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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/17/2007 - RESOLUTION 2007-066 CONCERNING IMPLEMENTATION OF S ITEM NUMBER: 21 AGENDA ITEM SUMMARY DATE: July 17, 2007 FORT COLLINS CITY COUNCIL STAFF: Bill Bray SUBJECT Resolution 2007-066 Concerning Implementation of Standards Created by Amendments to the Public Utility Regulatory Policies Act of 1978 by the Utility. RECOMMENDATION Staff recommends adoption of the Resolution. EXECUTIVE SUMMARY In August 2005, the United States Congress adopted the Federal Energy Policy Act of 2005 (P.L. 109-58),which amends the Public Utility Regulatory Policies Act of 1978(PURPA)to require state regulatory authorities and certain nonregulated utilities to conduct assessments regarding the implementation of federal standards relating to net metering, smart metering and interconnections. Because the City of Fort Collins Electric Utility (the "Utility") has retail sales in excess of 500 million kWh,it is subject to these PURPA provisions. PURPA,as amended,requires that regulatory authorities and utilities consider the standards after notice and public hearing and to make a determination in writing whether or not to implement such standards. A regulatory agency or utility may determine that it is not appropriate to adopt a particular standard and may decline to do so as long as it sets forth its reasons in writing. Staff recommends that Council consider each of the PURPA standards and that the Resolution be adopted as written. BACKGROUND The following is a summary of the PURPA standards that are to be given consideration by the City of Fort Collins. Following each summarized standard is the applicable Utility practice or policy and associated staff recommendation.The PURPA standards in their entirety maybe found at 16 United States Code §2601, et. seq. 111 Standards for consideration d . 16 USC 2601 Subtitle B Section , ( ) (11)Net Metering—Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves. July 17, 2007 -2- Item No. 21 The Utility currentlypermits net metering. For large commercial and industrial customers, Utilities allows net metering under the 'parallel generation"and "special services"provision ofthe current electric rate schedules. Customer-owned electric generation in excess of monthly consumption is credited at the appropriate avoided cost of purchased power in accordance with applicable rates and Platte River Power Authority(PRPA)tariffs. Net metering is currently available to residential customers under the demand(RD)rate or at the standard residential rate(R)through participation in a five year parallel generation pilot program. Staff will be using data collected during the pilot program to develop a separate residential parallel generation rate that includes a net metering provision similar to that currently offered to commercial and industrial customers. The Code, regulations,policies and practices of the City's Utility meet this standard. (12) Fuel Sources—Each electric utility shall develop a plan to minimize dependence on one fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies. The Utility does not own any electric generation facilities, but rather jointly owns Platte River Power Authority (PRPA) with four other member municipalities. PRPA provides the Utility with wholesale electricity. PRPA uses multiple resources (fossil fuel, wind, hydro,purchased power)to meet the needs of the four member cities. PRPA plans for future resources byway of an Integrated Resource Plan (IRP). This plan includes future capacity and energy supply resources, renewable energy and energy efficiency options. The IRP is updated annually, with a formal revision every five years. The IRP and associated budget is approved by the eight members of the PRPA board of directors. The City of Fort Collins is currently represented on the board by the Mayor and Utilities General Manager. Resources used to serve the PRPA member municipalities in 2006 included 74.8% coal, 18.7°yo hydro, 3.8%purchases, 1.6% renewable and 1.1%natural gas. The Utility will continue to work jointly with other member municipalities to promote efficiency at currently existing generation plants and to diversify the range of fuels and technologies used by PRPA to generate electricity. The Code, regulations,policies and practices of the City's Utility meet this standard to the extent possible through its membership and participation in PRPA. (13) Fossil Fuel Generation Efficiency—Each electric utility shall develop and implement a 10- year plan to increase the efficiency of its fossil fuel generation PRPA regularly plans for improvements to generation facilities including those mentioned in the Integrated Resource Plan (IRP). PRPA continues to make modifications to the Rawhide electric generation plant to improve efficiency. These include, but are not limited to: improvements to the boiler control system; turbine upgrades;pump motor upgrades; the addition of efficient lighting; emission control; and upgrades to the fuel ignition system. As a co-owner of the Craig electric generation facility, PRPA continues to participate in the evaluation and approval of similar improvements. The Code, regulations,policies and practices of the City's Utility meet this standard to the extent possible through its membership and participation in PRPA. July 17, 2007 -3- Item No. 21 (14) Time-Based Metering—Not later than 18 months after the date of enactment, each electric utility shall offer and then provide upon request to customers, a time-based rate schedule which reflects the variance, if any, in the costs of generation and purchasing electricity at the wholesale level. The Utility wholesale rates are a monthly demand-energy rate. The time-based element is the day and hour of peak demand as determined by our wholesale energy provider (PRPA). The Utility passes this charge directly through to industrial and large commercial customers as a time-based component of our commercial rate structure. Approximately 500 customers are currently on this rate, which corresponds to roughly 50%of our electric load and 33%of our rate revenue. Presently, all other customer classes have the PRPA wholesale rates blended into their rate structure based upon their estimated contribution to the system peak. These estimates are developed from industry load data, in-house sampling and engineering calculations. Given the cost of time- based metering and the lack ofa consistentpeak-demand time reference, implementing time-of-use rate and the associated billingfor residential and small commercial customers is not currently a cost effective alternative. Should PRPA develop future time-of-use wholesale rates, staff will respond with rate options reflecting these new cost components and present such options to City Council for review. Because PRPA does not currently offer a wholesale rate that includes a time-based component and because of the prohibitively high cost associated with the Utility providing the technology itself to measure time-based use, the Utility employs a modified approach to this standard as more fully described in the Staff Report(Exhibit 'B" to the Resolution). (15) Interconnection — Each electric utility shall make available, upon request, interconnection service to any electric consumer that the electric utility serves. The Utility has offered interconnection to customers who own approvedprivategenerationfacilities for several years. Currently, residential interconnection is allowed at the demand rate(RD)or with approval from the Utilities General Manager. In an effort to streamline residential interconnection and collect cost-of-service data, the Utility established a residential pilot parallel generation program in 2004. This five year program allows for the first 25 customers who participate to earn credit at the full retail rate for any electric generation (kilowatt-hours) in excess of their monthly consumption. Parallel generation for all other rate classes is permitted under the "special provisions"section of each rate schedule. The details for interconnection are described in the "Electric Service Rules& Regulations"and the "The Electric Construction Policies, Practices and Procedures. " A formal application process was developed in 2004, while technical interconnection requirements are reviewed and updated regularly. Staffhas developed aprocess to review each proposed installation to evaluate the safety and compatibility of interconnection equipment(breakers, relays, telemetry, disconnects) as well as the metering, monitoring and operational requirements. The Code, regulations,policies and practices of the City's Utility meet this standard. Utilities Consideration of PURPA Standards Public Hearing July 17 , 2007 Agenda • What is PURPA? • Why consider these standards ? What are the new PURPA standards? Consideration of standards • Future impacts Staff recommended resolution Consideration of PURPA Standards 2 What is PURPA? Adopted as part of the National Energy Act of 1978 Congressional Purpose for the PURPA : 1 ) Promote Conservation of Energy 2 ) Optimization of Efficient Use of Electric Utility Resources 3 ) Equitable Rates to Electric Consumers Several minor revisions 1980 , 845 867 90 Energy Policy Act ( EPAct) 1992 The recently enacted EPAct of 2005 made substantial changes and additions to the provisions of the PURPA Consideration of PURPA Standards 3 What action is required ? Initiate proceedings within one/two years upon public notice and by conducting hearings Complete the Consideration within two/three years and make Determination : . In writing . Based upon findings included in determination and evidence at hearings . Available to the public Consideration of PURPA Standards 4 What action is required ? The EPAct does not require adoption of any of the standards ; however, it does necessitate consideration . The City' s Utility initiated its consideration of these standards by way of a memorandum to City Council in June of 2006 Consideration of PURPA Standards 5 Why? PURPA' s " Retail Regulatory Policies for Electric Utilities" apply to an electric utility if it sells more than 500 million kilowatt- hours ( kWh ) during the any year for purposes other than resale . Our total retail sales per year exceed 1 . 4 billion kWh . Consideration of PURPA Standards 6 Why? PURPA applies to both regulated and non - regulated utilities . An " electric utility ' is specifically defined by PURPA as " any person, State agency, or Federal agency, which sells electricity" ( 16 U. S. C. § 2602(4)) . A "non -regulated electric utility" is defined as "any electric utility other than a State regulated utility ' Consideration of PURPA Standards 7 New PURPA Standards 1 . Net Metering , (Section 1251 (a) (11)) ✓ Fuel Sources Standard , (Section 1251 (a) (12)) 3 . Fossil Fuel Generation Efficiency Standard , ( Section 1251 (a) ( 13)) 4 . Smart Metering (with Time- Based Schedules ) , (Section 1252 (a) ( 14)) 4 Modified Approach 5 . Interconnection , (Section 1254 (a) ( 15)) ✓ Consideration of PURPA Standards 8 Compliance Deadlines C141-tif Fort Collin . .Augusust 8, . . Enactment of EPAct Section 1251 Standards. Net Metering, Fuel Diversity, and Fossil Fuel Generation Efficiency Begin consideration Make a determination Section 1252 , Smart Metering,* and Section 1254, Interconnection • Begin consideration • Make determination Consideration of PURPA Standards 9 Net Metering , (Section 1251 (a) (11)) "Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves. For purposes of this paragraph, the term `net metering service ' means service to an electric consumer under which electric energy generated by that electric consumer from an eligible on -site generating facility and delivered to the local distribution facilities maybe used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period. " Consideration of PURPA Standards 10 Net Metering - Current Practices Available to commercial customers under the " parallel generation " and "special services " provision of the current electric rate schedules . Available to residential customers under the demand ( RD ) rate or by participation in a five-year parallel generation pilot program . Data collected from the pilot will be used to develop a residential parallel generation rate . Consideration of PURPA Standards 11 Net Metering - Recommendations City Code , regulations , policies and current practices of the Utility meet this standard . Develop a new rate for 2008 specific to residential PV installations . Consideration of PURPA Standards 12 Fuel Sources Standard , (Section 1251 (a) (12)) "Each electric utility shall develop a plan to minimize dependence on one fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies including renewable technologies. " Consideration of PURPA Standards 13 Fuel Sources Standard - Current Practices Utilities does not directly own any electric generation • PRPA uses multiple resources (fossil fuel , wind , hydro , purchased power) to meet the needs of the four member cities . PRPA follows an integrated resource plan that plan includes future capacity and energy supply resources , renewable energy and energy efficiency options . Consideration of PURPA Standards 14 Fuel Sources Standard - Current Practices The IRP and associated budget is approved by the eight members of the PRPA board of directors . PURPA standards do not apply to wholesale energy sales . Consideration of PURPA Standards 15 Fuel Sources Standard - Recommendations The Code , regulations , policies and practices of the City ' s Utility meet this standard to the extent possible through its membership and participation in PRPA . Continue to work with PRPA via our board representatives to promote fuel source diversity and to meet existing renewable portfolio goals . Consideration of PURPA Standards 16 Fossil Fuel Generation Efficiency Standard , 1 _( Section 1251 (q) (13 ) "Each electric utility shall develop and implement a 10 year plan to increase the efficiency of its fossil fuel generation. " Consideration of PURPA Standards 17 Fossil Fuel Generation Efficiency Standard - Current Practices • Utilities does not directly own generation • PRPA regularly plans for improvements to generation facilities including those mentioned in their Integrated Resource Plan ( IRP ) . PRPA continues to make modifications to the Rawhide electric generation plant to improve efficiency . These include , but are not limited to : improvements to the boiler control system ; turbine upgrades ; pump motor upgrades ; the addition of efficient lighting ; emission control ; and upgrades to the fuel ignition system . As a co-owner of the Craig electric generation facility , PRPA has participated in evaluation and approval of similar improvements . Consideration of PURPA Standards 18 Fossil Fuel Generation Efficiency Standard - Recommendation The Code , regulations , policies and practices of the City ' s Utility meets this standard to the extent possible through its membership and participation in PRPA . Continue to work with PRPA via our board representatives to promote efficiency at the Rawhide and Craig plants . Consideration of PURPA Standards 19 Smart Metering (with Time - Based Schedules ) , (Section 1252 (a) (14)) "Each electric utility shall offer each of its customer classes, and provide individual customers upon customer request, a time -based rate schedule under which the rate charged by the electric utility varies during different time periods and reflects the variance, if any, in the utility's costs of generating and purchasing electricity at the wholesale level. The time-based rate schedule shall enable the electric consumer to manage energy use and cost through advanced metering and communications technology. " Consideration of PURPA Standards 20 1 Smart Metering (with Time - Based Schedules ) May include , among others : 0 Time-of- Use Pricing Critical Peak Pricing 0 Real -Time Pricing Credits for Large Load Peak Reduction Agreements Consideration of PURPA Standards 21 The Goal With appropriate rate incentives , utilities with energy and demand components in wholesale rate structure can seek to shift consumer use and consequently improve the load factor. Consideration of PURPA Standards 22 Smart Metering — Issues/Current Status •. PRPA's wholesale rate does not presently include a time-based component. �. A price signal does exist in the form of a coincident demand component �. Coincident demand is directly passed on to commercial and industrial customers in their respective rates . Coincident demand provides customers an incentive to modify use patterns to reduce energy bills and optimize the efficiency of operations • Coincident demand is relatively predictable but not a strictly defined time period as with traditional TOU Consideration of PURPA Standards 23 Daily Electric Smart Metering — The challenge . - . . , . , . , „ Hour Ending 111 12 Consideration of PURPA Standards 24 Smart Metering — Current Status The coincident demand component is blended for residential customers . Residential customers are viewed as homogeneous load . Staff has installed 33 + load survey meters on residential services with air conditioning loads . Data is being used to determine the best way to apply the coincident demand component at the residential level including the possibility of a time- based rate Discussions continue with PRPA to determine if the member cities would be better served with a time- based wholesale rate . Consideration of PURPA Standards 25 Smart Metering — Recommendations • Passing on the coincident demand wholesale component meets the intent of PURPA for C & I customers . Use load survey data to eventually develop a time- based residential rate that will better reflect the cost of energy throughout the day , thus enabling an electric consumer to effectively manage energy use and cost . Consideration of PURPA Standards 26 Interconnection , (Section 1254 (a) (15)) "Each electric utility shall make available, upon request, interconnection service to any electric consumer that the electric utility serves . . . Interconnection services shall be offered based upon the standards developed by the Institute of Electrical and Electronics Engineers: IEEE Standard 1547 for Interconnecting Distributed Resources with Electric Power Systems . . . . . . services offered shall promote current best practices of interconnection for distributed generation . . . All such agreements and procedures shall be just and reasonable, and not unduly discriminatory or preferential. " Consideration of PURPA Standards 27 Interconnection - Current Practices (residential) Interconnection is available under the residential demand rate ( RD ) . r A residential pilot parallel generation program was established in 2004 . This five-year program allows the first 25 customers who participate to earn credit at the full retail rate for any electric generation ( kilowatt- hours ) in excess of their monthly consumption . Data collected from the pilot program is being used to improve interconnection standards and aid in the development of a residential parallel generation rate . Consideration of PURPA Standards 28 Interconnection = Current Practices (commercial) Parallel generation for commercial rate classes is permitted under the " special provisions " section of each rate schedule . A formal application process was developed in 2004 that incorporates IEEE Standard 1547 . Staff reviews each proposed installation to evaluate the safety and compatibility of interconnection equipment ( breakers , relays , telemetry , disconnects ) as well as the metering , monitoring and operational requirements . Consideration of PURPA Standards 29 Interconnection - Status There are approximately 12 residential PV installations connected to the electric distribution grid . There are 4 large scale commercial distributed generation installations tied to the Fort Collins electric distribution system Consideration of PURPA Standards 30 Interconnection = Recommendation The Code , regulations , policies and practices of the Utility meet this standard . Offer a simplified connection for residential customers including a new PV rate that will effectively provide for net metering . This will eliminate the need for any special contracts . Consideration of PURPA Standards 31 Future Impacts Approval of this resolution does not prohibit any future review or changes to rates and efficiency/conservation policies . Consideration of PURPA Standards 32 Recommendation Summary Staff has reviewed each of the PURPA standards as required by the Energy Policy Act of 2005 and considered how each standard relates to the City' s current practices and future plans to adjust its practices in accordance with the goals identified in PURPA . Staff recommends adoption by Council of staff' s determinations as outlined in detail in the Staff Report and discussed in this presentation . Consideration of PURPA Standards 33 RESOLUTION 2007-066 OF THE COUNCIL OF THE CITY OF FORT COLLINS CONCERNING IMPLEMENTATION OF STANDARDS CREATED BY AMENDMENTS TO THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978 BY THE UTILITY WHEREAS, the City's electric utility enterprise, Fort Collins Utilities (the "Utility"), is subject to the Public Utility Regulatory Policies Act of 1978 ("PURPA") found at 16 United States Code §2601, et. seq.; and WHEREAS, the purposes of PURPA are to encourage the conservation of energy supplied by electric utilities, to optimize the efficiency of use of facilities and resources by electric utilities, and to ensure equitable rates to electric customers; and WHEREAS, in 1992 Congress amended PURPA by enacting the Comprehensive National Energy Policy Act of 1992 (the"1992 Act"); and WHEREAS, the 1992 Act required the Utility to consider adoption of a new energy standard, the Integrated Resource Planning ("IRP") Standard, after providing public notice and in a public hearing, and to make a determination whether to implement the IRP Standard; and WHEREAS, pursuant to the 1992 Act, City Council conducted a public hearing on October 19, 1993, at which it considered the IRP Standard and adopted such standard through the approval of Resolution 1993-150; and WHEREAS, in 2005, PURPA was fiuther amended by the enactment of the Energy Policy Act of 2005 ("the 2005 Act") which added five new standards that address the following topics: net metering, fuel sources, fossil fuel efficiency, time-based metering and interconnection; and WHEREAS, the 2005 Act requires regulatory authorities and utilities to consider the standards, after notice and public hearing, and to make a determination in writing whether or not to implement such standards; and WHEREAS, if a utility determines that it is not appropriate to implement a particular standard, it may do so as long as it sets forth its reasons in writing; and WHEREAS, the process of reviewing and considering the new standards was initiated by the Utility by virtue of a memorandum dated June 14, 2006, from the Utilities General Manager to the Mayor and City Council, a copy of which memorandum is attached hereto and incorporated herein by this reference as Exhibit"A"; and WHEREAS, City staff has reviewed each of the five federal standards established by the 2005 Act, considered and made determinations regarding each standard, and made recommendations to City Council with regard to each of the standards in a Staff Report that is marked as Exhibit`B", attached hereto and incorporated herein by this reference; and WHEREAS, at its regular meeting on May 16, 2007, the Electric Board considered a draft of the Staff Report prepared by Utility staff and voted unanimously to recommend that the City Council approve the report; and WHEREAS, in accordance with the procedural requirements for consideration and determination of certain ratemaking standards contained in PURPA, public notice of City Council's consideration of the PURPA standards was published on Sunday, July 1, 2007; and WHEREAS, the written determinations made herein by the City Council are based upon findings included in the Staff Report and upon evidence presented at the hearing, and will hereafter be available to the public in the office of the City Clerk. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. Upon review and consideration of each of the federal standards and as outlined by staff in Exhibit B, the Council hereby finds that it is in the best interests of the City of Fort Collins to adopt the determinations made by staff in the Staff Report Section 2. That this review of the standards of PURPA, consideration of each standard, public notice of hearing and public hearing, and the passage of this Resolution complete the consideration and determination process required by PURPA. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 17th day of July, A.D. 2007. Mayor ATTEST: City Clerk -2- EXHIBIT A �'tilities e ectr c = sttrmwater • waste,Aater - water City of Fort Collins MEMORANDUM Date: June 14, 2006 To: Mayor and City Council Members Thru: Darin Atteberry, City Manager From: Michael Smith, Utilities General Manager Re: PURPA Provisions Contained in the Energy Policy Act of 2005 (P.L. 109-58) In August 2005, the United States Congress adopted the federal Energy Policy Act of 2005 (P.L. 109-58), which amends the Public Utility Regulatory Policies Act of 1978 (PURPA) to require state regulatory authorities and certain nonregulated utilities to conduct assessments regarding the implementation of federal standards relating to net metering, smart metering and interconnections. Because the City of Fort Collins Electric Utility has retail sales in excess of 500 million kWh, it is subject to these PURPA provisions. PURPA, as amended, requires that the City take formal action to consider the following standards for electric service (but does not require the adoption of any of these standards): • Within two years of enactment (August 8, 2007), affected parties are required to have commenced consideration of net metering standards or have set a hearing date for such consideration. This process must be completed within three years of enactment (August 8, 2008.) • Within one year of enactment (August 8, 2006), affected parties are required to have commenced consideration of smart metering standards or have set a hearing date for such consideration. This consideration and determination must be completed within two years of enactment (August 8, 2007.) • Within one year of enactment (August 8, 2006), affected parties are required to have commenced consideration of interconnection standards or have set a hearing date for such consideration. This consideration and determination must be completed within two years of enactment (August 8, 2007.) The City's Electric Utility has considered these issues in earlier policy planning and has already begun implementation of some related programs. However, under PURPA the City will be required to review these considerations during the timeframes noted. This memorandum is intended to advise the City Council and to document for the public record that City staff has commenced working to evaluate the feasibility of modifying or oo Lca 5K • Fort C ollms, CO KK2-0550 • (970) 221-6700 • FAX (970) 221-6619 • TDD (970) 224-6003 e-n=,ail: utilitie5(v tcgov.Co!n . www.lcgov.Com!utilities . . . ........ ... EXHIBIT A adopting new metering/interconnection standards in accordance with PURPA requirements with the assistance of Platte River Power Authority staff. A formal City Council hearing to consider the matters listed above will be required after completion of this staff review. It is the intention of staff to provide the Mayor and City Council with recommendations to be scheduled for the required public hearing prior to August 8, 2007. Several PURPA related documents have been posted on APPA's website as part of a new webpage devoted to the Energy Policy Act of 2005. These materials may be accessed at http://www.appanet.org/legislative/index.cfm?ltemNumber=13734 cc: Diane Jones, Deputy City Manager Carrie Daggett, Sr. Assistant City Attorney EXHIBIT "B" Exhibit B ("Staff Report") Fact Sheets Regarding Consideration of the Public Utility Regulatory Policies Act (PURPA) of 1978 As Amended by the Energy Policy Act of 2005 Fort Collins City Council—Regular Meeting July 17,2007 In August 2005, the United States Congress adopted the federal Energy Policy Act of 2005 (P.L. 109-58), which amends the Public Utility Regulatory Policies Act of 1978 (PURPA) to require state regulatory authorities and certain nonregulated utilities to conduct assessments regarding the implementation of federal standards relating to net metering, smart metering and interconnections. Because the City of Fort Collins Electric Utility has retail sales in excess of 500 million kWh, it is subject to these PURPA provisions. PURPA as amended requires that regulatory authorities and utilities consider the standards after notice and public hearing and to make a determination in writing whether or not to implement such standards. A regulatory agency or utility may determine that it is not appropriate to adopt a particular standard and may decline to do so as long as it sets forth its reasons in writing. The Utility is not in violation of the law where it cannot meet a standard contained in PURPA. Page 2 of 22 FACT SHEET Legislation: Energy Policy Act of 2005—PURPA Amendments Requirement: Consideration of PURPA Standards (Appendix A) Standard: Net Metering, (Section 1251 (a) (11)) "Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves." Goal: Equitable rates to electric consumers Definition: Service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period. Status: The Code, regulations, policies and practices of the City's Utility meet this standard. Key Points: i The Utility allows for net metering under the"special services"provision of the current electric rate schedules. s� Customer-owned electric generation in excess of monthly consumption is credited at the appropriate avoided cost of purchased power in accordance with applicable Platte River Power Authority(PRPA) tariffs. 4i Net metering is currently available to both commercial and residential customers. Net metering for residential customers is made available under the demand (RD) rate or at the standard residential rate (R) through participation in a five-year parallel generation pilot program (Jan. 2005 - Dec. 2009). Staff will be using data collected during the pilot program to develop a separate residential parallel generation rate that includes a net metering provision similar to that of non-residential rates. Page 3 of 22 FACTSHEET Legislation: Energy Policy Act of 2005 —PURPA Amendments Requirement: Consideration of PURPA Standards Standard: Fuel Sources Standard, (Section 1251 (a) (12)) "Each electric utility shall develop a plan to minimize dependence on one fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range offuels and technologies including renewable technologies. " Goal: Promotion of renewable energy generation Status: The Code, regulations,policies and practices of the City's Utility meet this standard to the extent possible through its membership and participation in Platte River Power Authority("PRPA"). Key Points: 46 The City owns PRPA jointly with Loveland, Longmont and Estes Park. This standard does not apply directly to the Utility as the Utility does not own or operate any electric generation facilities. Through its participation in PRPA's governance, the Utility acts to develop a plan to minimize dependence on one fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies. PRPA uses multiple resources (fossil fuel, wind, hydro, purchased power) to meet the needs of the four member cities. Resources used to serve the municipalities in 2006 included 74.8% coal, 18.7%hydro, 3.8%purchases, 1.6%renewable and 1.1% natural gas. 4 PRPA reviews its future fuel needs on a regular basis, with several factors impacting these requirements. The fuel mix can be impacted by factors such as availability of hydropower or wind resources, scheduled maintenance of generation units, fuel price, and wholesale market prices. 4 PRPA maintains an Integrated Resource Plan(IRP) that describes future capacity and energy supply resources, as well as renewable energy and energy efficiency options. The IRP provides information associated with the planning of resource acquisitions to meet customers' future electrical energy needs, including capacity and energy supply resources, renewable energy and energy efficiency options. All resource plans and budgets are approved by the eight-member PRPA Board of Directors. The IRP is updated annually, with a formal revision every five years. The IRP and associated budget is approved by the eight members of the PRPA board of directors. The City of Fort Collins is currently represented on the board by the Mayor and Utilities General Manager. Page 4 of 22! When Council adopted the Energy Supply Policy in March 2003, the Council established specific renewable energy goals including the goal of a 15% renewable portfolio by 2017. These goals are regularly communicated to PRPA and reflected in planning efforts. Page 5 of 22j FACT SHEET Legislation: Energy Policy Act of 2005 —PURPA Amendments Requirement: Consideration of PURPA Standards Standard: Fossil Fuel Generation Efficiency Standard, (Section 1251 (a) (13)) "Each electric utility shall develop and implement a 10 year plan to increase the efficiency of its fossil fuel generation." Goal: Efficient use of electric utility resources Status: The Code, regulations, policies and practices of the City's Utility meet this standard to the extent possible through its membership and participation in PRPA. Key Points: The City owns PRPA jointly with Loveland, Longmont and Estes Park. This standard does not apply directly to the City of Fort Collins as the City does not own or operate any electric generation facilities. Through its participation in PRPA's governance, the Utility acts to develop a plan to increase the efficiency of PRPA's fossil fuel generation. +i As part of its annual operating goals, PRPA seeks continued improvement in plant efficiency at the Rawhide facility. These improvements are reflected in the PRPA Integrated Resource Plan. 4 PRPA regularly makes modifications to the Rawhide electric generation plant to improve efficiency. These include, but are not limited to: improvements to the boiler control system; turbine upgrades; pump motor upgrades; the addition of efficient lighting; emission control; and upgrades to the fuel ignition system. +i. As a part owner of the Craig electric generation facility, PRPA has participated in evaluation and approval of similar improvements by way of management and oversight committees. +4 All plant efficiency improvements are approved by the PRPA Board of Directors, either on an individual project basis or as part of the overall budgeting review process. Page 6 of 22 FACT SHEET Legislation: Energy Policy Act of 2005—PURPA Amendments Requirement: Consideration of PURPA Standards Standard: Smart Metering (with Time-Based Schedules), (Section 1252 (a) (14)) "Each electric utility shall offer each of its customer classes, and provide individual customers upon customer request, a time-based rate schedule under which the rate charged by the electric utility varies during different time periods and reflects the variance, if any, in the utility's costs ofgenerating and purchasing electricity at the wholesale level. The time-based rate schedule shall enable the electric consumer to manage energy use and cost through advanced metering and communications technology. " Goal: Equitable rates to electric consumers -With appropriate rate incentives, utilities with energy and demand components in wholesale rate structure can seek to shift consumer use and consequently improve the load factor. Status: The Utility employs a modified approach to this standard. Key Points: 4 The City owns PRPA jointly with Loveland, Longmont and Estes Park. PRPA generates electricity for the Utility and sells the electricity to the Utility at wholesale rates. The Utility then sells the electricity it distributes to its customers at retail rates that correspond with PRPA's wholesale tariffs. These retail rates reflect Utility operating costs while also directly passing on wholesale charges to the customer. ak PRPA does not currently offer a wholesale rate that includes a time-based component. db Prohibitively high costs are currently associated with the Utility providing technology to its customers to measure time-based use. 4 Time-based rates are electricity rates that vary with time and with the price of product. Time-based rates may be structured in a number of different ways. The most common types of time-based rates and those identified in PURPA may be referenced in Appendix A to this Report, Section 1252(a)(14)(B). Page 7 of 22 Background: The City of Fort Collins Electric Utility's cost structure can be broken down into three components. 1. Distribution Utility costs These are the costs to cover the metering,billing, operation and maintenance of the electric system from the distribution substation transformers to the individual customer. These costs are managed through the budget process and are generally sensitive to the number of customers and insensitive to the amount of electricity delivered through the distribution system. They are considered fixed costs and make up approximately 1/3 of the budget. 2. Purchase Power costs These costs make up 2/3 of the Electric Utility Budget and are evenly split between an energy component ($ per kilowatt hour) which is constant for all use and not time sensitive and a demand component ($ per monthly peak kilowatt) which is time sensitive to a one- hour period each month. The time of the one-hour period is not known until the end of the monthly billing period when it is determined when the highest hourly use of electricity can be calculated. These costs are considered variable costs. 3. Demand costs The demand component of the purchase power costs are not time-sensitive in the traditional sense where they vary over determined periods of time and season. Thus the Utility cannot pass along these time varying costs to its customers. However, given current metering technology, the Utility has some options to pass along the coincident peak price signal, particularly to the larger commercial customers. Residential Customers Residential customers have historically had uniform or homogeneous load characteristics among the many users and, as a result, there was not sufficient differentiation to justify time of use ("TOU") rates to support cost based pricing. Commercial/Industrial Customers When advanced metering and communication technology entered the commercial market, the Utility established a coincident peak rate for larger commercial and industrial (GS-750 and GS-50) customers (slightly less than 500 count). With this rate, the Utility accurately passes along the customer's contribution to the Utility's monthly wholesale purchase power bill. Several advantages have followed the implementation of this rate. These customers have an appropriate price signal to justify demand reduction measures if they choose to reduce their energy bill. Although the Utility cannot predict exactly the day and hour of the coming peak there are reasonably defined time periods in which they occur (Typically from 1:00—5:00 p.m. on summer weekdays and 5:00— 8:00 p.m. on winter weekdays.). The transition periods such as April, early May and late September are somewhat more elusive. Customer response to this rate has been similar to that of a traditional TOU rate. One additional benefit of the coincident peak rate is that the Utility Page 8 of 22 records 15 minute interval load history and make this information available to the customers for their own internal analysis. Things to consider regarding time-based rates: • Currently, there is no price variation in wholesale purchased power(kilowatt-hours) that varies with the time of day that can be passed on to customers via a time-based rate (fundamental goal of the PURPA standard). • A price signal does exist in the form of a coincident demand component that is based on the PRPA one-hour system peak each month. • This coincident demand element is directly passed on to Fort Collins commercial and industrial customers in their respective rates as a"coincident demand" charge. • Coincident demand provides customers an incentive to modify use patterns to reduce energy bills and optimize operations (the intent of the PURPA standard). Several commercial customers presently monitor the PRPA website for projected electrical load to predict the best time to alter use patterns, avoid the system peak and reduce energy costs. • The coincident demand period is relatively predictable, but it is not a strictly defined time period as it would be under a traditional TOU rate. • The coincident demand component is currently blended for residential customers, who are for planning purposes, viewed as a homogeneous load. • Discussions continue with PRPA to determine if the member cities would be better served with a time-based wholesale rate and how PRPA might implement this type of tariff. Potential Benefits: In general, TOUpricing has the potential to achieve two things. • Fair(cost based)pricing- If there is significant diversity among the users within a rate class regarding their electric load patterns and times of peak use, then TOU rates may more accurately allocate wholesale costs to these customers thus minimizing inevitable cross subsidies that would occur without this differentiation. Additionally, the more accurate allocation of such costs would allow the higher cost customers to be effectively targeted for proactive conservation or DSM measures. • Load shifting- If there is significant price differentiation between time periods the customer may have sufficient incentive to change their electric use behavior and reduce energy bills. Concerns: • Many consumers are not willing to commit to appreciable changes in energy use patterns, and as such, voluntary participation in TOU programs is very limited. "Participation in TOU rates and other types of residential DR (demand response)programs is generally low, usually ranging from almost zero to 3% of eligible customers."I • One unintended consequence of using residential TOU rates to reduce peak can be a reduction of revenue without a proportional reduction in system peak. The results of an Arizona Public Service TOU rate study revealed that, although customers shifted energy Randy Gunn,North American Utility Demand Response Survey Results,Summit Blue Consulting;150 North Michigan Avenue,Suite 2700, Chicago,IL,Match 7,2007. Page 9 of 22, use from higher priced on-peak time periods to lower priced off-peak time periods to save money, there was little impact of these customers on the system demand peak. The reason was that for most of the moderately hot days the customers would reduce the use of their air-conditioning but for the hottest days they were willing to pay that day's increased costs for air-conditioning comfort. Thus, they achieved cost savings in their monthly bill but there was not a proportional reduction in system peak savings or the utility's cost of service. • If a traditional TOU rate were established, the defined peak period would likely be longer than the control period currently used by those who actively seek to avoid the monthly coincident peak period, thus sacrificing some flexibility for predictability. • Hardware/Communication/Programming Costs. - The cost of a residential TOU meter is approximately$50 higher than that of a standard kwh meter. This increase is slightly less for commercial applications. - Adding communication hardware to a metering location ranges from $60-120 per residential installation and $200-400 for each commercial/industrial installation (not including monthly access changes for cell phone based installations). - While the actual number of customers who would migrate toward a time-based rate is uncertain, the potential exists to modify more than 60,000 installations. - Any increased hardware costs would likely be passed on to the customer in the form of fixed charges. These charges would offset some of the customer savings realized from altered use patterns under a time-based rate. - Any changes to pricing periods or seasons would require each meter to be reprogrammed. There also exists the issue with battery maintenance and replacement for TOU meters. Potential Residential Applications: With the recent growth in whole house air-conditioned homes it has become evident that there is a difference in costs per kilowatt-hour for these homes as opposed to the older, non-air-conditioned homes. The more recent whole house air-conditioned homes have a higher coincidence with the system peak and, as a result, should have a higher cost per kilowatt hour than the blended class as a whole. TOU pricing could be used for more fairly differentiating the costs between air-conditioned residential homes and non-air- conditioned homes but there are factors that make it presently impractical: • If the rate were voluntary, the current residential rate would be cheaper for an air- conditioned customer than the optional TOU rate unless that customer significantly altered their use patterns. This would make the TOU option less appealing. • If the rate were mandatory for whole house air-conditioned customers we would be in the difficult position of identifying these customers and then forcing them on the TOU rate. • If the rate were mandatory for all customers we would have the staggering task of purchasing, installing and reading TOU meters for more than 52,000 customers. Staff has installed load survey meters on more than 33 residential services with air conditioning(AC) loads. This data is being analyzed to determine the impact of AC on system peak and whether a time-based rate would better address the cost-of-service for Page 10 of 22 customers with AC. Data will be used to determine how to apply the coincident demand component at the residential level including the possibility of a time-based rate. Staff will continue to monitor and evaluate the cost of metering hardware and communication options to identify a point at which routine deployment of this equipment is cost-effective. Page 11 of22 FACT SHEET Legislation: Energy Policy Act of 2005 —PURPA Amendments Requirement: Consideration of PURPA Standards Standard: Interconnection, (Section 1254 (a) (15)) "Each electric utility shall make available, upon request, interconnection service to any electric consumer that the electric utility serves ... Interconnection services shall be offered based upon the standards developed by the Institute of Electrical and Electronics Engineers: IEEE Standard 1547 for Interconnecting Distributed Resources with Electric Power Systems ... ... services offered shall promote current best practices of interconnection for distributed generation ... All such agreements and procedures shall be just and reasonable, and not unduly discriminatory or preferential. " Goal: Efficient use of electric utility resources & equitable rates to electric consumers Status: The Code, regulations,policies and practices of the Utility meet this standard. Key Points: «1w Residential interconnection is allowed by the Utility under the demand rate ("RD") or with approval from the Utilities General Manager. 4, Parallel generation for all other rate classes is permitted under the "special provisions" section of each rate schedule. The details for interconnection are described in the "Electric Service Rules &Regulations." For residential customers: N In an effort to streamline residential interconnection and collect cost-of-service data, Utilities established a residential pilot parallel generation program in 2004. This five- year program allows for the first 25 customers who participate to earn credit at the full retail rate for any electric generation(kilowatt-hours) in excess of their monthly consumption. N Energy use data collected from the pilot program will be used to establish a residential parallel generation rate. This rate is planned for implementation in 2008. N There are approximately 12 residential PV installations connected to the distribution grid. Page 12 of22 For commercial customers: i✓ A formal application process was developed in 2004 N There are 4 large scale commercial distributed generation installations connected to the distribution system. Page j 13 of 22 Appendix A—Excerpts of the Energy Policy Act of 2005 Subtitle E Amendments to PURPA SEC. 1251. NET METERING AND ADDITIONAL STANDARDS. (a)ADOPTION OF STANDARDS-Section 111(d) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is amended by adding at the end the following: '(11)NET METERING-Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves. For purposes of this paragraph, the term 'net metering service'means service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period. '(12)FUEL SOURCES-Each electric utility shall develop a plan to minimize dependence on 1 fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies. '(13)FOSSIL FUEL GENERATION EFFICIENCY-Each electric utility shall develop and implement a 10 year plan to increase the efficiency of its fossil fuel generation.'. (b) COMPLIANCE- (1) TIME LIMITATIONS-Section 112(b) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C 2622(b)) is amended by adding at the end the following: '(3)(A)Not later than 2 years after the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority) and each nonregulated electric utility shall commence the consideration referred to in section 111, or set a hearing date for such consideration, with respect to each standard established by paragraphs (11) through (13) of section 111(d). '(B)Not later than 3 years after the date of the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority), and each nonregulated electric utility, shall complete the consideration, and shall make the determination, referred to in section 111 with respect to each standard established by paragraphs (11) through (13) of section 111(d).'. (2) FAILURE TO COMPLY-Section 112(c) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(c)) is amended by adding at the end the following: 'In the case of each standard established by paragraphs (11) through (13) of section 111(d), the reference contained in this subsection to the date of enactment of this Act shall be deemed to be a reference to the date of enactment of such paragraphs (11) through (13).'. (3)PRIOR STATE ACTIONS- (A)IN GENERAL-Section 112 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622) is amended by adding at the end the following: '(d)PRIOR STATE ACTIONS-Subsections (b) and(c) of this section shall not apply to the standards established by paragraphs (11) through (13) of section 111(d) in the case of any electric utility in a State if, before the enactment of this subsection— Page 14 of22 '(1) the State has implemented for such utility the standard concerned(or a comparable standard); '(2) the State regulatory authority for such State or relevant nonregulated electric utility has conducted a proceeding to consider implementation of the standard concerned(or a comparable standard)for such utility; or '(3) the State legislature has voted on the implementation of such standard(or a comparable standard)for such utility.'. (B) CROSS REFERENCE-Section 124 of such Act (16 U.S.C. 2634) is amended by adding the following at the end thereof: 'In the case of each standard established byparagraphs (11) through (13) ofsection 111(d), the reference contained in this subsection to the date of enactment of this Act shall be deemed to be a reference to the date of enactment of such paragraphs (11) through (13).'. SEC. 1252. SMART METERING. (a)IN GENERAL-Section 111(d) of the Public Utilities Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is amended by adding at the end the following: '(14) TIME-BASED METERING AND COMMUNICATIONS- '(A)Not later than 18 months after the date of enactment of this paragraph, each electric utility shall offer each of its customer classes, and provide individual customers upon customer request, a time-based rate schedule under which the rate charged by the electric utility varies during different time periods and reflects the variance, if any, in the utility's costs ofgenerating and purchasing electricity at the wholesale level. The time-based rate schedule shall enable the electric consumer to manage energy use and cost through advanced metering and communications technology. '(B) The types of time-based rate schedules that may be offered under the schedule referred to in subparagraph (A) include, among others-- '(i) time-of-use pricing whereby electricity prices are set for a specific time period on an advance or forward basis, typically not changing more often than twice a year, based on the utility's cost ofgenerating and/or purchasing such electricity at the wholesale level for the benefit of the consumer. Prices paid for energy consumed during these periods shall be pre-established and known to consumers in advance of such consumption, allowing them to vary their demand and usage in response to such prices and manage their energy costs by shifting usage to a lower cost period or reducing their consumption overall; '(ii) critical peak pricing whereby time-of-use prices are in effect except for certain peak days, when prices may reflect the costs of generating and/or purchasing electricity at the wholesale level and when consumers may receive additional discounts for reducing peakperiod energy consumption; '(iii) real-time pricing whereby electricity prices are set for a specific time period on an advanced or forward basis, reflecting the utility's cost ofgenerating and/or purchasing electricity at the wholesale level, and may change as often as hourly; and Page 15 of 22' '(iv) credits for consumers with large loads who enter into pre- established peak load reduction agreements that reduce the planned capacity obligations of a utility. '(C) Each electric utility subject to subparagraph (A)shall provide each customer requesting a time-based rate with a time-based meter capable of enabling the utility and customer to offer and receive such rate, respectively. '(D) For purposes of implementing this paragraph, any reference contained in this section to the date of enactment of the Public Utility Regulatory Policies Act of 1978 shall be deemed to be a reference to the date of enactment of this paragraph. '(E)In a State that permits third party marketers to sell electric energy to retail electric consumers, such consumers shall be entitled to receive the same time-based metering and communications device and service as a retail electric consumer of the electric utility. '(F)Notwithstanding subsections (b) and(c) of section II Z each State regulatory authority shall, not later than 18 months after the date of enactment of this paragraph conduct an investigation in accordance with section 115(i) and issue a decision whether it is appropriate to implement the standards set out in subparagraphs (A) and(Q.'. (b) STATE INVESTIGATION OF DEMAND RESPONSE AND TIME-BASED METERING- Section 115 of the Public Utilities Regulatory Policies Act of 1978 (16 U.S.C. 2625) is amended as follows: (1) By inserting in subsection (b) after the phrase 'the standard for time-of-day rates established by section 111(d)(3)'the following.• 'and the standard for time- based metering and communications established by section 111(d)(14)'. (2) By inserting in subsection (b) after the phrase 'are likely to exceed the metering'the following: 'and communications'. (3)By adding at the end the following: '(i) TIME BASED METERING AND COMMUNICATIONS-In making a determination with respect to the standard established by section 111(d)(14), the investigation requirement of section 111(d)(14)(F)shall be as follows: Each State regulatory authority shall conduct an investigation and issue a decision whether or not it is appropriate for electric utilities to provide and install time-based meters and communications devices for each of their customers which enable such customers to participate in time-based pricing rate schedules and other demand response programs.'. (c)FEDERAL ASSISTANCE ON DEMAND RESPONSE-Section 132(a) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2642(a)) is amended by striking 'and' at the end of paragraph (3), striking the period at the end of paragraph (4) and inserting and, and by adding the following at the end thereof.- '(5) technologies, techniques, and rate-making methods related to advanced metering and communications and the use of these technologies, techniques and methods in demand response programs.'. (d) FEDERAL GUIDANCE-Section 132 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2642) is amended by adding the following at the end thereof: '(d)DEMAND RESPONSE- The Secretary shall be responsible for-- '(1) educating consumers on the availability, advantages, and benefits of advanced metering and communications technologies, including the funding of demonstration or pilot projects, Page 16 of 22; '(2) working with States, utilities, other energy providers and advanced metering and communications experts to identify and address barriers to the adoption of demand response programs; and '(3) not later than 180 days after the date of enactment of the Energy Policy Act of 2005,providing Congress with a report that identifies and quantifies the national benefits of demand response and makes a recommendation on achieving specific levels of such benefits by January 1, 2007.'. (e)DEMAND RESPONSE AND REGIONAL COORDINATION- (I)IN GENERAL-It is the policy of the United States to encourage States to coordinate, on a regional basis, State energy policies to provide reliable and affordable demand response services to the public. (2) TECHNICAL ASSISTANCE- The Secretary shall provide technical assistance to States and regional organizations formed by 2 or more States to assist them in- (A) identifying the areas with the greatest demand response potential; (B) identifying and resolving problems in transmission and distribution networks, including through the use of demand response; (C) developing plans and programs to use demand response to respond to peak demand or emergency needs; and (D) identifying specific measures consumers can take to participate in these demand response programs. (3) REPORT-Not later than 1 year after the date of enactment of this Act, the Commission shall prepare and publish an annual report, by appropriate region, that assesses demand response resources, including those available from all consumer classes, and which identifies and reviews-- (A) saturation and penetration rate of advanced meters and communications technologies, devices and systems; (B) existing demand response programs and time-based rate programs; (C) the annual resource contribution of demand resources; (D) the potential for demand response as a quantifiable, reliable resource for regional planning purposes; (E) steps taken to ensure that, in regional transmission planning and operations, demand resources are provided equitable treatment as a quantifiable, reliable resource relative to the resource obligations of any load-serving entity, transmission provider, or transmitting party; and (F) regulatory barriers to improved customer participation in demand response,peak reduction, and critical period pricing programs. (fl FEDERAL ENCOURAGEMENT OF DEMAND RESPONSE DEVICES-It is the policy of the United States that time-based pricing and other forms of demand response, whereby electricity customers are provided with electricity price signals and the ability to benefit by responding to them, shall be encouraged, and the deployment of such technology and devices that enable electricity customers to participate in such pricing and demand response systems shall be facilitated, and unnecessary barriers to demand response participation in energy, capacity, and ancillary service markets shall be eliminated. It is further the policy of the United States that the benefits of such demand response that accrue to those not deploying such technology and devices, but who are part of the same regional electricity entity, shall be recognized. (g) TIME LIMITATIONS- Section 112(b) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(b)) is amended by adding at the end the following: Page 17 of 22' '(4)(A)Not later than 1 year after the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority) and each nonregulated electric utility shall commence the consideration referred to in section I H, or set a hearing date for such consideration, with respect to the standard established by paragraph (14) of section 111(d). '(B)Not later than 2 years after the date of the enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which it has ratemaking authority), and each nonregulated electric utility, shall complete the consideration, and shall make the determination, referred to in section 111 with respect to the standard established by paragraph (14) of section 111(d).'. (h) FAILURE TO COMPLY-Section 112(c) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(c)) is amended by adding at the end the following: 'In the case of the standard established by paragraph (14) of section 111(d), the reference contained in this subsection to the date of enactment of this Act shall be deemed to be a reference to the date of enactment of such paragraph (14).'. (i)PRIOR STATE ACTIONS REGARDING SMART METERING STANDARDS- (1)IN GENERAL- Section 112 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622) is amended by adding at the end the following: '(e)PRIOR STATE ACTIONS-Subsections (b) and(c) of this section shall not apply to the standard established by paragraph (14) of section 111(d) in the case of any electric utility in a State if, before the enactment of this subsection-- '(]) the State has implemented for such utility the standard concerned(or a comparable standard); '(2) the State regulatory authority for such State or relevant nonregulated electric utility has conducted a proceeding to consider implementation of the standard concerned(or a comparable standard)for such utility within the previous 3 years; or '(3) the State legislature has voted on the implementation of such standard(or a comparable standard)for such utility within the previous 3 years.'. (2) CR OSS REFERENCE-Section 124 of such Act(16 U.S.C. 2634) is amended by adding the following at the end thereof 'In the case of the standard established by paragraph (14) ofsection 111(d), the reference contained in this subsection to the date of enactment of this Act shall be deemed to be a reference to the date of enactment of such paragraph (14).'. SEC. 1253. COGENERATIONAND SMALL POWER PRODUCTIONPURCHASE AND SALE REQUIREMENTS. (a) TERMINATION OF MANDATORYPURCHASE AND SALE REQUIREMENTS- Section 210 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 824a-3) is amended by adding at the end the following: (m) TERMINATION OF MANDATORY PURCHASE AND SALE REQUIREMENTS- '(]) OBLIGATION TO PURCHASE-After the date of enactment of this subsection, no electric utility shall be required to enter into a new contract or obligation to purchase electric energy from a qualifying cogeneration facility or a qualifying small power production facility under this section if the Commission finds that the qualifying cogeneration facility or qualifying small power production facility has nondiscriminatory access to-- Page 18 of 22' '(A)(i) independently administered, auction-based day ahead and real time wholesale markets for the sale of electric energy; and(ii) wholesale markets for long-term sales of capacity and electric energy; or '(B)(i) transmission and interconnection services that are provided by a Commission-approved regional transmission entity and administered pursuant to an open access transmission tariff that affords nondiscriminatory treatment to all customers; and(ii) competitive wholesale markets that provide a meaningful opportunity to sell capacity, including long-term and short-term sales, and electric energy, including long-term, short-term and real-time sales, to buyers other than the utility to which the qualifying facility is interconnected. In determining whether a meaningful opportunity to sell exists, the Commission shall consider, among other factors, evidence of transactions within the relevant market; or '(C) wholesale markets for the sale of capacity and electric energy that are, at a minimum, of comparable competitive quality as markets described in subparagraphs (A) and(B). '(2) REVISED PURCHASE AND SALE OBLIGATION FOR NEW FACILITIES- , (A)After the date of enactment of this subsection, no electric utility shall be required pursuant to this section to enter into a new contract or obligation to purchase from or sell electric energy to a facility that is not an existing qualifying cogeneration facility unless the facility meets the criteria for qualifying cogeneration facilities established by the Commission pursuant to the rulemaking required by subsection (n). '(B)For the purposes of this paragraph, the term 'existing qualifying cogeneration facility'means a facility that-- '(i) was a qualifying cogeneration facility on the date of enactment of subsection (m); or '(ii) had filed with the Commission a notice of self-certification, self recertification or an application for Commission certification under 18 C.F.R. 292.207 prior to the date on which the Commission issues the final rule required by subsection (n). '(3) COMMISSION REVIEW-Any electric utility may file an application with the Commission for relieffrom the mandatory purchase obligation pursuant to this subsection on a service territory-wide basis. Such application shall set forth the factual basis upon which relief is requested and describe why the conditions set forth in subparagraphs (A), (B) or (C) ofparagraph (1) of this subsection have been met. After notice, including sufficient notice to potentially affected qualifying cogeneration facilities and qualifying small power production facilities, and an opportunity for comment, the Commission shall make a final determination within 90 days ofsuch application regarding whether the conditions set forth in subparagraphs (A), (B) or (C) ofparagraph (1) have been met. '(4) REINSTATEMENT OF OBLIGATION TO PURCHASE-At any time after the Commission makes a finding under paragraph (3) relieving an electric utility of its obligation to purchase electric energy, a qualifying cogeneration facility, a qualifying small power production facility, a State agency, or any other affected person may apply to the Commission for an order reinstating the electric utility's obligation to purchase electric energy under this section. Such application shall set forth the factual basis upon which the application is based and describe why the conditions set forth in subparagraphs (A), (B) or (C) ofparagraph (1) of this Page 19 of 22 subsection are no longer met. After notice, including sufficient notice to potentially affected utilities, and opportunity for comment, the Commission shall issue an order within 90 days of such application reinstating the electric utility's obligation to purchase electric energy under this section if the Commission finds that the conditions set forth in subparagraphs (A), (B) or (C) of paragraph (1) which relieved the obligation to purchase, are no longer met. '(5) OBLIGATION TO SELL-After the date of enactment of this subsection, no electric utility shall be required to enter into a new contract or obligation to sell electric energy to a qualifying cogeneration facility or a qualifying small power production facility under this section if the Commission finds that-- '(A) competing retail electric suppliers are willing and able to sell and deliver electric energy to the qualifying cogeneration facility or qualifying small power production facility; and '(B) the electric utility is not required by State law to sell electric energy in its service territory. '(6)NO EFFECT ON EXISTING RIGHTS AND REMEDIES-Nothing in this subsection affects the rights or remedies o an party under an contract or ./.� g /� Y P h' Y obligation, in effect or pending approval before the appropriate State regulatory authority or non-regulated electric utility on the date of enactment of this subsection, to purchase electric energy or capacity from or to sell electric energy or capacity to a qualifying cogeneration facility or qualifying small power production facility under this Act(including the right to recover costs of purchasing electric energy or capacity). 7 RECOVERY OF COSTS- A The Commission shall issue and enforce such O O f regulations as are necessary to ensure that an electric utility that purchases electric energy or capacity from a qualifying cogeneration facility or qualifying small power production facility in accordance with any legally enforceable obligation entered into or imposed under this section recovers all prudently incurred costs associated with the purchase. '(B)A regulation under subparagraph (A) shall be enforceable in accordance with the provisions of law applicable to enforcement of regulations under the Federal Power Act(16 U.S.C. 791a et seq.). '(n) R ULEMAKING FOR NEW QUALIFYING FACILITIES- (1)(A) Not later than 180 days after the date of enactment of this section, the Commission shall issue a rule revising the criteria in 18 C.F.R. 292.205 for new qualifying cogeneration facilities seeking to sell electric energy pursuant to section 210 of this Act to ensure-- '(i) that the thermal energy output of a new qualifying cogeneration facility is used in a productive and beneficial manner; Page 20 of 22 '(ii) the electrical, thermal, and chemical output of the cogeneration facility is used fundamentally for industrial, commercial, or institutional purposes and is not intended f ndamentally for sale to an electric utility, taking into account technological, efficiency, economic, and variable thermal energy requirements, as well as State laws applicable to sales of electric energy from a qualifying facility to its host facility; and '(iii) continuing progress in the development of efficient electric energy generating technology. '(B) The rule issued pursuant to section (n)(1)(A) shall be applicable only to facilities that seek to sell electric energy pursuant to section 210 of this Act. For all other purposes, except as specifically provided in section (m)(2)(A), qualifying facility status shall be determined in accordance with the rules and regulations of this Act. '(2)Notwithstanding rule revisions under paragraph (1), the Commission's criteria for qualifying cogeneration facilities in effect prior to the date on which the Commission issues the final rule required by paragraph (1)shall continue to apply to any cogeneration facility that-- '(A) was a qualifying cogeneration facility on the date of enactment of subsection (m), or '(B) had filed with the Commission a notice ofself-certification, self- recertification or an application for Commission certification under 18 C.F.R. 292.207 prior to the date on which the Commission issues the final rule required by paragraph (1).'. (b)ELIMINATION OF OWNERSHIP LIMITATIONS- (1) QUALIFYING SMALL POWER PRODUCTIONFACILITY-Section 3(17)(C) of the Federal Power Act (16 U.S.C. 796(17)(C)) is amended to read as follows: '(C) 'qualifying small power production facility'means a small power production facility that the Commission determines, by rule, meets such requirements (including requirements respecting fuel use,fuel efficiency, and reliability) as the Commission may, by rule,prescribe;'. (2) QUALIFYING COGENERATION FACILITY-Section 3(18)(B) of the Federal Power Act (16 U.S.C. 796(18)(B)) is amended to read asfollows: '(B) 'qualifying cogeneration facility'means a cogeneration facility that the Commission determines, by rule, meets such requirements (including requirements respecting minimum size,fuel use, and fuel efficiency) as the Commission may, by rule,prescribe;'. SEC. 1254. INTERCONNECTION. (a)ADOPTION OF STANDARDS-Section 111(d) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) (as amended by section 1252(a)) is amended by adding at the end the following: '(15)INTERCONNECTION- (A)In this paragraph, the term 'interconnection service'means service to an electric consumer by which an on-site generating facility on the premises of the electric consumer is connected to the local distribution facilities. '(B)(i) Each electric utility shall make available, on request, interconnection service to any electric consumer that the electric utility serves. '(ti)Interconnection services shall be made available under clause (i) based on the standards developed by the Institute of Electrical and Electronics Engineers, entitled 'IEEE Standard 1547 for Interconnecting Distributed Resources with Electric Power Systems'(or successor standards). Page 21 of 22 '(C)(i)Electric utilities shall establish agreements and procedures providing that the interconnection services made available under subparagraph (B)promote current best practices of interconnection for distributed generation, including practices stipulated in model codes adopted by associations of State regulatory agencies. '(ii)Any agreements and procedures established under clause (i) shall be just and reasonable and not unduly discriminatory or preferential.'. (b) COMPLIANCE- (1) TIME LIMITATIONS-Section 112(b) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(b)) (as amended by section 1252(g)) is amended by adding at the end the following: '(5)(A)Not later than 1 year after the date of enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which the State regulatory authority has ratemaking authority) and each nonregulated utility shall, with respect to the standard established by section 111(d)(15)-- '(i) commence the consideration under section 111(a); or '(ii)set a hearing date for the consideration. '(B)Not later than 2 years after the date of enactment of this paragraph, each State regulatory authority (with respect to each electric utility for which the State regulatory authority has ratemaking authority) and each nonregulated electric utility shall, with respect to the standard established by section I11(d)(15), complete the consideration and make the determination under section 111(a).'. (2) FAILURE TO COMPLY-Section 112(c) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622(c)) (as amended by section 1251(h)) is amended by adding at the end the following: 'In the case of the standard established by paragraph (15), the reference contained in this subsection to the date of enactment of this Act shall be considered to be a reference to the date of enactment ofparagraph (15).'. (3) PRIOR STATE ACTIONS- (A) IN GENERAL-Section 112(e) of the Public Utility Regulatory Policies Act of 1978 (as added by section 1252(i)(1)) is amended by striking paragraph 14'and inserting paragraph (14) or (15)'. (B) CONFORMING AMENDMENT-Section 124 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2634) (as amended by section 1252(i)(2)) is amended by adding at the end the following: 'In the case of each standard established by section 111(d)(15), the reference contained in this section to the date of enactment of the Act shall be considered to be a reference to the date of enactment of paragraph (15).'. Page 22 of 22