Category: "PWP"

11/09/10

  05:12:17 am, by Jim Jenal - Founder & CEO   , 1501 words  
Categories: AB 920 Payments, PWP

Pasadena Adopts AB 920 Compensation Rules - Sorta

Introduction

On Monday, November 8, 2010, the Pasadena City Council unanimously adopted PWP’s staff recommendation for surplus solar energy compensation rules in response to AB 920. That’s the good news. The bad news is that the rules that were adopted are clearly inconsistent with the mandates of AB 920. Moreover, they do not provide fair compensation for surplus solar energy producers since the compensation paid - even at its most generous - does not equal the true cost of energy for most PWP customers.

“PWP Customers who are not surplus energy producers every month should consider rolling over their surplus energy not only each month, but also from year-to-year to avoid paying for more expensive energy in the future…”

Run on Sun attended the City Council meeting (as did two of our Pasadena customers) and addressed the Council over what we saw as the deficiencies in the staff’s recommendation.  This post will first provide some background on what was being proposed, then layout our concerns as expressed to the Council (though that will take more than the three minutes provided for comment at the meeting) and then conclude with our recommendations for how PWP customers can best maximize their benefits under the new rules. By necessity this is a very long post - we hope you find it helpful.

Staff Recommendation

AB 920 amended the State’s Net Metering law to require utilities (except LADWP) to provide “just and reasonable compensation for the value of net surplus electricity, while leaving other ratepayers unaffected.” For municipal utilities like PWP, the process of determining what is “just and reasonable” was left to the discretion of the utility. (Investor-owned utilities, like SCE, must go through the CPUC to get their compensation method approved.) Despite requests for input into the process, to our knowledge, the compensation scheme advanced by PWP was crafted solely in-house without input from the installer - or customer - community.

Staff proposed to compensate customers who are surplus providers by paying them 8.7¢/kWh for the value of the energy itself and another 2.5¢/kWh for the Renewable Energy Credits (RECs) associated with the energy being from a renewable source.  Thus the total compensation proposed was 11.8¢/kWh. Missing from this proposal was any accounting for transmission and distribution costs or other fees and taxes that are tacked on to the cost of every kWh sold in Pasadena.

PWP’s staff report voiced internal concern about the cost of carrying over credits from one billing period to the next until they could be netted out at the end of the year, claiming that as more such customers came online, PWP would need to add a full time employee - at an annual cost of $75,000 - to handle the accounting. To avoid that accounting problem, staff proposed to encourage customers to switch to a netting-out process every billing cycle. To incentivize such a switch, PWP acknowledged that “the monthly net surplus compensation rate would need to be higher than the full retail rate for electricity, plus taxes ([as] this is the value customers would otherwise receive by carrying forward surplus energy from one billing period to the next within the twelve month net energy metering period.)” This incentived compensation rate included an additional 6.6¢/kWh to account for the amounts ignored above - transmission, distribution, customer charges and taxes - for a total amount of 17.8¢/kWh.

Thus, PWP’s staff proposed a two option approach:

  • Option A - customer carries forward their surplus from billing cycle to billing cycle until the end of their twelve-month net-metering period and then is compensated for any surplus energy at the rate of 11.8¢/kWh; or
  • Option B - customer is netted out at the end of each billing cycle and if there is any surplus in that cycle, they are paid for it at the rate of 17.8¢/kWh.

Run on Sun’s Critique

Unfortunately, there are a number of problems with the staff’s proposal, not the least of which is that it has no support in the law.

Legal Questions

AB 920 is quite clear on how this is supposed to work:

At the end of each 12-month period, where the electricity generated by the eligible customer-generator during the 12-month period exceeds the electricity supplied by the electric utility during that same period, the eligible customer-generator is a net surplus customer-generator and the electric utility shall, upon an affirmative election by the eligible customer-generator, either (A) provide net surplus electricity compensation for any net surplus electricity generated during the prior 12-month period, or (B) allow the eligible customer-generator to apply the net surplus electricity as a credit for kilowatthours subsequently supplied by the electric utility to the surplus customer-generator.

Public Utilities Code § 2827(h)(3) (emphasis added).

AB 920 requires the utility to pay based on the complete, 12-month net-metering period, or allow the customer to carry over the entire surplus to the following year - an option not addressed by PWP at all.  As we read the statute, there is no allowance there for administrative convenience as a basis for abandoning the 12-month netting-out process.

After we pointed this out to the Council, the head of PWP, Phyllis Currie, essentially conceded that the statute did call for a 12-month net-metering period, but then dismissed it as if it were of no consequence.  Indeed, one Councilmember praised PWP for coming up with a creative approach to solving their accounting problem. Creative it may be, but it is of dubious legality. Interestingly, the City Attorney was not asked for, and did not offer, an opinion at the meeting as to whether PWP’s proposal complied with the law.

Compensation Below Retail Value

PWP customers will now be given two options for compensation coming in at 11.2 or 17.8¢/kWh - the latter amount allegedly being “higher than the full retail rate for electricity."  Except that it is not. We routinely and consistently see PWP customers paying closer to 19¢/kWh for their electricity, when all taxes and fees are factored into the equation. This means that for most of the customers that we have seen, they will be losing money if they elect to receive payment under either payment rate. The Council entirely ignored this concern.

No Provision for Adjustment Based on Rate Increases

The staff proposal does nothing to tie the compensation rate to the rate structure going forward. Thus, PWP could raise its residential rates but leave the AB 920 rates untouched. Again, the Council ignored this concern.

No Basis for Setting the REC Value to “Green Power” Charge

The staff set the compensation value for REC credits (which flow to PWP under the law) at 2.5¢/kWh because that “is in line with current market cost of qualifying renewable energy credits and is equal to the premium rate paid by PWP’s Green Power customers.” Staff further suggested that “as more liquid and transparent renewable energy credit markets evolve, staff may recommend future changes to the renewable attribute compensation amount.” Yet there are markets that trade in solar RECs right now and you can readily see what their values have been simply by looking online.

According to the website, SRECTrade, the most recent prices for SRECs are as follows:

Nov. 2010 SREC Prices
District of Columbia $225.00
Delaware $259.99
Massachusetts $500.00
Maryland $320.00
New Jersey $640.00
Ohio $325.10
Pennsylvania $210.00
Average $354.30

To relate this market data back to PWP’s proposal, according to Wikipedia, “a green energy provider (such as a wind farm) is credited with one REC for every 1,000 kWh or 1 MWh of electricity it produces."  Thus, if the average value for an SREC representing 1,000 kWh of energy is $354.30, then the value of 1 kWh would be $354.30/1,000 = 35.43¢/kWh - more than 14 times as much as PWP is claiming is “in line with current market cost.

Of course, the staff report provides no visibility into what market data PWP considered (if any) and their conclusory statement seems to fly in the face of real world data that is readily available.

Suggestions for PWP Customers

So what is a PWP customer to do? That depends on how much surplus energy you are producing, and how frequently you are doing so. If your system produces surplus energy every month, so that there is no chance that in a subsequent month you will be a net energy consumer, then you should opt for the higher payment made on each billing cycle. You won’t be paid a true market value for your surplus energy, but you will do better than holding it to the end of the year given PWP’s approach.

On the other hand, if in some months you are a net producer and in other months you are a net consumer, you should carry your credits forward to the end of the year. That way you will save money by offsetting your future consumption since that offset is worth more than the 17.8¢/kWh that PWP is willing to pay you. Moreover, if you anticipate that your energy needs could increase in the next year - say because you are going to purchase an electric vehicle - then you should demand that PWP allow you to carry your energy surplus into the next year, as expressly required by AB 920.

As always, we welcome your (non-spam) comments.

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11/01/10

  06:14:09 pm, by Jim Jenal - Founder & CEO   , 457 words  
Categories: AB 920 Payments, PWP

Pasadena to Vote on AB 920 Surplus Energy Generation Compensation - 11/8/2010

The Pasadena City Council will hold a public hearing and vote on the proposed surplus compensation rate proposal submitted by Pasadena Water & Power (PWP) next Monday night, November 8, 2010. The compensation proposal pursuant to AB 920 breaks down as follows:

Energy services credit: 8.7¢/kWh - PWP’s average cost of energy;
REC credit: 2.5¢/kWh = premium paid by “Green Power" customers.
Total compensation: 11.2¢/kWh

In the first year of this program PWP estimates that it will payout roughly $1,300 to $1,700 total - “an amount equal to about 0.001% of PWP’s retail sales.”

Of course, what is missing from this equation is any compensation for the non-energy charges, such as PWP’s avoided transmission and distribution costs.

PWP itself realizes that this is not a very attractive deal and that customers are more likely to simply roll-over their surplus to offset more expensive energy costs in months when they are not a net energy producer. In fact, PWP complains that to track these likely carryovers, PWP will have to hire a full time employee at an annual cost of $75,000, making this a bad deal for both PWP and its customers.

To reduce that overhead cost, PWP proposes to provide a second option that would convince customers to get compensated as part of each regular billing cycle instead of carrying credits forward. As PWP acknowledges:

To encourage customers to select this option, the monthly net surplus compensation rate would need to be higher than the full retail rate for electricity, plus taxes (this is the value customers would otherwise receive by carrying forward surplus energy from one billing period to the next within the twelve month net energy metering period). The proposed compensation rate for customers choosing this option is the sum of the applicable Energy Services Charge for the billing period, plus 6.6¢/kWh to reflect non-energy charges (transmission, distribution, customer charges and taxes), and 2.5¢/kWh for the value of the renewable attributes. The resulting total compensation rate for residential customers would be approximately 17.8¢/kWh.

Of course, this is the rate that they should be paying from the start - regardless of whether a customer chooses to be compensated on a regular or annual billing cycle as this is the true value of the energy provided. (PWP’s inability to bring its billing system into the 21st century is an entirely different matter and not relevant to this discussion.) Given the tiny fraction of PWP’s overall sales represented by these solar net energy producers, there is no possible inequity that would be imposed on other ratepayers by providing full-value compensation.

We will update this post and bring forward additional details as they become available. In the meantime, we encourage all PWP solar customers to attend the City Council meeting next Monday and voice your support for adequate compensation for net energy producers.

10/30/10

  08:12:03 am, by Jim Jenal - Founder & CEO   , 195 words  
Categories: Solar Economics, PWP Rebates, PWP

Pasadena Reducing Solar Power Rebates Effective February 1, 2011

Run on Sun has learned that Pasadena Water & Power (PWP) will be reducing their solar power rebates for residential customers from the present $2.40/Watt to $2.00/Watt as of February 1, 2011. Presumably PWP’s rebate rates for all other categories of rebates will also be reduced, but we do not have those details at this time. There had been a rumor that the rebates were going to drop as of December 1, but our sources indicate that is not accurate.

We are being told that the goal of the reduction is to allow more customers to share in a necessarily limited pool of rebate resources.

There is surely more to report on this subject and we will be following up over the next week. Never-the-less, while any rebate reduction is disappointing, PWP deserves credit for managing their rebate process in a more orderly and predictable fashion than some of their neighbors have. Now if we could get them to disclose the statistics of their solar program so that we could all see where their rebate money has gone - as all CSI participants must do - we could really give them kudos, but that is a subject for another post.

07/12/10

  12:34:38 pm, by Jim Jenal - Founder & CEO   , 441 words  
Categories: All About Solar Power, Solar Economics, SCE/CSI Rebates, Utilities, PWP, SCE, LADWP, BWP, GWP

State of Solar in California - Annual CSI Program Assessment Released

Three years into an ambitious ten year plan to install 3,000 MW of solar power on California rooftops, the State of Solar in California is surprisingly good - despite a difficult economy.  The California Solar Initiative covers that portion of the program under the auspices of the California Public Utilities Commission (CPUC) and involves the three Investor-Owned Utilities in the state - PG&E, SCE and SDG& E.  The CPUC issued its Annual Program Assessment last week.   The CSI program, which is targeted to install some 1,940 MW of solar by the end of 2016 is already 42% of the way there.

More highlights from the Assessment after the break.

The Assessment has loads of interesting statistics and it is worth at least skimming the 91 page report.  Among the key findings:
  • CSI Incentives have Economic Leverage - For every dollar spent on incentives, there has been another $2.62 invested in solar power systems from other sources.  The CSI incentives have leveraged an additional $5.06 billion in other capital investments.
  • System Costs are Declining - using inflation adjusted data, costs for systems smaller than 10kW (i.e., most residential systems) have fallen by 15% from January 2007 to December 2009.  For larger systems, system costs declined by nearly 10% over the same period.
  • Backlog in Projects - Completed projects make up 20% of the goal while pending projects (i.e., projects for which a rebate has been reserved but the project is not yet complete) account for another 22%.
    • There are some concerns that this is not an accidental condition.  We will have more to say about this in a future post.
  • 2010 is the Strongest Year Yet - In just the first six months of this year, nearly 300 MW of project applications have been received by CSI and nearly 60 MW has already been installed.  April of this year saw the highest MW total for new applications of any month in the program - over 134 MW.
  • Solar Systems Work - for both the grid and their owners:
    • California has over 600 MW of solar power connected to the grid at nearly 65,000 customer sites.
      • But here is an eye opener - 598 MW of that is installed in IOU territory - only 11 MW is installed in publicly owned utility territory!  (I.e., the so-called “Muni’s” which include LADWP, PWP, BWP & GWP!)
    • In 2009, CSI projects generated more than 390,000 MWh of energy - three times the amount produced in 2008.
    • Based on a review of actual performance data, both large and small CSI-funded systems are performing above estimates and solar customers rank their systems at a ‘9′ on a scale from 1 to 10 for system performance satisfaction.

It would be nice to see similar analysis coming from the Muni’s - which up until now tend to keep their data to themselves.  That too is grist for another post.

06/17/10

  09:02:34 am, by Jim Jenal - Founder & CEO   , 345 words  
Categories: AB 811/PACE/LACEP Funding, PWP

Pasadena First City to Join LA County Energy Program

Residents Will be able to Qualify for AB 811/PACE Funding

On Monday, June 14, with little fanfare or public attention, the Pasadena City Council approved a Resolution making Pasadena the first city to join the LA County Energy Program (LACEP).  The Resolution clears the way for Pasadena residents to apply for Property Assessed Clean Energy (PACE) funding under the County’s AB 811 program, LACEP.  As we have reported here before, the LACEP will allow homeowners to borrow money from the County (funded through the sale of bonds) to finance energy efficiency measures and solar energy projects.  Those loans are then paid off over twenty years as part of the homeowner’s annual property tax assessment.  If the owner sells the property, the assessment “runs with the land” and the new homeowner (who receives the benefit of the improvements) assumes the assessment.  The County expects to begin accepting applications under the LACEP in the Fall.

Run on Sun has been a strong supporter of the LACEP concept and we are working hard with County officials (meeting with them as recently as this past Tuesday) to make the program work as well as it can for residents and small businesses alike.  While we still have some concerns over the details in the program - including the interest rates that will be charged (9% or more?), eligibility requirements for homeowners (at least 20% equity in the home - but based on what assessment?), the process for certifying qualified contractors to do the work (to protect the county’s investment, the homeowner’s property and the reputation of the solar industry), and the timeliness of payments to homeowners and contractors - we believe that if done correctly, this program could be a great benefit for all involved.

Run on Sun is pleased and proud that Pasadena - our hometown - has become the first of the 88 cities in LA County to get on board.  How about your city?  When will they get in?  If you need more information on what your city should be considering, here is a link to the Staff Report that was submitted to the Pasadena City Council.

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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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