CPUC Set to Tackle Net Metering Debate with New Distributed Generation Tariff

The California Public Utilities Commission (CPUC) could soon make big changes to how rooftop solar installations function in the state. Under Assembly Bill 327, enacted in 2013, the CPUC has until December 31, 2015 to “develop a standard contract or tariff” that applies to “customer-generators” who own rooftop solar installations or other distributed generation and are located in the service territories of Pacific Gas and Electric (PG&E), Southern California Edison (SGE), or San Diego Gas and Electric (SDG&E). This “successor” tariff could replace the current system of net energy metering (NEM), which allows rooftop-solar owners to offset their own energy use with the energy they generate and get paid retail rates for the net energy they export to the grid. (The new tariff will not apply to those who already participate in net metering.)

PG&E, SCE, and SDG&E filed comments in early-August, arguing that a new tariff is needed in order to promote sustainable growth for rooftop solar that harmonizes with the entire grid. Utilities claim that the current NEM tariff does not adequately charge customer-generators for fixed costs of maintaining the grid and are proposing monthly grid access charges to address this imbalance. Solar industry associations have filed comments urging the CPUC to keep net metering largely intact, and have said that the utilities’ concerns over cost-shifting are unfounded.

A common feature of the utilities’ proposals would charge customer-generators at the retail rate for electricity they consume from the grid and would pay a lower rate for energy generated on rooftops and exported to the grid. However, solar industry advocates warn that the utilities’ proposals could expose rooftop solar owners to significant tax risk because the proposals could be interpreted as a bifurcation of rooftop energy generation and household energy consumption, in which case customer-generators could potentially be taxed on income they receive from selling energy to the grid without being able to deduct the cost of purchasing energy from the grid.

Another potential wrinkle in this proceeding is that the current NEM tariff caps net metering at 5 percent of a utility’s nameplate generation, and solar installers operating in San Diego are concerned that SDG&E might reach that cap soon, which would bar any new installations until the new tariff is finalized. If utilities don’t reach that threshold, the tariff will become effective July 1, 2017 and there will be no limit on installed distributed generation capacity thereafter.

In any event, we can be sure that this is not the last we will hear about potential restructuring of net metering schemes. Utilities in many states are proposing new rate designs for rooftop solar and distributed generation systems through traditional rate cases and separate proceedings.

BREAKING NEWS: Xcel Energy Announces Commitment to Cease Coal-Fired Operations at Sherco Units 1 and 2

Xcel Energy announced this afternoon its intent to cease coal-fired generation at Sherco Units 1 and 2 in 2026 and 2023, respectively, while adding 1,200 MW of new renewable sources (800 MW of wind and 400 MW of solar) by 2020.  According to the Xcel Energy website, Sherco Unit 1 has a generating capacity of 680 MW and Sherco Unit 2 has a generating capacity of 682 MW.  A summary of Xcel Energy’s filing, pulled directly from the filing, appears below.  The full filing can be found here.

“Our proposal has four primary elements:

1.    Accelerate the transition from coal energy to renewables. Our proposal includes:

  • Achieving 60 percent carbon emission reductions by 2030,
  • Ceasing coal generation at Sherco Unit 2 in 2023,
  • Ceasing coal generation at Sherco Unit 1 in 2026, and
  • Advancing the addition of substantial renewable generation (1,200 MW by 2020).

2.    Preserve regional system reliability. We propose to continue operation of our nuclear units during the current resource planning period and construct sufficient gas fired generation and infrastructure to maintain reliability with an appreciation of regional, state, and local community economic and policy considerations. To that end, we envision:

  • Reaffirming our commitment to nuclear energy through the current licenses of our existing units,
  • Adding a combustion turbine in North Dakota by 2025,
  • Studying a Sherco Unit 2 boiler conversion or combustion turbine alternative,
  • Studying gas infrastructure and transmission expansion, and
  • Replacing Sherco generation with a combined cycle no later than 2026.

3.    Pursue energy efficiency gains and grid modernization. We propose to continue our commitment to energy efficiency and new technologies, and we look to capitalize on these efforts rather than seeking to replace coal capacity megawatt for megawatt. We believe that modernizing the grid will further enable customer-driven solutions.

4.    Ensure customer benefits. We propose to work with the Commission, the MPCA, and our stakeholders to ensure our customers get the full benefit of our proposal by:

  • Working with the MPCA, along with its counterpart environmental agencies in our other states, on the CPP State Plans to maximize the benefits of compliance for our customers and communities, and
  • Pursuing rate plans and cost recovery mechanisms that smooth costs for our customers.”

U.S. Fish and Wildlife Service Determines Protection for Greater Sage-Grouse No Longer Warranted

In a speech at the Rocky Mountain National Wildlife Refuge, Interior Secretary Sally Jewell announced yesterday that the U.S. Fish and Wildlife Service (USFWS) will not list the greater sage-grouse under the Endangered Species Act (ESA). Finding that protection under the ESA is no longer warranted due to an “unprecedented conservation partnership,” the USFWS announced that it was withdrawing the species from the candidate list.   The decision comes roughly a week before a court-ordered deadline for a decision. Continue Reading

Community Solar Update: PV Magazine and Solar Industry Magazine

Community solar (“CSG”) is the topic of two articles we authored in the September editions of PV Magazine and Solar Industry Magazine. Titled “Care in the Community” (PV Magazine) and “Proof of Concept: Community Solar is Ready to Soar Despite Complications” (Solar Industry Mag), the articles consider the launch of The National Community Solar Partnership by the Department of Energy in July, ongoing wrangling over the definition of “community” and why the imposition of capacity caps on CSG programs is both inefficient and unnecessary.

Read more:

Care in the Community” (PDF)

Proof of Concept: Community Solar is Ready to Soar Despite Complications

California Legislative Session Wrap-up

Last Friday, September 11, 2015 was the final day for California legislators to pass bills out of the Legislature and on to Governor Jerry Brown for consideration. This year’s crop of bills included something for both sides of the aisle on energy and climate change issues: from the proposed repeal of AB 32, the California law mandating greenhouse gas (GHG) emission reductions, to bills to set a higher GHG reduction target for 2050 and cut petroleum use in half, and from a proposed leap in the state renewable portfolio standard (RPS) to 50% and incentives for geothermal, biomethane, and alternative fuels, to the repeal of solar water heating loan incentives. Some big ticket items passed, most failed to pass out of the Legislature before the deadline and can be considered in 2016 during for the second half of the two-year California legislative session. Time for the post-mortem.

Continue Reading

IRS Opens Door for Community Solar Investors to Qualify for Federal Tax Credits

The Internal Revenue Service issued a private letter ruling this week to an individual owner of solar panels installed in an off-site net-metered community solar garden.  In the Ruling, the Service confirmed the individual’s eligibility to claim the residential income tax credit for 30 percent of qualified solar electric property expenditures pursuant to Section 25D of the Internal Revenue Code.

The Ruling is significant in several respects:

  1. it confirms that an individual who owns only some of the solar panels and other property comprising a community solar garden may claim the credit,
  2. it appears not to require direct tracking of the electricity produced by the taxpayer’s solar panels and, instead, permits allocation of the aggregate amount of electricity produced by the array based on the number of panels owned by the taxpayer, and
  3. it does not require the taxpayer to contractually agree with the utility that the taxpayer owns the electricity produced by the taxpayer’s panels until drawn from the grid at his residence. Continue Reading

Court Invalidates 30-Year Permit Provisions of U.S. Fish and Wildlife Service’s Eagle Permit Rule on NEPA Grounds

As we discussed in this post from May 2014, the American Bird Conservancy (“ABC”) in 2014 filed a lawsuit challenging the U.S. Fish and Wildlife Service’s (“USFWS”) 2013 revisions to its eagle permit rule, alleging violations of the National Environmental Policy Act (“NEPA”) and the Endangered Species Act (“ESA”). ABC’s challenge related to the revised eagle permit rule that was issued in December 2013 and that extended the maximum term for programmatic Eagle Take Permits under the Eagle Act to 30 years (the “Final 30-Year Rule”), subject to a recurring five-year review process throughout the permit life. Under the previous rule, the maximum term for programmatic permits for incidental “take” of bald and golden eagles was five years. Continue Reading

Gov. Dayton Signs 2015 Jobs and Energy Bill into Law

On Saturday, June 13, Governor Dayton signed the 2015 Jobs and Energy Bill into Law.  Our prior coverage of this bill can be found here and here.  The following amendments were made after the Governor’s veto:

  • New definitions for “propane,” “propane storage facility,” and “synthetic gas.”
  • New net metering provision that applies to cooperative electric associations and municipal utilities.  The vetoed version of the bill included a reference to a subdivision 3(f), which was omitted.  The final version of the legislation includes the referenced subdivision 3(f), which provides a customer with a net metered facility having a capacity of less than 40 kW to be compensated for the customer’s net input into the utility’s system via a kWh bill credit.
  • Continuation to the year 2017 of the Minnesota Department of Commerce’s ability to assess up to $1,000,000/year for regional and national duties under section 216A.07 subd. 3a.
  • New obligation of the Minnesota Department of Commerce and Minnesota Pollution Control Agency to formally submit the draft state implementation plan for Clean Power Plan compliance to the legislature for review and comment.
  • New authorization to the Minnesota Department of Commerce to assess up to $854,000 per biennium for reasonable costs it incurs in services it provides to implement the new energy-intensive, trade-exposed rate provision.

Funding for the Minnesota Department of Commerce appears to have been the big concern, which was set out in Governor Dayton’s veto letter.  Moving forward, the three regulatory developments “to watch” in Minnesota are concepts that were first considered and discussed in the Minnesota e21 Initiative.  Although not fully endorsed by all members to that effort, the statutory language authorized by the 2015 Jobs and Energy Bill on those issues can be summarized as follows:

  • Regulatory Reform: The existing multi-year rate plan provision was revised to permit multi-year rate plan proposals up to five years in duration, during which the utility may be subject to reasonable performance measures and incentives, and as part of which the utility may propose: (1) recovery of its forecasted rate base; (2) recovery of O&M expenses; (3) tariffs that expand the products and services available to customers, including an affordability rate for low-income customers; and (4) MN PUC-approved adjustments for changes the MN PUC determines are just and reasonable, including changes in the utility’s cost of operating its nuclear facilities.
  • Distribution Grid Planning: Utilities operating under a multi-year rate plan must engage in distribution system planning to (i) identify in a report those investments that are necessary to modernize the grid, enhance reliability, improve security against cyber and physical threats, and increase energy conservation; and (ii) identify in a study the interconnection points on its distribution system that are available for small-scale distributed generation resources and identify any necessary upgrades. The utility may recover the costs associated with this planning and any investments incident thereto.
  • Competitive Rate Options for Energy-Intensive Trade-Exposed Customers: To achieve the policy objective of ensuring competitive electric rates for energy-intensive trade-exposed customers, certain utilities have the flexibility to offer those customers various rate options, including fixed rates, market-based rates, and rates to encourage utilization of new clean energy technology.

MN Special Session Jobs and Energy Bill Posted

As a follow up to our prior coverage, Governor Dayton vetoed the jobs and energy bill that passed in the final few minutes of the 2015 regular legislative session.  Governor Dayton’s veto letter can be found here.

After significant negotiations, the legislature finally posted a revised version of the legislation in its 2015 1st Special Session Jobs and Energy Bill

There will be an informational hearing this afternoon to walk through the bill.  We will provide additional coverage once the bill passes.

USFWS to Evaluate New Incidental Take Permitting Program Under the Migratory Bird Treaty Act

Today, the U.S. Fish and Wildlife Service (“Service”) published notice in the Federal Register announcing that it intends to prepare a programmatic environmental impact statement to evaluate the effects of a program that would authorize incidental take under the Migratory Bird Treaty Act (“MBTA”). Although the Service has MBTA regulations that authorize the issuance of permits to take migratory birds for specific purposes (e.g. scientific collection, bird banding and marking, raptor propagation), there is presently no permit to authorize take that occurs incidental to, and which is not the purpose of, an otherwise lawful activity. Companies potentially impacted include those involved in the oil and gas sector, telecommunications, energy transmission infrastructure, and solar and wind energy generation.

Through this rulemaking, the Service will evaluate various approaches to regulating incidental take of migratory birds, including: Continue Reading