7. Implementation of NSC Payments

7.1. Does The Customer Need A Bill Credit To Be Eligible For An NSC Payment?

SCE, SDG&E, and PacifiCorp maintain that to qualify for an NSC payment, an NEM customer must have a remaining bill credit as well as generation in excess of usage. According to SDG&E, if a customer has used up all its bill credits earned during the 12-month true-up period, the customer has already been compensated for all excess generation at the full retail electric rate. SCE and SDG&E contend that to provide further compensation in excess of the retail rate would amount to double payment, shifting costs to non-participating customers.

In contrast, PG&E, the Joint Solar Parties, Acton, City of San Diego, IREC, and TURN claim that NEM customers should not be required to have a remaining bill credit to receive NSC. These parties generally assert that if a customer has generated surplus power, the customer should be compensated, and that any bill credit at the end of the true-up period should be irrelevant. PG&E maintains that the eligibility for NSC is based on net generation only, and there is no mention of a bill credit requirement in the statute. Moreover, PG&E describes how bill credits can bear no relation to the amount of surplus electricity exported by an NEM customer. PG&E asserts that if bill credits are required for or linked to NSC, senseless and unfair results can ensue, with some customers receiving well below avoided costs and others receiving tens or hundreds of dollars per kWh of net surplus. (PG&E, 3/15/10 at 8.) TURN and DRA both comment that NSC payments should be reduced by any bill debits owed on the true-up date.

Another variation on the issue is raised by CALSEIA/EC. They contend that if an NEM customer has a bill credit but no net surplus generation, the customer should still receive an NSC payment. According to CALSEIA/EC, this can occur when an NEM customer on a TOU rate provides excess generation during hours of peak electricity demand when rates are high, but uses most of its electricity off-peak when rates are lower. As a result, the customer may have a bill credit even though it did not generate excess energy over a 12-month period. The Joint Solar Parties and TURN argue that NEM customers with a bill credit but no net surplus should not be compensated.

Upon review of AB 920, we agree with PG&E that the language in the statute is straightforward and that customers who generate more kWhs than they use in their 12-month true-up period may choose to receive net surplus compensation. We will not add a secondary requirement, which does not appear in the statute, that customers must also have a bill credit to be eligible for net surplus compensation. Moreover, we agree with TURN and DRA that any payment for NSC should be reduced by any amount the customer owes to the utility. We disagree with the proposal by CALSEIA/EC that customers with a bill credit and no net surplus generation should receive further compensation. Again, we return to the plain language of the statute that requires compensation when customers are net generators. If a customer has not generated excess kWhs, the customer is not eligible for NSC.

7.2. Rollover of Excess kWh

Section 2827(h)(3) allows eligible customer-generators to elect whether to receive net surplus compensation for any net surplus electricity generated during the prior 12-month period, or whether to apply, or "rollover," the net surplus electricity as a credit for kWhs subsequently supplied.²⁶ Several parties raise conflicting views on how to handle NSC if the NEM customer opts to rollover the net surplus as a credit against future usage.

IREC maintains that because AB 920 creates two options for NEM customers, either compensation or a bill credit, there can be two NSC rates -- one that applies if a customer chooses immediate compensation, and a separate rate if a customer elects to rollover excess generation. In other words, if a customer chooses to rollover net surplus as a credit against future usage, IREC contends the rate used for future credits is not subject to the requirement in Section 2827(h)(4)(A) that other ratepayers be left unaffected. Thus, IREC claims that any rollover of net surplus generation should offset the full retail electric rate of subsequent usage.

PG&E and SDG&E argue that IREC's reading of AB 920 is not credible and defies statutory construction because the statute makes clear that NSC implementation options should leave other ratepayers unaffected, whether a customer chooses an immediate cash payment or a credit against future usage.

We agree with PG&E and SDG&E. The value that customers receive for net surplus generation should be the same whether the customer chooses immediate compensation or opts to rollover net surplus generation against future usage. The value of net surplus generation should be converted to a monetary credit before being carried forward. If net surplus generation were carried forward as IREC suggests, it could offset later usage at different and potentially higher retail rates. We have already found in Section 5.1.3 that providing NSC payments at the full retail electric rate shifts costs to other customers. We now add to that finding that providing NSC rollover credits at future retail electric rates, which might be higher than the rates in effect at the time the surplus was generated, could shift costs to future customers. Additionally, IREC's proposal could be difficult to implement. Currently, SDG&E, PG&E and SCE convert kWh to dollars on a monthly basis as part of NEM and changing this would cause administrative costs and customer confusion.

We find it more reasonable to adopt the recommendation of PG&E, SCE and the Joint Solar Parties that net surplus generation should be valued at the conclusion of the relevant true-up period at the same price whether a check is mailed to the customer or a credit is applied to the bill against subsequent usage. In other words, if customers choose to rollover excess kWhs, the dollar amount of any net surplus compensation will be applied to the customer's account directly rather than drafting a separate check. Once the excess kWhs have been valued in dollars, the kWh values in all time periods should be reset to zero and the cycle starts anew. We agree with the proposal by several parties that the utilities should allow NEM customers to maintain such NSC bill credits indefinitely. In addition, we will allow customers to switch from compensation to rollover, or vice versa, on an annual basis.

Sierra Pacific, which has very few NEM customers, requests unique treatment. It proposes the same concept that IREC endorsed, that is, to allow banking of surplus electricity in the form of kilowatt hours, which would be treated as a credit and used to offset kilowatt hours subsequently supplied by Sierra Pacific. Although Sierra Pacific has only a handful of NEM customers, we see no reason for unique treatment. Sierra Pacific should value excess kWhs annually and either mail a payment to the customer or apply that credit to future usage.

7.3. Minimum Payment Amount

PG&E recommends a one dollar minimum payment amount for a customer to receive a check for NSC. The Joint Solar Parties and CALSEIA/EC agree this is reasonable unless the customer is closing the account. Sierra Pacific suggests a higher minimum threshold for its NSC payments based on its unique characteristics. Sierra Pacific proposes that if customer's net surplus is valued at less than $25 after 12 months, the valuation of the net surplus should be applied as credit for kWh subsequently supplied.

We will adopt a requirement that customers need a one dollar minimum NSC payment to receive a check from the utility. We further agree that for Sierra Pacific and PacifiCorp, this minimum payment amount should be $25 to minimize the administrative costs on these smaller utilities with few NEM customers.

7.4. System Sizing Limits

The definition of an eligible customer-generator in Section 2827(b)(4) includes the statement that the system "is intended primarily to offset part or all of the customer's own electrical requirements."

The utilities maintain that the NSC scheme established by AB 920 is intended to address random, modest, inadvertent net exports and that NEM customers must adhere to this existing NEM system sizing limit, which has been a long-standing prerequisite for NEM participation, in order to qualify for NSC payments. The utilities contend that since the statute for net surplus compensation retains the system sizing limit language, customers cannot oversize their solar or wind electrical generating facilities to create additional revenue. Moreover, the utilities note that other compensation mechanisms exist for customers who want to generate electricity to sell to the utility, such as feed-in tariffs. CALSEIA/EC agree with the utilities, suggesting that customers who oversize their systems would not qualify for NEM, and therefore would be ineligible for NSC.

In contrast to the utility position, the Joint Solar Parties and Acton read the statute as not limiting the size of a customer's system except to less than 1 MW. DRA suggests the impact of AB 920 on current system sizing limits should be examined in R.10-05-004, where the Commission could consider exceptions to allow systems sized above historic demand.

We agree with the utilities that nothing in AB 920 alters the existing NEM system sizing language and that to be eligible for NSC, a system must meet the definition of an eligible customer-generator within Section 2827(b)(4), including that it be intended primarily to offset part or all of the customer's own electrical requirements. Systems that are sized larger than the customer's electrical requirements would not be eligible for NEM and therefore, are not eligible for NSC either.

7.5. Should Customers Repay CSI or SGIP Incentives to Receive NSC?

Sierra Pacific and PacifiCorp recommend that the Commission require repayment of CSI or SGIP incentives as a condition for receiving NSC. Most other parties assert that customers should not be required to repay any incentives they received from CSI or SGIP in order to receive NSC. Several parties cite to Section 2827(c)(1), which states:

Eligibility for [NEM] does not limit an eligible customer-generator's eligibility for any other rebate, incentive, or credit provided by the electric utility, or pursuant to any governmental program, including rebates and incentives provided pursuant to the [CSI].

We agree with the majority of the parties that it would be inconsistent with Section 2827(c)(1) to require repayment of CSI or SGIP incentives. In addition, even without this statutory limitation, it would undoubtedly create administrative and billing complications to attempt to collect repayment of prior CSI or SGIP incentives from customers.

7.6. Are Community Choice Aggregation, Direct Access, and Other Customers Eligible to Receive NSC?

Several parties question whether customers of Community Choice Aggregators (CCAs) and direct access customers of energy service providers (ESPs) are eligible to receive NSC payments. PG&E, CALSEIA/EC, IREC, and the Joint Solar Parties generally propose that the Commission require CCAs and ESPs to offer NSC to their customers who participate in NEM and are net surplus generators. PG&E further states that customers who receive service from ESPs and CCAs should not receive NSC payments from PG&E because PG&E is not their generation supplier. The Joint Solar Parties clarify that NEM customers should be compensated by the relevant CCA or ESP for the generation component of the NSC. PG&E proposes that additional customer groups, namely wind energy co-metering customers (i.e., wind generators from 50 kW to 1 MW), multiple tariff treatment customers, and virtual net metering (VNM) customers under the CSI Multifamily Affordable Solar Housing Program also be eligible to receive NSC.

SDG&E opposes requiring CCAs and ESPs to offer NSC, although SDG&E suggests these entities may choose to offer NSC. Sierra Pacific contends that according to Section 2827(b)(4), eligible customer-generators must be a "customer of an electric utility" to qualify for NSC.

First, we will not require ESPs to offer NSC because they do not match the definition of electric utility in the statute. Section 2827(b)(3) defines an electric utility as "an electrical corporation,...an electrical cooperative, or any other entity, except an electric service provider, that offers electrical service." (Emphasis added.)

Second, we will not require CCAs to offer NSC to their customers at this time because CCAs did not receive adequate notice of this proceeding concerning implementation of the NSC program. CCAs do not appear to have been included on the service list for this rulemaking. CCAs may choose to offer NSC to their customers and the Commission may, at a later date, consider requiring CCAs to provide NSC.

Finally, we will allow PG&E and the other utilities to offer NSC to any NEM customer, including wind energy co-metering customers, VNM customers, and multiple tariff treatment customers. PG&E's compliance filing containing its revised NEM tariffs should address how NSC will apply to these various customer classes.

7.7. Administrative Costs

The utilities propose that their costs to implement and administer NSC should be absorbed by all customers rather than applying an administrative fee on NEM customers alone. PG&E contends that the costs of implementing the NSC program could overwhelm much of the value of the program to eligible net generators. According to PG&E, in 2009, less than 10% of its NEM customers, or 2450 customers, had a credit at the time of their true-up and were net exporters of electricity, and of those net exporters, over 40% had net exports of 100 kWh or less. (PG&E, 3/15/10 at 10-12.) PG&E claims that the cost of tracking these customers, notifying them of their options, cutting checks, and other administrative duties could be larger than their compensation.

The Joint Solar Parties and City of San Diego agree with PG&E that the costs to administer the NSC program should be absorbed by all customers.

We agree that payments to individual net surplus generators are likely to be small. If the utilities assessed a fee on customers to participate in this program, the fee could be larger than any NSC payments. We accept PG&E's recommendation that the administrative costs of NSC, which we expect to be minimal, be absorbed by all customers. This is similar to how costs of implementing NEM tariffs and other alternative billing arrangements are allocated widely to all customer classes as billing-related costs in utility general rate cases. In the event administrative costs are larger than anticipated, we may reconsider this allocation of administrative costs.

7.8. NEM tariffs

Most parties agree that the details of the NSC program, including the NSC rate and details concerning NSC payments, should be incorporated into the utilities' existing NEM tariffs. We agree and we will require the utilities to include revised NEM tariffs incorporating the NSC rates, terms, and conditions set forth in this decision in the advice letter they each submit with their specific NSC rate calculations in compliance with this decision.

²⁶ Section 2827(h)(3) states that if an eligible customer-generator does not affirmatively elect service pursuant to net surplus electricity compensation, the electric utility shall retain any excess kWhs generated during the prior 12 month period and the customer shall not be owed any compensation.