solar photovoltaic Solar thermal Geothermal Landfill & waste methane 6 Solar PV • • • • • • Incentives to install Generation capacity System capacity needs Net meter and feed in tariffs Excess energy Production and Distribution systems cost recovery 7 Solar PV Incentives • • • • • Hobbyist & retired engineer Federal tax credit of 30% Florida rebate (so long as it is appropriated) Utility rebate – none Price – net meter, feed-in tariff 8 Solar PV Capacity • Lakeland typical Residential customer is electric heat/heat pump, AC and Hot Water • 1,220 KWH/MO requires ~9.4 KW-DC • Assume 4 KW is practical system size 9 System Capacity Needs • Lakeland is Winter peaking @ 8 am • Solar day 7 am to 5 pm; 70% of capacity by 10 am • Average Residential customer 4 KW • How much does Solar PV contribute to system peak requirements? • 8,000 KW of Interruptible Commercial load 10 4 600,000 3 400,000 2 200,000 1 0 0 KWH 800,000 Mon.Oct.22, 2007 Tue.Nov.27, 2007 Tue.Dec.18, 2007 Thu.Jan.3, 2008 Thu.Feb.28, 2008 Sun.Mar.16, 2008 Thu.Apr.3, 2008 Sat.May31, 2008 Fri.Jun.6, 2008 Mon.Jul.21, 2008 Wed.Aug.27, 2008 Thu.Sep.11, 2008 11 4 KWDC PV Solar PV KWH COL/LE System Profile FY08 Solar PV Billing • Net Metering in Lakeland – Credit for excess energy – 2 customers with capacity to be net provider – Renewable Energy Credits belong to _______ • Feed in Tariff – Similar to Power Purchase Agreement with Sun Edison for 24 MW over 10 years • $280.99 to $95.43 per MWH >>$149.33 average 12 Solar PV Excess Energy • “Purchase” of excess energy at average pricing • Time of Use pricing and Peak Critical Period pricing • Bank energy and Form 1099 to IRS? • Lakeland cashes out when account closes but Form 1099 (none yet) 13 Solar PV and Cost Recovery • Proper cost allocation for the Production, Transmission, and Distribution systems – Rate study allocation to entire class – Net meter billing contributes nothing • Recovery of capacity costs – PV Standby Service – Access charge for consumption regardless of generation source 14 Solar PV Alternate Rate Design • PV Standby Service – Demand meter – Non-demand meter • Access charge (identical to retail access) – Total consumption covers delivery cost – Charge for utility purchased energy only – Uses same metering required for Renewable Energy Credits 15 Residential Demand Rate Design • $13.54 • $0.00277 • $0.05261 per KW Cost of Service per KWH Cost of Service per KWH average of 3 tiers • $7.00 • $0.02019 • $5.94 per KW for Commercial per KWH for Commercial per KW Commercial Standby @ Dist. • 4 KW average Residential demand 16 Residential Demand Rate Design • $13.54 • $0.00277 • $0.05261 per KW Cost of Service per KWH Cost of Service per KWH average of 3 tiers • $7.00 • $0.02019 • $5.94 per KW for Commercial per KWH for Commercial per KW Commercial Standby @ Dist. • 4 KW average Residential demand 17 Residential Demand Rate Design • $13.54 • $0.00277 • $0.05261 per KW Cost of Service per KWH Cost of Service per KWH average of 3 tiers • $7.00 • $0.02019 • $5.94 per KW for Commercial per KWH for Commercial per KW Commercial Standby @ Dist. • 4 KW average Residential demand 18 Access Charge (Unbundled Price) • $13.54 • $0.00277 • $0.05261 per KW Cost of Service per KWH Cost of Service per KWH average of 3 tiers • $7.00 • $0.02019 • $5.94 per KW for Commercial per KWH for Commercial per KW Commercial Standby @ Dist. • 4 KW average Residential demand 19 Access Charge (Unbundled Price) • $0.04984 • $0.00277 • $0.05261 per KWH Access Charge per KWH Energy Charge(COS) per KWH average of 3 tiers • $0.03242 • $0.02019 • $0.05261 per KWH Access Charge per KWH Energy Charge (GSD) 20 Unbundled Revenue and Cost to Serve PV $0.10736 Energy $0.00277 Access $0.04984 Fuel Chg $0.05475 $128.83 $3.32 $59.81 $65.70 Net Meter 500 KWH of PV Gen $75.15 $1.94 $34.89 $38.33 Consumption Bill & PV Credit $100.07 $1.94 $59.81 $24.92 $38.33 rate 1200 KWH 21 Unbundled Revenue and Cost to Serve PV $0.10736 Energy $0.02019 Access $0.03242 Fuel Chg $0.05475 $128.83 $24.23 $38.90 $65.70 Net Meter 500 KWH of PV Gen $75.15 $14.13 $22.69 $38.33 Consumption Bill & PV Credit $91.36 $14.13 $38.90 $16.21 $38.33 rate 1200 KWH 22 Unbundled Revenue and Cost to Serve PV $0.10736 Energy $0.02019 Access $0.03242 Fuel Chg $0.05475 1200 KWH $128.83 $24.23 $38.90 $65.70 Net Meter 1400 KWH of PV Gen -$21.47 -$4.04 -$6.48 -$10.95 Consumption Bill & PV Credit $23.92 -$4.04 $38.90 $45.39 -$10.95 rate 23 Cash Value of Renewable Energy Credits Renew. Energy Credit per KWH $0.05000 Monthly REC value retail $25.00 for 500 KWH minus LE admin. cost @ ($0.00104) per KWH -$0.52 minus REC registration @ $0.00000 per KWH $0.00 Net REC value to customer $24.48 24 Summary • 40,890,430 KWH lost • 2.4% • Directly increases energy cost to others – 24 MW of PV $1.06 per MWH increase – SHW @ 1.1% $0.47 per MWH increase – Customer owned ?? • Mitigate with rate design change that continues to meet net meter rules. 25 Philosophy What are you going to do now? How do I know? I’m making it up as we go along. Indiana Jones, Raiders of the Lost Ark 26 Questions? 27