Attached please find Chart House Energy s final comments on the DG Tariff U I hope this will help to consider a fair and reasonable tariff.

Transcription

1 From: To: Cc: Subject: Date: Attachments: Rob Rafson LARA-MPSC-EDOCKETS Baldwin, Julie (LARA); Putnam, Charles (LARA); Talberg, Sally (LARA) Case No. U final comments Monday, March 26, :36:09 PM Microsoft Word - Final Comments on MPSC Case U CHE.docx.pdf PastedGraphic-7.tiff Attached please find Chart House Energy s final comments on the DG Tariff U I hope this will help to consider a fair and reasonable tariff. Rob Rob Rafson, P.E., NABCEP Corporate Office: 200 Viridian Dr Muskegon, MI c) rob@charthouseenergy.com

2 Comments on Public Service Commission Case U DG tariff The object of the DG tariff is to create a fair and reasonable tariff that will equalize the cost of service between DG and non-dg customers. Yet insufficient data has been collected or provided on the instantaneous (Inflow / Outflow) performance or usage for DG and non-dg customers of all classes and all rates. No cost of service study has been done for all classes and for all rates. Therefore, no DG tariff can be determined until data is collected and provided and cost of service study can be completed. We recommend a first year DG tariff based upon NEM or a simple extension of business as usual until data is collected analyzed and cost of service studies completed. This puts the pressure on the utilities to provide useful data. Additionally, we recommend that Staff s residential partial cost of service provides enough support to recommend including in the rate case after June1, 2018, a first year DG tariff of negative $0.02/kWh (credit) for all power generated by all DG customers. This would provide a first year DG tariff coupled with existing NEM upon which the present rates and cost of service are developed. Similarly, this puts the pressure on the utilities to provide the data needed for a cost of service study that would result in a more accurate and fair and reasonable DG tariff. Demand charges In an effort to increase profits, utilities have shifted fixed asset cost recovery to a 75/25 model. The demand charge is set on the allocated costs at the utility s coincident peak (the moment when the utility has the maximum system demand). However, rarely does any customer have their peak at the same moment in the month as the utility s peak or any other customer. This means the customers max monthly peak sets their demand charge and collectively these charges add up to a larger number than the utility s coincident peak on which the utility sets their rates. Thus, the utilities over charge all customers with demand charges. Unlike transmission, the excess funds received are not distributed to the customers but instead increase profits of the utilities.

3 Residential Commercial Industrial Combined This graph is generated using data provided to DOE for average customer hourly usage in each class based on 2016 data. The graph above is the energy usage for MI by customer class for an average summer day. You will note that combined demand is not when any one class has it s combined peak. This graph is average demand. It would be more accurate to take system demand and distribute based upon customers average demand. The attached graph shows the multiplying effect of the peak demand as compared to average customer demand. If the utility distributed demand charges on customers average monthly demand, there

4 would be no overcharge because costs would be recovered on averages which more closely add up to system peak demand. Solar customers (in fact all DG customers) are charged even more than non-dg customers because DG customers reduce their energy usage but less than the proportionate amount of demand. The extreme example is a net-zero DG customer makes all the power they need but generates that power during daylight hours thus decreasing the utility s peak (and therefore utility demand) but this customer will have a peak when the solar is not generating or when there is insufficient sun to generate power. Below is a graph of a Southern California residential customers with solar (it would be great if our utilities were to provide similar data to do similar analysis). You can see their peak demand is depressed every day (Michigan customers would have days each month where the peak is not depressed much at all). The demand is not depressed at all in the evenings, which is when the average residential peak happens (industrial peak is in the morning (first shift before the sun comes up) and commercial middle of the day, but because we live in Michigan there is at least one rainy day every month and thus peak is not shaved as much on that rainy day). Thus the demand reduction is less than the reduction in energy reduced by DG. The resulting demand savings is less than the savings realized by the utility in aggregate. This is another way the DG customer is overcharged. As part of the cost of service study it is important to determine the correct negative DG tariff (credit) to properly compensate the DG customer for the saving created to the Utility.

5 Energy Solar makes energy at peak times. This reduces the utility s cost to operate because it decreases summertime daytime peak and thus decreases peak power generation, which is the most expensive power to generate. As more solar is implemented both by the utilities and customers, the utilities will be able to operate intermediate load generation more uniformly and thus decreasing costs further. However, the utilities would lead everyone to believe that DG customers are more expensive to service than non-dg customer which is simply not true and proven by the partial residential cost of service study done by staff. Staff determined (with limited data provided by DTE) that a residential DG customer is over charged by $106/yr (CHE calculated $126/yr). The average DG customer usage is. This would translate to $0.02/kWh for power generated. There are three ways to create a DG tariff: Provide a credit for energy exported Provide a fixed annual (or monthly) credit Provide a credit for energy generated Providing the DG tariff based upon energy exported would favor the customers with the largest systems and may not provide any credit for smaller (relative to their usage (like commercial/industrial or smaller system)) customers.

6 Providing a monthly credit would most benefit the smallest customer because they would get a credit for the least amount of impact. This credit could be set by system size but would not relate to performance of the system and thus would not track the decreased cost of service of DG customers. We believe the most fair and reasonable credit would be to divide the average decrease in cost of service for each class by the power generated by the class in the same time period. This will result in a DG tariff that benefits those who produce the savings regardless of size and equally distributes the system savings. This will give the right market signals that a customer that positively impacts the cost of service of the utility will be compensated for that savings based upon their contribution to that savings. We acknowledge that not all customers have generator meters. We would suggest that to receive the credit the DG customer would either have to install a generator meter or provide access to the inverter meter. This will allow the utility to automate reading of the generation and thus billing. Transmission and distribution

7 The above simple picture shows how power flows from the power company centralized power station to the customers. If a customer solar system produces more than they use, the power will be used by the neighbor. The utilities charge that neighbor for full retail rate and transmission as if the power came all the way from the power station. The utility has not only recovered all of their costs of distribution but also receive transmission loss fee, increased capacity of the transmission and distribution lines, avoided air emission costs and environmental costs and liabilities, decreased price fuel risk and power quality improvements from inverter reactive power supply and voltage control. Even with all these benefits the utilities argue that distribution costs should be charged on outflow thus asking the MPSC to allow them to double dip on transmission and distribution costs. If the commission allows the utilities to receive these extra charges they will be distributed to the 99+% non-dg customers through the PSCR. This goes against the idea of a fair and reasonable tariff. Conclusion We recommend based on Staff s residential partial cost of service and implement a first year DG tariff of $0.02/kWh credit for all power generated by all DG customers using existing NEM. Excess power distribution should be true net metered (excess is credited for both energy and distribution) as it is done now (even though the utilities get additional savings). When MPSC does a full cost of service study and determines the fair and reasonable DG tariff, then it can adjust the $0.02/kWh credit to reflect the cost of service results. This will provide a simple starting point to an understandable first year DG tariff. and will be a start in the right direction to provide a fair and reasonable tariff. In future years, cost of service studies will take the methodologies, rates and other considerations to determine future DG tariffs.