Net Metering in Vermont APPA Business and Finance Conference Austin, TX September, 2007

Net Metering in Vermont Overview History Structure Issues Future

Humorous interlude Ancient Rome declined because it had a Senate, now what's going to happen to us with both a House and a Senate? – Will Rogers

Overview of Net Metering Net metering in Vermont is a statutory construction Program was designed by committee and has political overtones Changes are carried out in the political process Goals and results are mixed

History of Net Metering Act 136 was passed by the Legislature and became law in Vermont April 21, 1998 Title 30 §219a Self-generation and net metering is born Legislative findings in the Act: – (1) Encourage private investment in renewable energy resources; – (2) Stimulate the economic growth of this state; and – (3) Enhance the continued diversification of the energy resources used in this state.

History of Net Metering (cont.) Act 136: – General net metering system of 15kW – Farm net metering system of 100kW – Pricing at retail energy rates through the meter – Banking of excess monthly generation; reverts to utility at end of year – Simplified development review process – Capped at 1% of distribution systems peak in 1996

History of Net Metering (cont.) By March 1, 1999 the board shall establish by rule or order standards and procedures governing application for, and issuance or revocation of a certificate of public good for net metering systems under the provisions of section 248 of this title. Vermont Public Service Board established Rule governing net metering

History of Net Metering (cont.) 1999/2000 Legislative Session – S.230: Proposed group net metering Expanded definition of farm methane to include off-site projects and waste Allowed up to 5 systems per year to exceed 15 kW size cap for each utility Passed Senate; not House

History of Net Metering (cont.) 2001/2002 Legislative Session – S.85 Re-introduced group net metering Restricted net metering systems to renewable energy only Changed 15kW size cap to 15kW per group participant Stayed in committee

History of Net Metering (cont.) 2003/2004 Legislative Session – No legislation pertaining to net metering was introduced during the biennium

History of Net Metering (cont.) 2005/2006 Legislative Session – H.698 Boosted cap on project size to 1,500kW Required the PSB to act within 8 months on a Certificate of Public Good or it was deemed approved Accumulated credits had to be used within 12 months instead of by years end Re-introduced group net metering Stayed in committee

History of Net Metering (cont.) 2005/2006 Legislative Session (cont.) – S.169 Removed notice to adjoining landowners if abutting property line is more than 1,000ft from farm system Allowed projects to divide output and assign to net metering and wholesale or renewable portfolio Stayed in committee

History of Net Metering (cont.) 2005/2006 Legislative Session (cont.) – S.231 Proposed elimination of kWh banking Stayed in committee

History of Net Metering (cont.) 2005/2006 Legislative Session (cont.) – S.242 Proposed elimination of kWh banking Stayed in committee

History of Net Metering (cont.) 2005/2006 Legislative Session (cont.) – S.319 Re-introduced group net metering Extended size cap on net metering projects to 250kW Extended project cap to 3% of systems peak Added new small-scale hydro projects to approved list Proposed changing banking period to 12 months and required utility to purchase balance at 95% of LMP for previous year Allowed costs of upgrading from single to 3-phase power to farms to be allocated to all ratepayers Stayed in committee

History of Net Metering (cont.) 2005/2006 Legislative Session (cont.) – Act 208 Proposed 12 month banking of energy and revision to the electric utility Expanded farm project capacity, provided no more that 150kW participated in net metering Added §219b to statute – Expanded facilities capacity – Required PSB to consider group net metering based on Physically contiguous Municipal accounts

History of Net Metering (cont.) 2005/2006 Legislative Session (cont.) – Act 208 Added §219b to statute (cont.) – Provided compensation for unused kWh in bank – Required PSB to develop a system for capturing RECs from net metering projects – Allowed net metering projects to be considered for Sustainably Priced Energy Enterprise Development (SPEED) Program – Effective May 31, 2006

History of Net Metering (cont.) 2007/2008 Legislative Session – H.225 Established inclining block rates Expanded net metering system capacity to 250kW Allowed group net metering for customers within same service territory Stayed in committee

History of Net Metering (cont.) 2007/2008 Legislative Session – H.520 Allowed group net metering for customers within same service territory, including municipal accounts and non- contiguous (upon PSB approval) Expanded net metering to 150kW per project Allowed micro-CHP projects to quality as net metering Extended system cap of net metering projects to 2% and gave PSB authority to increase the cap Returned RECs to farm net metering systems Vetoed by Governor

Structure of Net Metering "Net metering" means measuring the difference between the electricity supplied to a customer and the electricity fed back by a net metering system during the customer's billing period, using a single, non-demand meter or such other meter that would otherwise be applicable to the customer's usage but for the use of net metering.

Structure of Net Metering (cont.) "Net metering system" means a facility for generation of electricity that: – (A) is of no more than 15 kilowatts (AC) capacity, or is a farm system; – (B) operates in parallel with facilities of the electric distribution system; – (C) is intended primarily to offset part or all of the customer's own electricity requirements; – (D) is located on the customer's premises; and – (E) employs a renewable energy source and utilizes a photovoltaic array, wind turbine or fuel cell electrical generating technology, or is a farm system.

Structure of Net Metering (cont.) "Farm system" means a facility of no more than 150 kilowatts (AC) capacity that generates electric energy from the anaerobic digestion of agricultural waste produced by farming, and which is located on the farm where substantially all of the waste used is produced.

Structure of Net Metering (cont.) Net Metering systems are required to have a Certificate of Public Good Projects are deemed to promote public good PSB may waive application of criteria PSB may modify notice and hearing requirements PSB may modify (simplify) application and review process as appropriate

Structure of Net Metering (cont.) Accumulated kWh credits shall be used within 12 months or revert to the electric utility without any compensation to the customer Farm net metering systems may credit on- site generation to all meters considered part of the farm Net metering project acceptance is capped at 1% of electric system peak

Structure of Net Metering (cont.) PSB may, at its discretion, raise the 1% cap within a utilitys service territory Utilities may charge reasonable fees for system improvements necessary to support interconnection Utilities may require that all meters for a farm net metering system be read in the same billing cycle

Structure of Net Metering (cont.) If a farm net metering system is producing less than the farms annual energy requirement, the utility shall receive the REC certificates Net metering systems must comply with electrical safety, power quality, and interconnection standards as established by the PSB

Structure of Net Metering (cont.) PSB may allow net metering for up to 10 non-farm systems per year that produce more than 15kW capacity, but not more than 150kW Electric companies may contract to purchase farm system output under net metering provided the contract assigns the amount to be purchased and the amount does not exceed 150kW

Structure of Net Metering (cont.) PSB may expand the scope of the net metering program – Expand the maximum kW capacity of participating facilities – Allow group net metering systems of physically contiguous customers or municipal accounts – Provide compensation for unused kWh credits at end of 12 months – Develop a system that allows for capture and sale of RECs – Allow net metering systems to be considered SPEED resources

Structure of Net Metering (cont.) As of 12/31/2006, PSB has issued 300 Certificates of Public Good for net metered systems – 218 photo-voltaic systems – 64 wind systems – 17 combination wind and photo-voltaic systems – 1 anaerobic digester system

Structure of Net Metering (cont.) As of 12/31/2006, the size of systems breaks down as follows: – 291 general systems (<15kW) – 6 farm systems (<150kW) – 3 general systems between 15kW and 150kW Approximately 90% of program potential under 1% cap remains available

Issues with Net Metering Vermont is still well below the original 1% cap that was placed on projects within a systems service territory; customers are not participating as expected Net metering program is not based on financial analysis of costs and benefits in current market of renewable resources Lack of appropriate financial incentives to encourage project development

Issues with Net Metering (cont.) Sets aside several fundamentals principles of ratemaking and underlying agreements of the utility franchise CPG issues – Cross subsidization: wheeling at retail – Exclusive franchise violation – Loss of facilities revenues and upward pressure on rates

Issues with Net Metering (cont.) Raising scale caps for qualifying projects will encourage developers to skirt project review, especially with respect to project impacts Raising project caps for utilities will put upward pressure on rates by shifting more costs to other ratepayers Net metering resources are the most expensive resources available to utilities

Issues with Net Metering (cont.) Energy from some net metering projects (wind and hydro) is excess to customers needs and is banked with the utility during periods of low wholesale market prices and is not available and so is withdrawn during periods of high wholesale market prices

Future of Net Metering Net metering program isnt producing the incentives necessary to encourage development of renewable resources Until a cost benefit analysis is completed, net metering will not be able to appropriately address the issue of overcoming barriers to participation and encouraging development of small-scale renewable resources

Future of Net Metering (cont.) Cost components of net metering program, including permitting, interconnection, and system improvements need to be evaluated more extensively Net metering program will continue to expand in ways that are not related to increasing participation in developing renewable resources

Future of Net Metering (cont.) Alternative structures to costing and funding the existing net metering program need to be explored and developed (Gardens for All) Net metering program impacts need to be more aggressively evaluated and reflected in cost of service studies