LPPC Distributed Energy Resource/Customer Owned Generation Principles
Scope of assignment: The scope of work includes development of high level Distributed Energy
Resource /Customer Owned Generation principles for consideration and submittal to the LPPC CEOs for
consensus approval at their September CEO meeting. An LPPC working group is tasked with developing
these principles; additional efforts will include ongoing review and archival of industry activities,
alternative strategies and tactics (including consumer protection initiatives and targeted messaging),
etc.
Background: Nationally, customers are adding distributed energy resources (DER), including distributed
generation (DG) at an increasing rate. Factors influencing this trend include national, state, local and
utility policies; the declining cost of photovoltaic (PV); the lease financing model and other technologies;
customer preference for ‘self
supply’ and conservation and
the emergence of smart
infrastructure systems.
Equitable Cost Recovery:
Traditionally, integrated
utilities have recovered a
large portion of fixed costs
associated with generation,
transmission and distribution
systems through volumetric
charges based on energy
consumption. As such, under
many utility rate structures,
the reduction in electricity
purchased by DER customers
results in nonpayment by
these customers for their
share of fixed costs needed
for rate recovery and
infrastructure maintenance.
Net energy metering, as
implemented in many states,
amplifies this effect. To the
extent DG customers are
credited at the retail rate,
versus a wholesale rate for their solar production, costs are shifted to non-solar customers. Given the
demographics of the typical solar customer, the end result is regressive in nature. This single issue has
become highly politicized, led to aggressive media campaigns and mischaracterization of the facts with
the general public. The principles to be formulated will support differential pricing approaches by LPPC
members, support fair and equitable recovery of infrastructure costs, promote transparency in pricing
and other pricing principles as identified.
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Risk Management and Forecasting: The variability in production from renewables, coupled with the
effects of DSM programs, complicates
the ability to forecast load and meet
the profile of load demand during any
given day, as shown in the chart right.
Given limited options to store excess
renewable energy, this increases the
cost of ancillary services and affects the
dispatch of plants that were intended
to serve load for relatively short periods
of time.
System Reliability: Similarly, studies
have shown that increased levels of
solar penetration on distribution
feeders is causing voltage variability
and impacting reliability.
Consumer Protection: As demonstrated
by events in Arizona during the Arizona
Corporation Commission’s (ACC)
consideration of a tariff for APS Solar customers, net metering and DG issues are not simple and lend
themselves to selective messaging by stakeholders. In Arizona and California, well funded TV ads were
launched and countered by parties in the debate. Additionally, recent experience has revealed
instances wherein rooftop systems have been over –sized, leasing provisions are unfavorable to the
customer (and premised on assumptions relative to forecasted utility price increases) and target
vulnerable populations. The LPPC DER work group will develop and maintain a library of effective
messages, discussion points and advertisements for use by the LPPC members and third party
advocates. The group will also conduct ongoing research to identify entities that oppose LPPC
principles, catalogue opposition messages and tactics.
Identify and Pursue Effective Alliances: In February, 2014, EEI and NRDC issued a joint statement to
state utility regulators (Attachment A) that set forth joint recommendations for supporting new and
evolving technologies, while maintaining safety and reliability, allocating costs of service equitably
among customers and promoting clean energy. Once LPPC CEOs have approved consensus principles,
the working group will identify alliance opportunities.
Working Group Participants: NYPA CEO Gil Quinones is the LPPC CEO sponsor of this initiative, which
will be co-chaired by Rob Taylor, SRP and Debbie Kimberly, Austin Energy. Tacoma PUD and SMUD
expressed an interest in joining the working group. All LPPC members are invited to participate in the
concentrated effort to complete this initiative. Members of the work group will meet via teleconference
to develop materials in advance of the September 13, CEO meeting. Ideally, working group members
will have a background in DER issues, regulatory matters, communications, pricing and/or related areas.
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