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New York IOUs told to raise net metering ceilings

PSC wants DER's value known, not capping growth

Rockville, MD (October 23, 2015) – The New York PSC on Oct 15 told the large utilities of the state to pick new net metering ceilings above the established 6% after Orange & Rockland (O&R) requested halting net metering when the ceiling was reached – which it warned would be soon. The utility argued cost shifting to homes without solar PV would be significant but the PSC wants the value of DER better understood before doing anything that could cap its growth.

The PSC on Dec 15 set a ceiling on the amount of net metered generation the major electric utilities had to interconnect – under its Public Service Law – at 6% of load. Orange & Rockland, in a petition July 13, said the applications it received for net metered interconnections were nearing the ceiling and proposed to stop interconnecting net metered generation when the ceiling was reached.

The petition offered alternatives to net metering for interconnecting the DG that formerly qualified for net metering, while waiting for the harmonization of net metering with the goals envisioned in the state's Reforming the Energy Vision (REV) proceeding, issued in April of 2014 and still being developed.

The utility wanted a "buy-all, sell-all" arrangement where a DG customer would sell all of its generation output at a wholesale rate to its connected utility and buy all the power it needed at the retail rate, its petition said. The utility reported that as of July 1, it had connected 2,407 net metered customers at a total capacity of 22.6 MW, which, when added to a queue of another 654 approved projects worth 79.3 MW, would add up to 101.9 MW.

The 6% ceiling equates to 62 MW, O&R said, and 27 of the applications it received were for 2 MW systems, driven largely by financial credits under the state's Transition Plan Order.

The net metering ceiling was raised from 1% to 3% in June of 2013, O&R said in its petition, and that order found that net metering could increase the complexity and cost of maintaining and managing utility grids. In raising the limit to 3%, the benefits of net metering were balanced against the costs and it was noted that any increase above the 3% level would need more analysis, it added.

When the ceiling was increased again in December, a rate impact analysis showed the public interest would not be harmed at the 6% penetration level, O&R argued. That level was seen as high enough to handle the net metered installations expected in the time before the REV process would sort out the problems and "harmonize" the rules.

But if the 6% ceiling were exceeded, O&R argued, rate shifting from net metered customers to other customers would be significant. O&R did not try to predict the date when actual interconnections would hit the ceiling, but expected it to be in the "near future," the PSC order said.

The cost shifting problem got worse under a Transition Plan Order, especially because many of the projects in its interconnection queue are premised upon the grandfathering of financial credits for DG projects, O&R said. The projects are generally interconnected at the non-demand, small commercial rate, which, as discussed in the NEM (net energy metering) Cap Order – the one that raised the ceiling – creates unexpected opportunities for uneconomic arbitrage through monetary crediting, it added.

The NEM Cap Order widened the net metering ceiling decisions to all major utilities in the state and the recent order also covered them all. They are Central Hudson Gas & Electric, Consolidated Edison, New York State Electric & Gas, Niagara Mohawk under the name National Grid, Orange & Rockland and Rochester Gas & Electric.

O&R figured non-net metered customers would pay an extra $7.3 million/year in price shifting due to net metering if the ceiling were raised to cover all the DG in its queue. Ratepayers are already surcharged about $1.3 million/year to fund existing clean energy programs including direct subsidies to net metered generation, it added.

The statute that initially set the ceiling had implicitly required the analysis of any cost shifting that would occur if the ceiling were raised, O&R said.

Solar industry disagrees

The Solar Energy Industries Assn (SEIA) asked the PSC to reject O&R's petition as moot since the commission's staff had recommended in its Ratemaking Whitepaper that net metering remain in place until DER were properly valued in the REV process. Utilities are obligated to continue accepting net metering applications even if the 6% ceiling is exceeded, SEIA added.

Solar City, a leading solar installer, asked that O&R's proposal to use buy-all, sell-all arrangements for net metering not be considered in this proceeding. Alternatives to net metering should be addressed in REV, it added.

The utility failed to show net metering causes inequitable cost shifting, Solar City said. That argument cannot be made until the benefits net metered DG provides are properly valued, which O&R has not done.

[EDITOR'S NOTE: The idea that the good likely outweighs the costs in using solar DG was made by former FERC Chairman John Wellinghoff in an exclusive interview with Smart Grid Today (SGT, March-6).]

That valuation of DG is ongoing in the REV, with the latest development in moving valuation forward was in the commission's community DG order – the CDG Order – which directed that a report be prepared on the benefits that DER provides to the grid, Solar City said. Until these efforts reach fruition, the PSC should not adopt restrictions that would prevent the interconnection of added net metered generation, it added.

PSC redefines 'ceiling'

Nothing in the NEM Cap Order authorized utilities to stop interconnecting projects when the ceiling was reached, the PSC's order said. Instead, beginning with the NY-Sun Order, utilities have been instructed to continue accepting applications for interconnection until such time as limitations on interconnection can be addressed.

Increases to the ceiling cannot be delayed by waiting for decisions in the REV process, the order said. As the NEM Cap Order said, "in no event, however, would a gap be allowed to open between the time minimum purchase obligations under the ceilings are fulfilled and the availability of [successors in REV] commences."

As a result, utilities have to continue to accept applications for net metering and process interconnections notwithstanding the level of the ceilings on net metered capacity, the PSC ordered. As stated in the CDG Order, "the obligation to add net metered generation continues" whatever the level of the ceilings.

NY Sun meets success

The continued fast pace at which utilities receive applications for net metered DG shows the NY-Sun Program – that promotes solar PV – met with great success and the PV industry continues to flourish in New York, the order said. As discussed in the NY-Sun Order, the NEM Cap Order, the Transition Plan Order, and the CDG Order, the growth of net metered PV and other forms of renewable net metered generation furthers achievement of the state's energy goals, and so that growth must not be disrupted because of the ceilings on interconnecting more net metered generation, the order said.

The pace of development should be set by the NY-Sun Program and other policies for promoting net metered generation, not by the level of the ceilings, it added. Nonetheless, as O&R said, a transition from net metering to a more accurate means of pricing and recognizing the value of DER, including PV and other forms of net metered generation, is expected in the REV process.

The staff's whitepaper affirmed net metering should stay in place for mass market customers, and perhaps in other applications, and it noted reforming rate design and DER compensation mechanisms, including net metering, can be accomplished on "a strong foundation of the system value that DERs can provide." That foundation for the more robust pricing of DER is being built, the order said, opening net metering to replacement with mechanisms that more accurately price the value of DER, the order said.

How to value DER

Valuation is being pursued on several fronts, it added, listing regulatory efforts and a new state law meant to do just that. The energy value set in power markets at the location-based marginal price (LMP), and the value of DER such as DG to the grid are being considered in the process, it added.

That "value of D" can include load reduction, frequency regulation, reactive power, line loss avoidance, resilience and locational values as well as values not directly related to delivery service such as installed capacity and emission avoidance, the order said. While the LMP is well established and transparent, the "value of D" is not.

The development of the tools and methodologies needed to fully implement an approach based on "value of D" is likely a long-term effort, and there is sufficient time to develop and adopt more precise interim methods of valuing DER benefits and costs, as well as the design of appropriate rates and valuation mechanisms, before Dec 31, 2016, it added.

The utilities were ordered to file by Oct 30, "tariff leaves implementing revisions to the ceilings on the interconnection of net metered generation." Those tariff leaves will then become effective Nov 6. Also, the order waved the legal requirement on newspaper publication of tariff amendments.

Burman dissents

Commissioner Diane Burman dissented on the order, noting she completely supports the goals of clean energy and "strongly" believes in the REV. But she disagrees on what to do during this transition and about whether the order would actually achieve for the short and long term a more stable sustainable energy system.

"I do not believe that this decision today is a true 'transitional' approach. In fact, the decision may invite uncertainty and confusion in the implementation of net metering and unintentionally cause long term harm to the goals we are trying to achieve," her dissent said.

This story was originally published in Smart Grid Today (http://ow.ly/TLWkV) October 23, 2015 and has been slightly edited for this format. To read more articles like this one, sign up for a Free Trial to Smart Grid Today.

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