NARUC’s rate design manual draws praise from utilities and solar groups

Published on November 16, 2016 by Tracy Rozens


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The National Association of Regulatory Utility Commissioners (NARUC) has produced a comprehensive and balanced rate design manual that utility regulators can use to help navigate some of the most divisive issues confronting the electricity market, advocates of both publically owned utilities and the solar industry said.

The final “Distributed Energy Resources Rate Design and Compensation” manual was designed to help guide regulators who are considering appropriate rate design and compensation policies for DER. The NARUC Board of Directors formally adopted the manual during NARUC’s annual meeting in La Quinta, California, this week.

“I think it provides most of the things that folks should be focused on with designing rates and addresses important factors like the impact of DER on the grid itself and reliability,” said Delia Patterson, general counsel and vice president of regulatory affairs at the American Public Power Association.

“It does a great job of talking about the benefits and the negative impacts of DER on the grid. It is very balanced,” Patterson told Daily Energy Insider, adding that the manual will become a practical tool for regulators.

The system of electricity delivery, consumption and generation are evolving with new technology. And DER, such as solar, wind and electric vehicles, are being integrated into the grid at a rapid pace.

The manual addresses many of the hot topics regulators are grappling with in states across the country, including net metering, cost shifting from DER to non-DER customers, and valuing solar.

NARUC’s Staff Subcommittee on Rate Design undertook the huge task of developing the manual, which started one year ago. A draft version of the manual was unveiled in July, which generated more than 70 public comments from stakeholder groups. NARUC then incorporated that feedback into its final document.

“… The NARUC Board of Directors adopted a manual that was significantly improved due to their willingness to be open to input from stakeholders and we expect that process to continue as new data becomes available that may warrant revisions and updates to the manual,” Sean Gallagher, vice president of state affairs at the Solar Energy Industries Association (SEIA), said.

Distributed solar provides a benefit to all consumers, state public utility commissions and independent researchers have found, and Gallagher said SEIA was pleased to see that aspect more accurately represented in the final version of the manual.

Gallagher also said the manual recognizes that more data and evidence is needed before imposing new rate structures on customers, and that imposing wide rate design changes when DER penetration rates are low “would most likely be a disproportional response.”

The manual acknowledges the debate that exists over the benefits of DER. Regulators are interested in calculating benefits that have not been typically incorporated in rate design or are difficult to quantify, including the environmental benefits of distributed carbon-free generation.

“Perhaps one of the most critical and, certainly, most contentious issues facing electricity utility regulators, utilities and the customers they both serve is the need to redesign rates to reflect the technological and financial realities of the 21st-century electric system now emerging in states across the country,” Julia Hamm, president and CEO of the Smart Electric Power Alliance, said.

“We congratulate NARUC on recognizing the benefits DERs can bring to customers, utilities and the grid — and responding to the challenge of finding new rate designs that fairly value and balance the economic risks and rewards of these new technologies,” Hamm added.

Rick Gilliam, DG Regulatory Policy program director for Vote Solar, said the manual included a more expansive view of DER to capture the range of clean technologies that are being deployed across states.

“We are especially pleased to see the manual acknowledge the economic opportunities that solar and other distributed energy resources can bring to all customers if managed properly by the regulators and look forward to working with state leaders across the country to achieve that promise,” Gilliam said.