VI. Metering for DG facilities with Combined Technologies and Subject to Different Tariffs

DG facilities using renewable technologies are provided the benefit of "net energy metering." That is, they receive bill credits for energy they produce that is not simultaneously needed at the site and is fed into the utility distribution system. For solar and small wind NEM generators, the bill credit provides the DG a payment of the bundled rate for the utility's purchase and delivery of the energy commodity.

Some DG facilities incorporate renewable and non-renewable technology, and therefore one or more tariffs may apply. For example, a DG facility may include a photovoltaic generator that qualifies for NEM and a fossil fuel generator that does not. Several questions have arisen about the rules and technical requirements for NEM at such "combined technology" sites. Existing tariffs and interconnection agreements do not address technical arrangements or certain administrative issues where multiple tariffs apply and multiple technologies are employed.

The CEC proposes two changes to policies in this regard. First, it would prohibit any tariff provision or methodology that restricts the export from the NEM generator while the non-NEM generator is supplying the customer's load on the same meter and account. Second, it would shift all costs associated with utility distribution system modifications for combined technology DG facilities to utility ratepayers.

Except for the utilities, parties generally support a prohibition of tariff provision or methodology that restricts export from the NEM generator while the non-NEM generator is operating. DG proponents state this would reduce the efficiency of the non-NEM generator and runs counter to the state's need for additional generation. The utilities, however, raise questions about whether such a policy would create unintended consequences, shift costs to other customers and create a variety of administrative complications that are unresolved by the CEC's report. SCE states that under the CEC's approach, a DG with a very small NEM generator and a much larger non-NEM fossil fueled generator will qualify as a combined technology DG facility and would receive the full range of NEM benefits -SCE states that CEC's assumption that such combined technology DG facilities provide commensurate ratepayer benefits is unrealistic. This generation "stacking" could encourage uneconomic dispatch because it could motivate the DG to serve as much of its load as possible with its fossil-fueled generator in order to export renewable energy for NEM credit. The utilities also object to the CEC's proposal to shift all utility distribution system modification costs for combined technology DG facility interconnections to utility ratepayers.

We concur with the CEC's general policy that protects the export for credit of NEM energy into the utility system. We also understand that the policy may create some complications that require additional attention, such as those identified by SCE in its comments to the report. We will adopt the CEC's recommendation with three protections proposed by SCE designed to assure the policy protects utility ratepayers while furthering the state's general goal of promoting renewable energy technologies. First, any energy reported by the NEM generator that exceeds the customer's annual energy usage from the utility will not be compensated, a requirement that is already in effect. Second, in no event will non-NEM generators receive credits and tariff exemptions designed for NEM generators. Third, and in order to assure that non-NEM generators do not receive NEM credits, any DG operating a combined technology DG facility must install, at its cost, metering for the separation of energy measurements of NEM and non-NEM generators or relays that prevent export from the non-NEM generators at all times, unless an export agreement is executed.

We herein direct the Working Group to develop technical and administrative solutions to these and other implementation issues. In the interim, the utilities shall modify their tariffs to incorporate the policy and associated implementation rules in advice letter filings

With regard to the allocation of distribution system modification costs for combined technology DG facilities, we again consider our role to protect utility ratepayers from unreasonable rates and to allocate costs mainly to the customer causing them. D.02-03-057 exempted NEM generators from interconnection application fees, study costs and distribution system modification costs but did not do the same for non-NEM DG facilities, that is, those that do not use renewable fuel sources. We are not aware that the existing policy for non-NEM generators to pay for distribution system modification costs has unreasonably stifled DG development. As we stated earlier, if we ultimately find that cost-effective DGs are not being built, we will consider changes to the allocation of costs for the distribution system modifications. In the meantime, we believe that combined technology DG facilities should assume the full costs of distribution system modifications required for the interconnection of the non-NEM generators. If costs attributable to the non-NEM facility cannot be readily identified, the utility should calculate the non-NEM facility's cost liability according to the generator's share of annual expected energy of that generated by the combined technology DG facility.

The CEC report does not recommend how to allocate costs and payments for DG facilities that include two NEM generators operating under different tariffs. We will direct the Working Group to propose ways to treat such facilities and address the matter in a subsequent decision.