Order 15705 - Narr. Elec.: Qualifying Facilities Rate & Back-up Service Filing

REPORT AND ORDER

On March 31, 1998, the Narragansett Electric Company ("Narragansett" or "Company") filed with the Public Utilities Commission ("Commission") proposals for certain new tariffs and changes to existing tariffs relating to rates and terms for purchases from Qualifying Facilities ("QFs") under the Public Utility Regulatory Policy Act of 1978 ("PURPA"); new rates and terms for providing backup, supplemental, and/or maintenance service to customers with self-generation; and a premium service option for large commercial and industrial customers who request greater reliability from Narragansett involving second feeders.

The Commission set an intervention deadline in the matter. The Energy Council of Rhode Island ("TEC-RI") moved to intervene on May 26, 1998; Providence Energy Corporation ("ProvEnergy") similarly filed on May 29, 1998. Blackstone Valley Electric Company and the Newport Electric Corporation (together, "EUA Companies") filed their joint motion to intervene on July 27, 1998. Each motion was unopposed.

On August 21, 1998, the Company filed a Stipulation and Settlement  [1 This Stipulation is attached as Appendix A, and incorporated by reference.] executed by Narragansett, the Division of Public Utilities and Carriers ("Division"), and TEC-RI. Intervenors the EUA Companies and ProvEnergy were not signatories, but indicated that they had no objection to the Settlement.

A public hearing was convened on August 24, 1998, at the Commission's offices. The following appearances were entered:

FOR NARRAGANSETT:                    Ronald T. Gerwatowski, Esq.

FOR THE DIVISION:                         Paul J. Roberti, Esq.

Special Assistant Attorney General

FOR TEC-RI:                                      Andrew J. Newman, Esq.

FOR PROV ENERGY:                        Dennis J. Duffy, Esq.

FOR THE EUA COMPANIES:           Laura S. Olton, Esq.

FOR THE COMMISSION:                 Adrienne G. Southgate, General Counsel

The settlement did not resolve the issue of whether the Commission should allow reverse metering for QFs of less than 25 kVA in size. The Company proposed to continue current policy for reverse metering for all very small QFs, while the Division took the position that reverse metering be limited only to the customers being reverse metered as of the date of the filing. The parties stated in their Stipulation that this issue should be decided by the Commission, as a matter of Commission policy.

Reverse (or "net") metering occurs when at any time more electricity is being generated than consumed by a customer with a QF or fuel cell, the excess flows into the distribution system, and the meter recording usage registers a decrease in the kilowatt hours used. The customer thus receives the retail price for the generated energy. Under the Division's proposal, there would be two meters, one to record usage and the other to record output, as there are for larger QFs. The customer would continue to purchase all of his energy from the utility or other supplier, and sell the generated energy, presumably at the same price as that calculated for larger QFs.

Public comment in support of reverse metering was made by Leigh Seddon of Solar Works; Dominic Bucci, President of the Rhode Island Solar Energy Association; and Geoffrey Keith and Thomas Starrs on behalf of the Natural Resources Defense Council.

Testimony was received from Jose Rotger, a principal rate analyst with the New England Power Service Company. Mr. Rotger described the Company's position favoring reverse metering.

Dr. John Stutz of the Tellus Institute provided testimony on behalf of the Division. He articulated his concerns with net metering.

A panel of Company witnesses then testified in support of the Settlement, including Peter T. Zschokke, Michael Hager, Jose A. Rotger, Christopher Worm, and James Malloy. The Settlement "grandfathers" all customers who were self-generating pursuant to the Company's Auxiliary Service Tariff on or before April 1, 1998. The Company committed to file a revenue-neutral rate design case for its general Retail Delivery Service distribution and transmission rates for certain customers by January 1, 2003, if it had not previously filed a general rate case or otherwise redesigned its rates by that date.

Narragansett also agreed that there was no guarantee of cost recovery for administrative costs associated with the purchase and sale of power from QFs. Certain other tariff modifications and agreements are reflected in the Settlement itself.

During open meetings conducted on September 15 and September 29, 1998, after review of the testimony and due consideration of the issues presented, the Commission made the following determinations:

First, the Stipulation and Settlement was approved as filed.

As to reverse metering, the Commission stated that the public policy of the state, expressed by the legislature and in other actions by the Commission, supports renewable generation. It was noted that its environmental benefits, such as reduction in use of fossil fuels and cleaner air, and the advantages of distributed generation, such as reduction of line losses and provision of voltage support, presently outweigh any subsidy incurred by other ratepayers. In any case, the extent of the subsidy is not clear, as account must be taken of these considerations and other values of this generation (for example, in producing energy during peak periods). The amount of the subsidy, if any, is expected to be very small. However, the Commission reserves the right to revisit this issue as the market matures.

There are disproportionate administrative costs involved in separately tracking the few excess kilowatt hours that small systems produce, requiring installing a second meter, cutting and sending checks, etc. "Keeping it simple" by net metering has many advantages. Only one ordinary meter is required; it can run forward and backward without the need for any additional hardware.

Customers being net metered as of the date of the filing will be allowed to continue under the previous policy.

For new installations, the following limits have been determined to be reasonable by the Commission.

- A customer's usage and generation will be netted for a 12-month period. Customers will accumulate any generation credits from month-to-month for one year. At the end of the year, any unused credits will no longer be available to offset usage and no compensation will be paid for them.

- Reverse metering will be limited to the renewable technologies in the Utility Restructuring Act, R.I.G.L. Section 39-2-1.2(b): "power generation technologies that produce electricity from wind energy, small-scale (less than 100 megawatts) hydropower plants that do not require the construction of new dams, solar energy and sustainably managed biomass." [2 Note, however, the further limitation for net metering to generation facilities of 25 kVA or less.]  Fuel cells, also eligible for funding from the 2.3 mill surcharge specified in the URA, shall also be eligible for reverse metering when of the requisite size.

- Reverse metering shall be limited to individual facilities of less than 25 kVA, located on the customer's premises and used to meet the customer's own load.

- Reverse metering shall be limited to an overall total of 1 MW for Narragansett.

- Reverse metering shall be limited to kWh charges. Customers with demand meters would continue to pay charges billed on a kW basis.

Further, the Commission orders the use of up to $3000 from the renewables fund for meters to monitor the first 10 to 12 installations eligible for net metering, in order to gather data on their performance. The Company shall furnish meters fitted with a module with a modem that will record data at 15-minute intervals and send it out on a daily basis to the Company. The Company shall report on the data collected to the Commission, as required below.

Finally, the Commission requires that Narragansett shall amend its Terms and Conditions for Electric Service to incorporate the above rulings on net metering. Narragansett shall require customers who install eligible generation to inform the Company within 30 days of the size and type of the generation and the date of installation. The Company shall report semi-annually to the Commission on the number of QFs eligible for net metering and shall estimate the kWhs produced. The Company shall review with Commission staff its methodology for such estimation.

The Company shall also amend the Power Purchase Rate for Qualifying Facilities of Less than 25 kVA to incorporate these rulings. Narragansett shall also revise any other of its documents referencing reverse metering for very small generators to conform with these rulings. The Company shall periodically inform customers through bill stuffers and/or other means of the availability of reverse metering for eligible facilities, and shall provide such informational pieces to the Commission.

Accordingly, it is

(15705) ORDERED:

1. The Stipulation and Settlement of the Parties submitted on August 21, 1998, is hereby approved.

2. The Commission approves the continuation of reverse metering for existing customers under the previous policy. For new installations, reverse metering is authorized, subject to the limitations delineated more fully above.

3. Narragansett is authorized to spend up to $3000 from the renewables fund to purchase meters and monitor the first installations eligible for net metering.

4. Narragansett shall amend its Terms and Conditions for Electric Service and the Power Purchase Rate for Qualifying Facilities of Less than 25 kVA to incorporate the rulings contained above, and shall adhere to all other directives in this Report and Order.

EFFECTIVE AT PROVIDENCE PURSUANT TO OPEN MEETING DECISIONS ON SEPTEMBER 15 and 29, 1998. WRITTEN ORDER ISSUED OCTOBER 28, 1998.

PUBLIC UTILITIES COMMISSION

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APPENDIX "A"

STATE OF RHODE ISLAND

PUBLIC UTILITIES COMMISSION

Narragansett Electric Company

QF Rate and Back Up Service Filing

Docket 2710

Stipulation and Settlement

The Narragansett Electric Company (Narragansett or Company), the Division of Public Utilities and Carriers (Division), and The Energy Council of Rhode Island (TEC-RI), hereby stipulate and agree on the following resolution of the issues in the above captioned proceeding: [1 Providence Energy Corporation, Blackstone Valley Electric Company, and Newport Electric Corporation are not signatories to this Settlement, but participated in settlement discussions and have indicated that they have no objection to this Settlement.]

I. Settlement of Issues

The parties to this Settlement agree that the Commission should approve the Company's filing, with the following modifications:

(A) Grandfathering

All customers of the Company that were self-generating pursuant to the Company's existing Auxiliary Service Tariff on or before April 1, 1998 shall be grandfathered on that tariff through December 31, 2003, unless such customers otherwise voluntarily opt to take service under the new Back-Up Service Tariffs prior to such date. This grandfathering applies only to generation capacity installed on or before April 1, 1998.

(B) Commitment to File Rate Design Case

If the Company has not filed a general rate case or made any other filing to redesign its rates by January 1, 2003, the Company shall make a filing with the Commission by such date to propose revenue-neutral rate design changes to its general Retail Delivery Service distribution and transmission rates for G-32, B-32, G-62, and B-62 customers. The Company is not committing to any specific rate design. However, at the time of such filing, TEC-RI reserves the right to put its own rate design proposal into evidence for Commission consideration for such rate classes at that time.

(C) Recovery of Certain QF-Related Costs

(1) Narragansett agrees that there is no guarantee of cost recovery for the administrative costs associated with the purchase and sale of power from Qualifying Facilities (QFs). Such costs will be subject to review in the Company's cost of service in future general rate cases of the Company and, at such time, the Division reserves the right to review the reasonableness of such costs and form of collection for such administrative costs.

(2) If the Company waives any system protection requirements with respect to any QF projects and, as a result, some damage or harm to the Company's distribution plant, equipment, or system results from such waiver, the recovery of any costs incurred by the Company in such case shall be subject to prudence review in the Company's next general rate case to the extent that any such costs are included in the Company's proposed cost of service in that case.

(D) NEPOOL Rules Change

As a result of the adoption of NEPOOL rules pertaining to the treatment of new generation projects of less than one megawatt, the parties agree that the Company may file an amendment to its "Qualifying Facilities Power Purchase Rate" (Exhibit JAR-1) prior to December 1, 1998 to address the payments to be made to newly constructed QF generation projects of less than one megawatt after the "Power Exchange Implementation Date" as defined in that tariff. The parties reserve the right to take any position with respect to the reasonableness of such amendment.

(E) Other Tariff Modifications