2. Net Metering and Interconnection Requirements IMUA 2015 Annual Conference May 8, 2015 Delia Patterson General Counsel, APPA

3. Agenda Define what I mean when I use the term “distributed generation” (DG) Provide you with an overview of some of APPA’s DG resources Discuss Net Metering Discuss Interconnection Standards and Agreements

4. What are DG Systems? DG refers to power produced at the point of consumption –small-scale energy resources that typically range in size from 3 kilowatts (kW) to 10 megawatts (MW) or larger –A typical household’s peak demand is about 3.5 kW, so the smaller resources are used by residential customers, while the larger systems are typically used by commercial and industrial customers –More than 90 percent of installed distributed generation in the United States today is solar –In addition to PV, DG can include small wind turbines, combined heat and power (CHP), fuel cells, microturbines, and other sources

5. DG Education and Tools APPA is concerned about the impact of DG on members if not properly managed –DG (esp. solar PV) is a major focus of APPA programming; we want members to learn from those on the front lines (CA, AZ) –APPA has several publications on different aspects of DG issues

6. DG Publications

7. DG Publications (cont.)

8. DG Webinar Series February 26, 2015 - May 7, 2015 All webinars take place from 2 – 3:30 p.m. Eastern. The series includes the following five webinars, which can be taken individually or as a series for a discounted rate: –Distributed Generation: A Primer – Feb. 26Distributed Generation: A Primer –Distributed Generation: Implications for Public Utilities – March 12Distributed Generation: Implications for Public Utilities –Understanding the Potential Value of Community Solar – April 2Understanding the Potential Value of Community Solar –Solar Rooftop Impact on Retail Rate Recovery – April 21Solar Rooftop Impact on Retail Rate Recovery –Solar Engagement Options for Public Power Utilities – May 7Solar Engagement Options for Public Power Utilities More information at http://www.publicpower.org/Events/Event.cfm?EventID=174077 http://www.publicpower.org/Events/Event.cfm?EventID=174077 Recordings of past webinars are available.

9. More DG Resources at PublicPower.org www.publicpower.org/distributedresources

10. NET METERING

11. What is Net Metering? Net metering rules generally provide consumers with certain DG the ability for the meter to roll forward when customer consumes and roll backwards when the customer exports power (“netting” effect on consumer bills) Currently, 43 states plus D.C. have implemented net metering policies ( policies vary significantly by state) Under most net-metering programs, the customer is both charged and credited at the utility’s full retail rate of electricity

12. Utility Cost Under-Recovery Is Becoming an Issue... As penetration of solar PV has increased in some states (California, Arizona, New Jersey, Minnesota), cost under- recovery has become a battleground issue Since net metering generally does not account for time of usage, it potentially over-compensates distributed generators and credits them with a value of generation that is higher than the utility’s avoided cost If the utility’s rate structure recovers fixed costs of service (e.g., transmission, distribution, power supply) in volumetric rate, those costs are not recovered –Net meters allow customers to under-pay fixed costs

13. Net Metering in Illinois Legislation enacted in 2007 (with changes in 2011 and 2012 ) –IOUs and Alternative Retail Electricity Suppliers must offer net metering –Public power and coops not required Net metering available to customers generating electricity using solar, wind, dedicated energy crops, anaerobic digestion of livestock or food processing waste, hydropower, fuel cells and microturbines powered by renewable fuels Systems up to 40 kW are eligible for net metering Any net excess during a billing period is carried over as a kWh credit to the following billing period Credits expire at the end of an annualized period

14. Net Metering in Illinois (cont.) For customers taking service under a time-of-use (TOU) tariff, if the customer is a net generator during any discrete TOU period, the net kWh produced is valued at the same price per kWh as the utility would charge for retail kWh sales during that same time of use period. Dual metering available for systems greater than 40 kW but no greater than 2 MW (generally less favorable to customers than net metering)

15. Should Current Net Metering Policies Be Updated? Yes Because of the way many net metering policies were designed, net-metered customers often receive the full retail electricity rate, even though it could cost less for the utility to produce or buy on the wholesale market Updates may be needed to ensure all customers have safe, reliable and affordable electricity

16. Tips for Creating/Updating Your Net Metering Policy Adopt policies that support renewables w/o shifting costs between consumers –Ensure appropriate compensation to consumers for their net excess generation at reasonable rates –Ensure customer generators pay an appropriate share of system costs, protecting other consumers from cost-subsidies

17. Tips for Creating/Updating Your Net Metering Policy (cont.) If net metering policies are adopted, impose appropriate limits: –They should only apply to small residential generators (<10 kW) that use intermittent renewable energy –They should only be permitted up to a small percentage (e.g., 0.1%) of the utility’s historic peak load

18. Interconnection Standards and Agreements

19. Federal Interconnection Procedures and Agreement FERC’s Small Generator Interconnection Procedures (SGIP) and Small Generator Interconnection Agreement (SGIA) adopted in 2005 (Order No. 2006) and revised in 2013 (Order No. 792) –Governs FERC-jurisdictional interconnections up to 20 MW (but sets standard for the industry...) –Generally do not apply to distribution-level interconnection unless specifically adopted at the state or local level

20. Federal Interconnection Procedures and Agreement (cont.) Order No. 792 is FERC’s response to the rapid increase in solar PV development and related changes in interconnection technology –Provides generators more flexibility Order No. 792 changes: –Customers can now request a pre-application report regarding a point of interconnection to help that customer select the best site for its small generating facility –Increased Fast Track eligibility from 2 MW to 5 MW (available only to inverter-based systems)

21. Federal Interconnection Procedures and Agreement (cont.) –Revised supplemental review process, which is the next step if a small generator fails the Fast Track screens Performed at discretion of Interconnection Customer 3 new screens – 100% of minimum load; power quality and voltage; and safety and reliability –Customers may comment on required upgrades

22. Illinois Commerce Commission Interconnection Standards For DG up to 10 MW (including CHP), the rules set 4 levels of review for interconnection requests, which are eligible for expedited review: –Tier 1: inverter-based systems up to 10 kW –Tier 2: systems up to 2 MW, connected to a radial distribution network or a spot network serving one customer –Tier 3: systems up to 50 kW, connected to an area network and from which power will not be exported, or certified, non-exporting systems up to 10 MW, connected to a radial distribution network –Tier 4: systems up to 10 MW that do not meet the criteria for inclusion in a lower tier, including all systems using non-certified components and those that require additional construction by the utility in order accommodate the facility

23. Illinois Commerce Commission Interconnection Standards (cont.) For DG systems (including CHP) >10 MW, an interconnection feasibility study and a system impact study will be required A standard interconnection agreement form is available from the utility, and fees and insurance requirements will be determined on a case-by-case basis

24. Then there is PURPA... Section 210 of the Public Utility Regulatory Policies Act applies to all utilities (including yours) PURPA established 2 types of Qualifying Facilities (QFs) –Small power production facilities Primary source is biomass, waste or renewable No bigger than 80 MW –Cogeneration facilities Produces steam/heat for industrial purposes and electric energy Any size

25. Then there is PURPA... (cont.) PURPA provides QFs the right to sell power to electric utilities at avoided cost rates unless the utility is exempt –Negotiated rates and net metering permitted QFs have the right to receive supplementary, backup, maintenance and interruptible power QFs also have the right to interconnect and wheel –Utility entitled to interconnection costs, which must be set at a non-discriminatory basis Interconnection costs include the reasonable cost of connecting, switching, metering, upgrades to distribution, safety provisions, and administrative costs incurred by the utility directly related to interconnecting the QF

26. Interconnection Agreements The purpose of interconnection agreements is to ensure consumers installing DG are addressing the following and other issues up front: –Certification of the reliability and safety of the proposed DG facility and physical interconnection equipment –The need for costs of any distribution system upgrades required to integrate the DG facility –Responsibility and requirements for the control, operations, and maintenance of the DG facility and related equipment –Metering and payment for any net energy exports to the system –Inspection rights –Liability and indemnification –Insurance

27. Questions Delia Patterson American Public Power Association dpatterson@publicpower.org dpatterson@publicpower.org 202-467-2993 (office) 301-529-4480 (cell)