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The New Utility

Don Loweburg and Bob-O Schultze

©1996 Don Loweburg and Bob-O Schultze

Over the last several years the electric utilities have begun using terms like "Distributed Generation", "Dispersed Applications", and (one of my favorites) "Virtual Utility". Those of us who have been in the offgrid RE business for years are somewhat familiar with these terms and in our visionary moments have discussed and dreamed of the "withering away of the grid". The inquiry of the moment is "What do the utilities mean by these terms"? We suspect they may have a far different vision in mind than we do.

This is what we think: These terms are part of an extensive PR program developed by utility strategists to prepare the general public for acceptance of utility movement into non-traditional market areas. To get the whole picture, we must simultaneously keep in mind the changes happening within utility restructuring. Large economic forces have come together, pressuring for a competitive retail market in power generation. The pattern developing is that the electric utilities, as we know them today, will get out of power generation. The question arises; If they don't make money generating power, what will they do? Sell services! Power transmission and distribution, conservation, DSM (demand-side management), and information services, are all possibilities. Many large utilities have started joint venture projects with companies like Novell and Cisco Systems (major networking and information service companies). The services include household load management, remote meter reading and even cable TV and information services using the established grid.

It's ironic that as producers of power, utilities had to be coerced (usually with heavy subsidization) to provide incentives for energy conservation. But now, moving into their new role as distributors of energy and services, they are eager to sell conservation and promote distributed generation. Simultaneously, they are attempting to charge off uneconomic generation assets to the rate paying public. By transforming to a Distributed Utility, an IOU (Investor Owned Utility) is achieving two goals at once.

First, it can position itself for profitable access to a new market of services and information (much more profitable than the commodity "electricity") and secondly, it can unload unprofitable hardware (like nukes and aging coal-fired plants) on the rate payers. This issue will be ongoing and is certainly wrapped up in all restructuring discussions.

IPP's view is, if it's distributed then why is it a utility? A regulated utility is, by definition, a monopoly. Other services like phone, information, entertainment, and security are all non regulated (or nearly so). The regulated wires company should not do business in the services and distributed generation market. These needs can be met by competitive providers. This is no place for a monopoly that controls the feedlines.

Rate Based Incentives

If all goes well in November, voters in Davis, California will vote on implementing the first US rate based incentive (RBI) program. As discussed in previous issues of Home Power, RBI programs are locally adopted programs in which communities assess utility bills a 1% surcharge. The surcharge is used to purchase PV power from participating homeowners at a premium rate. The incentive plus the benefits of net metering should allow recovery of 90% of system investment within 10 years. Tom Jensen of Strategies Unlimited has written and researched extensively on RBI. Strategies Unlimited has a web site with more information available at http://www.strategies-u.com

On the Right Path

The end user PV market continues to grow. Our companies and many others are experiencing growth.

Home Power magazine is read by more people every month. Alternative Energy websites are experiencing an ever increasing number of hits. The Real Goods Living Center opened in June and is a testimony to the growth of the renewables industry. Our industry is growing under it's own steam; free of subsidies and major government involvement-so far...

Confidence is building that the PV industry can stand on its own. Scott Sklar, director of SEIA and once a proponent of large federal PV subsidies to utilities such as TEAMUP, now editorializes: "...This is SEIA's mandate. The trade association for the solar industry cannot remain fixated on government- they are fickle friends. Now is the time to reach out to the American public and those in our society who know a good thing when they see it. Once we have educated and convinced these sectors, the Congressional policycrats will follow. Except for a paltry few, they are largely followers, not visionaries and leaders." Jim Trotter, president of Cal SEIA, reinforces this sentiment in his recent editorial stating, "...We as an industry need to reexamine the assumptions that lead to the proposition that a subsidy in some form is necessary or even good for the PV market."

We at IPP are very gratified. Followers of this column will note that our strong opposition to the PV industry, and Cal SEIA in particular, "getting in bed" with the utilities and their political cronies is what started IPP in the first place. Welcome aboard, gentlemen!

Another Step in the Right Direction

On May 14, 1996 PG&E filed Advice Letter 1549-E-A. In this document they remove all extra customer charges for net metering customers. In so doing, they join Southern California Edison and San Diego Gas and Electric in compliance with the PV industries sample net metering tariff. With the hard work of CAL SEIA, CEC, and the California PV Collaborative (and many IPP members), we now have all three major California utilities doing it right. Hopefully other utilities will adopt these policies as their model so the entire state can go to net metering as mandated by California law.

Financing

Last issue we reported that Sumitomo bank is making PV loans and that Renewable Energy Development Institute (REDI) is putting together a renewable energy loan database. Another project in the works is being done by the Solar Energy Industries Association (SEIA). They are soliciting a major lender to make a capital commitment for solar loans. The loans would be at normal mortgage rates and be available for solar thermal and photovoltaic projects.

Net Metering in British Columbia

IPP member Robert Mathews of British Columbia has been working to promote net metering in that area. He and other members of the BC Energy Coalition intervened in November 1995 before their Utilities Commission promoting net metering. The British Columbia Utilities Commission Decision section 8.5, dated February 16, 1996 states, "The Commission agrees with the general goal that every energy consumer should eventually have the right to be an energy producer, provided that their production contributes to the economic efficiency (in a full social costing sense) of the energy system. ..." Congratulations! This is a key first step. Keep up the good work. Combined RE industry and citizen action is exactly what is needed to promote and advance the use of renewables.

Net Metering Deluxe in Wisconsin

In what may be the fairest, and is certainly the most progressive net metering policy in the country, Wisconsin Public Service Corporation has a "Wise Buy" program offering both full net metering AND Time of Day(TOD) billing for RE intertied systems. This is a two meter system using separate Buy and Sell TOD meters. Buying power at different rates for peak and off peak times is a common practice in many parts of the country. It reflects more closely the utilities' costs for buying or generating electricity for their customers at different times of the day. It financially encourages the consumer to utilize power off peak which helps the utility manage their generation and load distribution more efficiently.

Selling power to a utility by an IPP on a full net TOD basis is almost like a dream come true. This especially applies to PV only IPPs who generate virtually all their power on peak. Net/TOD billing is ultimately the fairest and most logical way to meter an IPP/Utility intertied system. Rates should mirror costs. Until now however, no utility using TOD billing has been willing to give up the few extra bucks of profit it makes by paying for IPP kilowatts at the traditional non time-differentiated rate. Most offer only the lowest avoided generation cost rate at about $0.02 kW/Hr. The WPSC TOD rate is $0.111 peak and $0.0262 off peak. AND, it applies to all renewables, not just PV.

Wisconsin Public Service Corporation is an investor owned utility (IOU) which makes this "RE Friendly" rate structure even more remarkable. Hats off to ya! IPPs everywhere should be standing on their chairs applauding the WPSC program.

More on Restructuring

The just released Public Citizen's "Restructuring Blueprint" takes stands on many important issues related to changes occurring in the electricity supply business. Referring to the Blueprint, Matthew Freedman, director of the Critical Mass Energy Project, states: "Today, our coalition releases a blueprint outlining a vision for competition that puts consumers and the environment first. Our plan would make sustainable and affordable energy a priority by ensuring the increased use of renewable energy and efficiency technologies, a guaranteed universal service, and vigorous consumer protection.

The specific mechanisms in our proposal represent and approach that couples market forces with minimum standards. By making all companies adhere to the same requirements for serving the public interest, no single player or industry is disadvantaged and consumers can reap the benefits of competitive markets"

From the Blueprint itself; "On the heavily debated issue of utility stranded cost recovery, the blueprint calls for the burden to fall on utility shareholders in all but the most extreme circumstances. Utilities must take responsibility for making bad business decisions that resulted in uneconomical power plants. The ratepayer bailout now contemplated by state regulators would force consumers to pick up the tab for windfall profits for poorly-run utilities. Early estimates for the recovery of these costs requested by utilities range between $130 billion and $550 billion..." Do you remember the S&L bailout? Feel like paying for another one while utility stockholders and managers skate?

IPP is a party to the CPUC (California Public Utilities Commission) Renewables Working Group working on crafting a Renewables Portfolio Standard. The purpose of the standard is to protect the position of renewables in a market that does not yet value externalities, such as clean air and other environmental issues, one of the issues addressed in the blueprint. Shaping up is set of different proposals with stakeholders making supportive or opposing comments. This document will then be presented to the Commission for consideration. IPP is supporting two proposals that simultaneously protect renewables market share and exclude utility Renewable Energy Credits (RECs) for distributed generation. The market should reward innovators; not the fumblers of the nukeball.

Next Issue

A couple of items are on the calendar. Don will attend the commission's next compliance meeting that reviews Southern California Edison's offgrid PV program. We also have another meeting of the California PV Collaborative. More on restructuring. Be the first to tell me the number of times the IPP logo appears in this issue and I give you a free subscription to Home Power.

Access

Authors: Don Loweburg, IPP, PO Box 231 North Fork, CA 93643 • 209-877-7080, Internet Email: [email protected] and Bob-O Schultze, PO Box 203, Hornbrook, CA 96044, Internet Email: [email protected]

To join IPP or send tax-deductible donations: IPP, PO Box 231,North Fork, CA 93643 • E-mail: [email protected] • 209-841-7001 or 916-475-3402 xfec

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The Midwest Renewable Energy Association

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MREA is a grass-roots, non-profit educational organization whose mission is to promote renewable energy & energy efficiency through education and demonstration.

Membership and participation in the MREA are open and welcome to all interested individuals and organizations.

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Sept. 13-14

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