New Hampshire HB1116 Testimony Feb 12, 2016

7/25/2019 New Hampshire HB1116 Testimony Feb 12, 2016

1/10

TESTIMONY FOR NEW HAMPSHIRE HB1116 February 12, 2016

FROM: Harold Turner, PE

REPRESENTING: NH CleanTech Counci l, as Advisory Board Member

NH Center for Economic Policy, as Chairman of the Board

EXECUTIVE SUMMARY

Net Metering remains an important mechanism for the development of vital distributed

energy resources in New Hampshire. Net Metering is the connection point for self-

generators to tie into the electrical distribution grid within each utilitys territory. Each

distribution grid is a monopolized business regulated by the NH Public Utilities

Commission (PUC). The energy that flows over the grid is no longer monopolized, and

is made up of both large and small energy providers competing in the open retail

marketplace. The exception is Eversource electric who, at least for near term, stills

owns some of the electrical generation projects that supply energy to its customers in

their service territory. Small self-generation installations are now emerging in the

marketplace as competitive alternatives for customers to generate some or all of

their own electrical power needs.

The original 50MW cap on net metering, set by legislation some 17 years ago, has been

reached in 2016. This legislation is required to increase the cap in order for self-

generation to continue to be developed within New Hampshire. It is a vital and

necessary step to allow for the expansion of electrical energy resources, at a time when

significant amounts of aging generation in the region is scheduled to be

decommissioned. New generation is required not to increase grid capacity, but rather to

replace old generation that will soon disappear. Small distributed self- generation is

now a competitive alternative to large centralized power plants that require both

transmission and distribution lines to service the customer. The utility grid of the future

will have significant amounts of small, decentralized power resources on it. These

distributed resources already reduce peak power resource demands on the ISO-NE

grid.

The NH PUC will determine new, appropriately valued, credits to compensate self-

generation customers for the energy they send into the grid at times when their

generation output exceeds their own consumption. Much misinformation has been

disseminated about how net metering works, the value that generators are credited for

their excess power, and the fairness to all customers on the grid. All of these issues will

be resolved when the NH PUC conducts its rate studies and issues their findings. The

PUC process will engage all stakeholders.


2/10

Meanwhile, during the interim period, this legislative bill will permit customers to

continue to install their own electrical generation equipment as an alternative to buying

all of the electrical energy needs from 3rdparty grid suppliers or from their local utility

under default service. It will continue under the currently established methodology andrates, until the PUC has completed its work. It is vitally important to all classes of

ratepayers, and the New Hampshire economy, that New Hampshire gets this right and

we don't stop adding distributed energy resources because of arbitrarily set caps. If we

get it wrong, we will be left behind all of our border states, who have progressed much

further and faster than we have in New Hampshire. We cant afford to get it wrong.

The legislativerecommendations offered at the end of this testimonyare

advanced in that spirit of getting it right.

HOW NET METERING ACTUALLY WORKS

Currently, self-generators sized


3/10

1) Small projects sized below 100kW are credited at so called retail rates,

and includes all utility costs (energy costs, distribution system costs, transmission

system costs, system benefits costs, stranded investments costs, etc.)

associated with electrical power.

2) Larger projects >100kW but < 1000kW are credited against the energy

only costs, otherwise commonly referred to as the so called wholesale level.

Currently, disputes about the valuation of net metering rates in NH pertain to

projects sized


4/10

Any cap, either now or after the future PUC rate order required by this legis lat ion,

should only pertain to projects pr iced on the retail rate side of the equation.

Currently, that demarcation is set at 100kW. Any cap put on wholesale level projects,

which are sized >100KW, simply restricts commerce and artificially keeps electrical

energy prices higher than they should be.

MYTHS & MISINFORMATION ABOUT NET METERING RATES

Myth #1- Self Generators Get Paid Retail Rates: As articulated above, net metered

customers sized 100kW at wholesale rates, the total

sum of all net metered power in New Hampshire is likely to be under-compensated at

the two different credit methods of full retail (100kW) rates.

The following information will serve to further better clarify the economic compact thatcurrently exists on the grid:

Smart Grid Today reported on January 28, 2016 :

A New Hampshire PUC staff attorney approved the amount Un t i l Energy Systems wants to recover as

distribution revenue displaced by net metering generation, the attorney said in a letter to the PUC filed

in the docket yesterday. The utility on May 14 filed a petition to r e c o v e r a t o t a l o f $ 4 1 , 6 2 8

$ 1 5 , 2 6 1 f o r 2 0 1 3 a n d $ 2 6 , 3 6 7 f o r 2 0 1 4 , sa i d t h e p e t i t io n .

If the recovery is approved, the result would be an incremental rate increase of 0.003/KWH about

a 2 i n cr e a se t o t h e c u r r e n t , av e r a g e m o n t h l y r e s id e n t i a l b il l of $140.23, the Unitil said.

The Concord Monitor reported on January 14, 2016 regarding the SB333 hearing:

E v e r s o u r c e Distributed Generation Manager Rick Labrecque told the Energy and Natural

Resources Committee that existing solar customers in Massachusetts cost the company

as

much as $4 million compared with similar customers without solar power, equivalent

to a b o u t o n e h a l f o f a p e r c e n t o f t h e r a t e st r u c t u r e ."


5/10

As shown above, Utilities already have the opportunity to apply to the PUC for revenue

recovery if they can demonstrate that net metered power on their distribution network

causes them to under-recover their profits. However, cries of large cost-shifting doesn't

ring true under the exacting eye of the PUC. Below are numerous studies conducted to

determine the appropriate value of distributed self-generation on the grid. Our PUC will

conduct its own evaluation to determine the appropriate methodology and value on

each utilitys distribution system.

Greentech Media report ed on Nov 16, 2015 :

Since solar is primarily developed as a distributed energy resource, externalized costs are

lower than centralized generation, but they often arent reflected in pricing. This point is

reflected in a recent analysis of 11 studies(BY Environment America Research & Policy

Center)showing thatr o o f t o p s o l a r s m e d i a n v a l u e w a s 1 7 c e n t s p e r k i l o w a t t - h o u r , w h i le

t h e a v e r a g e U .S . r e t a i l e l ec t r i c i t y r a t e w a s 1 2 c e n t s p e r k i l o w a t t - h o u r .

Maine PUC Distributed Solar Valuation Study-March 1, 2015*

*-Study did not include value for T&D, nor did it factor in a value of peak period generation

Lowest Valuation

1stYear Avoided Market Cost - $0.090/kwh

1stYear Avoided Market Cost & Societal Costs - $0.182/kwh

Highest Valuation (25yr Life)

25 yr Levelized Valuation Avoided Market Cost - $0.138/kwh

25 yr Levelized Valuation Avoided Market Cost & Societal - $0.337/kwh

Acadia Center Value o f Distributed Generat ion- October, 2015

25 Year Levelized: 19-24 cents/kwh Grid Value

+7 cents/kwh Societal Value

Under this legislation, the NH PUC is charged with determining the appropriate value of

self-generation on the distribution systems of each of the states investor owned utilities.

From the above information, one can extrapolate that our PUCs findings might

approximate a number closer to the current (full retail) rate, which will then have to be


6/10

applied to all net metered projects without discrimination of project size. Currently we

have two different rates for two classes of projects one being at full retail 100kW. In asking for a change from the two current

simple applications we have today, dont be surprised to find that collectively the true

rate to be applied in the future to all projectswill result in even greater compensation

to self- generators going forward. Should the PUC or Legislature elect to keep things

simple with a higher rate for small projects and a lower (wholesale) rate for large

projects, it is likely that the small projects will actually stay at the same full retail rate

levels we have today, in order to account for the under-compensated larger projects at

the wholesale rate.

THE PROPER ROLE OF THE PUBLIC UTILITIES COMMISSION

So what should this legislation accomplish today?

First and foremost, this legislation should set an interim cap high enough (or set no cap

at all) so that an arbitrary limit will not be reached prior to the NH PUC issuing a rate

order. The order may or may not change the value of the power that is currently

exchanged at full retail rates. It should not automatically be presumed that the new rate

would be less that the current retail value, or if it is, that it won't be much closer to the

current retail value than any other benchmark. The information provided above tells you

that the rates produced will ultimately reflect the methodology used by the NH PUC. The

Maine PUCs study resulted in a max rate of $0.33/kwh, based upon a 25 year levelized

analysis that included societal benefits. Most people would agree that rates orderedinto service by any state PUC, at least for the foreseeable future, will never exceed the

retail rates. Consequently, all the other societal related value that is calculated above

the retail value will actually be provided free of charge to all of the states stakeholders.

Given the strong evidence above, that little or no cross-subsidy or cost-shifting

actually exists, we argue that it would be highly imprudent to set any cap that would

artificially restrict business growth, slow job creation, or prevent consumers from

investing in their own resources to cut costs during the time it takes the PUC to

complete a rate order. Additionally, as explained above, all projects >100kW do NOT

factor in the (cross-subsidy) debate, and are actually undervalued. Therefore thoseprojects >100kW should in no way be included under a net metering cap

because there is no economic justificationfor it. Artificially set caps only

restrict competition and increase prices, and are counter to all ratepayer interests.


7/10

WHAT ARE SOME OF THE CONSEQUENCES IF NEW HAMPSHIRE DOES NOT

RAISE ITS CURRENT NET METERING CAP?

1) Cleantech businesses, and their employees, who are currentlyproviding Net Metering and Group Net Metering energy installations in the statewill need to go to other states to survive and/or reduce their existing NHworkforce. Cleantech jobs are growing faster than the current state and nationalGDP job growth rates.

2) All customer classes will be denied the abili ty to undertake optimallysized self-generation installationson their own property to reduce theirelectrical energy bills and receive the appropriate credits for their power thatflows onto the grid at any time of day. Real time excess generation (ex.- solarPV) that occurs during expensive daytime peak periods would only be credited at

the wholesale grid level, or even valued at zero, which is what occurs now on theLiberty distribution system.

3) Industrial class customers, who currently have the 5thhighest rates inthe country, will have one less option to control their costs in order to stay in NH.

4) Municipalitieswho own stand alone generation will not be able to netmeter their power output to their own municipal buildings (ex.- City of Nashua)(Note: Also requires raising the project size limit from 1MW to 5MW)

5) Utility companies in NH, who currently use net metered distributed energy

resources (DER) on their system to help meet their renewable portfoliostandards(RPS) requirements, will have to buy out of state power instead.

6) The output from all small power assets associated with the future sale ofEversource NH will have to be sent out of state to ISO-NE. This alsoundervaluesthe assetsbeing sold, and reduces in-state resources thatcurrently serve to meet RPS requirements. (Note: Also requires raising theproject size limit from 1MW to 5MW)

7) New Hampshire will be at a competitive disadvantagecompared to allits border states in terms of overall job creation, attracting needed younger

workers who are more attracted to clean energy policies and jobs, and creatingnew energy projects that will keep energy dollars inside NH.

8) Utility companies in NH will have to buy EXTRA energy out of state, tocover the estimated 5% transmission and distribution line losses, in order toserve the same customer who could have added their own self generation.


8/10

9) Utility companies in NH will have to turn to other methods (and costs) toimprove grid resiliency.

10) Utility companies in NH will have to turn to other means (and costs) tocomply with Federal Clean Energy mandates.

11) All customers will lose the benefit of the downward pressure on energypricing that comes from a vibrant and competitive distributed generationmarketplace in state.

12) All customers will lose the benefits of the numerous societal benefits(reducing greenhouse gases, air pollution, etc.) that are not reflected in energyrates, but none the less come with increased use of renewable energy.

13) All customers will lose the benefits of increased price stabilitythatcomes with increased use of renewable energy. Fossil fuels, as a commodity, will

always be at risk to volatile pricing from supply and demand.

HOW DO NH ENERGY RATES COMPARE TO OUR BORDER STATES?

Customer Class NH VT MA ME (cents/kwh)

Residential 16.07 17.01 14.91 14.66

Commercial 13.36 14.32 13.84 11.53

Industrial 11.83 9.98 12.57 7.98

Customer Class NH VT MA ME (US Ranked)

Residential 6th 5th 9th 10th

Commercial 8th 5th 6th 12th

Industrial 5th 9th 4th 13th

Customer Class NH VT MA ME (> US ave)

Residential 35.3% 43.2% 25.5% 23.4%

Commercial 32.4% 41.9% 37.2% 14.27%

Industrial 77.36% 49.6% 88.5% 19.64%


9/10

What clearly stands out, by comparing rates in our border states, is that New

Hampshi re industr ial rates are not competitive with our border states of Maine

and Vermont by a wide margin.

LEGISLATIVE RECOMMENDATIONS

1) Immediately exclude all projects >100kW from the rate cap, as these

projects already compete on the wholesale energy side of the utility business

under groupnet meteringand should not have a cap at all.

2) Immediately increase the current cap from 50MW to 100MW to prevent a

cap from stopping the growth in small projects (


10/10

FUTURE LEGISLATIVE INITIATIVES:

In addition to completing the process of expanding the Net Metering cap (if any),increasing the size of Net Metering projects, and completing a new rate order at

the PUC for net metered customers, there are more steps that should be taken to

increase the amount of distributed energy resources in New Hampshire which

will also serve to relieve pressure from the high costs (5thin the US) of

industrial energy ratesfor New Hampshire manufacturers who we need for job

creation and living wages:

1) Legislatively re-authorize the rights of QF generators

Documents

New Hampshire HB1116 Testimony Feb 12, 2016