Input Needed: Distributed Generation Rates and Community Solar

Hi, Sabrina. I have included a response from Lisa Vedder at LM Vedder Consulting below; however, this topic can get pretty complicated. If you have any further questions, we would be happy to arrange a time for you and Lisa to discuss them directly.

"You are correct that under option G1 the DG customer would pay both the rider and the wires fee and under G3 the customer would pay both the wires fee and the increased customer charge. However, if the term “double tapped” means the customer would be charged twice for the same cost, the answer is no. The following examples attempt to provide a high level illustration of how the math works. The ultimate goal is to collect costs from each customer and avoid cross subsidies given the limitations of current rates. When one portion of the rate increases, it is offset by an adjustment to another rate component. The goal is to collect the COS not to over collect.

The Rider and the Wires Fee would be based on the overall projected shortfall as well as assumptions concerning total kWh sales and installed DG. For purely illustrative purposes assuming 35 DG Customers: 25 with 3 kW Arrays (460 kWh/Month production each) and 10 with 10 kW Arrays (765 kWh/Month production each) and a total projected DG fixed cost shortfall of $1,750/Month:

Under Option G1: assuming 50% (for illustrative purposes) or $875 will be recovered in the Rider and total average monthly sales are 1,250,000 kWh, the Rider is $0.0007. The remaining $875 shortfall would be recovered through the Wires Fee. Assuming 125 kW installed DG [(3*25)+(5*10)], the monthly Wires Fee would be $7.00/kW Installed Capacity.

The rates for each type of customer would be:

• A non-DG Residential Customer would pay (in addition to the PCA): 
  1. $ 9.80/Month Customer Charge 
  2. $ 0.1079/kWh Energy Charge
  3. $ 0.0007/kWh Rider
• A DG Customer with a 3 kW Solar Array would pay: 
  1. $9.80/Month Customer Charge 
  2. $0.0007/kWh Rider (based on a pre-set minimum kWh level applicable to all customers in the class)
  3. $21.00/Month Wires Fee (3 kW times $7.00/kW Month)
  4. Wholesale Energy Rate on all additional kWh Used
• A DG Customer with a 5 kW Solar Array would pay: 
  1. $9.80/Month Customer Charge 
  2. $0.0007/kWh Rider (based on a pre-set minimum kWh level applicable to all customers in the class)
  3. $35.00/Month Wires Fee (5 kW times $7.00/kW Month)
  4. Wholesale Energy Rate on all additional kWh Used

Under Option G3: Assuming the fixed customer charge increased to $11.30/Month, for purposes of illustration. The DG shortfall would be decreased by the additional fixed cost recovery. Assuming 35 DG Customers, the projected shortfall would potentially be reduced by $52.50 ($11.30-$9.80=$1.50 times 35), the monthly Wires Fee would be $13.58/kW Installed Capacity since in this example 100% of the shortfall is recovered from DG customers.

The rates for each type of customer would be:

• A non-DG Residential Customer would pay (in addition to the PCA): 
  1. $ 11.30/Month Customer Charge 
  2. $ 0.09750/kWh Energy Charge (This charge has been reduced to illustrate the impact of the higher fixed customer charge) 
• A DG Customer with a 3 kW Solar Array would pay: 
  1. $11.30/Month Customer Charge 
  2. $47.40/Month Wires Fee (3 kW times $13.58/kW Month)
  3. Wholesale Energy Rate on all additional kWh Used
• A DG Customer with a 5 kW Solar Array would pay: 
  1. $11.30/Month Customer Charge 
  2. $67.90/Month Wires Fee (5 kW times $13.58/kW Month)
  3. Wholesale Energy Rate on all additional kWh Used"

Thank you for your interest in this topic. Here is a response from Lisa Vedder from LM Vedder Consulting:

"Under option A1, the wires fee would be a fixed monthly charge per month designed to recover the potential shortfall. The charge would be based on the number of DG customers and the size of the installed solar array. So purely for illustration, a monthly wires charge of $3/installed kW would be $9/month for a customer with a 3 kW array or $15/month for a customer with a 5 kW array. For a current BASA customer, under the A1 tariff they would pay their current monthly customer charge, the fixed wires charge, and the current retail energy rate only on kWh purchased from Stillwater.

Under the hybrid option G3, the monthly fixed charge for all customers would increase. The wires charge would be lower than under A1, since rates are set to recover the cost of service not to over-recover, also, the variable energy charge would decrease. No one would be “double tapped.”

The proposed rate designs are to equitably recover costs from customers and not unduly cross subsidize."

Hopefully this helps!

Here's an answer from the City of Stillwater's Finance Director Christy Cluck and Lisa Vedder at LM Vedder Consulting:

"The City of Stillwater Electric Utility does not make a profit. As part of its budget, the Stillwater Utilities Authority (SUA) makes annual transfers to the General Fund in accordance with the SUA Trust Indenture. In the recent Cost of Service Study, the General Fund Transfer was allocated between the three fixed cost components (production, distribution, and customer service). Therefore, any reduction to fixed cost recovery would include some portion of the General Fund Transfer amount. The options presented during the Distributed Generation workshop (that are posted on the Speak Up Stillwater website) illustrate potential options under consideration to ensure fixed cost recovery.  

The non-DG proposed rate changes seek to move rates toward cost of service by increasing the fixed component of rates."

Thanks for reaching out!

Thanks for reaching out! Here's a response from Lisa Vedder at LM Vedder Consulting:

"The wires fee would not be impacted by energy consumption under either option. 

Under option A1, the wires fee would:

1. Apply only to customers that own rooftop solar panels and 
2. Be based on the installed capacity of the solar panels

Therefore to reduce the wires fee a customer would install a smaller solar array.

Under option A2, the wires fee would apply to all customers and would be a fixed monthly fee based on customer class (e.g., Residential, Commercial, Industrial, etc.). There would be no way to reduce the fee based on energy usage.

Under the current City of Stillwater rates, only Large Power & Light/Industrial customers pay a separate Demand Charge which could potentially be lowered through reducing demand such as using less A/C.

All other customer classes pay a monthly fixed customer charge and energy charge ($/kWh). For these classes, reducing A/C would reduce the energy portion of their bill but have no additional demand-related impact as they do not pay a demand charge.

Currently, the electric rates for the City of Stillwater define Customer Classes based on patterns of usage/type of customer (e.g. Residential, Commercial, Industrial, etc.), not based on income."

Here's an answer from Lisa Vedder at LM Vedder Consulting:

"The concept of equitable is subjective, complex, lacks a simple response, and is one key reason this stakeholder process was created.

Assuming the “wires” charge is assessed to all customers (rather than to DG-solar-customers only), non-solar customers may end up paying more depending on their total consumption.

Assuming no other change in usage patterns, the wires fee would increase the monthly fixed charge. Since the level of fee has not been determined, it is not clear how much that potential increase might be."

Thank you for your interest in this topic. Please let us know if you have any additional questions!

Thank you for your question! Here is an explanation from Lisa Vedder at LM Vedder Consulting: 

Although both options increase monthly fixed cost recovery, they are technically different from a cost of service/rate design perspective.

A “wires” fee is a $/kW charge assessed monthly based on a demand (kW) amount. Depending on how the wires fee is defined and assumptions concerning which customers would pay the fee (DG customers, all customers, other) the amount may vary. The primary goal of the wires charge would be to recover fixed investment in distribution and transmission infrastructure that may not be recovered on kWh sales displaced by DG. The wires fee would be based on the recent cost of service information. For purely illustrative purposes, an example of a “wires” charge assessed on DG customers could be $5.00/kW Installed Solar/Month. For a customer with a 3kW array, the charge would be $15.00/month. For a customer with a 5kW array, the fee would be $25/month. 

An increase to the customer charge would also recover fixed costs, however the charge would apply to all customers in a class and would be the same for all customers in a class. Customer costs are in units of $/Customer/Month. In the example above, both DG customers, regardless of array size, would pay the same Customer charge assuming they are in the same customer class. In the case of an increased customer charge, the goal would be to recover the fixed cost indicated by the cost of service study. 

If the intent were to use the increase in fixed monthly customer charge to recover additional fixed costs, renaming it a “facilities” or “service availability” fee would be preferable.