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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 01/13/2009 - NET METERING RATES DATE : January 13 , Zoos WORK SESSION ITEM STAFF : Brian Janonis FORT COLLINS CITY COUNCIL Steve Catanach SUBJECT FOR DISCUSSION Net Metering Rates . EXECUTIVE SUMMARY The purpose of this work session is to discuss the maximum net metering level to be defined in Fort Collins Utilities rates . Establishment of this maximum will not preclude the City from establishing net metering agreements above the maximum threshold set in rates . Generating levels greater than the maximum will require the establishment of a special agreement between the customer and the City. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1 . What is the maximum level of net metered generation Council desires be offered to customers of Fort Collins Utilities? 2 . At what rate should excess generation be bought? 3 . The Electric Board and staff have recommended a sunset provision or a requirement to examine the impact that the established levels (maximum and purchase price) have had on Fort Collins Utilities funds, the General Fund and on system operation after a specified period of time . What time period is appropriate? BACKGROUND Staff has worked for several years to develop a net metering program to establish a standard approach to allow customers to generate renewable energy and use that energy to reduce energy purchased from the City. Staff is seeking guidance regarding the parameters for that program. Subsequent to the adoption of Amendment 37 — the Renewable Portfolio Standard, the Colorado Public Utilities Commission adopted rules defining net metering requirements for regulated electric utilities . In 2008 , the State of Colorado adopted net metering rules in order to provide a consistent net metering environment throughout the state . The net metering statute applies to those municipalities serving more than 5 ,000 customers . The thresholds established require utilities to provide net metering up to 10 kilowatts for residential installations and 25 kilowatts for commercial and industrial customers . January 13 , 2009 Page 2 Net metering is defined as provision of service to a customer that has a qualifying renewable generation resource where the energy generated by that customer that is delivered to the local electric distribution grid is used to offset energy provided by the electric distribution utility to that customer over a defined period of time. Chart 1 is a graphical representation of a net metering service . 5 kW Solar Plant 1 ,000 800 _ 600 kWh 400 200 a —_ 4000 Jan Feb Mar Apr A"INIMray Jun Jul Aug Sep Oct Nov Dec (200) Month kWh Use w kWh Generated Net Usage Chart 1 . — Sample net metering service for a residential customer with 5 kW qualifying system The solid line in the graph represents a residential customer' s annual electrical consumption. The dashed line represents generation from a 5 kilowatt solar array and the dashed-dotted line represents the net energy delivered to the customer or back to the utility over the course of the year. Under a net metering service rate the customers ' generation would directly offset their usage between monthly billing cycles . Any excess generation delivered back to the utility would be credited to the customer and applied toward subsequent bills . For example, the customer above generated excess energy in March, April, May, June and October. The excess energy generated will be credited towards the usage amounts shown on the customer' s bills in subsequent months, effectively reducing subsequent utility bills . At the end of the year, should the customer have generated more energy than they received, the utility will buy back the excess energy. January 13 , 2009 Page 3 Table 1 . - Sample net metering service for a residential customer with 5 kW qualifying system Month Bill kWh Use kWh Gen Net New Bill Jan $52 . 53 748 562 186 $ 16 . 01 Feb $55 . 59 795 561 234 $ 19 . 14 Mar $45 .43 639 656 ( 17 ) $3 . 91 Apr $40 . 17 558 643 (85 ) $3 . 91 May $37 . 95 524 669 ( 145) $3 . 91 Jun $43 . 79 614 666 (52 ) $3 . 91 Jul $55 . 69 797 672 - $3 . 91 Aug $59 . 00 848 685 - $3 . 91 Sep $52 . 08 741 649 81 $9 . 17 Oct $40 . 22 559 640 (81 ) $3 . 91 Nov $42 . 82 599 508 10 $4 . 55 Dec $53 . 01 756 531 225 $ 18 . 51 Totals $578 ,27 83177 73442 735 $94.74 Table 1 is an example of how the customer with a 5 kilowatt system would have been billed during the year. As noted, the customer was a net generator between March and June which offset purchases during July and August. In October, the customer generated 81 kilowatts-hours which offset all but 10 kilowatt-hours in November. The $ 3 . 91 charge shown during months where energy was either negative or zero is the Fort Collins Utility ' s standard fixed charge which covers a portion of the costs incurred through meter reading, customer service and billing functions, which must occur whether any energy is consumed or not. If the modeled customer had been a net generator over the course of the year as shown in Table 2, which models installation of a 7 kilowatt system for the same customer, then the Utility would have "balanced the books" at the end of the year and paid the customer for the excess at a rate per kilowatt hour consistent with the energy rate paid by that customer. Table 2 . - Sample net metering service for a residential customer with 7 kW qualifying system Month Bill kWh Use kWh Gen Net New Bill Jan $52 . 53 748 756 (8 ) $3 . 91 Feb $55 . 59 795 715 80 $9 . 13 Mar $45 .43 639 889 (250 ) $3 . 91 Apr $40 . 17 558 849 (291 ) $3 . 91 May $39 . 75 524 885 (361 ) $3 . 91 January 13 , 2009 Page 4 Month Bill kWh Use kWh Gen Net New Bill Jun $43 . 79 614 883 (269 ) $3 . 91 Jul $55 . 69 797 898 ( 101 ) $3 . 91 Aug $59 . 00 848 903 (55 ) $3 . 91 Sep $52 . 08 741 871 ( 130 ) $3 . 91 Oct $40 . 22 559 848 (289 ) $3 . 91 Nov $42 . 82 599 686 (87 ) $3 . 91 Dec $53 . 01 756 710 - $3 . 91 Totals $578 ,27 81177 91893 ( 11716) $52 . 14 Under the net metering statute, regulated utilities are required to buy back excess generation at the end of the year at the average incremental cost. By analogy, this is equivalent to the Platte River wholesale rate of $ 0 . 0177 per kilowatt-hour. The statute states that municipally owned utilities "shall credit excess generation to the customer-generator in a manner deemed appropriate by the municipally owned utility. " In order to provide a strong incentive to help facilitate the installation and development of renewable resources, the Electric Board and staff recommend that the City purchase the excess energy generated at the retail energy rate for the specific customer' s rate class . In the example above, the customers is billed under the Residential energy rate . The rate has a $ 3 . 91 fixed charge and a $0 .06498 per kilowatt-hour charge. At the end of the annual billing period the 1 ,716 kilowatt-hours of excess energy generated by the customer would have been purchased for $ 111 . 51 . Please note that in the examples above, the significant saving realized by the customer is through the offset energy usage over the course of the year, not the realized gain at the end of the year. As noted, the statute requires utilities to provide net metering up to 10 kilowatts for residential and 50 kilowatts for commercial/industrial customers . The Electric Board and staff are recommending that the City of Fort Collins establish a level of I megawatt ( 1000 kilowatts) as the adopted threshold. Above I megawatt, net metering may still apply, but will have to be discussed with customer in association with Platte River' s Tariff 3 . Tariff 3 addresses generation above 1000 kilowatts and the potential need for ancillary services such as back-up capacity, metering, system protection, operational coordination, voltage support and reporting must be addressed. An installation above I megawatt will not necessarily be excluded from net metering, but additional coordination must be addressed. The Cities of Longmont and Loveland have adopted maximum threshold levels of 50 kilowatts. Longmont purchases the excess generation at the customer' s retail rate and Loveland purchases excess generation at its avoided cost of $0 . 021 per kilowatt-hour. The Town of Estes Park has adopted the minimum thresholds established in the legislation. Estes Park buys back the excess generation at the end of the year for its avoided cost of $0.021 per kilowatt- hour. The Electric Board and staff have discussed this issue and have looked at potential losses to both Fort Collins Utilities and the City ' s General Fund and believe that it is consistent with the recommendations made in support of the net metering rate to provide as strong an incentive towards the installation and development of renewable generation as possible . The recommendation is to accept the revenue losses and loss of payment in lieu of taxes to the general fund in support of January 13 , 2009 Page 5 renewable development. It may be desirable to cap the size of generation facility for which the payment in lieu of taxes or revenue losses would be absorbed. The net metering statute also requires municipalities to adopt and post interconnection standards that are functionally similar to those adopted by the Public Utilities Commission. The City of Fort Collins Interconnection requirements were developed utilizing the International Electronic and Electrical Engineers (IEEE) standard 1547 as a model. The PUC requirements were also developed utilizing IEEE 1547 . Staff believes that the above recommendations provide a strong incentive for the installation and development of renewable resources within the City. As with the Electric Code change, staff is seeking guidance on whether or not the net metering rate should have a sunset provision or a requirement that it is reevaluated in the next three to five years . If renewable resources installations are widespread throughout the system, then it is prudent to evaluate both the financial and operational impact these systems are having on the City. Additionally, changes in the equipment and technology available and the incentives provided by federal, state and local entities could change significantly in the next three to five years, making review prudent. ATTACHMENTS l . Electric Board Minutes . 2 , Natural Resources Advisory Board minutes . 3 . Power Point presentation. ATTACHMENT Electric Board minutes October 15,2008 anmary. Also,the load management program (formerly the Hot 311VL rIU6imn) ,a a ,,.eloping program and is part of a critical foundation. Utilities Executive Director Brian Janonis would like to add a general item to encompass ates on security and facility safety to the work plan. Chairperson Morris will forward the draft 2009 Work Plan to members f eview. The schedule will be finalized in December or January with staff input. Draft Enerey Policy Customer and Employee Relations Manager Patty Bigner spo out the Department of Local Affairs (DOLA) grant for new energy communities r Governor Ritter's new energy economy initiative. Grant monies are used to fun blic buildings with three components: greening public facilities, homes and do own areas. The City submitted a joint application with Larimer County and the Fort ins Housing Authority. Of the $1.2 million requested, nearly $800,000 was aw d. Minor changes to the Draft Energy Policy i de: ■ Wording of the vision was ch ed to include "affordable". ■ The section on smart grid w expanded to provide more details. ■ A few points with PRPA re removed, and Goal #4 was added to maintain Fort Collins ity's collaborative relationship with PRPA with three objectives. ■ Specific criteria a added to the reporting and policy update. A public open house is eduled for November 17 at the Lincoln Center. Information provided will include ackground on Utilities and linkage between the Energy Policy and climate goals. ff will be on hand to share about education programs in the schools, efficiency and r wable programs, and our distribution system reliability. Staff is wo ng on the implementation plan and expect to return to Council with recom ded programs to be implemented, schedule, budget and rate impacts. Public proc will be connected to adoption of any rate ordinance associated with the Policy. airperson Morris will write a letter in support of the draft Energy Policy for vote y the Board at next month's meeting. Net Meterine Structure Mr. Catanach reported on net metering, currently in place as part of the solar pilot program. The State Legislature passed House Bill 1160 earlier this year requiring net metering across the State including municipalities with over 5,000 customers and all rural electric associations (REAs). The bill was designed to create a consistent net metering environment statewide and set recommended thresholds at 1 Okw for residential customers and 25kw for commercial customers. The Public Utilities Commission rules apply to investor-owned utilities and have a 2 megawatt cap. It also requires municipalities to post and adopt small generator interconnection standards.Net metering is only required for eligible energy resources, which must be customer owned, and does not apply to third party installations. Compensation occurs at a retail rate as an offset for the energy generated, and credit can be applied and carried forward on an annual basis. Excess energy is then purchased. 4 A philosophical question must be answered as to whether it is fair for the rest of our customers to reimburse the generating customer who is due money back from generating more energy than the customer used. According to Tariff#3, generation over 50kw must be reported to PRPA. The City would have the latitude to adopt net metering up to a one megawatt level. Board Member Barnish favors credit for avoided losses in the system. If overhead, functional and maintenance costs can be separated from system costs (included), it could make this more equitable without causing detriment to other customers. Vice Chairperson Bihn noted a possible connection to our strategy in meeting Energy Policy goals. Mr. Janonis added a customer who installs net metering is still entitled to sell their renewable energy credits (RECs). Literature is not clear whether it's considered a REC purchase if the City pays an incentive for the solar installation. Attorneys are studying this issue for right of first refusal to purchase such RECs. Mr. Catanach is seeking guidance from the Board on net metering generation thresholds, levels at which we should purchase energy, and purchase price for annual excess energy. Discussion will take place at the next meeting. Routine Updates PRPA (Vice Chairperson Bihn): Some projects are delayed until cr markets improve. Capitol News (Board Member Wolley): No report. Future Aeenda Items ■ Climate Action Plan ■ Draft Energy Policy 2009 Work Plan • Net Metering Discussion Adiournment The meeting was adjourned at 8: in. following a motion to adjourn by Vice Chairperson Bihn. Submitted by Robin rce, Executive Administrative Assistant Fort Collins Utili Approved b e Board on 2008 Signe obin Pierce Date 5 Electric Board minutes November 19,2008 vcussion of the negative impact of the promotion of Fort ns as Promotion of the City of Fort Collins as a green community provides its of economic development. Promotion of the community is primarily a from outside sources, and it is understood about the carbon footprint left w' a promotion of the community. Motion for recommendation of proposed addend th an endorsement from the Electric Board. 5 for, 0 against, 1 abstention Abstention: Board Member Bamish Motion passed. Draft Ener Polic - ommendation Letter A recommendatio er was drafted and will be sent to Council Liaison Troxell regarding the Energy Policy and our endorsement of the Policy. Motion t ept recommendation being sent to Council Liaison Troxell. 6 fo gainst ion passed. Net Metering Light and Power Operations Manager Steve Catanach would like direction and guidance from the Electric Board regarding net metering parameters. The State Legislature House Bill 08-1160 requires the limit of the size of net metering generation with the recommendation of 10 kilowatt(kW) for residential and 25 kW for commercial customers. Compensation occurs at a retail rate as an offset for the energy generated, and credit can be applied and the excess energy is then purchased. The retail rate is the cost of the energy per year. The systems would require separate metering, and the program funding is through subsidies and grants. However, if every house offsets usage, Utilities would lose money, so there is a built-in cost for infrastructure. The fixed cost would be paid to Utilities regardless of generation. There will be a Council work session regarding net metering on January 13, 2009 and will be proposed to Council for approval on February 3, 2009. Discussion: At what level do we have the retail rate? Platte River Power Authority (PRPA)has a retail rate, and the customer would pay for generation. What if there was an "energy park" with a homeowner's association? There would have to be parameters set if this were to happen with the possibility of a contractual agreement with regard to generation and rate issues. The overall goal is to set the net metering limits for residential and commercial including operating parameters and purchasing of energy generated. Mr. Catanach will be returning in December with scenarios and will be requesting a recommendation from the Electric Board on the net metering parameters. 3 DRAFT Fort Collins Utilities Electric Board Minutes Wednesday,December 17,2008 Electric Board Chairperson City Council Liaison John Morris, 377-8221 Wade Troxell, 219-8940 Electric Board Vice Chairperson Staff Liaison Dan Bihn, 218-1962 Robin Pierce, 221-6702 Roll Call Board Present Chairperson John Morris, Vice Chairperson Dan Bihn, Board Members John Graham, John Harris, Steve Wolley and Jeff Lebesch Board Absent Board Member Tom Barnish Staff Present Steve Catanach,Norm Weaver, Kraig Bader, Robin Pierce, Jenny Lopez-Filkins, Bill Switzer, Ellen Switzer, Tom Rock, Scott Dahlgren, Terri Bryant, Brian Janonis, Patty Bigner and Meagan Peil Guests Bevan Noack, Steve Yurash and Rick Coen Meeting Convened Chairperson Morris called the meeting to order at 5:32 p.m. Public Comment None Approval of November 19,2008, Minutes Vice Chairperson Bihn motioned to approve the minutes from the November 19, 2008, meeting. Board Member Harris seconded the motion, and it passed unanimously. Net Metering and Code Changes Light and Power Operations Manager Steve Catanach would like to continue the discussion from the previous meetings on proposed changes to the City Code related to net metering. During those previous discussions,the Board desired to see a provision in the Code for a net metering limit of 1 MW (megawatt) per system and a requirement that each system be reviewed either within a specific time frame or when the system has issues which become a concern. A draft of the new code language will be provided at the next meeting for t the Board to review and recommend changes. Question: Should the City of Fort Collins Code language remain as "provides for the recovery of all direct and indirect costs of the City and Platte River Power Authority 1 DRAFT (PRPA) and such additional amount as may be determined by the City"? This would include costs such as PILOTS (Payments In Lieu of Taxes), taxes, insurance costs and the impact on the system. The example of this impact would be if we were to implement PILOTS with a 5 kW system. The loss to the City with PILOTS would be roughly $27and the loss in sales tax would be $14. We would still collect sales tax on this,because the customer was still purchasing energy from us. Another example would be a customer with a 7 kW system. The loss of PILOTS would be roughly $32 and sales tax of$15, and we would be purchasing approximately 1700 kWh at the retail rate. Total impact on the General Fund would be $46. With the larger customer like the GS-50 rate customer with a 750 kW system,this would be fairly large and has a peak demand of 158 kW. This in turn is energy consumption close to zero. Looking at the demand of this type of system with no infrastructure and no installation of transformer to handle this, who is going to be responsible for the cost? Electric Utilities looks at the size of the transformer,the wiring needed and service section going to the customer, and applies certain factors like looking at the building with practical knowledge and knowing not everything will be on at the same time. The National Electric Code dictates how the building is designed and requires each area have their own standards. We do not size our equipment to those standards, but we size the equipment to their equipment with our practical knowledge over time. On occasion, we do need to upgrade a transformer for a customer, but with the net metering system and the interconnection, who is responsible for the additional cost? Another example is with a 1 MW system. Only 10 to12 of our current customers would be capable of having a large system like this. With the I MW systems, we would be looking at the loss of PILOTS around $8,000. However, they would be paying taxes and that would add approximately three percent. The recommendation is we do not see PILOTs values as a significant cost to the General Fund and are not worried about PILOTS. Another recommendation is to review the language in the interconnection agreement to ensure an appropriate level of insurance for the system. In addition, if we should have to upgrade our facilities to support the generation,then the customer would be responsible for those costs. Discussion: If I purchased a system and installed that in 2009, is the language of the agreement going to cover that? There is a way to write in a clause and be grandfathered in to cover the interconnection agreement for the smaller systems. Can we change it in a couple ofyears? The agreement can be written as a long term agreement with periodic reviews. Mr. Catanach will be bringing the proposed language to the Electric Board at the January meeting before taking it to Council for approval. (End of discussion) 2 ATTACHMENT Natural Resources Advisory Board Meeting Minutes Excerpt 17 December 2008 Net Metering and Service Area Code Change Citizen guest Eric Sutherland addressed the NRAB with his concerns. • It was Eric's opinion that the regulatory environment for electric utilities in this country is an artifact from the Roosevelt administration's New Deal. o The concept of a regulated monopoly emerged as the most efficient way to insure electric service to the nation. That concept has served us well. However, it does not fit with the expectations people are placing on the ability of distributed energy sources to fulfill the promises of a new energy economy. o The question is what is the proper regulatory framework so technologies and business models that promise to deliver clean energy can be incentivized. • Eric stated he is very much opposed to the direction being taken by Fort Collins Utilities and Platte River Power Authority (PAPA). o He is specifically opposed to the ordinance being proposed to change city code to allow distributed energy generation to occur under the conditions where a willing buyer and seller enter into contracts with PRPA and Fort Collins Utilities—known as "buy all, sell all" agreements. o The concept is that a willing buyer might be willing to pay more for electricity to ensure it comes from a clean energy utility. PRPA and Fort Collins Utilities would then become regulators. o Eric is opposed to this type of regulation and stated this model has never been attempted in the country. This is a unique situation since Fort Collins has a municipal-owned utility. The overarching question that needs to be answered is: what is the appropriate regulatory environment for Fort Collins as a leader? City of Fort Collins Light and Power Manager, Steve Catanach, addressed the NRAB to present two topics: net metering and the proposed service code change. Net Metering • In August, 2008, Colorado HB 08-1160 (Net Metering for Customer-Generators of Electric Utilities) was passed. o This bill only applies to Colorado municipalities with more than 5000 customers and sets net metering capacity minimum thresholds at 10 kW for residential and 25 kW for commercial and industrial customers. o It requires the municipalities to post and adopt small generator interconnection standards that must be functionally similar to those adopted by the PUC. The legislative intent was to create a consistent net metering environment statewide. • Net metering is only required for eligible energy resources such as solar wind, hydro and geothermal. It doesn't specifically define combined heat and power. 1 • The net metering law only applies to "customer-generators" and doesn't open the door to third party generators. • Compensation for the netted customer generation offsets the customer's consumption and payment is effectively at the municipality's retail rate. • The major benefit of net metering is that it offsets the usage at the retail rate. If generation exceeds customer's consumption, "excess generation" is carried forward through the calendar year, zeroing out in December. o Steve stated the PUC has been approached to consider changing the calendar year from March to March to avoid having 2 winter periods in the year to allow for a better energy offset. • In answer to a question from Alan Apt regarding anyone who far exceeds energy production over consumption, Steve stated Utilities will be recommending to Council that they purchase that excess energy at the retail rate. o The Electric Board suggested adding a sunset or trigger in the code that allows them to re-examine what effect customer energy generation is having on the operations of our system. • Steve presented charts and graphs showing energy plant generation and net energy usage scenarios and compensation cash out amounts. Discussion: • In answer to a question by Clint Skutchan regarding carbon offsets, Steve stated they attach"x" number of pounds of carbon to the mix of generating plants. In a solar energy production scenario, they would not be producing carbon but are offsetting what's produced at a fossil fuel plant. The calculation for the offset is currently 1.76 points per kWh, but could change according the power generation mix. • Steve pointed out Fort Collins Utility rates are low. $0.0122 cents/kWh is the offset generation rate from PRPA for renewables going back into the system. The current residential retail rate is $0.06498/kWh. • Steve pointed out the questions they are carving forward to Council after recommendations from Electric Board are: o Where should the net metering generation threshold be set? We're recommending one megawatt (MW or 1,000 kW) which provides an incentive for larger customers to install renewables and receiving the retail rate back o At what price should annual excess energy be purchased. We recommend the retail rate. • Steve presented some additional models for small to large commercial customers from 50 kW to 750 kW and possible savings o The rates for commercial customers are made from 3 components: an energy component, facilities peak component and coincidence peak component. o The models show potential customer savings and the impact on our payment in lieu of taxes and the fee the utility collects in lieu of a franchise fee with the City that goes into the general fund. By implementing this we have an impact on the general fund. This can be a concern and can be a large dollar amount of taxes lost. We believe it's not enough of a concern to de-incentify installation of renewables. 2 • Steve Catanach stated there is a major industrial customer looking into developing a 1 MW plant. In that scenario Utilities would establish a contract with the customer. They would most likely honor net metering, but would need to evaluate what impact that would have on the system. • Glen Colton asked if Utilities is also going to present to Council the tax credits that Fort Collins may be giving. He felt it might take more than $2,000 for 2 kWh to incentivize people to install solar on their homes and, instead of giving credits, perhaps pay more up front. o Steve explained he read a white paper about the environmental credits that are associated with renewable power generation and it was his feeling that,just providing the incentive and purchasing the energy at a retail rate, was not following the Governor's Energy Office requirements to pay a premium for environmental assets. The exact credit amounts have been delayed because we're trying to establish the value and an accounting method to keep track of them. Utilities will be purchasing solar RECs at probably $1.50/Watt and then entering into a long term contract. He is hopeful that will add additional incentive dollars. Proposed service code change Steve Catanach also presented the proposed service code change that Utilities took to Council in August, 2008. At that time Council asked him to address some of their concerns and bring it back to their January 13, work session. • As background, Steve informed the NRAB that Fort Collins Utilities became aware that the current code might allow"behind the fence"competitors and needed to be changed to prevent that. o In Longmont, a 3`d party solar generator company wanted a contract to own the generation equipment and just sell energy to customer. The issue went to Longmont's city council and was dismissed. However, PRPA looked at other cities' codes and discovered the Fort Collins' code allowed anyone to enter into retail sales for electric production if they obtained a franchise agreement to cross public rights of way. o As a result, Utilities and PRPA became concerned because the loss of large customers could adversely affect the City and PRPA bonds. • Fort Collins Utilities re-examined this code with the following goals: o To generally conform with"regulated monopoly". o To bring Fort Collins code in line with bond holder expectations. o To recognize and support installation of renewable generation including those owned by third-parties. • Service areas are certified by the Public Utilities Commission (PUC) for investor owned utilities and rural electric cooperatives. • Regarding granting bonds, Moody's (bond rating agency) rates public power electricity utilities according to the following criteria: o The utility is a near monopoly in providing service. o It is unregulated and has independent rate setting. 3 o It has lower cost structure due to the ability to issue tax-exempt debt. o There is a lack of profit motive and a need to generate a return on equity. o There is a strong link between the utility and sponsoring local government. o Market position carries the highest importance among the rating criteria. • In answer to a question from Clint Skutchan who asked what would endanger a "monopoly" status, Steve Catanach stated that, under the existing code, we have a large industrial customer that one of our neighboring utilities could get to without crossing public right of way. So, under our current code, that utility could negotiate a contract and take that large customer away from us. Retail competition in the service area downgrades Moody's rating. • Next year PRPA will be pursuing $120 million in bonds to finance projects and upgrades. For example, every 1% increase in interest rate adds $17 million over life of loan. This would ultimately be paid by customers. It's important to consider what we do impacts on bonds. ■ Steve explained what they will be presenting to Council is what effect the code change will have on different scenarios. o No effect on off-grid customers o No effect on customer generation for own use. o No effect to customer generation for customer and tenant use not crossing the right of way, however, the original customer can't mark up the cost and profit from his tenant(master metering). o No effect to customer generation for customer and tenant who is crossing the right of way, but will require City Council approval and a franchise agreement and PUC implications. Master metering requirements would apply as above. o They do have concerns about third party retail sales. ■ PRPA's bond council stated they would they allow this to occur if it is tied to the net metering legislation. There is no concern for customers under 1 OkW and below. Above that, there will have to be a wholesale arrangement between that third party, PRPA and City to allow PRPA to purchase energy from that generator at wholesale level and then selling it back to the city and that customer. The agreement is that no additional cost will be tacked on to that agreement • Steve explained the Electric Board discussed the alterations to the code: o They suggested removing the language in the code which states "the proposed code provides for the recovery of all direct and indirect costs of the City and PRPA and such additional amount as may be determined by the City." o Should there be a requirement for insurance for the generators. There is no concern with solar, but spinning generation could cause problems with the system. o Who should be responsible for upgrades to our infrastructure. The Electric Board recommended the customer should be responsible for the costs. Questions • Joe Piesman asked Steve to give an example of what a 5 kW, 7 kW and I MW facility would look like. Steve responded that a 5 kW would be 2-4 panels and would 4 service a residential customer without air conditioning and would go up 4 kW with air conditioning. 1 MW would be 5 acres of solar array. • In answer to a question from Eric Sutherland who asked if Fort Collins would own and operate electric generation, Steve said in the current Contract with PRPA the City itself is not allowed to own generation. PRPA needs to be our sole provider in order to satisfy the bond requirements. o The Energy Supply Contract that goes to Council work session on February 3, 2008 provides Fort Collins with the ability to develop 1% or 3,000 kW for generation for City facilities, o Eric said he thought the most economically feasible way to build the pickle plant is to have a 3rd party in a position to capitalize on tax credits and sell energy to Fort Collins because most businesses don't have a contract with PRPA. He thought 3`d party generation should become the dominant economic model for distribution. Steve answered the City code can be changed but it is a long process. • Joe Piesman asked if 3000 kW is 1% of the City's electric usage. Steve responded the City as a whole peaks just under 300 MW. The City's building usage is about 5 MW. Some of them are not demand metered. They are also looking at cost benefit analysis for Advance Metering (AMI) to provide instantaneous information. • Alan Apt where the smart meters are in this. Steve stated they have already done a lot of the digitization of our electric system and the AMI system is the first step to monitor the health of the system. We're major participants in the Fort ZED grant which is a smart grid project of a small communication network. • Liz Pruessner asked if a person installs solar on their home, how would it tie into the city infrastructure and who would be responsible for that. Steve explained you put panels on roof, the installer feeds it into your electric panel so that the electricity you produce would spin meter backwards. The excess goes outside the house and back onto our distribution system. The AMI would provide a monitor of your energy usage. • Liz also asked about solar energy storage capacity. Steve explained storage for large amounts of electricity is not technologically feasible at this time • In response to a question from Alan Apt, Steve stated they are looking at a small hydro project at Horsetooth to generate energy that's being lost now. • Joe Piesman asked, if the maximum allowable private energy generation is 1%of the total PRPA load, if technology changed, could this be increased to 2%. Steve indicated they had already posed that question to their bond council and anticipates a response soon. • Glen questioned the bond rates might have suffered from the current economic situation. Steve stated they are currently in the process of selling $32 million bonds for Mulberry Waste Water Treatment Plant. Utilities has asked their bond council what effect the bond rate has on that and they indicated it would be fairly significant since people are looking for no-risk investments. • Glen stated Xcel is installing complex solar installations from third parties in Boulder and wanted to know if Fort Collins could do similar things, or are our policies too restrictive. Steve answered we've tried to obtain a balance and would not restrict someone coming in with a 5 MW plant. Utilities would try to implement the 5 methodology to preserve financial benefits to City and PRPA are not trying to block/stand in the way. We are trying to answer and achieve both goals. • Guest Neil Kaufman asked if a HOA invested in solar panels, would the HOA be able to operate up to 1,000 kW or would it be a third party. Steve responded it depends on how the rules are written in the HOA and how the ownership is split up. It's a complicated scenario. • Eric Sutherland stated Xcel Energy rejected the 3`d party model as too costly to administrate. He suggested anything Fort Collins can do to put more energy on the grid has huge financial benefits and Fort Collins should do it. The cost of inaction is expensive. Fort Collins should have a welcoming environment for more energy generation. • Glen stated that if the money for bonds could be put into solar and wind it would avoid the costs of upgrades of building new substations and lines. Steve answered energy efficiency is the first priority. Solar is a fairly expensive media that does not have a lot of generating capacity. • Joe cautioned not to lock into anything you might regret 10 years from now when technology could be vastly different than it is today, especially plug-in hybrids. The electric system needs to be more flexible. • Steve stated he may come back to the NRAB in January after the Council meeting for an action item. Alan Apt stated he would like to see Electric Board recommendation before the NRAB weighs in on this. Therefore, the NRAB made no recommendation at this meeting. 6 Net Metering Steve Catanach , PE Light & Power Manager Net metering • House Bill 08- 1160 • Initial legislative intent was to create a consistent net ATTACHMENT 3 metering environment statewide • Adopted by Colorado General Assembly during the 2008 session ; signed by Gov . Ritter • Effective August 6 , 2008 Net metering • Only applies to munis with 5 , 000 + customers — Includes all Platte River Municipal Members • Net metering capacity thresholds are 10 kW for residential and 25 kW for commercial/industrial customers — PUC rules apply a 2 , 000 kW threshold , provided this does not exceed the customers service entrance capacity Net metering • Interconnection Standards — Munis "shall adopt and post" small generator interconnection ATTACHMENT 3 standards — Must be "functionally similar" to those adopted by the PUC • Net metering is only required for "eligible energy resources" • Only applies to "customer-generators" — doesn 't open the door to third party generators Net metering • Compensation for " netted "customer generation : ■ amounts offset from the customers consumption - the payment is effectively at the muni retail rate ■ constitutes major benefit of net metering because compensation is at fully loaded rate ■ if generation exceeds customer consumption , "excess generation "carried forward for annual period ■ offset only applies to energy charges ATTACHMENT 3 5 kW Solar Plant 1,000 . / 1 400 00 FebJan _ . Yt Nov D - 00 UsageMonth Net metering • Compensation for "cash out" amounts : — "excess generation " only accumulates for an annual period or until termination of retail service — at such time , the muni "shall credit such excess ATTACHMENT 3 generation to the customer-generator in a manner deemed appropriate by the municipally owned utility . " — for regulated utilities , the cash -out is at the "average hourly incremental cost of electricity over the most recent calendar year. " — by analogy , this would support cash -out at Platte River wholesale rate 5 kW Solar Plant 1,000 . / 1 400 00 FebJan _ . Yt Nov D - 00 UsageMonth 5kW plant Month Bill kWh Use kWh Gen Net New Bill Jan $ 52.53 748 562 186 $ 16 .01 Feb $ 55.59 795 561 234 $ 19 . 14 Mar $ 45.43 639 656 (17) $ 3 .91 ATTACHMENT 3 Apr $ 40. 77 558 643 (85) $ 3 .91 May $ 37.95 524 669 Jun $ 43.79 614 666 (52) $ 3 .91 Jul $ 55.69 797 672 125 $ 12 . 02 Aug $ 59.00 848 685 163 $ 14 .49 Sep $ 52 .08 741 649 92 $ 9 .91 Oct $ 40.22 559 640 (81 ) $ 3 .91 Nov $ 42.82 599 508 91 $ 9 .81 Dec $ 53.01 756 531 225 $ 18 . 51 7 kW Totals $ 578.27 8,777 7,442 735 $119.43 FLt,1� Solar 000 0 0 0 • 0 00) Jan Feb'qqqIIII"War ADr Mav Jun 00IT7 I 77r I!� • - 00 . 00 usageMonth F, 0 t_f� 7kW plant Month Bill kWh Use kWh Gen Net New Bill Jan $ 52.53 748 756 (8) $ 3 .91 Feb $ 55.59 795 715 80 $ 9 . 13 Mar $ 45.43 639 889 (250) $ 3 .91 Apr $ 40. 17 558 849 (291 ) $ 3 .91 May $ 37.95 524 885 (361 ) $ 3 .91 Jun $ 43.79 614 883 (269) $ 3 .91 Jul $ 55.69 797 898 ( 101 ) $ 3.91 Aug $ 59.00 848 903 (55) $ 3.91 ATTACHMENT 3 Sep $ 52 .08 741 871 ( 130) $ 3.91 Oct $ 40.22 559 848 Nov $ 42 .82 599 686 (87) $ 3 .91 Dec � 53.01 756 710 46 $ 6 .87 Totals ' $ 578.27 8, 177 9,893 ( 1 ,716) 55. 10 Net metering • Policy questions ? — Where should the net metering generation thrAd, shold be set? — At what price should annual excess energy be purchasAm, d ? 5kW plant Month Bill kWh Use kWh Gen ' I New Bill PILOA Jan $ 52.53 748 562 ' 186 -' $ 16.01 $4.73 .- Feb $ 55.59 795 561 ' 234 -' $ 19.14 $5.00 .- Mar $ 45.43 639 656 ' (17) -' $ 3.91 $4.09 .- Apr $ 40.17 558 643 ' (85) -' $ 3.91 $3.62 .- May $ 37.95 524 669 ' (145) -' $ 3.91 $3.42 .- Jun $ 43.79 614 666 ' (52) -' $ 3.91 $3.94 $1.31 Jul $ 55.69 797 672 �MdLW.M�I $ 12.02 , $5.01 __ $1.67 Aug $ 59.00 848 685 Iw 163 W' $ 14.49 1 $5.31 is $1.77 Sep $ 52.08 741 649 I- 92 " $ 9.91 ` $4.69„ Oct $ 40.22 559 640 'jmb=�=' $ 3.91 ■�- Nov $ 42.82 599 508 * 91 " $ 9.81 Dec $ 53.01 756 531 ` 225 a' $ 18.51 Totals $ 578.27 8,177 7A42 $ 119A3.-= PILOTS lost-- $ 27.53 Sales Taxes Lost-- $ 13.77 AW plant Month Bill , h Use kWh Gen Net New Bill PILOTS Jan $ 52.53 748 756 (8) $ 3.91 $4.73 $ . Feb $ 55.59 ' 795 715 80 $ 9.13 $5.00 $1 .67 � Mar $ 45.43 639 889 (250) $ 3.91 ._ $1 .36 . Apr $ 40.17 558 849 (291) $ 3.91 ._ $1 .210 May $ 37.95 524 885 (361) � Jun $ 43.79 614 883 (269) --- Jul $ 55.69 797 898 (101) --- Aug $ 59.00 848 903 (55) --- Sep $ 52.08 741 871 (130) --- Oct $ 40.22 559 848 (289) ---- Nov $ 42.82 599 686 (87) --1 Dec $ 53.01 756 710 46 --_ $1 .59 . Totals $ 578.27 %177 91893 (IIJ16) -mj= .04 $17.3� PILOTS lost $ 31 .39 Sales Taxes Lost- $ r7O � �J I Rate GSSO 150 kw 1125000 Savings ' Month kWh Km ,CWp Bill kWh Gen kWh $ kWo $ kWp $ 11 Savings ' New Bill I Jan 52,769 134 jk&i $ 2,763.16 16,004 $304 $611 $1,12511 $2,040 ` 723.49 I Feb 55,752 134 EL$ 2,876.27 MMMM,663 $298 ` $613 $1,17911 $2,090 1 786.56 I Mar 49,702 136 NJ$ 2,790.97 'M $402 I $2,223 1 567.68 I Apr 53,760 m1zii!$ 2,813.78 _ $377 $624 $1 ,143II $2,145 1 669.20 I May 51,243 --I$ 3,076.57 '_ $373 $642 $1,436 $2,451 1 625.64 I Jun 54,703 =MJ$ 3,132.64 '_ $357 $648 $1,42011 $2,425 1 707.59 I Jul 58,426 --IE 3,574.71i_ $358 $73LeemjjI $2,798 777.20 I Aug 56,696 --I$ 3,238.891_ $369 _ $682 $1.455 I $2,506 1 732.79 I Sep 71,123 I 159 1EI$ 3,826.55 ' 9,350 $368 $728 $1,72311 $2,818 , 1,008.14 I Oct 55,854 I' 150 "$ 3,458.40 'E8,864 $358 ' $688 $1,685 $2,731 , 727.68 I Nov 55,296 II 142 ■J$ 2,915.53 15,754 $299 ' $648 $1,192 $2,1391 776.18 I IN Dec 52,048 138 $ 2,776.33 15,498 $294J $629 $1,134 $2,057 L719.42 Totals 667,371 i�1 $37,243.79 21IIIIIIIIIIIIIIIIIIIIIIIIJEW, $7,860 $16,405 $28,422 PILOTS Collected $2,108.14 _ $529 PILOTS Lost : $1,578.86 Fort Collins Rate GS-750IN norpmmmwmmqw500000 1 Savings mmom kWh I, Kwo W Bill 'tWh Gen ' kWh $ kWo $ kWp $ ' Savings New Bill 1,579,833 I, 2,806 IF,158 $67,770.92 i 126,921 ' $2,373 $3,444 $10,1871 $16,005 $ 51 ,766 1,664,117 I, 2,801 12,319 $71 ,464.73 IN 127,138 ' $2,377 $3,444 $10,1871 $16,009 $ 55,456 1,516,699 I, 2,828 ' 2,409 $69,988.45 ' 180,410 ' $3,374 $3A" $10,1871 $17,005 $ 52,984 1,690,182 I, 2,992 ' 2,335 $72,746.74 , 180,139 ' $3,369 $3,444 $10,187 $17,000 $ 55,747 1,666,923 I, 3,075 ' 2,874 $79,698.41 , 183,850 ' $3,438 $3,444 $10,187 $17,069 $ 62,629 1,776,194 I, 3,107 02,884 $81 ,963.97 . 177,479 ' $3,319 $3,444 $10,187 $16,950 $ 65.014 1,780,595 I, 3,275 3,011 $84,249.77 . 172,429 $3,224 $3,444 $10,187 $16,856 $ 67,394 2,086,998 I, 3,643 . 3,475 $97,240.57 IN176,056 I`$3,292 $3,444 $10,187 $16,923 $ 80,317 2,140,119 I, 3,729 ' 3,442 $98,054.94 ' 169,382 $3,167 $3,444 $10,187 $16,799 $ 81 ,256 1,914,308 I, 3,531 ' 3,399 $92,663.71 . 158,154 ,$2,957 $3,444 $10,1871 $16,589 $ 76,075 1,894,092 I, 3,321 ' 2,868 $84,613.66 . 127,667 $2,387 $3,444 $10,1871 $16,019 $ 68,595 1,753,450 ! 3,188 hW& $77,408.09 IN122,311 1$2,287 $3,444 $10,1871 $15,918 $ 61 ,490 21,463,510I` i $977,863.94 . W.566 $41,329 $122,24=A4$199,141 $ 778,723 PILOTS Collected $55,350.79 $46,723.40 PILOTS Lost = $8,627.39 - _ �tJollins