6.1.a. ERMUSR 11-18-2014 - Laserfiche WebLink

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Regulatory Issues Associated with Distributed Generation and Renewable Energy Renewable energy technologies continue to Net Metering Policies and its Impact on evolve at a rapid rate. Specifically, various Customer Rates distributed generation technologies, such as The growth of distributed renewable generation is due in solar PV, fuel cells, micro- wind turbines and part to utility retail rate design, and at the same time is other types of distributed energy storage are starting to put upward pressure on retail electricity prices. improving in performance, and declining in "Customers that substitute electricity from their own cost, although at different rates. Customer rooftop solar systems for power provided by a utility are demand for distributed generation that not independent from the grid, unless they also purchase provides for predictable pricing at lower costs energy storage and back-up power systems," said Glenn George, principal and co-head of Economic& Regulatory, continues to increase, as evidenced by the KPMG LLP (U.S.). To date, they still rely on the grid, and rapid growth in the number of residential, utility-owned transmission and distribution wires, to commercial and even public-sector customers obtain utility-supplied power when the sun does not shine, with on-site solar systems. The combination or lack of wind idles their micro-turbines. In addition, in of on-site generation with net metering states with net metering policies, customers use utility- policies available in most states is putting owned "wires" to sell back to the grid any distributed downward pressure on utility sales that in generation that exceeds their own consumption, usually at the retail prices that they would have otherwise paid most regions are already declining or for that electricity. growing more slowly than in the past. "The bill reductions achieved by residential customers that Retail and commercial customers often are use rooftop solar PV to supply themselves, and in some unaware of the role growing penetration of cases 'sell' excess generation back to the grid, usually renewable energy can potentially play on exceeds the costs utilities avoid as a result," said Bruce long-term electricity prices. Perlstein, a director of regulatory Advisory services KPMG LLP (U.S.), who has advised several utilities on these "The attractive initial costs of renewable issues. "Those bill reductions are based on volumetric power has taken distributed generation from ($/kWh) charges that recover fixed T&D costs, as well a niche base of customers interested in as the costs of back-up generation capacity needed to green power to more of a mass addressable integrate customer-sited intermittent renewable resources market," added John Gimigliano, principal in into the grid, in addition to variable power production costs that are avoided when customers use power they gener- charge, Energy Sustainability Tax practice, ated for themselves, rather obtaining that energy from the KPMG LLP (U.S.). "However the costs of grid." As a result, utilities must charge other customers maintaining a reliable grid infrastructure have higher prices, thereby creating a cross-subsidy, benefiting to be passed on somewhre. The question customers with on-premises renewable generation at the remains if consumers who are ultimately expense of other customers. That gives nonsolar PV willing to pay a higher price for green power customers an even greater financial incentive to install solar PV, particularly residential customers on inclining block rates that use relatively larger amounts of electricity and therefore pay higher marginal prices for that energy. 7s KPMG Regulatory Issues Associated with Distributed Generation and Renewable Energy 16 114