NARUC aims to produce neutral rate design manual amid opposing interests

Published on September 13, 2016 by Tracy Rozens

The National Association of Regulatory Utility Commissioners (NARUC) received more than 70 comments from stakeholders on its draft manual on Distributed Energy Resources (DER) Compensation, and NARUC officials are examining that input as they produce a final manual that remains neutral despite opposing interests between utilities and DER advocates.

“Natural debates are going to happen in regulatory proceedings and both parties are trying to protect their interests,” Chris Villarreal, chair of the NARUC subcommittee on rate design and director of the Minnesota Public Utilities Commission, recently told Daily Energy Insider.

NARUC’s Staff Subcommittee on Rate Design was tasked with writing a manual that helps state commissions manage challenges related to rate design issues in state policy.

“Based on the utilities’ comments that we received, generally speaking their perspective is that the manual did not do an adequate job of explaining the costs that distributed resources incur upon the grid,” Villarreal said. “From the solar industry side, a lot of the comments we got said we didn’t do a good job of explaining the benefits with distributed resources, nor did they agree with the characterization of costs or the section on net energy metering.”

The manual is not trying to provide all the answers to state commissions on thorny issues being debated by the industry, such as the issue of net metering creating cost-shifting from DER to non-DER customers, but to identify pros and cons in as neutral of a manner as possible, Villarreal said.

The public comment period on the draft rate design manual ended on Sept. 2 and NARUC plans to release the final manual at its annual meeting in November. It is the first NARUC manual to take stakeholder submissions.

NARUC President Travis Kavulla said in a written response the comments from stakeholders would be made publicly available following the publication of the manual. This comes after several members of the solar industry wrote a letter to Kavulla requesting greater transparency in the process of incorporating stakeholder input into the draft manual.

NARUC said that the rate design manual will not be the final word on the subject, but will instead be periodically updated to reflect changes in technology, future uses of DER, and advancements in market or policy developments.

Electric utilities, solar companies, state utility commissions and others are heatedly debating the relative costs and benefits of DER to the electricity system.

According to the N.C. Clean Energy Technology Center’s second quarter 2016 edition of “The 50 States of Solar,” 24 states considered or enacted changes to net metering policies. In addition, 15 states plus the District of Columbia formally examined or resolved to examine some element of the value of distributed generation or the costs and benefits of net metering during the second quarter.

“What we see playing out in many states, regardless of penetration rates with rooftop solar, is that utilities need to ensure that whatever the future looks like that all customers pay something into the grid,” Villarreal said. “On the flip side, you’re seeing DER advocates in the same proceedings argue that those mechanisms should not be put in place because they hinder that development of distributed resources.”

The manual cites examples of different types of DER, including photovoltaic solar, wind, and combined heat and power, energy storage, demand response, electric vehicles, microgrids, and energy efficiency.

Joint comments submitted by the Solar Energy Industries Association, SolarCity and other pro-solar groups said the majority of independent studies conducted to date demonstrate that customer-owned resources on the distribution grid can produce net benefits for all utility ratepayers.

“Too often, the draft manual treats DERs as a burden that imposes costs on the utility or other ratepayers without acknowledging the opportunity these resources offer to defer expensive infrastructure projects, improve power quality, resilience and reliability, and reduce emissions in a cost-effective manner,” the groups’ comments said.

The non-partisan Regulatory Assistance Project (RAP), which serves as advisers to regulators and policymakers in rate design deliberations in various markets, noted that the U.S. utility system is becoming more distributed due to the availability of technology, its costs, environmental profile and, most important, consumer demand.

“Through inefficient compensation and other barriers to entry, regulation can either slow the deployment of these resources, or it can begin to value them properly and allow utilities and consumers to make informed investment decisions,” RAP said.