Interpreting HB 3693

1. Interpreting HB 3693 Interstate Renewable Energy Council presentation to the ERCOT Distribute Generation Task Force December 4, 2007

2. IREC’s Perspective • DOE funded to provide expertise regarding net metering and interconnection • Not a renewable industry advocate, but well regarded by the industry • 25 year history - more state participation in net metering and IC dockets than any other organization • Active in 2007 in NM, IL, NC, MD, TX and FL

3. Net Metered Systems in the U.S. ~80% of new generation is non-residential Source: U.S. DOE Energy Information Administration http://www.eia.doe.gov/cneaf/electricity/epa/epat7p5.html

4. Net metering availability www.dsireusa.org June 2007 NH: 25 MA: 60 RI: 25 * CT: 2,000 * 100 VT: 15/150 100 * * 50 100 * 40 * 25 30 * 10/400 20 * 25/100 * 25 * * no limit 500 * PA: 50/1,000/2,000 NJ: 2,000 DE: 25 MD: 2,000 DC: 100 VA: 10/500 * 40 * 1,000 * * * 25 10 * 25 * 2,000 1,000 100 15 * 20/100 * * 100 25/300 10 80,000 10/100 * 50 25/100 50 varies Net metering is available in 42 states + D.C. State-wide net metering for all utility types * State-wide net metering for certain utility types (e.g., IOUs only) Net metering offered by one or more individual utilities (Numbers indicate system size limit in kW; in some cases limits are different for residential and commercial systems, as shown)

5. Legislative Intentin HB 3693 Sec. 20 - “it is the intent of the legislature that net metering . . . be deployed as rapidly as possible to allow customers to better manage energy use and control costs . . ." (but “net metering” is not defined) Sec. 22(d): "Utilities may choose to implement any program option approved by the commission after its evaluation in order to satisfy the goal in Subsection (a) [which has efficiency program requirements] including: . . . (11) solar thermal or solar electric programs” Together, these imply that TDSPs may create programs to implement net metering of solar electric systems without allocating program start-up costs to solar customers.

6. What did the legislature mean by “net metering”? Start with Rule §25.242 (3) for QFs The standard tariff shall offer at least the following options: [ for QFs under 100 kW ]  (A) parallel operation with interconnection through a single meter that measures net consumption; [ inflow only ]       (i) net consumption for a given billing period shall be billed in accordance with the standard tariff applicable to the customer class to which the user of the qualifying facility's output belongs;       (ii) net production will not be metered or purchased by the utility and therefore there will be no additional customer charge imposed on the qualifying facility;  (B) parallel operation with interconnection through two meters with one measuring net consumption and the other measuring net production; [ inflow / outflow ]       (i) net consumption for a given billing period shall be billed in accordance with the standard tariff applicable to the customer class to which the user of the qualifying facility's output belongs;       (ii) net production for a given billing period shall be purchased at the standard rate provided for in paragraph (1)(A) and (B) of this subsection; (C) interconnection through two meters with one measuring all consumption by the customer and the other measuring all production by the qualifying facility; [ gen / load ]    (i) all consumption by the customer for a given billing period shall be billed in accordance with the standard tariff applicable to the customer class to which the customer would belong in the absence of the qualifying facility;       (ii) all production by the qualifying facility for a given billing period shall be purchased at the standard rate provided for in paragraph (1)(A) and (B) of this subsection.

7. What else did the legislature mean by “net metering”? Rule §25.242 (4) for renewables In addition, each electric utility shall offer qualifying facilities using renewable resources with an aggregate design capacity of 50 kilowatts or less the option of interconnecting through a single meter that runs forward and backward. (A) Any consumption for a given billing period shall be billed in accordance with the standard tariff applicable to the customer class to which the user of the qualifying facility's output belongs. (B) Any production for a given billing period shall be purchased at the standard rate provided for in paragraph (1)(A) of this subsection.

8. Implication for HB 3693 of defining “net metering” pursuant to Rule 25.242 • HB 3693, Section 26(d) requires that utilities "shall make available too a distributed renewable generation owner for purposes of this section metering required for services provided under this section, including separate meters that measure load and generator output or a single meter capable of measuring in-flow and out-flow at the point of common coupling.“ • Based on “net metering” pursuant to Rule 25.242, renewable systems up to 2 MW have any of the three metering options in 25.242(3) plus the “single meter that runs forward and backwards” option described in 24.242(4). • HB 3693, section 26 does not require load/gen or in-flow/out-flow metering; it says "metering required for services provided under this section." Section 26 requires determination of “surplus,” which can be done using a single meter that runs forward and backwards. • If the nationally accepted definition of “net metering” is used, the single meter option in Rule 24.242(4) is appropriate.

9. What does “surplus” mean in HB 3693, Section 26? • Sections 26(h) and (j) reference “surplus” without defining the term. Some members of the DGTF have interpreted “surplus” to be synonymous with “out-flow.” But, the term “out-flow” is used elsewhere; if the legislature meant “out-flow,” it would have used that term. • Surplus means a difference between one thing and another, and in this case a logical definition would be in-flow minus out-flow or load minus generation, which both result in the same number. • Section 26(h) allows metering by load and generation, but it is not possible to derive “out-flow” from this metering configuration. This implies that surplus does not mean “out-flow” because it is necessary to know the amount of “surplus,” but “out-flow” need not be metered. • Therefore, under HB 3693, REPs may decide whether to contract for “surplus” as described here, but they do not have discretion regarding how to contract for all “out-flows.”

10. TDSP compensation • Given that net metering includes the option of "a single meter that runs forward and backward," which does not measure in-flows, there is no legislative intent to allow TDSPs to charge customers based on in-flows. • TDSP rates should be set by costs divided by power delivered, with net metered figures rather than in-flows for renewable generators. This is the same effect felt by TDSP from a conservation program. • To address rate impacts, net metering could be capped at 3% of all generation. • Using in-flows as the basis of TDSP billing begs the question of whether a DG customer’s neighbor should get a T&D credit. Only 100 feet of line was needed to get the out-flow from the DG customer to the neighbor, rather than needing the whole distribution system. That would be mess, but the point is that out-flows have value. • Recall the legislative intent to allow TDSP solar electric programs.

11. Accurate Profiling • For non-solar renewable, apply existing profiles to net metered consumption. • For non-renewable, require IDR metering. • For solar, use existing profiles with adjustment. Apply a class profile to the sum of all metered data for that class plus estimated solar production within that class. Then subtract estimated solar production for that class using a solar profile (daytime sine wave). • For estimate solar production within a class, use the sum of all solar energy systems in that class measured in direct current kW and multiply by 130. The figure of 130 is based on average inverter losses and irradiance (how much the sun shines). An average month has 730 hours, 20% irradiance equals 146 hours, and inverter losses of 11% get you to 130 hours.

12. Jason B. KeyesWilson Sonsini Goodrich & Rosati701 Fifth Avenue, Suite 5100Seattle, WA 98104(206) 883-2577jkeyes@wsgr.com