Input Needed: Distributed Generation Rates and Community Solar

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The Distributed Generation Survey has closed.

Overview

Almost every day you can see a new headline announcing advances in clean, renewable energy. It’s also a hot topic in Stillwater.

In early 2020, the Stillwater City Council passed a resolution expressing a commitment to transition to 100 percent clean, renewable energy and forming a citizen “Renewable Energy Task Force."

Now, Stillwater City Council sitting as trustees of the Stillwater Utilities Authority (SUA) will address energy-related issues, including distributed generation, community solar, and renewable energy certificates.

Distributed Generation

Stillwater Electric Director Loren Smith said, “The current distributed generation rate is an industry-standard design; however, we realize the billing process is difficult to understand. While the SUA trustees adopted the current distributed generation rate in 2018, we feel a need to revisit the topic and get public input to see if adjustments are needed to the program.”

Distributed generation refers to a variety of technologies that generate electricity at or near where it will be used, such as solar panels on residential houses.

“The SUA is looking at how to equitably credit and bill customers who use distributed generation. We are seeing customers signing solar panel contracts without having a clear understanding of the methodology the City of Stillwater uses for calculating credits on customer’s electric bills,” Smith said. “The City wants renewable energy in our community.”

In fact, one of the City’s strategic priorities is to provide reliable utility service that meets the needs of today’s customers as well as to anticipate future ones, and that means opportunities for renewable energy.

In addition to distributed generation, the City of Stillwater is exploring opportunities for customers to purchase renewable energy through programs like community solar and renewable energy certificates.

Smith said, “If you want to purchase solar energy, but don’t want solar panels on your home, we are looking at establishing a community solar farm at the Stillwater Energy Center. However, we need public input on what this program would look like.”

Another program would allow customers to purchase renewable energy certificates called RECs. The certificates represent actual energy produced by renewable power sources. Although the energy is not actually delivered to the buyer, by purchasing the certificates the customer receives the benefit of using renewable energy.

Renewable Energy Options

Smith explained that SUA wants to explore additional options for customers who want options for clean, renewable energy. The optimal mix of programs and how best to fund such programs are among details the SUA will have to address. “This is part of why the public input is so important,” he added.

In a recent FlashVote survey, 29 percent of Stillwater residents indicated that they would be willing to pay 1 to 10 percent more for power produced by a community solar farm. Another 25.3 percent said that they would be willing to look at a community solar farm if there was no additional cost associated with it.

Smith said he is looking forward to the Oct. 19 SUA meeting when the Grand River Dam Authority (GRDA) will present its new community solar program and discuss revisions to its distributed generation policy. The City of Stillwater purchases its wholesale electricity from GRDA.

Next up for SUA is a Utility Rates Study Session on Monday, Oct. 26 and a breakout session on distributed generation tariff rates on Monday, Nov. 2. SUA has contracted LM Vedder Consulting to provide services regarding 1) Distributed Generation Tariff Review and Modification; and 2) Community Solar and Renewable Energy Certificate (RECs) Rate Design.

Public Input Opportunities

LM Vedder Consulting will also host a Zoom public input session for distributed generation on Thursday, Nov. 12 at 5:30 p.m. Information on how to access the meeting will be posted on the City of Stillwater’s website stillwater.org.

Smith said, “The public has a vested interest in their energy options. We need input so we can build the best program we can.” Public input will focus on three alternative rate design proposals for distributed generation.

LM Vedder Consulting will then focus on community solar and REC rate design. Smith said, “Again, public input is critical, especially for a new concept for Stillwater like community solar.”

A Zoom public meeting on community solar and REC rate design is planned for early December.


About this Page

This page is meant to function as the hub of civic engagement for this project. Feedback is shared with City Council and city staff. Comments made on this page, as well as any comments made to city staff through email, are considered public documents. For questions about this, click on "Who's Listening."

Overview

Almost every day you can see a new headline announcing advances in clean, renewable energy. It’s also a hot topic in Stillwater.

In early 2020, the Stillwater City Council passed a resolution expressing a commitment to transition to 100 percent clean, renewable energy and forming a citizen “Renewable Energy Task Force."

Now, Stillwater City Council sitting as trustees of the Stillwater Utilities Authority (SUA) will address energy-related issues, including distributed generation, community solar, and renewable energy certificates.

Distributed Generation

Stillwater Electric Director Loren Smith said, “The current distributed generation rate is an industry-standard design; however, we realize the billing process is difficult to understand. While the SUA trustees adopted the current distributed generation rate in 2018, we feel a need to revisit the topic and get public input to see if adjustments are needed to the program.”

Distributed generation refers to a variety of technologies that generate electricity at or near where it will be used, such as solar panels on residential houses.

“The SUA is looking at how to equitably credit and bill customers who use distributed generation. We are seeing customers signing solar panel contracts without having a clear understanding of the methodology the City of Stillwater uses for calculating credits on customer’s electric bills,” Smith said. “The City wants renewable energy in our community.”

In fact, one of the City’s strategic priorities is to provide reliable utility service that meets the needs of today’s customers as well as to anticipate future ones, and that means opportunities for renewable energy.

In addition to distributed generation, the City of Stillwater is exploring opportunities for customers to purchase renewable energy through programs like community solar and renewable energy certificates.

Smith said, “If you want to purchase solar energy, but don’t want solar panels on your home, we are looking at establishing a community solar farm at the Stillwater Energy Center. However, we need public input on what this program would look like.”

Another program would allow customers to purchase renewable energy certificates called RECs. The certificates represent actual energy produced by renewable power sources. Although the energy is not actually delivered to the buyer, by purchasing the certificates the customer receives the benefit of using renewable energy.

Renewable Energy Options

Smith explained that SUA wants to explore additional options for customers who want options for clean, renewable energy. The optimal mix of programs and how best to fund such programs are among details the SUA will have to address. “This is part of why the public input is so important,” he added.

In a recent FlashVote survey, 29 percent of Stillwater residents indicated that they would be willing to pay 1 to 10 percent more for power produced by a community solar farm. Another 25.3 percent said that they would be willing to look at a community solar farm if there was no additional cost associated with it.

Smith said he is looking forward to the Oct. 19 SUA meeting when the Grand River Dam Authority (GRDA) will present its new community solar program and discuss revisions to its distributed generation policy. The City of Stillwater purchases its wholesale electricity from GRDA.

Next up for SUA is a Utility Rates Study Session on Monday, Oct. 26 and a breakout session on distributed generation tariff rates on Monday, Nov. 2. SUA has contracted LM Vedder Consulting to provide services regarding 1) Distributed Generation Tariff Review and Modification; and 2) Community Solar and Renewable Energy Certificate (RECs) Rate Design.

Public Input Opportunities

LM Vedder Consulting will also host a Zoom public input session for distributed generation on Thursday, Nov. 12 at 5:30 p.m. Information on how to access the meeting will be posted on the City of Stillwater’s website stillwater.org.

Smith said, “The public has a vested interest in their energy options. We need input so we can build the best program we can.” Public input will focus on three alternative rate design proposals for distributed generation.

LM Vedder Consulting will then focus on community solar and REC rate design. Smith said, “Again, public input is critical, especially for a new concept for Stillwater like community solar.”

A Zoom public meeting on community solar and REC rate design is planned for early December.


About this Page

This page is meant to function as the hub of civic engagement for this project. Feedback is shared with City Council and city staff. Comments made on this page, as well as any comments made to city staff through email, are considered public documents. For questions about this, click on "Who's Listening."

CLOSED: This discussion has concluded.
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    Regarding the response to my last question, how can you say no one will get "double tapped"? With option hybrid G3, wouldn't the solar customer have to pay the wire fee and the increased customer service fee? And in G1, wouldn't the solar customer pay the wire fee and a rider charge?

    Sabrina asked about 1 month ago

    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"
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    I'm struggling with understanding how the options would affect how much customers could end up paying without some examples. I want the city to recover fixed costs, but I don't want to overburden the people already struggling to pay their bills. However, I look at the options, A1, and can't see how this would change what the residential solar owners are paying or receiving compared to current BASA. And in Hybrid option G3, it looks like solar customers would be double tapped, and even though it is NEM, how would this actually compare to current BASA/ If part of the goal is to enable people who own solar or want to get solar to see a benefit for themselves, and the city wants to encourage solar, I think we need to better understand the options with some examples. The presentation was good, but a lot of information that is hard to understand. This needs to be clearer, easier to understand.

    Sabrina asked about 2 months ago

    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!

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    How do these potential fee or demand increases fold into the reality that some of the profit from Stillwater utilities are "allocated" to the city's general fund? This also is a question concerning the utility rate change analysis.

    Ranger Mark asked about 2 months ago

    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!

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    In reading the response to Robin's first question on wires fee (A1 & A2) and customer cost (F), and watching the presentation, would I be correct in my understanding that a wires fee could influence a customer to use less A/C or heat (electricity) in order to keep cost down because they are demanding less? So in addition to keeping the cost based on kWh lower, they would pay less of a wire fee as well and use less electricity? Also, regarding customer cost, in the response to Robin's first question, it mentions "customer in a class". Would customer cost vary based on income or such? Thanks

    Sabrina asked about 2 months ago

    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."

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    The "wires" fee seems more fair to me than the "customer charge," since it a) is designed to cover the fixed production and distribution costs, and b) is based on a demand amount (rather than being a flat fee). If all customers were charged a "wires" fee, is it equitable? Would non-solar customers end up paying more than they do now, if a "wires" fee were assessed?

    robin asked 2 months ago

    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!

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    What is the difference between the "wires fee" in option A1 and A2, and the "customer cost" increase in option F? Don't those changes both cover the fixed production and distribution costs?

    robin asked 2 months ago

    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.