J-2-Oa Dear Mr

January 6, 2007

pilpul/Q

I- l~'~l $Lpg(", Q 3 ~Ji~] South Carolina Public ServiceCommission _/,=, AAttention:ttention: Charles L. A. Terreni .,.'_,_".... ,,COP,l_ _::: ...."-_.. Chief Clerk/Administrator ,_Pested: Ky, +Q54GQe 101 Executive Center Drive 101 Executive Center Drive _ &_ - 0_ Columbia, SC 29211 Dc_t:&~V~' j-2-oa Dear Mr. Terreni:Terreni :_ T_eoTj~~~i Q; ==='=_ "F ' II am filingfiling thethe following written comment and attachedatta.ached studystud y "Freeingreeing Theh Grid" to you inin accordance with Docket No. 2005-385-E, Order No. 2006-680 on thethe consideration of implementingimplementing the requirements of Section 1251 (Net(N et. MeteringMetering and Additional Standards) of the Energy Policy Act of 2005.

This isis my comment:

It is probably not necessary toto relate thatthat most ofo SouthSou.th Carolina'sCaro 1'inas energy is produced by coal or oil fired plants and how thisthis has made South Carolina one of the worst ' polluters inin thethe U.S.A.U.S.A. Because of the bada practicesprac ces ofof utilitiesutitil ities owning and operating coalco fired. ed plants across thethe country and in-action of theth. e,SouthSou th. CarolinaCaro. 1ina Public Service Commission and other states Commissions ns thethe. e FederalFedera 1 EnergyEnergy Policy Act of 2005 was passed forcing you to have this hearing.

The utilities and the South CarolinaCarolino ina Public Service Commission alreadyalread know that 40 ' ' other states have e netn . metering and interconnecting ruleses that. a allowa ow andan encourageencoura e zero-energy-homes to be built. So, the question of whether to allow net metering and interconnection rules inin SouthSou Carolina isis not important.important. The real question is: "Will the

South Carolina Public ServiceServic. vice Commission pass great rules or will they wind up like the States of Arkansas and Indiana, who o haveave thethee worst net metering rulesrules in tilethe nation". If thatthat is thethe case everyone in South Carolina will be thethe losers.

South Carolina has toto understand that technology isis producing a revolutionrevo1uhon in the renewable energy field.field. Major breakthroughs inin reducing the cost of solar photovoltaic cells11 cells are occurringoccurrin g daily.dail y.. InexpensiveInexpensive solar photovoltaic cells are, I fundamentally,fundamentall 1 a II "disruptive technology,"technology, even in South Carolina, with below-average electric rates and many cloudy days thin filmfilm photovoltaic cells will produce electric cheaper than a coal firedfire plant.p ant. Much like cellular phones have changedange theth. e way people. 1 communicate, cheapc eap solarso ar cells will change the way wew'e produce and distributedistr'bi u.te electrice1ectric energy. The race isis on, we all want cheap renewable electricelectric!! Meanwhile, the prospect of thisthis technology creates a conundrum for thethe electric utility industry.industry. Can --—or should --—any utility, or investor,investor, count on the long-term viability of a coal, nuclear or gas investment?investment? The answer isis no. In about ayear, we'llwe' ll seehow well these technologiestechnologies work. The question is whether South Carolina energy policy can change fast enough to join the renewable energy revolution.revolution.

To give thethe South Carolina Public Service Commission a understanding of how States are being judgedjudged on this issue, I am filingfiling a study entitled: "Freeing The Grid", How Effective State Net Metering Laws Can Revolutionize U.S.U.S. Energy Policy, Report No.

01-06 II November, 2006.

This compares allall of thethe states thatthat have passed net metering and intercom_ectioninterconnection rules "A" and has graded themthem with a "A" toto "F". Please studystudy the rules of thethe "A" states, they should be your example for South Carolina. Make no mistake, what ever rules the South Carolina Public Service Commission puts into effect the world will grade you.

ItIt is now up to you to put South Carolina in the "A" category, South Carolina has already filled it'sit's quota of "F's".

Sincerely,

RaltYhRal Stork 3717 Annandale Dr. Myrtle Beach, SC, 29577

Attachment: Freeing The Grid REPORT NO. 01-06 November 2006

@ '!. 'i%~' ll" „':. '4-;"': :"p~"'. "', !'""'S he I~le !W O't'4, , 'Or I"'.!!!:. I'. z Il'l.::Oil(:. is a New York based nonprofit organizationorganization committedcommitted toto providing U.S.U.S. state andand locallocal governments with ideasideas and information to generategenerate clean, affordable powerpower from local, renewablerenewable energy sources. WorldngWorking with a growing coalitioncoalition of nonprofit groups, municipal officials, business leadersleaders and academics,academics, NNEC isis promoting creative and objectiveobjective ideasideas for financing community-based clean energy, helping to dispeldispel misinformation about renewable energyenergy in thethe media and advocating critical utility policy reformsreforms thatthat will usher in aa new world of energy choices for all Americans.

ChrisChrlls Cooper IExecutiveDirector Cooper ~

JamesJalnleS RoseROSe ] Research Director ~

ShaunShaUn ChapmaniLhapman ] Communications Manager ~

The%he Network for New Energy Choices thanksthanks The Tamarind Foundation and VermontVermont Law School's Institute for Energy and the Environment for their support of this publication and our work on utility policy reform. We wish to thank the many reviewers of this report:

William Ball I Stellar Sun, Little Rock, Arkansas ~

Scott Cullen I C~RACEGRACE Energy InitiativeIniti ati ve ~

Rusty Haynes I InterstateInterstate Renewable Energy Council ~

Wilson Rickerson [ New York Million Solar Roofs Initiative ~

Dr. Benjamin Sovacool I Oak Ridge National Labomto_Laboratory7 ~

Network for New Energy Choices lg

How Effective State Net Metering Laws Can Revolutionize U.U.S.S. Energy Policy

Report No°Ho. 01-06 1I Novembe_Movember„20062006

Execute've Director Cllrl5Chris Cooper i_x¢_eD_¢_o_~

James Rose IResearch DirectorDirector JameS ROSe ~ Research NetworkNetworlk forIIor New Energy ChoicesChokes

ForwardIForwanll by MichaelMIIChBeI DworkinDWOrklln Institute for Energy &R the Environment at Vermont Law School Former Chair, Vermont Public Service Board

Research Team:lleB.lYI:

Jessica Elliot, Lewi.5Lewis and Clark Law School

Will Greene, Amherst College

Carolynn Johnson, Carlton College

JeaneneJeanene Mitchell, Columbia University

Dan Stellar, Columbia UniversityUni versity

Cameron Tepfer, George Washington University

Network for New Energy Choices All Hands on l3eckDeck Recruiting Clean, Secure and Distributed Help for America's Energy Needs

''."',". When a sailing crew, inin peril on the sea, sawsaw stormsstorms ahead,ahead, thethe cry rangrang out: ", ',:,";+~'.:. "All"All hands on deck!" For thosethose who now see perils before us in thethe worlds of utilities and energy, therethere isis a lesson to be foundfound there°there.

InIn six years as Chairman of a state utility commission,commission, I sawsaw a lotlot of rough water and a few storms, but none as largelarge and dark as thosethose nownow facingfacing our " nationnation and our world. We face an "Energy"Energy Trilemma,"Trilemma, -—an energy world strainedstrained by thethe three forcesforces of financial stress, environmental constraints and security risks. We all need solutions now that help us on some or all of thesethese fronts, without makingmalting others worse. Yet, allall too many of the remedies thatthat some propose for one or two parts ofof' thethe Trilemma tendtend to worsen thethe others. To make progress, we need to find new patterns, going beyond thethe way the electricity gridgrid has functionedfunctioned for almostalmost a find new patterns, going beyond way " century. InIn a very realreal sense, we need toto seek and welcome "new hands on deck."deck.

Why do II saysay this?this?

Well, on thethe financial front, we allall get monthly remindersreminders of somesome of the past costs of ourour electricelectric needs. But, fewfew Americans havehave yet been shown thethe financial costs of the traditionaltraditional ways of meeting future needs. Every looklook at increasedincreased demanddemand and known resources says thatthat strains will increaseincrease fast.fast.

The North American Electric Reliability Council's 2006 annualannual report says that generators and utilitiesutilities now have contractscontracts with new plants forfor only one-third of what NAERC predicts will be needed. At thethe same time, Regional Transmission Organizations -—thethe RTOs- cry out that we must setset up payment plans right now to build capacity inin years ahead, with billions needed to buy thousandsthousands of mega-watts fromfrom fossil-fired, centralized power plants. Yet, Edison Foundation's June 2006 study says that utilities'utilities' financialfinancial strengths have weakened and thatthat they will need to raiseraise ratesrates to financefinance upgraded transmissiontransmission and distribution systems.systems. In other words, bringing inin investments fromfrom old sources of capital will be difficultdifFicult -which—which means costly.

On the environmental front,front, the dollar costs of sulfur containmentcontainment and of nitrogen control are showingshowing up inin the bills chargedcharged by some utilities. The costs of mercury controls will come on soon.soon. The financial costscosts of carbon capturecapture lie ahead. The costs of land forfor power plantsplants andand transmission lineslines are risingrising fast.fast. And, yet, thosethose 'costs''costs' inin bills and rates,rates, areare but aa smallsmall part of the truetrue environmental costs thatthat we allall face, and an even smaller part of thethe true environmental costscosts thatthat we are passing on to our children. We have now reached the pointpoint where environmental harms will be not just a cost, but aa constraint on the electricityelectricity system. Whenwe turn to security, we all have seen images ofoF flames and smoke when central focalfocal buildings are destroyed,destroyed, andand we allall knowknow of daysdays of loss and nightsnights ofof' darkness when thethe central grid fails forfor millions of us timetime after time.time. ZheThe costs of patching up and reinforcing thethe central station-focusedstation-focused grid are high indeed. But despite costly investments, itit will never yieldyield true reliability.

We haveIhave now reachedreachedl thetlhe point where environmentalenvironmentaI harms willwilli be not just a cost, but a constraint on the electricity system.

Why not ease thisthis stressstress on the transmission gridgrid by callingcalling inin the help of thosethose who will investinvest in small,small, clean power plants installedinstalled right next to thethe electricity demand? A fewfew utilities are taldngtaldng thethe first-steps toward this transitiontransition (for(For example, Con Edison isis seekingseeking bids for 12.312.3 MW of demand-side resourcesresources --—including distributed generation --—to meet growing energy demands inin 14 specific locations). But we need toto pick upup the pace. ItIt is time forfor baby-steps to mature intointo healthy strides.

As aa formerformer rate-regulator;rate-regulator, I know how it feels toto have a utility come and saysay it needs toto increase rates toto covercover newnew investmentsinvestments in transmission and distribution: it doesn't feelfeel good at all. So, when we have a chance to recruit and encourage folks who will installinstall theirtheir own small,small, clean generation, right next to thethe loadload that it will serve,serve, thethe message is:is: "Many hands make lighterlighter work; welcome to the tasktask that we all face!"Face!"

What must we do to welcome those new hands? _heThe Network for New Energy Choices has looked in detaildetail atat decades of experience inin dozens of states.states. ZheyThey offer herehere thethe " "lessons-learned.""lessons-learned. And theythey do so,so, not as an academic exercise,exercise, but with toolstools for all of us to see andand use.

What are some of the key lessons they present?

_-hatThat states and cities are takingtal&ing up the challengechallenge ofof' meeting our national needs; trulytruly thinkingthinking globally and acting locally. Efforts likelike NNEC's analysis cancan offer uniformuniform models thatthat will helphelp meet larger goals. At the same time,time, the consistency of model laws and standards cancan ease the path for investors.

To treattreat net-metering as a vital part ofof' a larger efforteffort toto supplement our current centralized, fossil-fired, costly electric grid with clean, secure, and cost-effective energy resources. Zhus,Thus, energy efficiencyefficiency and renewable resources distributed throughout the systemsystem can both help, and be helped by, investmentsinvestments in clean net- metered generation.generation.

To keep ourour eyes open, asas net metering occurs, for chances toto transition to smartsmart meters that incorporate time-of-usetime-of-use pricing and smartsmart tariffs for all generators.

To take aa dozen steps, detailed within, toto make thatthat hope a true reality.

And, perhaps most importantly,importantly, toto encourage, not discourage, small, clean,clean, distributeddistributed investments that can helphelp all of us on all three fronts of our energyenergy trilemma -- finance, environment, and security. These are valuable lessonslessons for utility regulators. II knowknow from personal experience. They are also valuablevaluable lessonslessons forfor us all.

And so II close by asking these questions, andand thankingthanking NNEC for help with the answers:

IsIs an energy storm coming?

It surely is.is.

Does America's electricity grid needneed help?

It surely does.does.

Can net-metering of clean, secure,secure, distributed resources helphelp meet thethe needs that we all face?face?

The folksfolks thatthat can do this are among the hands we want on deck.

How do we inviteinvite those hands to join us on the deck?

By using allall the tools NNEC setssets outout for usus in thisthis report.report.

We'veWe' ve never needed thethe education thatthat NNEC offers here asas much as we do now -—soso my message to states andand cities,cities, toto legislatureslegislatures and commissions,commissions, is: "Let'sput"Let's put thesethese tools " and lessons to work now."now.

The Network for New Energy Choices has looked in detaildletail at decadesdlecailjes of experience in dozensdlozens of states. They offer here the "lessons-learned.""lessons-learned. "

as' I I ~ I ~ MichaelMliChael Dworkin,DWOrklnt ProfessorPi'ofcssor of Law andand Director of therhe InstituteInstitute forfor EnergyEnery andand thethe Environment at VermontVermonr Law School, has also been a litigatorlitigator forf'o r USAS EPA, a management partner inin anan engineering firm,finn, arrdand a utility regulatoLregulator,

Professor DwoddnDworkin was Chair ofthethe Vermont PublicPublic ServiceService BoardHoard fi°omfiom 1999 ton& 2005 andand he chaired thethe national utility commissioners' Committee on Energy Resources &R; the Environment. In 2003, onon behalf of the PublicPublic ServiceSeivice Board, he receivedreceived thethe "Innovations"Innr&vations inin American GovernmentGovel"nment Award" fromfrom the Kennedyl(ennedy School of Government forf&&r helping oversee Efficiency Vermont's de- velopmentvelopment into oneone of America's five most innovative and effective public serviceservice programs.prograins.

Michael isis now a non-utility Trustee of thethe Electric Power'Power Research InstituteInstitute and was recentlyrecently elected toto Board ofthethe American Council for anan EnergyFncrgy EfficientEff&cient Economy. For many years, he has helped pursuepursue more sustainablesustainable energy portfolios, with special emphasisemphasis on energy-efficiency and renewablercncwablc energyenergy choices, including rural and agricultural options.

A giaduategiaduaie of Middlebury College and thethe Harvard Law School,School, Michael's work has focusedfocused on thethe points where technical, economic, and legal issuesissues intertwine.inteitwine. HeI-Ie believes that:that: "]_)_erg),"Energy policy isis our world_world's most pressingpressi»g environmentalenoi& onnlental challenge,chrtflenge, andrind environmentalenoi ronnzentnl issuesim_es arenre thethe energyene&gy

sector'ssee&or, s mostniost importantlnsportonnt conm'aint."const&an&it.

III IV i_i___i_i ii_i_I?i

Forward by Michael Dworkin ......

Executive Summary ...... I. Introduction The State of Net Metering ...... 5 Central vs.vs, Distributed Generation ...... 6

Methods of Metering Small-Scale Renewable EnergyEnergy...... 8

ll.II. Why FewIFew Customers Participate ...... _1 California -—Caps can be Counterproductive ...... 14 ill.III. Comparing States ...... 17

Measures of Program EffectivenessEffectiveness...... 18

The Magic of 67 ...... , . . . „...... , . 18

Chart 3.13.1 -—Overview of State Net Metering Programs (2004)(2004) ...... 23

Chart 3.23.2 -—Grading State Net Metering Programs ...... , ...... 30 State ProfilesProxies ...... 31

ArkansasAI'k'&I ns'ls ...... 31.

Calit:blCaliinl nia ...... 32

Colorado(. .O1()I"'Id() ...... 33

( _OlllleCtiCtll()nneet1( Ill...... 34

Delaware1 )el a wa re,...... 35

GeorgiaGeo)'I)la ...... 36

HawaiiH;I«'a i i ...... 37,37

[rldianaIntliana ...... 38

llowali)wa ...... 39

Kenmck_liennl( 1'y...... 40

Louisianal. , ouisiana ...... 41

MaineiX' l a) Ii e ...... 42

Mary]andi v'1;I I" yl I) n tl ...... 43

MassachusettsM assllehlise'I. ls ...... 44

Minnesotai v41nlles). )rl) ...... 45 Montana ...... 46 Nevada ...... 47

New ]}lampslfire1 lampshire ...... 48

Newe« lersey]else)i,...... 49

V NewNew MexicoIvle&il«.''&,...... 50 NewNew YorkY&&rk ...... 51

NorthNor&. h DakotaDak&&ia ...... 52 Ohio ...... 53

Oldahoma&Ol lab&. ) ma ...... 54

OregonOi egon ...... 55 Pe'nns):lwmiaI'ennsvlvania...... 56

RhodeRh&&de MandIslantl ...... 57 "I_-.'×asIexas ...... 58

Utd_I.Jtah ...... 59

VermontVei &no i it ...... 60

\,qJginiaVi I'gl. n!a ...... 61

i'i \X;%hi_glXX'asl'i I. i& &~~& ono ...... 62 Wisconsin ...... 63 Wyoming ...... 64 IV.IIV. Worst Practices Indiana &8 Arkansas ...... 65

Indiana -- Preventing Legislators from Balancing Economic InterestsInteresrs ...... 66 Arkansas -—Allowing Utilities to Discourage Participation ...... 67

Cross-Subsidization -—The Boogey-Man of Net Metering ...... 70 V. Best Practices

New Jersey ...... 7.3

Development of New Jersey's DogramProgram ...... 73 Features of New Jersey's Program ...... 7676

Rules Matter."Matter: Michigan vs.vs. Wisconsin ...... 80 VI.Vl. SimpleSimplle Solutions How to Make Net Metering Work ...... 83

ModdModel Statute: The EnerEnergyD, Sdf-RdianceSelf-Reliance Act (ESRA)(ESRA) ...... 84

ModdModel Interconnection Standards &6c RegulationsRegulations...... 89

A Federal Net Metering Program ...... 97

Appendix A: Explaining thethe Magic Number 67 ...... 99

Appendix B: Breaking Ties ...... , 100

Appendix C: Glossary ofTerms ...... 101

VI _i_:)i__

American consumers face a crisis at the plug that is every bit as serious as the crisis at the pump. Recognizing an impending climate catastrophe andandi facing thethe unmet promises of eledricityelectricity deregulation,dleregulation, consumers are beginning to revolt against rising utility costs.

his fall, for example, voters in Illinois waged a modern-day version of the Boston his fall, for example, voters in Illinois, waged a modern-day version of the Boston TTea Party, sending teabagsteabags to the statestate'ss utility inin protest of projected rate increasesincreases of 22% to 55% inin 2007. In Boston, homeownershomeowners and small businesses have seen electricity prices rise by 78% since 2002, from 6.46.4 cents a kilowatt hour to 11.411.4 cents aa ldlowatt hour)hour. ' As utilities scramble to address thethe realityreality of global climateclimate change, retrofitting dirty, coal-firedcoal-fired power plants with carbon capture technology could raise thethe cost of electricity generation by 4.3%43% toto 91%291%.

Given relative inactioninaction by thethe federalfederal government, Americans are talcingtaldng matters intointo theirtheir own hands. A record number of homeowners and smallsmall businessesbusinesses are declaring their independence fromfrom utility monopolies by finding ways toto meet theirtheir electricityelectricity needs more cheaplycheaply (and more cleanly) on theirtheir own. And more state governmentsgovernments areare assuming control of their energy futurefuture by intervening toto encourageencourage thisthis energy self-reliance.

For nearly 252, 5 years, statesstates have been the cruciblecrucible forfor innovativeinnovative policies toto promote small-scale, renewable energyenergy generation. By 2006, ' :-.-;-::-''„:::.-'-, 36 states had adoptedadopted statewide programs that set rules by which cus-cus-, ,:,''"&~g=., . tomerstomers who generate their own electricity can interconnect toto the " centralcentral transmission grid. Known as "net"net metering,"metering, thesethese programs have been described asas "providing"providing thethe most significant boost of any policy tool at anyany lev- " el of government...togovernment. ..to decentralizedecentralize and 'green' American energy sources. ''_ By compensating customers for reducing demand andand sharingsharing excessexcess electricity, net metering programs are powerful, market-based incentivesincentives that statesstates can use toto encourage energy independence.

The Energy Policy Act of 2005 (EPAct)(EPAct) reqmresrequires allall states to "consider""consider" a net metering programprogram by 2008 or explain why their existingexisting programprogram isis sufficient. Many statesstates areare already in the process of examining their existingexisting programs toto determine theirtheir effectiveness.

' "!'l . I I!' ". tl!I . Smith..» 'Ih. ReLiec(:a(2OO6)!!I!!:!!i-., ErrlLiold{m{_dst4_te!_t(d_echarge(if(-!nergyi_!;t_e.'_'W_._ItStreelioiirn;:dt't. !!.I!!!!t!!!!!!!I'!:I!!'!l'!god:, ::, t!!n!non OctoLiel.12r!!'t!It!%. p A_; a'. ;" 22 hitergoY!_.inmelitaII!II':.i'io". t!ttttnniil!IP!ititPanei it!Iion (';iinl_m_riiifiii!itr!CharigeI!nitro!.(_!006;", 1'Irii (;liItr!li_ i!!tin!PIU!t-'nliii.I._!c_ ptu e aid s,'.'!(iini„"-oa_ IPcci,CC sit(!!nl-'.pc ; al Reporla."I (iri [atileIoiil: SPI 3;_,, p S-'Int! on". riot !; Fem._y,tnr. ,'y, gtevenCTOU3)Sioyr ri! i!I!t'3) [,Iloil!3n!i_ i.{bltn.'LP,hitr noI: Ii!rrtr!!or!i&ioeri(.;wabieoner_JyarlUon!tririy nn!I ll_-,,-.'.nvironmeltIii!.or!in) nrnr'n3 MkJArrek;,',I!Iiri'!rn!it ntt,I Ioiio!0[_ Int I_ r,..,andstq:_emacydoctm_e,, or!dot pi orntry Inno, DuioticyPolioy 6!trttrttFortm_ 14:J.-120I 'I: I- I [1 ::New Jerseyjersey ?_ 100% 305 ! 2 iMontanaMontana A i 97%97% : 67 i : 15 I 3 i California A i 94% i:OregonOregon /_ 91% 14 I 4.5 Nevada A 1 91°/° 5 ' Nevada 88%88o/ 7 ::MinnesotaMinnesota /_ : 82% 6 I 7 i.': New Hampshire A : 820/082% 6 i " 88 ::. Wisconsin _ 79% 4 I 9 : Hawaii g 64%64o/ : 3 1010 Vermont 64% 11 ' Wyoming 64% 1212 i: Ohio • 64%64o/o • 3 1 1313 Louisiana 64% 3 1414:.Utah 61% 2 15 ' Connecticut C 48% 1 16 16 " New York 48% 1 48% 1 17 '. New Mexico g .... 48% 1818 :Georgia: Georgia 48'/48% 1 19 i' Washington D 36% 0

': 36% 0 20 ! Virginia 36o/ 0 I 21 : Kentucky 36% 0 22 :Maine. Maine 36% 0 I 23 ' Massachusetts _:: 27%270/ -1 . 24 i lowaIowa 27% • -1 24:iI ' 27% -1 25 i Delaware < 270/ ° ! 26 : ' Colorado 9% 26,iI i 27 i' North Dakota li:: 9% -2-2 2828:,::IndianaIndiana 9%9/ -2 ,.I 29 ":MarylandMaryland 9% -2 30 30:.:TexasTexas 9% -2 31 i Arkansas 9% -2 3% '3 i 32 i Rhode Island 30/ -3 33 . Pennsylvania F 3% -3 34 !: Oklahoma • _::: 0%0'/o -4 The Network for New Energy Choices (NNEC)(NNEC) has developed a metric toto compare, grade and rank the 34 existing statewide net metering programsprograms so that statesstates cancan make a rational determination of how effective or ineffectiveineffective theirtheir programs have been. We havehave determined which states are most effective and how states that have ineffective programsprograms can adopt best practices toto empowerempower customers toto generate theirtheir own clean energ_energy.

By analyzing thethe evolution (and performance) of effective and ineffectiveineffective state programs, we have identifiedidentified pitfalls inin thethe rulemaking process and ways to overcome them.them. Our comprehensive analysis revealsreveals somesome fundamentalfundamental lessonslessons for states consideringconsidering how toto improve their net metering programs:

Ineffective Programs Discourage Small-ScaleSmall Sca-ie RenewableRon esoable En_2gyFnesxy

Most utilities are vocal opponentsopponents of net metering, mistaking self-generation asas a revenuerevenue loss ratherrather than as a demand-reduction strategy. Smart utilities shouldshould see everyevery household and everyevery smallsmall business as aa potential contract generator, contributing clean, renewablerenewable electricity to the centralcentral transmission grid, helpinghelping the utility ensure reliablereliable electrical service in aa market strained by risingrising demand.

But in anan effort toto appease false concerns overover lostlost revenue, many states have erected common barriers toto self-generation by:

Restricting commercial, industrialindustrial or agricultural customers from eligibility Limiting the size of eligibleeligible renewablerenewable energy systems Preventing customerscustomers from receivingreceiving credit forfor excess electricity Capping thethe total number of participants Charging discriminatory fees and standby charges Demanding unreasonable and redundant safety requirementsrequirements Requiring unnecessary additional insuranceinsurance Failing toto promote thethe program toto eligibleeligible customerscustomers

Analyzing thethe evolution of restrictive and ineffectiveineffective regulations,regulations, we have discovered lessons forfor all states that want toto avoidavoid regulatory pitfallspitfalls and encourage energyenergy independence.independence. .EffortsFfforts to protect thethe economic interests of one sector (electrical utilities) often hurt other sectorsinsectors in thethe state (like manufacturing). Example: Indiana

Despite entreaties fromfrom thethe state'sstate's legislature, Indiana'sIndiana's regulatory commission decided to restrict commercial and industrialindustrial customers from participating in net metering. Indiana utilities argued that these customers, who could generate a substantial amount of theirtheir electricity demand themselves, would representrepresent too great a revenuerevenue lossloss for thethe utility. As a result,result, Indiana'sIndiana's technology and manufacturing companies suffer from higher operational costs which limit theirtheir economic competitiveness.competitiveness. C_mmissionsCommissionsthatthat attempt toto balance utility concerns with customercustomer interestsinterests oftenoPen undermineunckrmine thetheintentintent of state legislatorskgislators andancladoptadopt regulations that effectivelyegectsvely destroyclestroy thethe program.program Example: Arkansas

In anan effort toto appeaseappease utility concernsconcerns thatthat net metering representsrepresents a subsidysubsidy to participating customers, Arkansas' commission allowed the state's utilities to seize (without(without compensation) any excess electricity generated by customers at thethe end of every month. Denied fairfair compensation for excess electricity,electricity, only threethree Arkansas customers have enrolled in the state's program since it was initiated in 2001.

FPectiEffectiveve ProgramsPrograms Revolutionize Energy Production

Several statesstates have experienced rapid growth in small-scale renewablerenewable energy generation. InIn California, legislatorslegislators had to increasedincreased the cap onon totaltotal eligibility by 250% toto meet demand (see page 14). In New Jersey, thethe state regulatoryregulatory commission is overwhelmed with new applications. 4

HowHoso do states ct'afiaft an effectiveCfective net meteringprogram?meteri ng programs Focus on goals rather thanthan on balancing interestsinterests Allow monthly "banking" of excessexcess electricityelectricity Reduce unnecessary and burdensome redred tapetape Link net metering toto statewide Renewable Portfolio Standards (RPS)(RPS) Create net metering as a comprehensive package of incentivesincentives Require regular performance measurements

Example: New Jersey)ersey

In 2004, the Governor's Renewable Energy Task Force amended thethe state's net metering rulesrules to help reach thethe state's ambitious goal of 20% renewable energy production by 2020. JeaneneJeanene Fox, thethe state'sstate's powerful utility board President, evaluated proposedproposed changes with a singular'singular focus: do thethe changeschanges encourage oror impedeimpede thethe development ofaof a statewide renewable energyenergy industry?industry? Using this calculus, the state expandedexpanded eligible customer classes,classes, institutedinstituted generousgenerous credits for excess generation and adopted thethe highest cap forfor eligibleeligible systemsystem sizes of any state in the nation.nation. As aa result, New Jersey has experienced thethe highesthighest rate of enroll-enrollment of any state, increasing thethe number of installed solar systems more thanthan fivefold.fivefold.

Applying thethe lessons we have learned fromfrom .34.34 statestate net metering programs,programs, thethe InstituteInstitute forfor Energy &R the Environment at Vermont Law School has crafted model statutory languagelanguage for state legislators and model interconnection standards and regulations for statestate utilityutility commissioners. As states consider adopting or expanding netnet metering programs inin 2007, thesethese models provideprovide an easy way toto emulate effective programs and avoid mistakes.

Ideally,Ideally, a uniform national renewablerenewable energy policy would stem from federal leadership.leadership. The wide discrepancy inin the design and implementationimplementation of 50 different state net me- teringtering programs has the potential to create uneven playingplaying fieldsfields forFor renewable energy serviceservice providers and for regulatedregulated utilities. Uniform federalfederal net metering standards could create a level playingplaying field as well as provide greater regulatoryregulatory predictability thanthan a patchwork of 50 state-based programs.

4 II. acey SR_phenSl&slthen (2006)(2006l 'The'ilia price of success:success: Inside thelht! N,JIMJ cieaneisa&1 erl:.,,,igy&sllelgy programploqr&tllt, " RenewableEnergyAccessBe&towel)leEner&fyC&ccess cornr!&., ni OctoberOofr!her 1010 Accessedati&&;Ceeee&f ai http:!!wwwrenewableeueqljyac,,:esscom!ma!news/s_ory?id=46172I IIP:iiWWW rr!&teWahlee&ter&lyaCCOSS CO&&tireaine«&SiSI&tryzid=40172 i7

THE State oF NEt MEtEriNG

Buried within the mammoth Energy Policy Act of 2005 (EPAct) is a littlelittle paragraph that could have profound effects on renewable energy generation in the United States.

n Section 1251 of EPAct, the U.S. Congress required every state to "consider" issuing net n Section 1251 of EPAct, the U.S. Congress required every state to "consider" ' issuing net r.meteringmetering standards and by 2008 "mal{e"make thethe determination" of such standards.standards. 5 As legislative languagelanguage goes, the word "consider""consider" isis as preciseprecise asas words like "gourmet""gourmet" or "sustainable"."sustainable". It is impossibleimpossible to saysay what constitutes consideration or what distinguishes itit fromfrom cursorycursory rejection. The "determination" part of the provision isn't much clearer,clearer, but appears to require states to mal{emake a decisiondecision on whether to adopt some kindlund of net metering program by 2008. ItIt is, however, silent on justjust what a good net metering programprogram should look likeolike.

In itsits simplest form,form, net metering employsemploys a standard electricalelectrical meter toto record thethe flow of energy back andand forthForth between aa generator and thethe utility'sutility's power grid. 6 SinceSince most meters areare already capable of runningrunning in both directions, they provide an easyeasy way to record the net excess electricityelectricity consumedconsumed or produced by participating customers during a givengiven billing cycle.cycle. Across thethe nation,nation, some 36 state legislatures and/or utility commissions have gone through thethe arduous process of crafting andand passing 'net'net metering' rules -- programs that require utilities toto credit customerscustomers for generating their own electricity from renewable resources and toto purchase any excess generation. Net metering isis usuallyusuaHy created as an incen-incentive for homeownershomeowners and small businesses to investinvest inin renewable power systems and toto helphelp decrease demand on thethe central transmissiontransmission grid. InIn many states, the programs are seeing hundreds of new participantsparticipants each year,year, jump-starting new renewable energy service companies and creatingcreating robustrobust markets forfor off-the-shelf solar andand wind systems.

But inin many states, net metering has proven a poor mechanism for promoting small-scale, on-site renewable energy. By 2004, therethere were onlyonly about 15,20015,200 customers nationwide Air participating inin netnet metering programs, with ]13,3,000000 of them inin California alone.

Outside California, there are fewerfewer than 2,2002,200 customers in the United States participating in net metering programs.

Three statesstates have net metering standards and nono participating customerscustomers at all.all.

Six states registeredregistered five or lessless participating customers.

InIn many states,states, more energy has been lostlost crafting the Byzantine interconnection rulesrules governing net metering than has been generated by the programs themselves.themselves. InIn some states,states, thethe number of participating customers actuallyactually has decreased asas many customers, deterred by burdensome paperwork requirements andand hidden utility fees,fees, simply dropped out.

"r ". !!!!!r'r[!" er_!v Po liicyr!!A{ t ofI'!!'!2 305 (2005)i:.l:IA!I.Subti!le [!,r Aivl!_i_dri)el_( »!r '!"_,!"I'!!to P.IRVAI!r S,_!cdoi_r!!ilia"' !1!!!!I] '_51. !t!Nei !I!I:-:"niiir!'n!Meielirig _1(1 1 f_cie_itioi_al!n;, I,Stai_!J_(Is'!!I!:Ii ' 6G {JO S [Itvil(!_ll_l_;it[_itr!'!!!r!i!nnli)l I:'t'ol:e,';,.[iorlI'rn!PXI(!r Trrlp!IP!'_._{_ll(;y {2(iO(I)li!IQ(ri NoiNP! Mei{_riri_5!lr!!0!Ir!!rSi_.i;eS!i!!'.&(1 Lo(;slD( i!t;lirnal:,?( Irrr'n((' (:hail{{eTI(n'!ll'0 P!o[_r_imP!(!I!r(!Ir!.l_nli_iryX!i!!!!ll'}'i_t{t):,_.,',/{_s(..'._tiii_!!1!P:,'"!'%(P!r!i!!epa(!Pr!{_ov,'Il()', , ':. QAlc_l{_(!All! !((L,)!Il'Sr!((inn!w tYin_ n:Ils ill'Ll!Irrlr!0!(nnq_ .,,Ke_ I (r!!k(:pk _WSSillsi,S '!SB!5[4 IT%/Itr'it;:,,Frrl(-,(:,.'_Ir!3 Irtr(!I(n('nrlv e r{ 8 tp"!)dr _-]'_hehC preeminentplCC!11111C!li indusu'ialist1!1dilstritlllsi Had thethe U.S.U.S.electricalelectrical system followedfollowed .i.JL financier,financie, J.j. EP, Morgan,MD!gall, who J.EJ.lo. Morgan's model, it may have looked bantaolledbanlctolled much of Edison's early fatfar simpler and operated farfar more workwolk withivith electricity;clccii iclty, wantedivailtcd toLo efficiently than outour current model of sell the machinery thatthat generates centralized generation. Customers electricity rather than getget involvedinvolved inin would producepioduce theirtheir ownown electricityelectricity the messy detailsderails ofof'creatingcreating andand selling close to where itit isis consumed, with the electricity itself. It isis farfar easiereasier generators scaled to fitfit theirtheir demanddemand to build andand sell a widget, Morgan andand using fuelsFuels befitting thethe geography. thought,Lhougl'li, thanLhall tryingL'lyiilg toto manageInallagC Electricity guru AtomAmoiy7 l_,ovinsLovins has anall endleCITL'lie commoditycoililllodiiy market.nlarket. But documented overovei 200 benefits florafroin Edison preferred toLo keep aa tighttight leashleash this ty,petype of 'distributed'distributed generation' onoil theLhe generationgcilci"tii'!oil technoloLcchllologyD' andand model-model -- from reducing thethe number wanted insteadinstead to profit fi'o,nfrom selling of customers affectedaffected by blackoutsblaclututs to thethe dectricalelectrical current, much likelike gasgas maldng beneficial use of local fuels fz companiescompanies profited byby selling gas. 8 thatthat would otherwiseotherwisc be discarded.12discarded.

Unfortunately for US,us, Edison's visionvision While some utilitiesutilities areare beginning to plevailed.picvailed. Over aa centrecentufyTlarer;later, AraericanAmerican tmderstandLu1derstand thethe benefits of distributed Central Versus consumers havehave come to dependdepend generation andand starting to invest inin smaller,smaller, on aa rickety,rickety, unreliable transmission modtflamodular power systems, mm_ymany continue toto Distributed grid, stitchedstirched togethertogether fi"omfiom netwod_snenvo!ks fightfighr. rðe pa_fidpationparticipation of homeownershoineowners and cont,olledconuolled by regional fianchises.franchises. In smaJlsmall businmsesbusinesses byby discoungh_gdiscourtgi!Tg on-site Generation 13 Generation our modernmodel n electronic society,,society, itit isis renewable energyenergy generation.tageneration. increasinglyincreasingly aa gridgfid strainedsuained to capacity and unlikely toto meet futurefuture demand.

ItIt isis also staggeringlystaglreringly inefficienuinefficient. By thethe timetime electricity,electricity reaches thethe customer, nearlynearly two-thirdsLwo-thirds of thethe enerD_energy in thethe original fuelfuel hashas been wasted)wasred. American consumersconsumers paypay up to 2.62.6 cents per kWh forfor electricity lostlost in transmission)transmission. '° Grid(.rid failuresfailures cost anan additional $80 billinnbillion toto $123 billion each year and add 29% to 49% toto the cost ofof'everyevery kW of power transmitted inin thethe United States.States. n'

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r ". _,{)iex.'41drurt nu:I, ot_/l!}.v,e!_!ci}s!lJ,_Wh],),_ds/to(ilt_i!ro t!.u;!i' «!srrf:::nt:lr!«(l:,!oofn Ot}_ll_iiyQiu!r«ifc ]3 lJIl S0 Depi_rtmelito[[n_r_yI!«Inirliriuiit c» i n. rro (1999)Distdbub_.d(1(lite!I out tl»tttncl ini_Solar.,BeneNleinta((L!r"Rut«!filo pd[p(II G_!_}el_tJor}:(in tnt!!iu!.SeolJril_ytl_l,*'!lic?_Socunr fiirrnnr! .n kvu futurefuture-"n:fiV,'i_h rHi>,ble.rc li. l lc.

c» I'ri. 11ii {:aslen('nntnn 1I;trr!If)un!ron,alidDowl_es.B 0 t2OOS)', !(i!'!')!I!r!lhe_,_sefurc!»::f r flexib,.lefl-."„c!'!Ic-«i:,pow::_r';»r Officei?Iftc, _}fnf Po,in«nilesil }!liergy,f tiur„':}.t:ed.-2ialI"»cfn!nf lTnergyrcy :'»ucu 'r,". !tint!'.:0(nc»cf (lecellhe_ir_:d.I tr r tilt«'.::;;»(I,_L_il_r:_tlefl"(rni=r»tron«I«fr»cut!O[ eib!:ilic_}¢ n»r Skeptical0!ir utt! «I _.!:hhul0gy"r.r!I'trulnrn(.Cenieb:!n'nr. t'M,_ber(i. htil):/fwwwlit»it !., dis}Iibu!ed 'I . iilquirer«!(Ic!it' !' la!lt_alyi!;ebm;_rvI crlu(«»o "c'!(fisc!'r .'4enelaiionpnn un:tun oomitc, !»co!Iiblaly/H]tl!r;r'y I i(;0 pdf« if In 1983, Minnesota became the first statestate in the U.S.U.S. toto mandate net metering by '4 legislative statute.statute. 14 Proponents of the legislation believed thatthat thethe program was an easy way to promote investment inin renewablerenewable energyenergy without spending aa substantial amount of public funds. By providing aa market mechanism for compensating customerscustomers for excess generation, the program was intendedintended to offsetoffset somesome of the up-frontup-Front capital costscosts associated with installinginstalling renewable energy systems.

After nearly 25 years of experimenting with net metering, therethere is aa dearthdearth of information comparing statestate programs and littlelittle guidance for states that must now considerconsider establishing net metering policies or make improvements in existing programs. While some en-environmental groups and government agenciesagencies have issuedissued reportsreports attempting toto evaluate the effectiveness of net metering, in most cases these reports have described the regulatory environment, evaluatedevaluated differencesdifFerences between programs, and speculated about thethe effects ofof' various rules. Most attempts to assess the effectiveness ofof'netnet metering usingusing more objective criteria have beenbeen hampered by thethe lack of available data on customer participation rates,rates, thethe ' amount of renewable energy generated, or the effectseffects of thethe programsprograms onon sen,serviceice quality)quality. _

Starting in 2002, the U.U.S.S. Energy Information Administration (EIA) began collecting data on statestate net metering programs. _heThe EIA has onlyonly made public datadata sets from 2002-2004. Because no complete setset of data isis available for allall statesstates since 2004, a comparative analysis ofof' more recent policy changes is impossible. Instead,Instead, we take a snap-shotsnap-shot inin time and compare thethe performanceperformance of state net metering programs at that time. The result is a comprehensive analysis of how differentdifFerent state net metering arrangements have affected customer participation over aa specific time period (2002-2004). InIn many states,states, significant policy changes have occurredorcurred since 2004. Where possible, we have noted thesethese changes and their effectsefFects on participation rates_rates.

By comparing regulatory arrangements (and participation rates) acrossacross states from 2002-2004,2002-2, 004, we have identified how unnecessaryunnecessary regulations and ...... :± burdensome requirements (often(of'ten adopted at thethe behest of utilities opposed to net metering) havehave limitedlimited thethe abilityability of the programs WhatWlhat emerges is a picture of toto meet theirtheir intendedintended goals. What emerges isis a picture of state state legislaturesllegisllatures often under-undler- legislatureslegislatures often undermined in theirtheir attempts to promote clean, distributed power by utilities thatthat perceive on-site renewable gen- mined..,mined. .. by utilities thattlhat perceive eration asas a threatthreat to theirtheir bottom line. TalcingTaking the lessonslessons learned on-site renewable generation as from a quarter-century of net metering policy in multiple states, we a threat to theirtheir bottom line.line. attempt to dispel myths, identifyidentify best and worst practices andand make ...... i recommendationsrecommendations forfor policy reforms.

For over twotwo decades,decades statesstates have been thethe cruciblecrucible forFor innovative policiespolicies to promoting small- scalescale renewablerenewable energy:energy. Some states have seen remarkable success°success. Others havehave failed.Failed.

This report is aa call toto action. It is timetime to apply thethe lessons learned from successfulsuccessful (and unsuccessful) state net metering programs to reformreform and improve existingexisting policies, to create new state initiatives where they do not exist and ultimately to adopt aa model policy that offers new energyenergy choices to all Americans.

". '! 'rlpnl '. » , '::!'', :»":."»!ines 14 Aln_ricanrp»::ppn Win!_lip!!4!:!s"!!!::!t:rtelgy As;,_2oeiati{}t_. .;:!!!!!!:;!!!!(2005) Small Windl!!in Miftnes{}i;_!n»nnp!!4. htip:!!!:'._/;'P,'_'_,__iweapip!:r,o_E/slr_alh,,;ind/n_innes{!_ai!!. ,'4v,;hhnl 'nr i'. ":lpnl'It rrl!n'rr'I prrir lr, ',I« t5ls ]JeMJ(;i_ariIlt!"' !411 prlt?prr pptrfl":'I[ g,,%_vs(!'!Irp_ «rp!1lp!:Soir_ Tiggi tl Inrofextrr!rpplr:.[1t3. . II 44]s?_t_nrtorl[ornaf_'.rr!Ir prptr rt I!& rp rip r!r_;(:l_._ef]gg(,}ssrlleritofffsSiSh}l:_{_,rsI;l,_Inc('JEir}9r rrrrr'lpr!::, ". (if rtp slrrlp r. 4 I'in;Iphr ', I'rrrn TirurTheir roI)(_lrppr N wssrrlrp {.;tiltst;II htI I d_{terr!It f{._!rnrrrrrn asn:; {}[pl {:h;h}ber, r, :!(106? Methods of Metering Small-Scale Renewable Energy

The mostfnost commoncommon method of "basic" net metering uses a single bi-directional meter that registers the flowflow ofol' electricity inin twotwo directionsdirertions toto recordrerord thethe customer-generator'srustorncr-generator's netnct energy consumptionconsumption or production over a single billing period. The meter spinsspins forwaidforward during periods of elec- tricitytricity consumptmnconsumption from thethe grid,grid, similarsimilar to any mdinatyordinary 0 llr 139b 0 meter. Alternatively, the meter spinsspins backwards during DCrf&a@ KrLOWATTHOUlle periods ofol excess energy production toto registerregister the flowflow of 0 electricityelectricity tedfed intointo thethe grid,grid. Many existingexisting meters havehave "II "'"0'II x thisthis capability.capability. At thethe endend of each billing period,period, thethe utilityuulity companycompany bills thethe customer-generatorcustofncr-gencrator only for the netnct en-en- t ergyergy consumed by the gridgrid (the(the differencediffi. renre betweenbetween the en- ergyergy consumedcollsuf lied and the energycllcigy producedprodured on therhe grid)_grid). In the situation of net metering with rollingrolling credit, thethe utilityutility should creditcredit the customer forfor anyany excess generationgeneration at thethe retail rate forlror electricityelectricity and carry thatthat creditcredit. to thethe next LOAD ' billing periodperiod indefinitel,_:indcfinitcly. m

Dual metering, another method of metering, should not be 7¸¸¸-,¸¸¸¸¸¸¸¸"...... , /: confused with net metering.fnetcring. UnlikeUnlilce net metering, which ii uses a single, bi-directional meter, dual meteringfnetering requires }} two separatesep6uate meters: one toto measure thethe electricityelertricity consumed fi-omfrofn the grid and another to measure the distributed generation (DG) producedprodurcd electricitelec trirityT sold toto thethe grid.grid. tt Dual metering typicallytypically costs motemore thanthan netnct metering for'for QC)OQ( 'r both the utility and thethe customer.custofner. The customer&:ustomer generally +",6 %160 0 0 I '" IKAUi pays for the secondaryscrondary meter, while thethe utility incurs the KIAUWAKIKUUUK 0 IKKIK 660606066666 KIKK TAKU 0 6 ~ exu'aextra administrativeadministrative costs associatedassoriated with processing the "I"' I'CJ '" 6666 i!i datadata f}omfrom twotwo separateseparate meters./7meters. Under dual metering, the customer-generator feedsfeeds any electricityelcrtricity producedprodured fromf'rom a DG-system directly onto the grid,grid, which thethe utility puppur- chases at avoided cost (the amount it would cost thethe util- :}ii ity toto placeplace thethe power in thethe gridgrid itself) and creditscredits thethe LOAD mnountamount purchasedpurr based toto thethe customer'srustomer's monthly bill. The keyIcey difl:_erencediBerence between net metering and dual meteringfnerering isis thatthat a netnet metetedmetered customercustomer receivesrereivcs creditrredit at thethe retail raterate (the price thethe electricityelertricity would cost thethe customer atat thethe timetime it isis used), while inin dualdual metering, thethe customerrustomer receives therhe (much(murh lower) avoidedavoided cost, or'or wholesale tare,rate, for'for electricityelectricity genetatedgenerated by a DG system°systcrn.

' ' ". " *: ::.. I- I I " I I!I I . !i!'u!':»!!n» :!I I. 6'n. I lU!I:":u:: . I1!! 16 I-{tlghesI!,I!!'{auyahdBeiiI.»' ».I II JeffI( 20(Acmic)0!:}} ; I)(I sa »,gc '::s ) !1!;;!!_r£ _rato!!',_ a _xu Ty I'!!,_S Ilrrm:.) _ ,_' O ,*; _ )e S;. )_(;i stoleI'0'I 8eier;£orslor,eiechicitysl_o)liedtothe_jridr!un! . d. ':, I a, l! [:uergy ' II! !:: PolicyIAulih! VolVol :3'I-'I No 13ls pgUP t532I!j3R _'339iss!1

:Eul 0 Ill iri RiiKeai intr rnonnoation or dilel flelorm&rof; mill RAnr Ual Ir snr rut oenr ietore in E!& i'.; I nial f&r uori nf the Torus I7I!' Wiese,'i/irUe, Ste;venalai in Mll "ohn. n E tllolfrlolfrier,or EiinI rin St;eftsault .k.me.Ioi Pukiskiin. Rugsel Smitilsminr 2a()(15)usi inte co _ e lion .ind r,a_etM¢_tering_ol Small Renewa.',}le [ii_(trgy ('Chelators inYe_:_s: Final I;:epor{.of the Texas I:_E-ConnectProjectI&Econnarrarojrrt b'llillI or:solur_S a_l_oofsP'ro}ectRoufellroirrt .hme!ilia i_.il hltlx//w',_;_dreiahlta:, rwwwlree org/pdlrirUradf l_ies/Fmat%2fiRer_ortp!iiho. Irr!Iri'n!2rri'!lforl En, '„" I":,I P ~&a I;*, I j iris (2818

uses a , ( / - : , :, / , L z ¸ Another two-meteredtwo-mctered system, calledrailed net billing, uses a bidirectional meter toto recordrecord thethe netnet energyenergy consumption,consumption, while a secondary meter recordsrerords thethe totaltotal output of' electricityelectririty ' fed into the gridgrid fromfiom thethe DG system)system. 9 As in bi-directionalbi-dircrtional metering, thethe customer is creditedcredited therhe retail raterate forfof the elec- %iÃ tricitytricity generated. For somesome customer-generators,customcr-gencrarors, totaltotal outputoutput isis awarded performanceperforfnance based irrcentives,incentives, such asas Renewable OC&CQC3 EnergEnergy7 Credits (RECs),(RECs), uadabletradablc commoditiescommodities thatthat tepresentrepresent thethc attributesattributes ofof'energyenergy produced by renewable sources. How-

e RIOVAV RACS Kr TAM @ f-'==- C&20 ~ 72 ever,ever, for smallersmaller PV systems, REC distributorsdisnibutof s often estimateestimate f ~ "II; II potenti_dpotential output andand award RECs based on thatthat estimate.estimate. Milli rrl 0

CREMT LOAD

)( L:j-/7 : : /-T' u/ u k ¸ ¸¸¸ c _H ¸ ' / / u A finalfinal typetype of metering systemsystem isis smart metering. Smart metering allows customercustomer to gaugegauge the real-time price, or 'time'time of-use' rate, for electricity.electi icity. _lhisThis enablesenables customers toto base their'theit electricityelecnirity consumptionronsumption patterns on the retail prices ofelectric-of elernic- ib_ity. _IheThe useuse of smartsmart metering in conjunction with net meter- inging encourages customer-generators to make more informedinformed %55 which can drastically re- /5:2c' u6,=': electricityelecnicity consumption decisions, which can drastically reduce demand on thethe electricity gridgtid asas well asas the customer'scustomer' s customer-generators with smart r monthly bill. For example,example, customer-generators with smart A"» 8 metering reduce demand by producing their own electric-elertric- ityitT during peak loadload intervals (conveniently,(conveniently, thethe time when PV systems aieare at optimal performance),pet formance), and reducereduce their'their monthly billshills byby performing energy intensive chores (like(like household laundry)laundry) when retail ratesr'ates of electricity are lowest.lowest. LOAD Also, smart meters can differentiate between sources of energy and can tracktrack DG production, which can facilitate thethe riseuse of performance-based incentives.

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Most states that have adopted net metering statutes have done so inin pursuit of the same goals:

To encourageeAc0UYBge greater,grec(ter renewablev( AewBblle energyeAevgy geAer3tIGAge_:eration "X_T() promotePI()rA0fe dis_ribu_ed84|ivIbU(e6 generationgeAeI"ztI(&A of(8 e_ectricityeIec&vIcIky

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y_h et,t, even where states have adopted similar net metering statutes, no twotwo states share Ythee exact samesame regulations or procedures governing how thethe programs areare imple-implemented and monitored. InIn an effort toto appease utility concerns about lost revenues, some state legislatorslegislators have adopted statutory languagelanguage that intentionallyintentionally limits participation inin net metering programs. InIn otherother states,states, well-intentioned state legislators have been thwartedthwarted by the addition of burdensomeburdensome requirements and fees insertedinserted at thethe regulatoryregulatory level. InIn either case, these common barriers to participation are universally unnecessaryunnecessary and generally counterproductive.

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Some state net metering rules restrict thethe customer classesclasses that are eligibleeligible toto participate in thethe program,program, often excluding commercialcommercial customer'scustomers who may havehave thethe most substantial effect on reducingreducing demand on the central transmissiontransmission grid.grid. 21" Since thesethese customer classes typicallytypically consume more power than residential customers,customers, they areare also more likely to view net metering as an economiceconomic incentive toto invest in on-site generation.

Most net metering programs are intended toto encourage investment in technologiestechnologies that are being delayed by market barriers. Restricting customer classes isis often counterpro- ductiveductive to thisthis goal. The Texas State Energy Conservation Office has noted, "It would make more sense toto limitlimit thethe eligibility of aa technology forfor a period ofof'time,time, say five or ten years,years, in order to givegive the technologytechnology a period in which it hashas the opportunity toto become commercially viable, thanthan toto limitlimit the sizesize of the initialinitial market, when thethe goal " is creating a critical mass ofoFmarket demand. "=

Allowing commercialcommercial and industrial classes to be eligible for net metering is essential to jump-starting new renewablerenewable energy markets and reducingreducing electricity demand.

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11 Most individualindividual state net metering standards impose aa limit on thethe maximum allowableallowable capacity size of individualindividual net metered systems, rangingranging flomfrom a system size limit of 10 kW in several states up toto 1 MW inin California and 2 MW inin New Jersey.Jersey. 23

Many statesstates restrictrestrict net metering customers from participating inin power salessales and sub- sequently discourage customers fromfrom investing in renewable energy systemssystems largerlarger thanthan necessary to meet on-site demand?demand. "4 In other states, statutory limitations on thethe size of eligible technologies prevent customer-generators from correctly sizingsizing a renewable energy system to provide most (or all)all) of their on-site demand. For example, New Hampshire's net metering statutestatute limitslimits commercial customers to solar PV systems smallersmaller than 25 kW.kW. As a result, commercial customers with loads greater than 25 kW andand thethe capabilitycapability of installing larger systems are limitedlimited to a grid-tied system that can onlyonly generate the firstfirst 25 kW of theirtheir demand. 2s'

Uniformity of size limitslimits reducesreduces regulatory confusionconfusion while promoting Some of the leastlleast effective thethe broadest population of renewablerenewable energy generating systems. It is net meteringmeteling programsploglams dodlo not nono longerlonger uncommon toto see renewable energy systemssystems in thethe 100 kW toto 2 MW range. IncreasingIncreasing the eligibleeligible facility sizesize forfor non-residen- allow customers to bank excess all!low customers to bank excess tialtial systemssptems also could encourageencourage participation by largelarge investorsinvestors inin net generation,genel ation, lettingllettiing utilitiesutilitiies seize metering programs. SeveralSeveral project developers in Oregon, forfor example, less than kW are it at the endencl of a given monthlymonthily havehave argued thatthat the transactional cost of systems less than 100 kW are too great toto interestinterest large investment partners.parmers. 26' Projects like FedEx's billingbilllling cycle.cyclle. 904 kW net-metered solarsolar system inin Oakland, California would not be possible under many states' current regulationsYregulations. '

InIn 2005, thethe Federal Energy Regulatory Commission (FERC) issuedissued uniform standards for interconnecting smallsmall generators and requiredrequired public utilities that own or control interstate transmissiontransmission lines toto abideabide by the standards.standards. FERC standardsstandards define "Small Generators" as having a capacity of no more thanthan 20 MW andand further create aa specialspecial class of "Certified Inverter-Based Small Generating Facilities" no largerlarger thanthan 10kW. 2_ For practicalpractical purposes, system size limits contained within state netnet metering regula- tionstions should reflectreflect the limitslimits defined by FERC. Should statesstates adopt system size limitslimits at all, theythey shouldshould limitlimit eligibility to systems that qualifyqualif'y as "Small Generators" under FERC's standards - 10kW for residentialresidenrial customers and up to 20MW for commercialcommercial andand industrialindustrial customers. !'nip! " " &s& is/ E»&~~/»;&Et» , /s /ae&'I-, &/. r'/Oyso $212 & .;, ir /'r(2//sy. j u/& ( s,a!«/Py", 2«,'//&2/ f/'N/ „ - _<::_

When customerscustomers generate more electricity during aa monthly billing period thanthan they consume, some states allow customerscustomers toto "bank" the excess generation. The utility credits the customer forfor any excess electricity generated inin a monthly billing period and

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12 carries thisthis credit foimardForward to subsequentsubsequent billing periods either throughout the year or indefinitely.indefinitely. Some of the least effective statestate net metering programs do not allow cus- tomerstomers toto bank excessexcess generation, granting thethe utility excess electricity generated duringduring aa given monthly billing cycle. Other states limit thethe time thatthat excess generation can be applied to future electricityelectricity bills.

Restrictions on bankingbanking areare more a function of utility billing cycles than a rational public policy. Just because utilities bill on a monthly cycle does not mean that customers generating excess electricity forfor thethe gridgrid should not be adequately compensated forfor the electricity theythey contributecontribute to thethe grid°grid. Compensation for excessexcess generation encourages customers toto participate in netnet metering programs and install systems that generate more renewablerenewable en- ' ergy thanthan isis consumed on-site. 29 Utilitiesutilities also benefit from banking becausebecause they do not incurincur the administrativeadministrative costs associated with paying forfor smallsmall amounts of excessexcess generation on a monthly basis. To be successful, a net metering program must facilitate bankingbanldng so thatthat customer-generatorscustomer-generators cancan receivereceive credit for excess energyenergy generated during the seasonsseasons when renewablerenewable output is highesthighest and apply it towardtoward their consumptionconsumption when output is lower.

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In aa nod toto utilityutility concerns thatthat on-site generation represents lostlost revenues, half of the states havehave limitedlimited thethe total capacity of electricity thatthat is eligible for net metering. InIn most cases, thethe utilities are only required toto honor netnet metering arrangements untiluntil the total amount of renewable energy generated by netnet metered customers reachesreaches a certain percentage of the utility's aggregate peak demand. Generally, states have set capacity limitslimits well below one percent of aggregate peak demand. InIn a majority of states, the limitslimits areare well below one half of one percent. 3° Once the total capacitycapacity of eligible net metered systemssystems reaches the limit, the utility isis no longerlonger legally obligated to offeroffer net metering to new customers. Utilities do not have a divine It makes little sense to limitlimit thethe totaltotal amount of clean energy that Utilities dlo not have a fljtvllne customers may generate andand contribute toto thethe electricity grid.grid. Utili- right to charge for electricity ties dodo not have a divine right toto charge forfor electricity that cus- that customerscostomers can otherwise tomers cancan otherwise generategenerate more efficiently and more cleanly onon theirtheir own. Capacity limits artificially restrict the expansionexpansion of on- generate more efficiently andandi site renewablerenewable generation and curtail thethe market for new renewable ' more clleanly on their own. energyenergy distributed generation (DG) systems. _1

Capacity limitslimits alsoalso create uncertainty for newnew customers consideringconsidering net metering. Since customers have no way of knowingIcnowing when capacity limits will be met, they cannot effectively plan for future DG installationsinstallations andand know forfor suresure thatthat those installationsinstallations will qualify for net meteringJmetering. '2 This regulatory uncertainty complicates calculations ofbuybackof buyback periods on capitalcapital investmentsinvestments and inhibits renewablerenewable energyenergy servicesservices companies from providing accurate long-term cost projections to potential investors.investors.

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]313 customers aliforniaalifornia amendedamended its netner metering If thethe aggregate number of customers Cstatutestatute inin 2002. The original lawlaw happens toto reachreach the maximum requitedrequired utilities to provide net metering enrollment, thethe utilitiesutilities would have no toto custome,scustomers until thethe totaltotal energyeneigy longer beenbeen requitedrequired tofo offeroffer custome,scustomers generated by netner. metering met 0.5%0.5% of"of net metering. AtAr [hethe time, many inin thethe thethe utility's aggregate peal

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Many utilities claim that,that, in thethe event thatthat net metered systems fail,fail, the utility is re-required toto meet the resultingresulting customer demand. As a result,result, many statesstates allowallow utilities to impose aa stand-by feefee on net metered customers thatthat is intendedintended to cover thethe cost of thethe electricity the utility would otherwise be required to generate should thethe systemsystem fail.fail.

The logic behind standbystandby charges strains credulity. Some researchers havehave noted thatthat theythey are "analogous toto assigning standbystandby fees toto residential customers who purchase " ' high efficiencyefFiciency air conditioning unitsounits. ''3_

InIn some cases, standby chargescharges are equalequal to oror eveneven exceed ratesrates for fullfull electrical service, in effecteffect creating an economic disincentive for customers toto install renewable energy DG systems.systems. Indeed, inin statesstates where utilities have imposed thesethese charges, thethe number ' of grid-tied solarsolar PV installations has tended toto decrease,decrease. ar

Standby charges are particularly burdensome to smallsmall generators. Utilities onlyonly need toto provide aa negligible amount of back-up power forFor these customers. Yet standby fees may be so exorbitant that they diminish most, if not all, of the economiceconomic incentive net metering was intended to offer'offer smaller'smaller generators.generators. As well, when standby charges are levied,levied, smaller generators, without leverage to negotiate a more reasonablereasonable raterate with the utilities, areare placed at a disadvantage toto largerlarger generators who may have more leverageleverage with the utilities or more resources toto devote to negotiating,negotiating. a8

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In theory,theory, net metered systems present a safety hazard ifif the central grid either shutsshuts down or loses power but thethe interconnectedinterconnected systems continue to produce power without the utility's knowledge (a situation utilities call "islanding"). Potentially, line workers could comecome inin contact with anan unexpectedly energized line.line. Many utilities sitesite thesethese safety concerns to require that net metered customers installinstall and testtest exter- nalnal shut-off switches on anyany interconnectedinterconnected system. However, the practical effecteffect isis that,that, like hidden interconnectioninterconnection fees, requiring additional externalexternal shut-off switchesswitches only adds unnecessary costs and discouragesdiscourages customers from investing inin renewablerenewable energy systemsPsystems.

It is important toto note that not one accident resulting from the "islanding" of net " metered renewablerenewable energy systemssystems has everever been reportedreported inin thethe United States. 4° More importantly,importantly, utility workers are trained toto treat all lines as live and a varietyvariety ofoF other safety precautions are required as part of standard operating procedures of lineline workers. 41" An externalexternal shut-off switchswitch representsrepresents a 4th or 5th level of redundancyredundancy that is onlyonly relevant ifaif a utility worker ignores his or her trainingtraining and doesdoes not act accordingaccording to protocol. If a worker isis followingfollowing proper'proper protocol, none of the levels of safety preceding anan external disconnect switch will everever be needed, much less thethe switchswitch itselfPitself. 43

Requiring additional externalexternal shut-off switchesswitches isis also unnecessary since all invertersinverters that meet Institute of Electrical and Electronics Engineers standardsstandards (IEEE1547) have '3 automatic shut-off capabilities integrated with the systems. 4a All modern inverters,inverters, for 44 example, shut down interconnected systems automatically inin the event of grid failure. 44

As well, recent studies have foundFound thatthat requiring additional, expensiveexpensive safety equipmentequipment forfor net metered installationsinstallations may inadvertentlyinadvertently decrease worker safetysafety by encouragingencouraging illegalillegal interconnectionsinterconnections or byby forcing line workers to traversetraverse customer'customer property toto accessaccess equipment (see page 77).

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Because of potential personal injury and property damage liability risksrisks associated with interconnection of net metering systems, most state commissions allow utilitiesutilities to impose additional,additional, and often excessive, liability insurance requirementsrequirements on net metered customers. Several utilities have required customer-generators toto carry comprehensivecomprehensive general liabilityliability policies with oneone hundredhundred thousand dollars or more in coverage toto pro- tecttect utilities from being held financially responsibleresponsible forfor problemsproblems caused by interconnect- inging net metered systems. A limited number of states have enactedenacted regulatory limits on thethe amountamount of additionaladditional insuranceinsurance aa utility may imposeimpose on a customer, and a fewfew states prohibitprolTibit utilities fromfrom imposingimposing any additional insuranceinsurance requirements for net metering.

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15 There has never been a documented case of a small-scale net metered system caus- ing grid failurefailure or creating potential personal injuryinjury or property damage liabilitiesliabilities forfor " a utility. 4s Renewable energy technologies manufactured and installedinstalled inin compliance with national interconnection standards significantlysignificantly reducesreduces the riskrisk of potential safetysafety issuesissues and electricMelectrical failure problems. 46' Furthermore, product liability insurance carried by equipment manufacturers asas well as the ability of these manufacturers toto indemnify customers or 4' utilities from liabilityliability for product failures negates the need for additional insurance.insurance. 4v

Excessive insurance requirements only serve to discourage customers lExcessmveExcessive insuranceInsurance reqrequire-u t re- fromfrom investinginvesting in renewable energy systems and participating in net customer-generators to obtain and ments may also provoke metering programs.programs. Requiring customer-generators to obtain and maintain million-dollar insurance policies is impractical because thethe customers to interconnect highhigh premiumspremiums associatedassociated with these policies will likelylikely exceed thethe without informinginforming the util- economic benefits of participating in net metering programs. For example, a Florida utility imposed aa $1 million insurance policy with ity, which, as one utilityutiillity ity, which, an annual premium of $6200 thatthat effectively shutshut down a commer- executive noted,notedl, "willll create cial photovoltaicphotovoltaic installation entirely. 4848 safety problemsprolbllems in the name Excessive insuranceinsurance requirements may alsoalso provoke customers toto of safety." interconnectinterconnect without informing thethe utility, which, as one U.S.U.S. utility of safety. "48 executiveexecutive stated, "will"will create safetysafety problems in thethe name of safety.safety. ''49

Because many utilities view net metering requirements asas revenuerevenue losers, they do not readilyreadily promote theirtheir programs,programs. s°' Most state net metering statutes do not includeinclude any public information requirements. As a result,result, many customers remain unaware of the opportunities and benefits associatedassociated with investing in net metered systems.

InIn somesome cases, lack of promotion may limit participation even more directly. Build- inging codecode officialsofFicials unfamiliarunfamiliar with renewablerenewable energyenergy technologiestechnologies or statestate net metering regulations may add unnecessary permitting requirementsrequirements thatthat delay or discourage installations. 51sf States should do a better job of promoting theirtheir net metering programs either by insertinginserting public informationinformation requirements in their statutes or by directing state agencies to initiate public information efforts and fully funding theirtheir campaigns.

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16 To measure the effectiveness of 34 statewide net metering programs5programss2q we developedclevelopecl an indexlnlElex that rewardsrewaKIS program elements that promote participation, expand renewable energy generation or otherwise advance the goals sought by net metering.

onversely,onversely, thethe index assigns demerits toto program components thatthat discourage cparticipation, limit renewablerenewable energy generationgeneration or otherwiseotherwise retardretard thethe goals soughtsought by netnet metering programs.

We limited our analysis to statewide net metering programs.programs. In many cases, these programs require that multiple utilities comply with thethe same set of state net metering rules. In Arizona, Florida, Idaho,Idaho, and Illinois, utilities operate voluntary net metering programs. Since these programs are self-imposed andand limited to certain parts of thethe state, we did not includeinclude themthem inin our analysis. 52' _"

We measured program components asas well as theirtheir impacts and assigned numerical values toto each. For example,example, a value of zero means thatthat the program component offers littlelittle to no incentive for aa customer to participate. Negative values representrepresent factorsFactors thatthat undermine the effectivenesseffectiveness of thethe net metering program. Positive values represent additionaladditional incentives that contribute to program effectiveness.

Applying thesethese numerical valuesvalues toto program componentscomponents allows us to plot the effectiveness of each state net metering program on a continuumcontinuum rangingranging fromFrom -8-8 to +316, where:

I -8 0 +9 +67 +316

-8: characterizes thethe program thatthat most discourages the goals of net metering 0: characterizes a minimal net metering program, but one thatthat does not strongly encourage or discourage program goals.

+316: characterizes thethe program that displays the most features that encourage the goals of net metering.

!a!:Ji';:r:»ne. :., "::*,»;.". ::-::.:!!. :!:::. !!!. »!!!!nii:.»n!rn!u» .!!!!'"!un:!:»:'!!!:.!!.'.!!!!!u'hu. :I. '!!'hl ' U_en'i_iililandei_ctri(;,'-_ate'_ [_hode ,_;:_ri[ isill{',ludedil O_ _l_d.y_i_b,_(a_S( hi&1(3 _it_,-" _rulf3,'-i(iovertt_e('_laorJtyo(t.hesEai(SC_lSl_(_r)le('_r i&1 'I iiilalaiili!fa I I" ri'iri iililild i'I!r .Iiii; aal;» frhndn lnlar il '. a ineluilnd in uu: ar: .Ir' i» i ni a usa i inan!lated rule;: near the llurttr Illa eral( a 'ai!'!d 53"&3 Weau&.',.>c"hideded InchIv_icilare; _ 1 _ NI&i&ilh) [h Car(!ii_l_.}_I errhine. _._danrI W_.l_i)iri_t(!{lV&rnnrrngti ~ Dll Ce allail ,q|elruhlri&_,_.,hk:h!)e_a{ihegan _l_ei_Ih!di l)roi_ramarel&ram alii&afte! 2004

17 Customer Participation -—UheThe number of customerscustomers enrolled in net metering programsprograms indicates how effective the net metering policies are at creatingcreating incentives for participation. Effective programs should see progressively increasingincreasing numbers of participants.participants. We compared thethe most recent, publicly available datadata from thethe U.S.U.S. Department ofof' Energy, Energy InformationInformation Agency (EIA),(EIA), which has surveyedsurveyed thethe number of net metering participants inin eacheach statestate since 2002 and published data sets for 2002, 2003 and 2004.

To account for variable population densities, we translatedtranslated rawraw participation numbers into the number of net metering customers per million utility customers within each state. This calculation allows us toto more accurately compare the raterate of growthgrowth inin par- ticipationticipation between states with widely varying populations.

-1: The number of participants declined

0: Fewer than 10 customers per million joined the program from 2002-2004. t_+ The states in this range were neutral or marginally better thanthan neutral. We decided that single digit growth did not represent a positive/effective program.

1: 10 toto 99 customers per million joined the program.

t_ Programs with participation levelslevels inin thisthis range indicate that the program was marginally effective.

+1 point: We assigned one point for every additional 100 participants per million utility customers.

! /

A cursory examinationexamination of rawraw participation numbers revealsreveals thatthat many states have few, if any, participatingparticipating customers. We have examined why participation rates are so low in these states. However, low raw figuresfigures complicate any analysis of the changechange inin participation ratesrates over thethe limitedlimited time period forFor which data is available. For example, Utah registeredregistered not a single net metering customer in 2002, 1 customer in 2003, and 10 customers in 2004. AA crude calculationcalculation of Utah's rate of participation would revealreveal a 1000 percent increase from 2002 to 2004. However, such aa calculationcalculation would reflectreHect an inaccurateinaccurate assessment of the effectiveness of Utah's program.

To account forfor statesstates with lowlow participationparticipation rates, we performed aa regression analysis thatthat plots thethe age of aa state's net metering program against the number of net metering participants per million utility customers (see(see Appendix A). The resultsresults ofoF the regression analysis conclude that thethe age of aa state'sstate's net metering program is not a significant factorfactor inin customercustomer participation rates. We foundfound thatthat justjust because a program hashas beenbeen

18 in placeforfor severalyears,it doesnotmeanthatthenumberofcustomersparticipating in theprogramwill have increased.

Moreimportantly, ourregressionregression analysis revealsreveals thatthechange in programprogram participationparticipation from 2002 to 2004 isis only a relevantrelevant calculation for statesstates thatthat have overall participation rates exceeding 67 net metering participants perper million electricity customers. InIn states thatthat have adopted net metering programs, our'our analysis showsshows thatthat thethe expected raterate of participation isis 67 customers forfor every million electric utility customer,customer, all other factors being equal. Therefore, we used 67 participantsparticipants asas a "floor" forfor factoring the changechange in net metering participation asas aa measure of program effectiveness. For states with lessless than 67 program participants per million utility customers, we ignored anyany growth inin participation rates from 2002 to 2004, since anyany changes areare below what isis expected inin any case. For states with participation ratesrates exceeding 67 net metering participants per million utility customers, we calculated the percent change from 2002 to 2004 and rewardedrewarded anyany growth accordingly. 0: <67&67 Customers t_+ Less thanthan 67 participants per million customers indicates thatthat the net metering program was ineffective.inefFective. 1: 0 toto 99% Growth

For states having more than 67 net metering participants per million utility customers, we assigned one point for any growth in participation rates from 2002-2004.

+1 point: Every 100% increaseincrease in growth

States earned one point for every additional 100% increase inin theirtheir state's participation rate. For example, Nevada experienced 236% growth from 2002 to 2004. Therefore, thethe state scored 3 points: 1 point for growth from 0 toto 99%, 11 point for thethe next increment of growth (100% toto 199%), and 1 point for next increment of growth (200% to 300%).

System Size Limits (residential) -—Residential electricity loads generally range between 2kW and 4kW. State net metering programs thatthat allowallow residential systemssystems above 10kW create incentivesincentives for excess generation for almostalmost all residential customers. We used thethe following valuesvalues to assess residential system size limits:

--1:1: Net metering regulations limitedlimited renewable generators to lessless than 2kW inin overall capacity. Limits thisthis low will not allow customer-generators toto produce enough electricity to covercover theirtheir entire on-site demand.

0: Net metering regulationsregulations allowed for renewable generators fromfrom 2 to 10kW in overall capacity.

19 1: Net metering regulationsregulations allowed for renewable generators inin excess of 10kW in overall capacity.

System Size System (non-residential) -—Non-residential loadsloads tendtend toto be larger thanthan residential. To bebe as inclusive as possible for all non-residential customercustomer loads,loads, systemsystem size limitslimits shouldshould be largelarge enough to exceed thethe on-site demanddemand of most commercialcommercial operations.operations. We used thethe following values to assess non-residential systemsystem sizesize limits:limits:

-1: Net metering regulationsregulations limited renewable generators to less thanthan 25kW in overall capacity. Limits this lowlow will alienate largerlarger customer classes from producing a substantial portion of theirtheir loadload with on-site renewable generation.

0: Net metering regulations allowed for renewable genera- torstors from 25 to 149kW in overall capacity. This range will cover most commercial classes, but still may be tootoo smallsmall forfor most industrialmdustnal loads.

1: Net metering regulations allowedallowed forfor renewablerenewable generators from 150 to 999kW in overall capacity.capacity. Renewable energy systems inin this range should cover a majority of non-residentia]non-residential classes.classes.

2: Net metering regulations allowed for renewable generators inin excess ofof' 1000kW inin overall capacity. Above the 1000kW threshold, nearly all loadsloads will exceed on-site demand, allowing commercial and industrialindustrial customers to take advantage of any incentives for net excess generation.

InterconnectionInterconnection Standards -—Without interconnection standards determineddetermined by statute,statute, utilities cancan chargecharge high interconnection fees and delay thethe installation process with long and complicated rules and procedures. InIn 2005, the Federal Energy Regulatory Commission (FERCl(FERC) issuedissued uniform interconnection standards for small generators and required all public utilities that own, control or operate interstateinterstate electricity transmission lineslines to comply with them. However, since our analysisanalysis lookslooks specifically at thethe effectiveness of state program prior to 2005, we included an assessmentassessment of interconnectioninterconnection standardsstandards andand assignedassigned thethe following numerical values:values:

-2: The statestate had not adopted a standard or the standard varied by utility and was not determined by statute -—OR-OR —Interconnectioninterconnection rules were leftlef't toto thethe utility's discretion.

-1: The state was developing a standard, but no statewide standard existed by 2004.

0: The state had adopted a practical and reasonable standardized process forfor application and approval.

2O20 Treatment of Net Excess Generation(~eneration (NEG) -—Compensation for net excessexcess generation provides a powerful economic incentive to investinvest inin on-site renewable energy systems andand helps offset thethe capital costs associatedassociated with interconnection.interconnection. We assigned thethe following valuesvalues based on how thethe net metering program creditscredits NEG.

-3: NEG was gifted to thethe utility on a monthly basis k_+ This situation denies thethe customer any way of banking excess generation and applying thethe credit to thethe next billing cycle. Monthly gifting does not account for thethe seasonal variability of renewablerenewable generation. If a customer-generator wants to be energy self-reliant,self-'reliant, tlleythey must size their system to the season of least energy generation, but lose the value of any excess energy produced during seasonsseasons when generation is greatest.

-2: NEG was sold to the utility at thethe avoided cost on a monflxlymonthly basis 1_+ While crediting monthly excessexcess generation at the avoided cost createscreates some financial incentiveincentive for production, itit presents similarsimilar problems associated with season variability and allows the utility to pocket the profits fromfrom selling NEG to other customers at the retailretail rate.

-1: NEG was sold to the utility at thethe retailretail rate on a monthly basis !._+ Close in financialfinancial termsterms to month-to-month banking, this situationsituation would have thethe utility incurincur additional administrative costs associated with purchasing small amounts of electricity on a monthly basis. Currently, no state programsprogram require utilities to purchase NEG at thethe retailretail rate on a monthly basis.

0: Excess generation was granted to thethe utility at thethe end of an annual billing cycle. i_+ A minimally satisfactory net metering program will allow thethe customer-generator toto install a DG system thatthat will provide enough electricity for on-site demand. Gifting NEG toto thethe utility on an annual basis allows the customer toto taketake advantage of month-to-month banking, but does not provide a mechanism to compensate customers for any generation exceeding annual on-site demand.

21 1: NEG was purchased by the utility at the utility's avoided cost on a yearly basis. LI_9 This situation creates an incentiveincentive for customers toto install renewable energy systems large enough mto generate more energy than they consume and gives consideration to thethe seasonal variability of renewablerenewable energy generation.

2: NEG was purchased by thethe utility at the retail raterate on an annualannual basis or carried over at the retail rate indefinitely.indeFinitely. L}+ Purchasing NEG at the retail creates a largerlarger economic incen-incentive for customers to invest in renewable energy systems that exceed on-site demand and ensures that any profit fromfrom sellingselling thethe excess generation is passed on toto thethe renewable generator.

Total Capacity Limits - Capacity limitslimits stunt thethe growth of renewable energy DG f' systemssystems by artificially limiting thethe number of systems that are eligibleeligible foror net metering benefits. We assigned numericnumeric valuesvalues to total capacity limitslimits asas such:such:

0: Net metering regulations prohibit total capacity fromfrom exceeding a certain percentage of peak load.

1: Net metering regulations do not indudeinclude maximum capacity limits.limits.

Additional Installations -—Extraneous devices add toto thethe cost of aa renewablerenewable energyenergy DG system,system, creating a financial disincentive for'for participation. We assigned thethe follow-following values to regulations requiringrequiring additional installations:

-1: Individual utilities determine ifif additional installations (such as mandatory external shut-off switches) are required and whether the customer bears thethe cost.

0: Customers are not requiredrequired to purchase or install additionaladditional devices.

Liability Insurance Requirements -—Requiring additional insurance for net me- teredtered renewablerenewable energy DG systems can make the systems prohibitively expensive. We assignedassigned the following values toto liabilityliability insurance requirements:

-1: Additional liability insurance is required of all net metering participants or isis otherwise leftleft toto the discretion of the utility.

0: Customers are not required to purchase additional liability insurance.insurance.

22 CHART 3.1:OVERVlEW DF STATE NET METERINC PROCRAMS IN 2004

1 ~ 8 ~ 8 8 e88 8

:T): ¸ i 3139. 3 26 15 25 18

'. ", i'jgj :t) ijf:,,'j if!»1j-, 18' 1 2 1101 44 22 0 i_I _: i _ i_ _i :='- ,""j.'.",Bttjilii;'l;"::i:;.!fj!; „: i_ :i i_i,_i -:.," iujfj'»"* .Iffrfrfr /( )!_/_i_i_ii__(i )jiff!fir jri!ti:"„:rrttr, * 0% .'r'Tjl."„'"!fl...j':..:.Bj'If!j,i'gffijhli:. 0%0%ac56 435% O%0% 0% O% 0% if:"..I'r'!'!jjjlrli":,ith;

0.2%0.2% _/_:(i/(_II))i 0.5%0.5% of a ofaof a utility's None None None None utility's peak annual peak demand

Solar, Landfill Gas, Solar,Solar, Wind, Solar, Wind, Hydro, : Wind, Biomass, FuelFuel: Solar PV, Wind, Biomass, Small Biomass, Cells, Small Hydro, : Solar,Wind, Anaerobic Digestion, : Hydro, Landfill Gas, FuelFuel Cells, Tidal Energy, Wave:Wave Hydro, Biomass, : PV,Wind, FuelCells LandfillLandfill Gas, : Anaerobic Digestion, Geothermal, Energy,Energy, Municipal Geothermal Fuel CellsCells.:FuelFuelCells MieroturbinesMicroturbines : SolidSolidWaste,Waste, Oceanocean: (Renewable) Thermal

' 100 kW (renewable), lOkW10kW/Residential,/ Residential, 25kW/Residential25kW/Residential: 1MW/Commercial, : lOkW10kW/Commercial,/ Commercial, : 50kW50kW(fossil)/:(fossil)/ 25kW25kW/Commercial,/ Commercial,: lOOkW/Commercial100kW/Commercjaj: Industrial,Industrial, ResidentialResidential: Industrial, ResidentialResidential: Residential, :. ResidentialResidential. :100kWlOOkW // Commercia CommercialCommercial

Credited at retail raterate: : CreditedCredited at retail raterate : Credited at retailretail raterate: Purchased at Granted toto month-to-month; month-to-month; :toto next bill month-to-:.month-to- avoided-costavoided-cost at endend Varies by Utility Utility monthly granted end of granted end ofof f. of billing period monthmonth: of billing period annual billing cyclecycle annual billingbilling cycle _)"/(! ii ' _i i_ii_:!i i_'ii/_!i

Yes YesYes"57 No Yes Yes No

No No No Yes Yes No

!/' i_ _i_ i_' i,i '-.':If)cd-"'::9fjfjtft,'"jjj) Yes Yes No Yes : Yes Yes »:...::-;,;;j:j~[r;i't't!:;,

&l!) I 2')') vcww if&'. Ir &!i.'„a l i o! I nl[ino ul I Eftf n )!re a! 0 pan awol li-; f:i!!8', St: la n: I n» I oti tg 0 toga«n' . nip l:.i t&-:o!!Hf ) ) 0 toy! up& a ra&! in 2 no!n I&oui: 0gf ffpyfni 0 0 or g, S I):pt n;!py, n nip» y titty ' Info!nip I&:. &1& »' 12, 20&cut ttrfr:, .":::,On!O on)tgy Po;) gtoon! ( wo. , 'p Iia itin!or ng '. )G&lg p ff, tl non (fI;.:noornod Soie!)tisl. Iga&ui) 2&r!)8, 0 i:::)ln:t I) )ta f c ti'n s n.;;t;if Inn&8» Ptr&nfy !nf! Se St &C'SW If:. t.'W;."Iiian Gi' iu:tui irt: p., i!ai»ln area! i Innhdnd inuiC gl.: II: t)tn nOlunu: far tn!)S!)&is OspinittnCI at)nun 07 Sy. !rt!ns gtrrritcrt tl on 1 Iev

lite»i!tlnr ar "I!i: I iiii ntiir!i', ad Stain j. !&igi'at)W!It!&nip!rl'!ilia& 20!2

&' tf)rin!itu; !ii'll!!nlfili( iit' &ll afdliiniia ln! t!Irgt'fin) Iillilir' ( l!!rial!002 23 I ~ ~

":;,-. " !l)'. .f',lf::,'

.,j',f'-;if»'1";-:, 9 28 24 21 13 22 /

«-njjf)jri'fij'iii. ijf«i)cd, nijj jf.:«dfjj:ud) frj!ijjjj»I;n 118 6 6 1 0 0 »» ij»j "»'ihfjh)»op="jf)'

. )))«hf';yzillof)!i . „;:i)))itfif"!»i':,:..!i::)):, ' 0% 0% f!L)f,.'1)ii'„-~g !Id)tij ),;!u)4,; 317% 0% 0% O%0% 0% 0% ' -' . :;»').")f»",i''ill ff'ij", I

0.1%0.1%of a 0.1%0.1%of a 0.5%0.5'/o ofofaa utility's single utility's most ',:utility'sutility's annual ' None . hour peak loadload.: None None : recent peak peak demandd emand, duringtheduring the n summer load previous year :.

Solar,Wind, PV, Wind, Hydro, Biomass, PV,Wind, Hydro, Biomass, Fuel 1l"-:::::, Geothermal, CliP,CHP, -:-'; ';";:i/i). :» ':::::.. Solar,Solar, Wind, Hydro, PV,Wind, : Biomass, Municipal PV Cells (Renewable),(Renewable), ';:;i ftjt!»i,'f)BIO) Biomass Small Hydro Hydro, Fuel Cells, 1 Solid Waste Geothermal, Municipal Solid Microturbines : Waste, Tidal Energy

100kW / 100kW / :_i_!_i/i_ii_i_! .ij p~g I!-;l»j;,:,.'i', );j';;)lliiljh/; 50kW/Commercial, : lOkW/Residential,10lfW/Residential, 500kW / 15 kW / All Commercial, Commercial, Industrial,Industrial, : . : Commercial,Industrial, : : kW ;-'::i»ff:)!i'ji)'it."), ;tf;:. Industrial, Residential: Schools Electric Customers „.Agricultural; 25 / ::::. j,i:j;:; Industrial,Residential Schools Residential ElectricCustomers . Agricultural;. 25. kW':/ 'Residential. Residential Residential ResidentialR d I

/, / : Credited' at retail rate ' Credited to : Credit at retail rate to: Credit at retail rate to: Credited to uutlllt„at:.":"'_'u.tyat Credited to Purchasedatat i Credit at retail rate to Credit at retail rate to to next bill; granted : customer's next bill customer's next bill to next bill; Aranted :8~k»fj'I'@if tj;1)'j jtf f if))I) customer's next bill customer's next bill:' customer's next " "/ end of the month : avoided monthly cost: ...... : at end of annual customer'sindefinitelynextbill avoided monthly cost i indefinitelyindefinitely: indefinitely at end of annual end of the month indefinitely : billing cycle

. '". ;:":=.:":,",)~g)i:.f:,),",,; ",IIl) )3~,.:=:« ': Yes Yes No No Yes No

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:,:.;;tif",1)jl!Ejij'-;if)i!is)fy:Ijtj;:.!-';:. No Yes No No No NO -, ',.:.:i::,::,"-:i«fg:;B)IIta',"„'.

...... / i

ft)"-, dfi i)if)f."«tijfi)) Yes No : No NoNOaa58 Yes No —; ' ': Yes „-j'4!)j'jji'",'jjf tv

58sa Indnnfnt_dtvsdU_lt/Itllit_OSif ojiiitn"., hElVen»»o". fiiodtiiOd inlxnoonnaotion'll.£1co[_rl_(;[pon _[_lrl[[Sjan::["

' Jhji»1)jo{]iE.:i_i!oot_£, £,_olaln-a [l_ 1.h,'._Ilia1_ {_l_al:led-:;nni lail st,_E_«!a!at)ru_r_li!._unlit'&n .;durihgdin)i!' i,"!oi afl._rnnn!2!2002ioi _": iltdil;ab_5i)ji)nnj'::»nn._he!tiJltleHIsa:.)I)In», iinnranii)l._r a_HJli,:th5)i.'»1i»pin)rail'._0 t)[,)Br_l_ d:.)Uiliignraf»ai?oo?urJllg or af_er2002 24 I ~ ~ ~ I

'r.;.„.:;' . 29 23 6 2 5 7

r ' ,i'!frjjiiti'r'$ji'ff j'r /- ~ :iirrt j~tn!I»!»}i!k/"„,"',:r!!;,! s 4 66 108106 432 107 142 }". -'.igr.;-.I';iJ!illlliiitri. '!t'::::. :;:i

/ :::=;"iJ,ifi-i;:,"';i!!.:Ijr:» '1:";"!I Broil„""'."1'0!'„!rs!Ipi:, : 236% 114% ::;ji':-Ir..'.:!9iJ'--'~&/!I(i'rt'}':}:"; O%0% 0%p 231% 5955% 238% 9.14% , -" . HJ~'r:,:'rlilillrr!j}' . ' :»".'./1, }i&j'/":'~&t!I!,r'„'.

.", /: state' : 0.2%0.2% of state'ss. 1% peak 0.05% peak :,..,- ';:L! 1% peak: 0.05% peak Iff lard}i, adjusted peak None None None . capacitycapacity. :capacitycapacity load inin 1998

Solar, Wind, Solar,Wind, PV,pV, Wind, Hydro, Solar,Wind, ,:.';,; -r! "r, lijltjf::o. Biomass, Municipal: Biomass, Municipal '. Biomass, MunicipalMuniciPal: PV, Wind, Hydro Biomass, Hydro.Hydro, : PV.PV, Wind, Hydro '- PV, Wind ' .!ur",'.reit}.'„I:fifo,'t} PV,Wind SSolidI'd Waste,W t CHP,CHP .: Solid Waste, CliPCHP Geothermal FuelF I Cells,C Il HydroH d

::,"„-"tr!.-'}ra1!'!-If,'':iiji Ir!!,::r» 80kW/Commercial,80kW/ Commercial, 60kW/commercial,60kW/Commercial, :. 40kW/Commercial,40kW/Commercial, 50kW/50kW/Commercial,Commercial, ': 30 kW/Commercial.kW/ Commercial, : 25kW/Commercial25kW/ Commercial,

", Residential ;.,"!r~irdfg! r},', n."rrnin:;- Residential,Schoolsschools: Industrial,Industrial, ResidentialResidential: Industrial, ResidentialResidential: Industrial, ResidentialResidential: Industrial,Industrial, ResidentialResidential: Industrial.Industrial, Residential »,"„'/

: Credited at retail raterate: .: Credit at retail rate toto:.i Credited at retailretail Purchased avoided: Purchase at retail: to next bill; granted Purchased atavoidedat Purchase at retail to next bill; granted customer's next bill ! rate to customerscustomer' , /-":,Bra -:n'brf&)i~r'rdriiurn Granted Monthly . next bill: rate to s monthly cost rate at end off annual I Granted Monthly monthly cost rate at end of annual indefinitely :. nextnext bilbill billing cyclecycle :

'. :."";i»'if;,I'; i!, f!'1I i:},'r jt $ No No Yes No No No s9 -- "r „ i-., i'!j!titian:; l.,'ji I!!l t1ii!;» 1;

:.'!fii'I»IJi id!fili} Iij:}IIrrii!i; r No No Yes No No No ijhrir' Yes

_i_i_ ,_i_i!iiI ', ;."!!P14!Ir'ft}VI'd&ti!!r;-;", Yes No Yes Yes Yes Yes '". . ', Yes Yes Yes ,a!."lier'rirrl:: . ! _i_iiii_,_iiii!i_i_'_iii_ii_ '/

59 Ye_,rrrS, [(_r'. Or»y»In!Orsystem_" I_rg_,'.r!rir!!1r thai.l!1r1!i0t!}!!!VkW

' ir diana S»Inta»!hn! Cnr Olnd;! r!O pmar1 n» r}ndn!I O Oi!Or2i &02 -: irclioo!os rr»r dmr. nl,'„"., r o', !d!!onsto proem;n!arri!e nr rl!!cr2!}02 , ! 25 I I ~ I ~

" ' ' ':,::,":.':, & f'& I', ',:-''. . -:, , .:, f'=, f !,;: " l

1 17 16 27 12 34

""'. ':"' '.:.:::. .".'.'" 'i . =. -. .-' . -': ."! ::.:~ &&Ifnf!I&&'„"&ii. J&f„n&fe:6. ~;"f i'1!1!gf;I",!,"(,""-i')ll"'";&&!Jff"'!6)& 93 14 13 13 4 20

j" )ti&ft& it!&l.':x "I &;-' , / I))i&I «,,:::j

f '~!: uf&f:!:;:Ifn!&fu:-::] ", .:, c'fit&)IT&1),"f,."I;:!',"Ij'R&f,; i:.,;:6,'I -", O% if&!',i&'~'&!'&1!g!Ill';)&&ffttf''i;,: f 30,141%30„i41% 0% 0% O%0% 0% 0% ' I'I:.&r,"'I)i'IIlli:;jf,';:::::,. -. "-:.",&!I(;:::~tii'!'I I

0.1%0.1%ofQf 1996 1% peak 0.1%0. peak demand inin (solar),(solar),

&f« f„"-jI&" a utility's: ': capacitycapacity or None 0.4%of0,4% of 1996 None 1% ofaof utility's None 'i None None None . :'::ff&idl:,;. f fr)&I&"-!„", $2 million demand(farm peak demanddemand: biogas), 0.2%0.2% ofof ': annual impact : 2003 demand (wind)(wind):

Solar, Wind, Solar, Wind, Solar, Wind, Solar, Wind, Solar, Wind, Biomass, Hydro, Biomass, Hydro, Solar, Wind, Hydro, Biomass, Hydro, Biomass, Hydro, Solar, Wind, Hydro, :. Solar,Solar, Wind, Hydro, '. Hydro, Biomass, !I!g&f&ff.'f. ;:;:.:","6 . :I Geothermal, Tidal Municipal Solid CHP,CHP,' Geothermal,Genthermal, ' ' PV, Wind, Biomass:Biomass . . . . Biomass, Fuel Cells, : Geothermal, Energy, Fuel Cells Waste, Fuel Cells, : Biomass, Municipal:M Energy, Fuet Cells Waste, Fuel Cells, Biomass, Municipal Microturbines MuniciMunicipalSolidpal Solid I (Renewable), Wave CHP, Geothermal, Solid Waste l Waste, CliPCHP Energy Microturbines

lOkW10kW (solar)/ No Limit. lOOkW '. 100 kWkW (up to : Residential,Agricultural:Agricultural;: No Limit, 100kW "". lOOkW100kW // "5t &9 &«6!)g«!)f«ff lOkW10kW / commercial,Commercial, lOOkW/Commercial.100kW/ Commercial, : (microturbines)/(microturbines)/. :25,25,000000 kWh/kWh/ j Commercial, / 400kW400kW (biagas)(biogas) 125 Industrial, ResidentialResidential Industrial.Industrial, Residential:Residential Commercial, Industrial.Industrial, : year) / Commercial,Comrnercfal Residential : kW (wind)/Agricultural:(wind)/ Agricultural;: / ' ResidentialResidential: Industrial Residential 7 i "-'- Industrial, Residential -"::-'.":=::. i . 25 kWkW(wfnd)/(wind)/R_den_alRes!dent!a

: Credited to Credited at utility's Credited attoat to next Credited to next Purchase byby utility atat: Granted to utility '. ' f' customer's next unbundled- :-. rf''*",.'i&if i I; if i::~i:;-:I, '„'::;:;:.j ' custnmer's next ' unbundled- bill; purchased atat bill ornr purchasedpurchased at : avoided-costrateatavoided-cost rate at . : monthlymonthlyorcreditedtoor credited to bill;bill; purchasedpurchased atat generation raterate to avoided cost at end avoided-cost at end thethe end of aa monthly next billbill atat avoidedavoided cost at end at end: 'd monthly:: -". avoided-cost at end customer's next ":;.. .";j&gff&tf&f, . : avoided-costd at endd ' customer's next of annual billing cyctecycle : nf annual billing cycle: billing period cost;cost; utility's choice ofannual billing cycle ::: ofannualbillingcycle61nfannualbillingcycle. " monthlyhl billbiill:

NO Yes Yes Yes No a2 No h'& Yes . ..-:~$«I!«)/II fc,".jt&! 6!& f

No No 6° No Yes No No

r!'".';&."':"!itj! .J)ji!;fif."'fj ji! , Yes No Yes Yes Yes Yes .'I&;I'&f, f frif'

66 Buf I!c Beau'cui! n'! unu &':.',i)nexus &a:.;:!i&cia!uunca

61 v&u&!I '-' &!!f&'V! &!'(In&of &ann'I&!0 &'uuu!!!a! «&!&uuuu c(&:!

6.'. 6&if!!fc".;n:.«:,'eq&:!&!.;.u«xlun:of&fi'. «!unu. cl.',&a&I&:I:. i / : ! ¸

34 4 33 i 32 30 14

'-'"'inji jfd I';-;ij:inf, ~ .!itic:.Iiifj f'i!Iillfn i!f'!i,:ij 2O 152 17 59 72 12 '. !j'jf'eiijjIII'iijlif!'".,"!jij~LI..

. ', - ".IIF!jjjlr~."djlf'djf'i- 'd if!J!1!!f:I i'dfiijj"„', -

'" ".. i ",j:;: O% jl',jiff'!I jj.!ijj I'jiff), j, : O% 1019%X019% O%0% O%0% O%0% "-, I"jti i l ii ( I ijII", ., .. '.dlj!P; i"ii'j,.!dr

0.05%0.05% of a 0.1%0.1%of 2001 None None 1MW None utility'sUtility's peakloadload.: peakdemandpeak defnand

Solar,Wind, Solar,Wind, Solar,Solar, Wind.Wind,

' Hydro, Biomass, Hydro, Biomass, Biomass, Hydro, i:,-.--,-i."t!fj-:!l,':iii Hydro, Biomass, Solar,Wind, : Renewable energy Hydro, Biomass, Biomass. Hydro, Solar.Solar, Wind, Fuel Geothermal, Geothermal, FuelFuel Tidal, Wave, 'H'ie!!I!ofl'riV: . '- Hydro, Fuel Cells: including fuel cells Municipal Solid Hydro, FuelCells including fuel cells Cells, Municipal Geothermal, Fuel Cells Hydro Waste, CHP Solid Waste, CliPCHP : Cells, MicroturbinesMicroturbines:

100 kW (up(up toto -' ")'!jnjjilajrn:-':jjjff! -:.':: 25,00025,000 kWh/kWh/: 25kW/Commercial,25kW/ Commercial, :. 10kW10kW // AllcustomerAlj customer 25kW/Commercial,25kW / Commercial, 50kW/Commercial50kW/Commercial, : 25kW/Commercial,25kW/ Commercial, 'r)ig~jijjjf":, "":' C! Industrial,Residential classes Industrial,Residential IndustrialIndustrial, ResidentiaResidential: Industrial,Industrial.Residential j"il!!fif. year) / Commercial,Cornmercjal: Industrial, Residential: classes Residential: Industrial,Residential

Granted toto utility Credited at retailretail raterate: : :"fi@k".ljjajf'"-'3i::,elan' i monthly or credited toto customer's next Purchased by utility . Creditedtoto nextbilbill;; Granted Monthly Granted to utility monthly at avoided- granted at end of ' ';.,Ldt!iafQj!jij.."!BB!I!! to nextnext bill at bill or purchased byby: Granted Monthly monthly at avoided-: granted at end of monthly ' '.' monthly cost rate annual billing cycle ":;.", ';;,,!jtjjj!rIj .. .: avoided-cost; utility's utility at avoided-cost cost rate . annual billing cycle choice raterate

No No No i No Yes No ;::--'.-'!!!jfjjjj«jria' fii!i1'i'!ll . .:

...... i ......

'«2

;i:;fjjj"".jffjjj:". :!F,:iIj)j::,"jjj'ill:,. : , I;, No No No i No No No '-...-...;jjj;,Bflljj:,':,', .

-" «

'~! djf!jjxfiu!!!tau!I9l„. 'i ' *. No Yes No No Yes Yes , ""$!gjj'gj",l'::ij:;

iill ii !iii _ fill

fiidfcnl assi!sins i!i:Iiolin!'! nd:iulic pinfitiiil'ls alii![ii!Oinf!i:i'2ilo ' : Indinnfisniricndninnin nriiddilini! f&! pin! in n dndn[.'ninfl!!20i!2 27 i i_iiIii_II_/_iii!_i 10 20 19 8 11

"iaaf!

tt."!I!'i'I''! "l~j:.'if;";Iij!:.'-:Il[if&jtp'. =, 226 6 28 85 47 Bt )tiff'tie]r[l f."2I'jU jf,

''='F.-. ",I'''jf:::j''.":-:i 0% :.:::;i". t., 152%162'/0 0%O% 0% 127% 0%

,tfe!',,"",tffff[U[t,

1% of peak 1% of peak 0.25% of a '-':. '=;-;['i'-,:;jI:"..",;::::::::;;.: ':":. demand ofof:.0.1%0.1%of annualannual:. utility's 1996 None None ;-'-":.'-'. '-::':::.-"';'',I-:--:-'-":.'-':":. ';,, '. :::;:::::::1996 or recentrecent peak demanddemand: peak loadload year

Solar,Wind, : ' Solar, Wind, Biomass, Hydro, -:;:-::-.;,:l."'--fi'.':,l."ji-;-:. '::-::::::::-.. PV, Wind, Biomass, Solar, Wind, Solar, Wind, HydroHydro: Hydro,Biogas,Hydro, Biogas, : Geothermal, CHP, =-,. ;-'tJjii;fjj'l'!jjl;"j':"i:;::,::,.;;:: FuelCells Biomass, Hydro, .,„:":.. ; g FuelCeils,Cells, CliPCHP: Municipal Solid Waste

.::-' 150kW / AgriculturalAgricultural: : "-'. 15kW/ 500 kW/Non- 25kW/Commercial, 20kW / Commercial, 25kW/Commercial, i PFpi0'rishi'. -'flftffl;:" 15kW/ residential 25kW / Commercial, .:20kW / Commercial, ,:25kW / Commercia "; Industrial, Residential: Industrial, Residential: Industrial, Residential ,:.(If l:!1:irpf:Jji Fit t:". Commercial, Commercial, 10 kW // Residential Industrial, Residential Industrial, Residential Industrial, Residential Residential

: Renewableenergyenergy Creditedtoto next -'.-'-. ':.-;. '; ', „.:-„-.;;,;.,::,; .. . Credited at retail rate : :. Credited at retail rate :: Credited to next bill;bill;: Credited toto nextbill;bill; .: purchased byutilityutility bill; purchased at ' to next bill; granted : -'i i-'I'tt'f j,"";;i-'.:.'l'1[[jj;";firfrt;; granted at end of: granted at end of: at retail rate / avoided-cost rate at atatendend ofofannuannualal i granted at end of granted at end of at retail rate / avoided-cost rate at : annual billing cycle .: annual billing cycle .: Non-renewable at endend of annual billing billing cycle billing cycle avoided-cost raterate cyclecycle

Yes Yes No Yes Yes

Yes Yes No Yes No

Yes Yes No Yes Yes

' to" tC I'[US Sill[US 011l ell le[cd siilf e Uto['UIIU, ditilita UI';Iflcl '200 f tttU[tc; .Us UI11UU(iolcllls Ul Udlliijl! Ils lo i lo[foiln l[UI[i10 Ul Ufl .l 2000 We assignedassigned aa grade toto each state's net metering program by ranking the state's based on their index score and thenthen calculating a percentile based on thethe highest-ranked statestate (New Jersey)Jersey) representing 1O000 percent (an A).

Since an index score of zero should represent a minimally satisfactorysatisfactory net metering "D" program, we assigned states with index scoresscores of 0 thethe grade of "D" or justjust passing. Our calculation roughly translatestranslates as >75th&75th percentile = A, 55th-74th percentile = B, 40th-54th percentile = C, 30th-44th percentile = D, and <30th&30th percentile = EF. Chart 3.23.2 displaysdisplays each state's indexindex score, percentile, and grade.

Although many of thethe 34. state net metering rules areare similal;similar, eacheach has itsits idiosyncrasies. After we used the indexindex systemsystem to create a way of generalizing effective versus ineffective net metering rules, we compared individualindividual statestate programs with the same indexindex score and made more specific evaluations toto break ties (see(see Appendix B). We rankedranked statesstates that had the greatest customer growth and highest overall participation higher than other states,states. s4

n '"rnrst tkmtipn TheIi e t_rklialypntnary hldi_.at0rinrlicatpr fera!i10ran efle.{:liveeffecli!e programI&r gra ri iis_, paHicip_tionpar!is!pari n Additkin,_lAgrlitin i!I rariking_ g g fee!nrsa .o s arir_P. exexpiaiiie(lI _t e t in_ cer!!!ni)u_ :011 _.'q_ri_.orliari. ofnf 'woIgt ' practi_,,e._practic!'s irtri Arkansas _ll'ldant'I tridia.qain!Ii;ria Rirgv {r _riiilparirlgnl)ar ngl Uiele {tff{E:,'.affec! ofOf differel_tdi!;-,r;rit _li.Wamprofparn (;O¢11_}Ol_911F_carl'ipnrierlts 0rln pa_lii:ipat;olti&.rtir ip 1! ntt ialesrates illitl P.a{lhrin;Ii .qtute_.t rt n fortpr (_xarnt)ie,;"."aiiifiie, we"!edechli;gitffa!IIII:elf thaltl:al H_eIlir'. tri_.;:JtH_i_llt'll'.r till!ant. (if(if!!etit_.i i_.x,r',essei!!e'i"_llela_iOll!„r'li!!!a!innh_(!Iia!I .'qa rllorefiler(", si_,liiii_:atllS!giitnriai':I i_li[/a{:lI!!iflrlr:I lh_llII!an IoI_1I!!!rll(:al)a(;it!iCirt!ar, i!Ir Ihl/iF,liitii!S 29 1 New Jersey]ersey A 100%100% 305 2 Montana /\ 97% 67 ;:Montana 97% 67 iI 3 i: California A 94% 15

i: Oregon A 91'/ 14 I 5 i' Nevada A 88% 7 ! . 6 :Minnesota. Minnesota £ 82% 6 I I 7 ' New Hampshire A 82% 6 8 !Wisconsin: • " 79% 4 , Wisconsin 79% I 9 : Hawaii B 64% 3 1010 :::Vermont B 64% 3 I 11 Wyoming B 64% 3 12 :. Ohio B : 64% 3 I n 13 : Louisiana B : 64% 3 14 :Utah : 61% 2 ,. 15 ' Connecticut C : 48% 1 C 48% 1 1616 " ', New York 48% I 17 New Mexico C 48% 1 ii ¸¸! : 18 :. Georgia 48%48o/ 1 36% 0 19 ;: Washington 36% 0 2020 :. Virginia 36% 0 I

21 '. Kentucky 36% : 0 22 :::Maine : 36% : 0 t 23 i' Massachusetts : ii 27% : -1 ! 1 2424 ilowa: Iowa 27%270/ 25 ' Delaware i__ 27% :, -1 [ • 2626 !Colorado: Colorado : 9% -2 t 27 i' North Dakota cr : 9% -2-2 28 i Indiana : 9% -2-2

29 :. Maryland 9% -2

30 ', Texas 9% 31 ' Arkansas 9% -2 32 :. Rhode Island 3% -3 I

33 ': Pennsylvania 30/

34 :. Oklahoma 0% -4

3o.30 AI ansas

0 Number of customerscustomers 20042004:3

Change perper million customers (2002-{2002-2004)2004) '0%*0%*

System size limitlimit: 25 kW for residential systems;systems; '100kW100kW fortor commercial systemssystems

Eligible classesclasses: Commercial, Industrial,Industrial, Residential

Net excess generation :Granted to utility monthly

Limits on enrollment i:None l 0 Eligible technologies i:Solar, Wind, Hydroelectric, Biomass, Fuel Cells, Geothermal Electric, Microtur- ::bines using renewable fuels 0

External shut-off !:Yes

Additional insuranceinsurance: i Utility discretion

Utilities involved:involved i All utilities

*Growth isis calculated as zero because the state did not exceed6767 participating customers perper million customers (see Appendix A).

On April 19, 2001.2001, Arkansas GovernorMike Huckabeesignedsigned intointo law a billbill (HB 2325) requiringthethe state's electric utilities to offer netnet metering for solar, wind, hy-hydroelectric,droelectric, geothermal,geothermal, and biomass systems. In addition,addition, fuel cellscells and micro turbines are required to bebe fueled byrenewablerenewable sources. The Arkansas Public ServiceService Commission (APSC)(APSC) approved final net-meteringnet-metering rulesrules inin JulyJuly 2002,2002.

The APSCallows residentialresidential systems up toto 25 kilowatts (kW)(kW) and commercial systems up toto 100 kWtoto be elig_eligiblealeforfor net metering.metering, There is nototaltotal cacapacityDacitycap, however,APSCAPSO Order NeNo. 02-046-R states thatthat any net excess generation (NEG) will be credited toto the utility at thethe endend of thethe billing period without anyany compensation toto thethe customer.customer. Utilities aregranted the discretion toto cllargecharge interconnection fees and requirerequire customers to installinstall externalexternal disconnect switches. Utilities may also requirerequire additional liabilityliability insurance upup to $1 million.

Developments since 2004: InIn July,20062006 thethe APSC began its consideration of thethe state'sstate's net metering rules pursuant to EPActand designated allall of the state'sstate' s regulatedregulated utilities as official parties,gartiestoto thethe proceedingsproceedings, All otllerother parties hadhad to petition to intervene byAugust 25, 2006.2006, Onlytwotwo additionaladditional non-utility interveners (a(a consumerconsumer group and aa renewablerenewable energyserviceservice provider) were granted permission toto submit comments. Recommendations: •~ Amend official docket procedures to allow open public comment oeriodsperiods on Commission rulemakingsrulemakings •~ Allow monthly banking of net excessgeneration, purchased annually at thethe retail raterate •~ Allow systems upup toto 2MWtoto be eligible forfor netnet metering •~ Remove utility discretion to charge interconnectioninterconnection fees,fees, requirerequire external shutoffshutoff switches and additional liabilityliability ulsurance.insurance.

3t Cali

Number of customers 20042004: 13,506'I3,506

Change per million customers (2002-(2002- 2004)2004)» 435%*

System size limitlimit: 1 MW

Eligible classesclasses: Commercial, Industrial, Residential

Net excessexcess generation:generation Credited at retail rate month-to-month; granted end of annual billing cyclecycle

Limits on enrollment » 0.5%0.5% of aa utility's peak

Eligible technologiestechnologies: Solar PV, Wind, Anaerobic Digestion, Landfill Gas, Fuel Cells

External shut-offshut-off: Yes

Additional insuranceinsurance: No

Utilities involvedinvolved: All utilities (solar(solar and wind); Investor-owned utilities (biogas andand fuelfuel cells)

* Growth is calculated as change inin thethe numbernumber of net metering customers perper million utility customers to accountaccount forfor variablevariable population densities (See(See page X).

California's net metering lawlaw took effect inin 1996. All utilities must permit net metering [orfor solar,hybrid,hybrid, and wind-energysystems with a capacity limit ofof 1 MW;investorinvestor owned-utilities must also allowallow net meteringforfor biogas-electric systems and fueltuel cells. Significant amendmentsamendments weremade in 2002 under AB2228.2228, notably relating toto biogas systems, feefee structures,structures, and systemsystem sizelimitslimits for wind energyenergy projects.

Developments since 2004: InIn September2005,September 2005, AB 728 further extendedextended eligibility requirements for biogas-powered systems. Authored by Senator Kevin Murray, SB i1 was unanimously approved on August 8.20068, 2006 by the CalifcCalifornia_niaSenate Energy,Utilities and Communications Committee asas aa net metering bill which raisesraises thethe caprap on investor-owned utilities'utilities' loadload fromfrom 0_5%0.5% to 2.5%,2.5%, Rep,Rep. John Campbell (R) and Senator Dianne FeinsteinFeinstein (D) also advocated forfor thethe newnew legrslation,legislation. The bill supports thethe California Solar InitiativeInitiative, which has a goalgoal of installinginstalling 3,0003,000 MWsolar systems byby 2017.2017, and has been applauded bysolarsolar advocatesadvocates asas aa step towardstowards s' making thethe Solar Initiative program economically feasible forfor participants, 64 Recommendations: o~ Remove limits on aggregate enrollment °~ IncreaseIncrease system-size limit toto at leastleast 2 MW - Remove reGrequirementsuirements forexternalexternal discondisconnect_ect switch

C4 [:'l{_cld,:, l",sw_!I [):_ily, A_ISI _-:I9.2{_(}_,:_

32 rado

Number of customers 2004 87

~ * Change per million customerscustomers (2002-(2002- 2004) 0%*OD/

System sizesize limit i 10]0 kWI&W

Eligible classes !: Commercial, Industrial, Residential ! Net excess generationgeneration: i Credited at retailretail rate toto next bill month-to-month

LimitsUmits on enrollmentenrollment: i None

Eligible technologiestechnologies: Solar, Wind, Biomass, Small Hydroelectric, Tidal Energy, Wave Energy, Ocean : Thermal, Municipal Solid Waste

External shut-offshut-off: No

Additional insuranceinsurance: No

Utilities involvedinvolved: i All utility

* Growth isis calculated as zero becausethethe statestate diddid not exceed 67 participating customers permillion customers (see Appendix A).

Becauseour data set was limitedlimited toto publicly available data on netnet metering customercustomer participationpanicipation from 2002-2004.2002-2004, Colorado's grade and rankingranking reflectreflect thethe lacklus-lacklus- terter netnet metering program put in place bybythethe Colorado Public Utilities Commission (CPUC) prior toto 2004.

Developments sincesince 2004:2004; In November 2004, Colorado became thethe first state inin history to put a renewable energyportfolioportfolio (RPS) up forfor a vote rather than go throughthrough thethe state'sstate's legislature,legislature, After failingfailing four timestimes inin thethe legislature,legislature, 52%52% of Colorado voters approved Amendment 37.37, requiring a 10% renewable energy genera- tiontion byby 2015 and establishing statewide net metering rules_rules,

Inn December 2005, afterafter extensivemeetings with manyrenewablerenewable energy interest groups, the CPUCissuedissued an order adopting implementation rulesrules forfor Amendment 37. Thee,CPUC, now allowsallows systemssystems up toto twotwo megawatts (MW) in capacity toto be eligible forfor netnet metering, Electricity generated at a customer's site can be applied toward meeting the utility's renewarenewableble generation requiremenLrequirement. Colorado's RPSrequiresrequires thatthat 44%0_ of thethe requirementrequirement bebe met with solar energy, half of which must comefromfrom customer-generators,customer-generators. Net excess generation (NEG)(NEG) is creditedcredited to the following month's billing cycle.cycle. Atthethe end of an annualannual billing cycle, thethe utility must reimburse the custornercustomer forthethe excess generation attheat the utility's average hourly incrementalincremental costcostfortheforthe prior 12-month perio&period. Systems overover 10 kilowattskilowatts (kW) inin capacitycapacity require a second meter toto measure output thatthat counts towardtoward renewable-energyrenewable-energy creditscredits (RECs)_(RECs). Customer-generators retainretain ownership of all renewable-energy creditscredits (RECs](RECs) associatedassociated with the generation of electricity.

Applying NNEC'smetric toto thethe program adoptedadopted inin 2005, Colorado would rankrank in the top 5 statewide net metering programs andand receive an A rating[rating!

33 0 Numberofcustomers20042004:"- 31

Change per million customers (2002-(2002-2004)2004) i.'0%*0%* 0 System sizesize limit:imit " 100 kWkW (renewable), 50kW (fossil) ' Eligible classes !. Commercial, Residential, Multi-Family Residential

Net excess generation : Purchased at avoided-cost at end of billing period

Limits on enrollment : None

Eligible technologiestechnologies : Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, Fuel Cells, : Municipal Solid Waste, Small Hydroelectric, Tidal Energy, Wave Energy, •«' Ocean Thermal

External shut-offshut-off i: Yes

AdditionaAdditional insurance i: Yes .0 Utilities involved : Investor-owned utilities

*' Growthisis calculatedcalculated asas zerozero because thethe state did not exceed 67 participating customers per million customerscustomers (see(see Appendix A),A).

Connecticut firstfirst implementedimplemented net metering legislation inin 1990.1990,under thethe DPUCD PUG (Connecticut Department of Public Utility Control) Ruling 159. With this ruling,ruling, utilities had toto purchase NEGfromfrom qualifyingqualifying facilitiesfacilities with a maximum capacity of 50 kWnon-renewable energy systems, andand 100 kWforfor renewable-energy systems. Fol- lowinglowing thethe electric restructuring bill of 1998, all investor-ownedinvestor-owned utilitiesutilities were required toto offeroffer net metering toto customer-generatorscustomer-generators using renewablerenewable energy sources, '" includingincluding solar, wind, hydropower, landfilllandfill gas,fuelfuel cells, and/orand/orsustainablesustainable biomass,_5 InIn JuneJune 2003, amendments were enacted to includeinclude wave and tidaltidal energyenergy sources and decreased monetary restrictionsrestrictions forfor units less thanthan ]Okw?10kw, "6 Though distribution companies areare only requiredrequired toto offer net metering toto residential customers,ers, Connecticut LightLight &fk Power Company (CL&PI(CLg P) and United IlluminatingIlluminating Company (UI)(Ul) provide net meteringtoto commercial entities that meet certain conditions.conditions. _7"

Developments since 2004: InIn May 2006, renewablerenewable energy proponents triedtried toto oasspass SB 211211,which would havehave increased kilowatt limitslimits andand the carryover billing period,"_R"' howeverhoweverthethe bill was stalled inthe Senate._9" Recommendations: , IncludeInclude industrialindustrial asas part of eligible customer classes o~ IncreaseIncrease system-.sizesystem-size limitslimits to at leastleast 2MW o~ Amend treatment of net excess generation to be purchased at retailretail rate at end of annual billing cyclecycle -~ Exclude anyexternalexternal shutoff switchswitch or additional insuranceinsurance requirements

'", 't, to;-t'Iclseelnrn (; I c ", nun&en c r.„'&I!nn!';: irtc lu lc-: 'rrtr!ernie!:xirt' ;ere!nn c: c inrir r tinul lr cc nil;e":cr I'!;r ei. !Bir::;uiI I ftlu»tn&r nail'(F!!Bleb iee!I:.Ilni&t ln:en! .'el!i!i n, ei le I:.ier! hltrt: wnw: I: . " T".l&Curr_-utPaF_-!ID,NFrtirerrtPrt, .'el(;:. I _I'.Rt'-,,BF-:1&.1ff,Et:,,B!:-tI

i rn'& 't'n'nu [')(_ 13r_li(:I nile. i'_t:"cfMB'tfr!trt_'Iletrrrrne bU-lt@St'&I: !'.[Lq!r_!illri&lrrnllti"'iuetl@1[al rtr&ei,{r;_,_ll'Lf:t;r:,_ll£,r&&i!rrr!Ier mirhltn: • WWW _fI_Otttli_rre~rnctnt!r:. '; I!_?dilgiH_:_f:!lli_.rn,", :ret rer&'rr&rz >_ial_ac;tJ',,Jb,Oet. nnti, i!t nm_him! !R7Bz.::utcl[bl(

r&'& lrir I%fr!!1!c'rl'&i!i&!ui lrrriri t_._J [:JJl(,rI! Br _;telh..'_.l_scull!eri "!Ci06noi B NeiMnt[!INet kIeirirlrr!Bgb]i llirclJlICl[,Jeedsn{!..lieerlellelli (Jr,;(:ll(;oltrlseJf:_io_j('r.,:t!(:un!a! Blue S.[z![t._alid[ol;z!l(s_(;s_('ri_l_Kditsoir! &r cl!n::!Ir,:.;,;r n iunt _,[vlav200[','B ten ziirit, ill[p..'/li_!if&i», _'!i!If!in( I v[fief»cl[a uerii.o ,gre,!.„',I'encutiriec'i',.o s_ ",_::I!!le_, a&!i!i1 ctl'.anl i?c ver r'er ,'tl_l](:Xl_,lll

&'~v c. ':I i..,_ Su!ssilutt)BJllNo 2_]':I _'"" ;/w_'/',_..[S.:;:;& c ! ¢ air,/ _ _ slates z _7 i g s( ; f i_,_(} ].}ill&bill ill nurm,211._!

34 {FF

0 Number",[umber of customers 20042004: 0Q ' Change per million customers (2002- 2004) 0%*Q%*

SystemSystem size limitlimit: 25kW

Eligible classesclasses: Commercial, Residential

Net excess generationgeneration: Varies byby Utility

Limits on enrollment:enrollment None 0 0 0 Eligible technologiestechnologies: Solar Thermal Electric, Photovoltaics, Wind, Biomass, Hydroelectric, Geothermal Electric

External shut-offshut-off: Yes

Additional insuranceinsurance: : Yes

Utilities involvedinvolved: : All utilities

* Growth is calculatedcalculated as zero because the statestate did not exceed 67 participating customers per million customers (see(see Appendix A).

Delaware adootedadopted netnet metering legislationlegislation inin 1999 underunder HB 10,thethe ElectricalElectriral Restructuring Act. The act required that Conectiv (now Delmarva) and Delaware Electric "' CooperativeConperative (DEC)(DEC) offernffer net metering to residential andand commercialcnmmercial customers with systems up to 25kW, with nonn limitlimit on capacity forfor renewable energy.7° Technical standards andand treatment of netnet excessgenerationgeneration vary between thesethese twotwn utilities,utilities. However,thethe state'sstate's ninenine municipal utilities, which are not includedincluded in the act.act, havehave "' not adopted any net metering policiespolicies and consistcnnsist ofof 30% of the Delawareconsumerconsumer market. 71 Recommendations: , IncludeInrlude industrialindustrial inin eligibleeligible customercustnmer classesclasses - Increase system size limitlimit to at least 2MW2MW o Create a standard treatment of net excessexcess generation inin thethe state, toto be credited at retailretail rate and carried overover indefinitelyindefinitely o Remove external shutoffshutoff switch andand additionaladditinnal insuranceinsurance requirements

' ' ' 'I?,': i'n ' ":r' &Ii: &?&!tv!s':r ir. I nr'&,". ', & ". &Isttr it",ri 'i!&;, Ift&rr&ry*":n". .:;UJ~. :tt'-snit'!-'. pfiri'!Ili: rri!I!&i, rvilri L!f 7!!I&rxJI. "f?r I;;, iri' I!t:",":1!'r.":,fvr li;ti&, ;:, &I!!':at& J I fft:",i:v &&tr ':I~!pf "& &C&I&!t. «I S! ir ! i!, r!i!& i! ,7 &It!i"! i, , ;;. ;i,a!!I"".Currenlh'!L,r::!1!Dr!fir&!L![_l&Ri:Ir!n!_!&L:[:-14LI! '..'i ' 'c!i'&1 r!&. :. '. 'I &it::, tt i&,'« l ". I!fit&i I Iff-,p(rf:, lit&lit. . ~ &'IK::n pi!&it:, Lri! r . Ir p Dv&! h ,'&v«v 71 !If&or'&t, si!tn.",i:r&, ; rt tlirt!'I:. v ari::p i fat!I& t li', r ir i .i! &::!&J !nt v vt ;'x&i!I I't&pt. ;:& t&::;: t&!::,! D:;:Ir&!?ri iipi : !:, is ip:, ar

~ ' & ",'; " ol:_m..-'.e_:l_;_',_rn;qt;{:upaon!._, I&&it&."vt!'IP'r 'tf &r r!"t!iii iJlt&s lirfif[:M[:'o,:2(df!P',_V_,>O[_.r!(ll!'irii ,_r.:,'_(St"r:."!!Pal!&&(ly.v-i_.1_I: I .)

35 ® rgla

Number of customers 20042004: 2

Change per million customers (2002-(2002-2004):2004) 0%*

System size limitlimit: 10kW/Residential,10kW/ Residential, 100kW/Commerical100kW/ Commerical

Eligible classesclasses: Commercial, Industrial, Residential

4 Net excess generation:generation Credited at retail rate month-to-month; granted end of annual billing cycle

Limits on enrollmentenrollment: 0.2%0.2% of a utility'sutility's annual peak demand

Eligible technologiestechnologies .'Photovoltaics,Photovoltaics, Wind, Fuel Cells

External shut-offshut-off: No

Additional insuranceinsurance: No

Utilities involvedinvolved: : All utilities

* Growth isis calculated aszerozero becausebecause thethe state diddid not exceed 67 participating customers perper million customerscustomers (see Appendix A).

Georgia's net metering rulesrules went intointo effect under SB 93, tilethe Cogeneration and Distributed Generation Act of 2001.2001, which was a restructuring of Georgia's 19791979cogenerationcogeneration law.The bill tooktook about a month to movefrom a favorablefavorable reviewreview inin Senate committee toto the Governor.Governor,72" - Georgia's legislation combines net meteringwith green pricing.pricing, The nonprofitnonprofit Georgiansfor CleanEnergy(GCEI(GCE) worked closely with Georgia Power- a subsidiary of Southern Company -- inin thethe development of thethe law.law. AlsoAlso supporting the lawlaw as it moved througllthrough thethe legislature werethe Georgia Electric Membership Corporation.Corporation, the Municipal Electric AuthorityAuthority of Georgia.Georgia, and variousvarious environmental and consumer grouos.groups. However,Georgia Powerand thethe state's other utilities have not yet established their green pricing program, andand thethe green pricingtariffstariffs stillstill need to be filed.

Power flowsflows toto andand from the home areare separately measured. Customers are given a choice of metering arrangements: the customer's system cancan bebe interconnectedinterconnected onon thethe customer side of the meter with a bi-directional meter toto measureflowsflows inin eachdirectiondirection, or customers can send all of thethe power fromfrom theirtheir system directly toto thethe gri&grid, Recommendations: •~ IncreaseIncrease system-sizesystem-size limitslimits toto atat leastleast 2 MW •~ Remove aggregate limitlimit on enrollment •~ Reimburse NEGto customer-generator at retailretail rate at end of 12-month periodDeriod

(' ' & && r& I fi!I!!&:", .&'I::,:&o &,v&n';r &(;». v»r~(v::. (a! Is(!(&((;;.i:;,(&(!('&v&!(i(((! I &I!): 'vv!;;&::;:;!.:. &!(.:,'(8(!(."&2 io( n) &.,(((&'.,(!!i!!I zz „:v ei & &i„v& ( &(r«:»rn,";ly zonj ss n!i-(s««&!;.Cvs (&(«t ((n:((: Ic.':q, ;

36 Flawall@@

NumoerNumber of customers 20042004: 46

Change per million customers (2002-2004)(2002- 2004): 317%*

System sizesize limitlimit: 50kW

Eligible classesclasses: Commercial, Residential, Local Government,Covernment, : State Government,Covernment, Fed. GovernmentCovernment

0 Net excess generationgeneral. ion: Credited to next month's bill; granted to utility at end of 12 month period

Limits on enrollment «'0.0.5%5% of aa utility's annual peak demand 0 0 Eligible technologiestechnologies' »SolarSolar Photovoltaics, Wind, Biomass, Hydroelectric

External shut-offshut-off: Yes

Additional insuranceinsurance: No

Utilities involvedinvolved ". AllAllutilitiesutilities

*' Growth is calculatedcalculated as change innthethe number ofof net metering customers per million utility customerscustomers to account forfor vadablevariable population densities(Seedensities (See page 18).

As an island state without many energyresources.resources, Hawaii is inin a position that requires innovative energy solutions, Hawaiian officials have looked intointo a varietyvariety of energyoptionsoptions including renewablerenewable and waste-to-energytechnologies.technologies. Even with thosethose options, thethe state still reliesrelies on oiloil forfor nearly 80% of its electricity.electririty. Realizingthisthis one-sided production,3roduction. Rep,Rep. Hermina Morita.Morita, chairoersonchairperson of thethe HouseEnergyand Environmental Protection Committee.Committee, helped leadlead thethe way towards more renewablerenewable energy and energyenergy efficiency,

InIn 2001, she helpedhelped HouseBill 173173 pass throughthrough thethe legislature,legislature. This bill created a state renewableportfolioportfolio standardstandard and includedincluded net energy metering provisions toto "' helphelp promote distributed renewable energysystems,systems. 73 The net metering provtsionsprovisions wererevisedrevised inin 20042004 by HB 2048.2048, expanding the system capacity limitlimit from 10 kWkWtoto 50kW.50 kW,

Developments sincesince 2004: In 2005, Hawaii's net metering lawlaw was again amended by HB606, eliminating aa provision allowing utilities to impose additional require-requirements onon net-metered" systems. InIn the same year, SB 1003 allowed the PUCtoto increaseinrrease limitslimits imposedimposed inin thethe 20012001rules,rules, as well as permitted NEG toto bebe carried overover toto subsequent bills,bills. TM Recommendations: •~ IncreaseIncrease system-sizesystem-size limitslimits toto atat least 22 MW •~ Remove limitslimits on aggregate enrollmentenrollment •~ Remove requirementsrequirements forfor externalexternal disconnect switch •~ Credit all NEGatat retailretail rate

'&!(. ' "*:_'s [ {_(."i (" i)i(t[_(J J[l_}{_ 10 )(J01 ["]!j[[_j{.!{.{I''I i". HY i'{;.lW['_[[i", "_. (J[!{_,_[{{ *W(-[i [}()_'1"_!5;'! Ir=[(_i(_.:(.,1!._[_'v D'.[i(_',,tr'i (; . ;{[)[[-*'iu (. t_(}[i_c(][,:x!i!!';;!xHo[){)i!llu!I(r!v!!Iu._-;[iJr _{_i[;.'iiRn! Il i ir.; httl'_:., z M;Jrb[lll{_h[1! 'irl iill! I n!C{]mvvi'"._'()I)i'Iin ,'r)_'ll''iilm,in;1K,\_*.:%iof':; v i!:;._ iitil_lI!I!!!I#_c(_i_zz%(-[]'v(xx f( d:_[1~ I!!in: I'!iii!i i Ivvv n!. xfnl ,lie!I:!xfl :;i!:. (n!xl I!i!n(':;( Iiv I!i(. !, s!!r !!!If:" _tec.l{-!mt]ert 6;:ilvliil) 'i 7..', 200(_it!no "„'. . !_ DSff_[' .D_wa_; .r.;_l _:es or {er_r;'_R e I:*_; 2' u'd.u:,"v:',',v,";. d:4teHsa Ol_,hb": a_) a_cu_(le._ Inrrnr.'_:ntl,.,:] '!vm''invrrniircfm_'incen(l,_e..uode" uiiv li{04n_'!.s_ate--lll_,Cu;_etltP_!£eiD--l_&n[!-.1-&{:E-OIi!ixifis'!&i! -If!~i vrellr'a r!Ii-le!I", -I'..I fi-o Accessedt vxq!. !n-_!-.o(_If!1'. o!I !: osffi! ri.";,.;s I lrx!Ivvsfr, . !(vnv, ;,xi fx I v irr nflf& i '.. . .oirr!!sn v!, I!I!:..r irrfv!'. , nt!r !

37 IndianaO

0 Number of customers 20042004:: 16'16

Change per million customers (2002-(2002- 2004)2004):" 0%*

System size limitlimit:i lokW10kW

EliglEligibleb[e classesclasses:i Residential, Schools ' Net excessexcess generation i Credited to customer's next bill indefinitelyindefinitely

Limits on enrollmentenrollment: 0.1%0.1% of a utility's most recent peak summer loadload

EligiEligiblehie technologiestechnologies: Solar Photovoltaics, Wind, Small Hydroelectric

External shut-offshut-off: Yes

Additional insuranceinsurance: Yes

Utilities involvedinvolved: All utilities

* GrowthGrowth is calculated asas zero because the statestate did not exceed 67 participatingparticipating customers permillion customers (see(see Appendix A),A).

Despite opposition from several utilities,utilities, inin 20042004 thethe Indianaindiana House passed HHB1212B1212 which would haverequiredrequired IndianaIndiana utilities toto make renewable energysystems up toto 2MW eligible forfor netnet metering. However.However when thethe bill reachedtilethe IndianaIndiana Senate, SenatorJimSenator Jim Merrit (R-Indianapolis),(R-indianapolis), Chair ofof the Senate IJtilityUtility and Regulatory Affairs Committee, refused to give it aa hearing.hearing, AttheAt the urgingurging of supportive House members,thethe Indiana Utility Regulatory Commission (IURC)announced that itit would initiateinitiate rulemaking inthethe summer of 2004.

By September 2004.2004, the IIJRCIURC adopted net metering rulesallowingallowing residencies"esidencies and k-12 schoolsschools toto interconnectinterconnect systems up toto lOkW.10kW. Under IURCIURC rules,rules, net excess generationgeneration (NEG) is creditedcredited toward tilethe customer'scustomer's nextnext billing cycle.cycle, The rulesrules do not address when thisthis bankingbanking expires and do not provideprovide for thethe purchasepurchase of NEG. Recommendations: o~ IncreaseIncrease eligible system sizestoto 2MW •~ Expand eligible customercustomer classesclasses toto includeinclude commercial,commercial, industrialindustrial and agricultural generators ,~ Allow thethe annuaannual purchase of netnet excessgeneration attheat the retail rate °~ Remove limitslimits on statewide enrollment

38 Numberofcustomers 20042004:: 8

" Change per million customers (2002-{2002-2004) : 0%*

System size limitlimit: 500kW

Eligible classesclasses:: Commercial, Industrial, Residential !

Net excess generationgeneration: " Purchased atat avoided cost monthly

Limits on enrollmentenrollment: : None

EligiEligiblehie technologiestechnologies: ! Solar Photovoltaics, Wind, Biomass, Hydroelectric, Municipal Solid Waste

External shut-offshut-of'f:i No '0 Additional insuranceinsurance i No

Utilities involvedinvolved: i Investor-owned utilities

[

* Growthisis calculatedcalculated aschangechange inin thethe number of net metering customers perper million utility customers toto account forvariablefor variable population densities (See(See pagepage18).18).

[heThe Iowalowe Utilities Board adopted netnet metering guidelines in 1983Y1983,"s

Customer-generators with alternative energy generation systemssystems are permitted toto net meter with investor-owned utilities, with no capcap on systemsystem sizesize ortotaltotal enroll-enrollment. However,However.thethe IowaIowa Utilities Board granted waiverTF-01-293waiver TF-01-293 to MidAmerican Energy in 2002.2002, limiting individual net-metered systems to 500 kW.kW, Interstate Powerand LightLight has a similarwaiversimilar waiver arrangement. Iowa's net-metering rulesrules require NEGtoNEG to be purchased attheat the utility's avoided-cost rate:rate; however.however, MidAmerican Energyand Interstate Powerand Lightinsteadinstead credit NEGfor useinin future months, asas part of theirtheir waivers arrangement. 7_"

Though thethe IowaIowa Utilities Board issuedissued a draft order inin December 1997toto eliminateeliminate net metering for residential renewablerenewable energyenergy systems, public supportsupport ofof netnet meter+metering resultedresulted inin the orderorder beingwithdrawnYbeing withdrawn. "7 Furthermore.Furthermore, despite utilities' efforts to overturn netnet metering and a ruling to thisthis effect fromfrom thethe Iowa Supreme CourtCourt,

FERCultimatelyultimately ruled inin favorfavor ofof netnet metering inin Iowa.iowa, TM" Recommendations: •~ Credit NEGat retailretail raterate annually •~ IncreaseIncrease systemsystem size limitlimit toto 2MWforfor allall customer classesclasses •~ Set interconnectioninterconnection standardsstandards as recommendedrecommended byby FERCand IRECIREC

fir' IISIRL Vere!'r u! Iron'. "rI Stnln!nn& r!ti&r-; fn! Ir;.;!r;,&n!Pr I rnrf!Pr ' r I I'r il&:&&!u Ar! I in:-. ntnt ra I!Atop!fr'ri!iz n&szer I fn I!trrii !ii froI; (I i.;;&!ir;-':: .'.Itnt! sop& t!!Ro!rt!!!Ioinpn n nfsn & Irionrn! ir o!!Ior'II I porirc r! n .:;Irnstr& rot ! Itp;, ;!rp o!p o! ri!„;, 1,:. ' f I:tin '&mt", rrr. i i&i» 'orvrfr. '.:o rv!o!rnror?t! Rirni 'or& rr'&'rnii! ''zri'!'r ill'iir! s& zff !!nr r; rphn zrro! Ron. r!!hi&!el!orpt'tlr."'."'topi'ri'rlttlnrl' r'rrionnr\I''n! !!n!r''n ri?'I'r '(IU! troll!proter!!!I!r hrfp:;&wl i r'rr&rr 1!lot!Io6(ll! nrrtrorripr, I!I!!Iirro& Rrr!!i rrr rp& n poop!ni "Pr&nr!tp p(lf

39 Kentu

Number of customerscustomers 20042004: 2 * Change per million customers (2002-(2002- 2004)2004):! 0%*00/ 0 0 System size limitlimit:: !'I 5SkwkW

Eligible classesclasses:i Commercial, Residential, NonprofibNonprofit, Schools, Local Government, 0 State Government, Agricultural, InstitutionalInstitutional

Net excessexcess generationgeneration: Credit at retail rate toto customer's next billbill indefinitely

Limits on enrollmentenrollment: 0.1%0.1% of a supplier's single-hour peak loadload during the previous year

Eligible technologies ". Solar Photovoltaic

External shut-offshut-off: No 0 Additional insurance:insurance No

Utilities involvedinvolved: Investor-owned utilities, rural cooperatives

*' Growth isis calculated asas zero becausethebecause the state diddid notnot exceed 67 participating customerscustomers permillion customers (see{seeAppendix A).

Kentucky's net metering regulations began in March 2002 when the Kentucky Public ServiceCommission began a 3 year pilot programprogram requJnngrequiring Louisville Gas and Electric and Kentucky Utilities Company toto offer net metering toto thethe first 25 customers,customers. They thenthen measuredthethe costs and benefits toto those 25 customers,79"

Kentucky's current net metering rules werepassedpassed on April 22, 2004 byby GoveGovernor"nor ErnieFletcherFletcher under SB 247. InterconnectionInterconnection standards were set inin October 20042004.8o" Recommendations: °~ Increasencreasesystemsystem sizesize limitlimit to at leastleast 2 MW -~ Do not limit overall enrollment capacity °«OfferOffer all renewabletechnologiestechnologies °~ Allow allall customer classestoto participate

' 'I I er L s ie; Iictl lit!I tritig sl !lit!nvircrnntentel i !is!erin!it crit!!r h!!,':,r '::;:::,sc rr. ir iirte 0:„"crt tlrtt!Iei'ii.„" tte« t!'nu I!nil ', ;ll' BO ,talk-_nd Stephe 2(;0,1 I'tEi'_JUUKY. Staie,,,,ide bie_,Me_.etil_4[ei_lslf!_lon !-nacied: R 'uteriSlaudar(is1_l._e bevei.r bed [RIC Ma _ _u_'; 'wwwits;,'tt trecusaireense ori£,: 4rtir:l_.seriirl s'sin!!c,slatic/1/I0_Ja061_,85'I 98;'096450&roots I'ic n_tt! r I aU I!rrtl inii stetrttr ii .' !UI I!Il!U!xy sle!e,'!cleric!vie!e ir x!«i i«I i!I'n! n'et«it kI lercls inc«!ii'vcinn;"' in! c Ii it a Itin r er&, ice«i!i/ra,

4O40 Lou i slana®

(

Number of customerscustomers 20042004: 0 " Change per million customers (2002- 2004) . 0%*

System size limitlimit: '100kW/100kW/Commercial,Commercial, Agricultural; 25kW/Residential25kW/ Residential

Eligible classesclasses: Commercial, Residential, Agricultural

Net excess generationgeneration: Credit at retail rate to customer's next billbill indefinitely

Limits on enrollment:enrollment None

Eligible technologiestechnologies: Solar Photovoltaics, Wind, Biomass, Hydroelectric, Geothermal Electric, Fuel Cells (Renewable Fuels), Microturbines 0

External shut-offshut-off: Yes

Additional insurance:insurance No 0 Utilities involvedinvolved: All utilitiesutilities

* Growth isis calculated aszero because the state did notnot exceed 67 partparticipatingc pat ng customerscustomers per million customerscustomers (see Appendix A).

The Louisiana Renewable EnergyDevelopment ActAct(FIB(HB 789)789)"m was introduced in March 2003 by Rep. William Daniel (D-District(D-District 68) afterafter collaboratiocollaboration q with Jeff Shaw.Shaw, director of the Louisiana Solar EnergySociety. It was signed into lawlaw onon June27.27, 2003 eyby GovernorM.J.M J."Mike""Mike" Fester.Foster.

Though Rep.Rep, Daniel's original proposal was considered aa strong net metering bill, it receivedreceived opposition from EntergyCorp., a locallocal investor-owned utility.utility. After twotwo months of negotiations, amendmentsamendments were agreed uponupon which significantly weakened thethe bill.bill, including removalremoval ofof specific languagelanguage designeddesigned toto protect customer-customer- generators duringtheduring the interconnection process.process. The bill can now onlyonly cursorily be defined asas aa netnet metering provision, due to problems posedposed byby ambiguous metering " arrangements, feefee structures.structures, "eferencesreferences toto electricity "sales,""sales, and thethe bill's treatmenttreatment of net excessexcess generation#generation. "2

Developments since 2004: In 2005, thethe Louisiana Service Commission set regulationsregulations forfor netnet metering and interconnectioninterconnection similar toto thosethose of Arkansas. These stan- ;;;vis dards required thatthat net metering be offered by public owned utilities andand ruralrural electricity cooperatives,cooperatives. The renewable energy technologies included weresolar,solar, wind.wind, hydroelectric, geothermal, and biomass for residential customerscustomers up to 25kW andand commercial customers up to lOOkW.100kW. TheThe utilities are also required to payfor a twotwo hydroelectric, geothermal, and biomass for residential up "' way meter, but customers are expectedtoto pay an installationinstallation charge. Net excessgeneratiGgeneration 1 is creditedcredited indefinitely attheat the avoided-cost rate. ,3 Recommendations: •~ IncludeInclude industrialindustrial customer classes as eligible and increase system sizelimitlimit toto 2MW •~ Credit NEGat retail raterate •~ Remove external disconnectdisconnect requirement

el if!«nns&li j,"s I!Ii !», &nr »!. I&l&!II & pa! ' I' v& &'ln&rti»&l' !&& I»' '&", ., «! !&t!int' ';ll«! I r & n&li'I !&ai'l!I'&'I &I rif ', ir '!eris i &r!'«n«&i 7 ll'. ini!:!, iii!!! rr» f' &i &r&r nl.;ilnr, Iles! I, Ii!n» a » sz I!«Ii &ri!'.. !t& t&! n!&!i!!Itnnf» li &r&n'n &t ii« lilt!' k&fnr: n linn f:, i! '! «&i 'lalili: '2&. 'i e in«i«in»n "N'&'!«I%i&i»'nn&'I

4t Maine

0 Number_,lumber of customers 20042004: 0

Change per million customers (2002-(2002- 2004)2004): 0%*0%'

System size limitlimit: 100kW

Eligible classesclasses: Commercial, Residential, Agricultural

Net excessexcess generation:generation Credit atat retail rate toto customer's next bill indefinitelyindefinitely ' Limits on enrollment None

Eligible technologiestechnologies .'SolarSolar Thermal Electric, Photovoltaics, Wind, Biomass, Hydroelectric, : Geothermal Electric, Fuel Cells, MuniciMunicipalpal Solid Waste, CHP/Cogeneration, : Tidal Energy

0 External shut-offshut-off:! No 0 Additional insuranceinsurance: -" No

Utilities involvedinvolved: : All utilities

* Growthisis calculated asas zero becausebecause thethe state did not exceed 67 participatingparticipating customers permillionmillion customers (see(see Appendix A). '" Net-metering began inin Maine inin 19871987for cogenerationcogeneration and small producing facilitiesfacilities with a maximum capacity of lOOkW,100kW.8_ InIn December 1998,1998,legislatorslegislators passed an electricalelectrical restructuring bill that allowed the Maine Public Utilities Commissiontoto amend net metering rules.rules, The PUC'sregulations did not gogo intointo effecteffect untiluntil March "' 2000 and allowed excesselectricity toto gogo back on the gridgrid for renewablerenewable energy under similar regulationsregulations as the 1987 standards?standards, E Recommendations: ° Increaseincrease system sizefor commerciaL,commercial, industrialindustrial and residential to 2MW ° Changetreatment of net excessexcess generation toto carry credited retailretail rate overover indefinitelyindefinitely o~ IncludeInclude interconnectioninterconnection standards that followfollow FERCorIRECIREC standards -~ Promote program to increase participation rates

i! Ii!I 'll li!:::„;;:!.v: u.a ore I!:Is'll!M!:::!If!' &cii"."Ii'irlvineI, v !!xxvli!'!!.'x!I !' un!i:, ':v,"w,!I!( I!lii!.ii ', 'l1 Ivl';i x'il'. ,", :vu( x!!i!'!!!'l!f!!!

42 0 Numberofcustomers20042004: 9

Changepermillioncustomers(2002-(2002- 2004) 0%* 0 Systemsize limitlimit: 80kW80kw

Eligibleclassesclasses: Commercial, Residential, Schools, Local, State, and Federal Government 0

Netexcess generationgeneration: Granted monthly

" Limitsonenrollment. 0.2%0.2% of state's adjusted peak loadload in 1998

Eligibletechnologiestechnologies: Photovoltaics, Wind

Externalshut-offshut-off: No

Additionalinsuranceinsurance: No

Utilitiesinvolvedinvolved: All utilities

* Growth isis calculated asas zero because thethe statestate did not exceed 67 participating customerscustomers per million customers (see(see Appendix A).

Beginning in 1997,1997, Maryland first issuedissued net metering legislationlegislation allowingallowing up toto 80 kWfor residentialresidential customers and schools. The Maryland EnergyAdministration conducted a study of thethe economiceconomic impactsimpacts of net metering on utility companies after thethe programprogram wasfirstfirst implementedimplemented andand found themthem inconsequential?inconsequential. "6 Developments since 2004: Since 1997, Maryland hasexpandedexpanded net metering regulations inin May2004, April 2005 and most recentlyrecently inin April 2006 underunder SB 167. InIn 2004, GovernorRobert L.L Ehrlich signed HB 1269 and expanded net metering toto wind energylessless thanthan 80kW.80kW. Additionally, the lawlaw includedincluded private businesses and nonprofitsnonprofits undertheunder the residential eligibilityeligibility class and schools under thethe institutionalinstitutional class?class. "7 Changes made inin 2005 included biomass eligibility, an increaseincrease from 80kW to 200kW.200kW, and capacity limit to 500kW. SB 167 in 2006 made net metering eligible to solar,solar, wind and biomass, allowed net excessexcess generation toto carry overover an- "" nuallynually andand requiredrequired additional dualdualmetersmeters inin some cases. These provisions encouraged the Public Service Commission to develop aa credit formula?formula. 8 Recommendations: •~ Removethethe limitlimit on totaltotal capacitycapacity -~ Amend eligiblee! gible customer classesclasses toto include industrialindustrial - IncreaseIncrease system sizeforfor commercial, industrialindustrial andand residentialresidential to 2MW •' Amend treatment of net excess generation toto bebe purchased at retailretail rate annually •~ Remove requirements forfor additionaladditional dual meter

'"&I»'n& &!&. ' . l i -".-sfi&ii, ii{'{li!&i&i! ;;&!&v:",:!i il{&inf iuou&l I wil{&il;,;&!.'. ll:.:: I v»&1!:, Bll!{Ii I;:'»'I I:.'I v I I{&fili:;.l:-:I !1 fill;:;&:;.w;; i! !il I, I::I I', I &I Ii (, . .I. rii !I {ll '::., I{!vi::. '.I! c;. : i!! ;;cv! l; ! i!!f '{ ', zl'ln&l ', &ill!{ f'Ji!, li!& f&ftf. .'vl'. "» iir!I II&!'. 'v'& il',".I' i":ri!!".irir I&l&{&! f{z sl!&li I{'!&{&!»'!!I&&ini l!; ! I&!{!if& II'!I'&&v&In'n&. ":&I&!& El:'r!&', Lllh !i!iyiin I sv&!& f{ir {. in! r!if : vol I 2 , as

43 Massac u setts

Numberofcustomers2004 170 * Changeper millioncustomers(2002-(2002- 2004) 0%*00/ \ Systemsizelimitlimit 60kW60kw

Eligibleclasses Commercial, Residential, IndustrialIndustrial

« « NetexcessgenerationCredited to next month's bill at average market raterate

Limitsonenrollment None

Eligibletechnologiestechnologies Solar Thermal Electric, Photovoltaics, Wind, Biomass, Hydroelectric, Fuel Cells, Municipal Solid Waste, CHP/Cogeneration

Externalshut-offshut-off: No

AdditionalinsurancensuranceNo « Utilitiesinvolved All utilities

* Growth is calculated asas zero because thethe state did not exceed67 participating customers per million customerscustomers (see Appendix A).

Massachusetts currentlycurrently hashas nono state netnet metering legislation,legislation. The Department of Public Utilities allocated standards inin 1982 throughthrough 220220 Code of Massachusetts Regulation.Regulation, Section 8.04(2)(C).8.04(2)(C). Initially,_itially, renewablerenewable energy-based and c_combined-heat-and-power_nbined-heat-and-powersystemssystems with aa generating capacity limitlimit of 30 kWkW wereeeligibleigible for net metering',metering; NEGwas purchased at thethe avoided-cost rate.rate,

In 1997, the Department of Telecommunications and Energyissuedissued net metering amendments throughthrough 220 Code of Massachusetts Regulation, Section 11.04(7)(C).11,04(7)(C). Changes included an increased system capacitycapacity fromfrom 30kW30kW toto 60kW.60kW, as well as allowingallowing NEG toto be credited to the customer generator'sgenerator's next bill at the average monthly market rate. Investor-owned utilities are required toto offeroffer net metering and municipal utilities may do soso voluntarily_voluntarily.

The primary purpose ofof net metering regulations in Massachusetts was to increaseincrease thethe diversity of resources inin thethe area and promotepromote smallsmall powerpower production facilities ItIt was not meant as part of aa largerlarger renewable energyenergy initiative?initiative. "'9 Recommendations: •~ Increase system size limit forfor eligibleeligible classesclasses toto 2MW •~ Amend treatmenttreatment ofof NEGtoto be purchased at retail raterate annuallyannually •~ Create interconnection standardsstandards similar toto those recommended byFERCFERC or IRECIREC

ae !xi!«s«i!hv««u I!!'!i!ivi!'r!r Sr'rn&'min uv ual" si(11v':.liv!!OA!!i".!!ivliv'. "l!!v««cv!ill'! iiui!;', i".' ««t!!!1llli: '!I;;liv!Ai!':.«v!I!j' «:!'!'!'viiii''tifi!i

44 /

' Number of customerscustomers 2004 233

Change per million customers (2002-(2002-2004):2004) i 231%*

System size limitlimit:: 40kW

Eligible classesclasses: Commercial, Residential, IndustrialIndustrial

Net excess generationgeneration: Purchased at retail rate minus fixed costs

Limits on enrollment:enrollment None

Eligible technologies .'Photovoltaics,Photovoltaics, Wind, Biomass, Hydroelectric, : Municipal Solid Waste, CHP/Cogeneration

External shut-offshut-off: Yes

Additional insuranceinsurance: Yes

Utilities involvedinvolved: All utilities

*Growth is calculatedcalculated as change in the number ofof net metering CUStomerscustomers per million utilityutility customers toto account forvariablevariable population densities (See page 18).

InIn 1983.1983, Minnesota became thethe firstfirst state toto adopt aa net metering program by legislativelegislative statute,statute. Minnesota's lawlaw applies toto alail investor-owned utilities, municipalities and rural electric coacooperatives._eratives.Qualifying residentialresidential commercialcommercial and industrial facilitiesfacilities up toto 40 kilowatts (kW)(kW) inin capacity are eligible and therethere isis no enrollment or total cacapacity9acity cap.cap. Regulated utilities must purchasepurchase netnet excess generation (NEG) at thethe utility's average retail rate.rate, which equals tilethe total annual revenuefromfrom sales ofof electricity minus the annual revenueresultingresulting fromfrom fixedfixed charges, divided oyby thethe annual classclass kilowatt-hourkilowatt-hour (kWh) sales.sales. Wisconsin and Minnesota areare the only statesstates thatthat requirerequire NEG bebe purchased attheat the modified retail rate. Minnesota hashas adoptedadopted aa state renewable portfolio standardstandard (RPS) requiring utilities toto use renewablerenewable energyto meet 10% ofof theirtheir retailretail electricity sales by 2015.2015, Customer-generators retain ownershipownership of all the renewable-energy credits (RECs)associated with renewable generation usedtoto meet theirtheir on-siteon-site demand.demand. Utilities purchase any RECsthat adhere toto NEGpurchased from customer-generatorsocustomer-generators. Minnesota also offers progressivetaxtax incentivesincentives forfor renewable energy generation, production incentivesincentives and salessales taxtax exemexemption_tion forfor wind energy, and a rebate program forfor grid-connected solar electric systems. On May25.2005.25, 2005, GovernorPawlentysignedsigned intointo lawlaw tilethe Omnibus EnergyBill of 2005 which established a tarifftariff of uoup tato 2,72, 7 cents peroerkWhkWh forfor community-basedcommunity-based wind energy production,production. Recommendations:Recommendations; •~ Raise limitslimits on eligible system sizessizes toto 2MW •~ DeleteE)eleterequirements for external shut-offshut-off switches and additionaladditional liability insurance

45 Montana

Number of customers 2004 186'I 86 0 Change perper million customers (2002-2004)(2002- 2004) 5955%*

System size limitlimit 50kW50I(W

Eligible classes ~ Commercial, Residential, IndustrialIndustrial

Net excess generation Credited at retail rate toto next bill; granted at endend of annualannual billing cycle

Limits on enrollment None ' Eligible technologiestechnologies . Photovoltaics, Wind, Hydroelectric

External shut-offshut-off:! No

Additional insuranceinsurance: : No 0 Utilities involvedinvolved: i All utilities

* Growth isis calculated asas changechange inin the numbernumber of net metering customerscustomers per million utility customers toto accountaccount forfor variable population densities (See page 18).18),

Vbntana'sMontana's nebmeteringnet-metering legislationlegislation wassponsored bySenator ionJon Ellingson (D-Missoula) and supported by organizations suchsuch asthethe Renewable Northwest Project, _lationalNational Resource Defense Council and tilethe Montana Environmental Informationinformation CenterPCenter, "° When SB409409 passed unanimously inin the Senate and inin the Housebyby 96-3.96-3, renewablerenewable energyenergyadvocatesadvocates considered itit one ofofthethe mostmostprogressiveprogressiveprogramsprograms inin tl_ethe nation2nation. "_ The bill appliesappliestoto NorthWestern Energy,one ofofthethe largestlargest "- providers inthethe region, and remains voluntaryvoluntary for ruralrural cooperatives and non-investor owned utilities?utilities, _ Recommendations: •~ Includenclude all types of renewablerenewable energyenergy inin eligibilityeligibility •~ Increasencrease system sizelimitlimit forfor eligibleeligible classesclasses toto 2MW

r ". ", I'In! r lr n: hinr!In'!:;. r!nf rr'rrtf ii!nf. u'wf!run« frl ih'nr;, nhfu I'nnr, ii."'ui !fir'r r!prrf jr! I rtp . v;;;:;;rr!nnrf n r ,._orifi 1_eoker-r)u!nr kur 13rftprn!!'rrh_n{naull, Alli]_/!i!!uinla =-'999ie'ie Mm_I'_l_aVrnrrlurn i:lierj_VI rln frr I;-!.t/s"tn. v Net Mfs_elinRlrrrfnft IJec{]ftl_.!nnnf~r_ LaWla", II_ r_4_ti_ir.H,-_ [';!LIllenurfrnn!!rlfnN_IIIIP,'_eSl [-qeri!'_I (:f_qlge!v.-3tiun. ,,'_l]d !)_(_ni_WE!!]lr: ['llqI2V !New.d,_lier Anut 3t_ iiu) _orn'ei_;rlieL:t:ot_weEnnrn nnunfutruun;. nh 'u!!:nvr!hnrfooqw{;,b40 Jg.l_llInnii

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46 Nevada

Number of customers 20042004: 'I10000

Change per million customers (2002- 2004)2004): 236%*

0 System sizesize limitlimit: 30kW30kw

Eligible classesclasses: Commercial, Residential, Industrial

Net excess generationgeneration: Credited at retailretail rate to customer'scustomer's next bill indefinitelyindefinitely

Limits on enrollmentenrollment: : 1% peak capacity = Eligible technologiestechnologies: ! Solar Thermal Electric, Photovoltaics, Wind, Biomass, " . Hydroelectric, GeothermalCeothermal Electric

' External shut-off _ No

Additional insuranceinsurance i. No

Utilities involvedinvolved: i Investor-owned utilities

* Growth is calculated as change in thethe number of net metering customers per million utilityutility customers to account forvariablevariable population densities (See(See page 18).18),

Inn 1997, Nevada enacted net metering legislation allowing solar and wind systems with a maximum cacapacitypacity of 1010 kW. Legislators revised regulations inin 20012001 under AB 661 and removedremoved limitslimits on electricity amounts a utility can receive,receive. Inn 2003 AB429 increasedincreased thethe system capacity from lOkW10kW to 30kW and included hydropower as an eieligiblegible source23source. " '" Developments sincesince 2004: Nevada legislators amendedamended net metering inin 2005 by increasing system capacity toto150kW150kW forfor all classes under AB 236236. 94 Recommendations: -~ Removelimitslimits on totaltotal cacapacitypacity •~ Includenclude all typestypes of renewablerenewable energytechnologiestechnologies •~ Increase system size limit toto 2MW

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47 Numberofcustomers2004 818I

Changepermillioncustomers(2002-2004) 114%*1'14%*

Systemsize limit 30kW30kw

Eligibleclasses: Commercial, Residential, IndustrialIndustrial

Netexcessgeneration Credited at retailretail raterate to customer'scustomer's next bill

Limits onenrollment 0.0.05%05% peak capacity ? Eligibletechnologies .'Photovoltaics,Photovoltaics, Wind, Hydroelectric

External shut-off:shut-off No \ Additional insuranceinsurance: No

Utilities involvedinvolved: All utilities

* * Growth isis calculatedcalculated as change inin thethe number of net metering customers per million utility customers to account forfor variablevariable poppopulationulation densities (See(See pagepage 18).

New HamHampshirepshire passed net metering legislationlegislation under HB 485 inJuneJune of 19981998. However,However.the law required that thethe state Public Utilities Commission make"reasonable"reasonable interconnection requirements for safety and powerpower qualiti"quality". Thiscommissioncommission included thethe state's largest utility company, Public Service of New Hampshire.Hampshire, thethe New HamoshireHampshire Office of Energyand Planning, and representatives from thethe inverter industry2industry. "_ The legislationlegislation specifiedspecified no date for the implementationimplementation andand federal litiga- tiontion from thethe PUC andand PSNHstalledstalled completion96completion. " Rules for net metering and interconnectioninterconnection were not set untiluntil 2001. Recommendations: •~ Remove limitslimits on total capacity •~ IncludeInclude all typestypes of renewable energy technologiestechnologies •~ IncreaseIncrease system sizelimittolimit to 2MW •~ Carryoverover netnet excess generationgeneration indefinitely

ri ? g5ss L&?!v&!n.arsen Cllrlscirris ]99_les!i !'r!!I!1!hr'ronllhe Slates:stptr!s: iRE("f)Lc.s hlie{connectiul_I!rip p&?nnrr ti p r_e*,;'sllr! ~ ff_i:Cut'Lc _;ecemoeL?.':"p!1!L?rr,IH98';«os V_livp: ]I [1oI p 2"!p!p„,. _tn v_v,.v,,imcusa!«r! v!!p,; orp!:„'priG ad[cle,,_,'statJc;ir lpvrsrrtrp'': Q_inarlesJcongS];2ip?«p&:.on&os) odfp I

'?Oi!I)! ') '&'n!?j &I I'I?I ge?j] Iu!r?'v!?I.]_ne',_,,'ableIp I[n('.'ri_yI::rvr)i) 7L( e' 'I":!!r&'Issur, s ,-indp!&Iir!!p!!sTreildS Enet_:,I rrr !&!I!?I!!pnJornl_.}[Jori/_(hli_l_Jstl,:.ltJonr!!Ii':rr p&irr! pi! tr rtii!!:,ij!JS. [l_;rJ_trr_erltI'?!!p? trnppl o[pl [:ne!gvI err!&'! FebV& I! L,,')!li !_p _t):7I )? I!it@:,II_[}:r' 'rt&?ntpit(Inlo {'}lav?!r doear?!! _/ovSF}PR(}C}I&'! Ii(ri)rpr?!v&?I?I".r(._newables,_ .. !'Ii( 2_2_Za)?J()!?(} i od[I?!Il

48 f -/J

' Number of customerscustomers 2004 307

Change per million customers (2002-{2002-2004)2004): 30,141%*30 141%*

System size limitlimit: 100kW

Eligible classes : Commercial, Residential 0 Net excess generation : Credited at retail rate toto customer's next bill; purchased at : avoided-cost atat endend of annualannual billing cycle

Limits on enrollment 0.1%0.1% peak capacitycapacity or $2 million annualannual impact

EligiEligiblehie technologiestechnologies Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, • Hydroelectric, GeothermalCeothermal Electric, Anaerobic Digestion, Tidal Energy, •: Wave Energy, FuelFuel Cells (Renewable Fuels)

ExteExternalreal shut-off No

Additional insurance No

Utilities involvedinvolved: All utilities

* Growth is calculatedcalculated asas change inin thethe nnumberumber of net metering customers permillion utility customers toto accountaccount forfor variable population densities (See page 18).

NewJerseyJersey established itsits net-metering program inin ;t999.1999.This program cappedcapped net-metering system capacity atat 0.t%0.1%of a utility's peekpeak demanddemand or at an annual finan-financial impact toto thethe utility of $2$2 million,million. ItIt also limitedlimited eligible system sizes toto 100kWlOOkWand eligieligiblehie customercustomer classes to commercial and residential generators,generators. However.However, the program provided for monthly banking of net excessgenerationgeneration (NEG)and required utilities toto purchasepurchase NEG at avoided cost a thethe end of thethe annualannual billing cycle,cycle.

InIn March 2001, thethe New JerseyBoard of Public Utilitiestltilities (BPU) approved funding for renewable-energyrenewable-energy programs,programs, includingincluding a rebaterebate program forfor renewablegenerationgeneration o at homes, businesses, institutionsinstitutions and non-profit facilities,facilities. NewJerseyJersey also offers a fullfull exemotionexemption fromfrom the state'sstate's 66%%sales taxtax forfor all solarsolar aandqd wind-energy equip- menLment. This exemption is availableavailable toto allall taxpayers.taxpayers.

NewJersey'sstatusstatus asas the most effectiveeffective state programprogram is largely based onon satisfactory components ofof the original program and the rapidrapid growth in participating customerscustomers from 2002-2004.

Inn SeotemberSeptember 20042004, with the strong support of then-Governor McGreevey,the New JerseyBoard of Public Utilities (BPU)(BPiJ) expanded thethe state's program toto includeinclude solarsolar technologies,technologies, wind.wind, fuelfuel cells,cells, geothermal technologies,technologies, waveor tidal energy,energy, methane gasfromfrom landfillslandfills and biomass. InIn additionaddition, thethe new rulesrules increasedincreased thethe maximum capacity of thesethese systems from 100 kilowatts (kW) to 2 megawatts (MW) and rernovedremoved thethe limitationlimitation on total enrollmenLenrollment.

NewJerseyJersey allows renewablerenewable energy credits (RECs)from customer-generatorscustomer-generators toto apply toward thethe stringent requirements of the state's renewableportfolioportfolio standardstandard (22.5%(22.5% renewable by202t)2021) onlyonly ifif theythey aregeneratedgenerated from systems thatthat are eligible for net metering.

49 NNew Mexico

"0 Number of customers 2004 " 11

". * Change per million customers (2002-(2002-2004)2004) : 0%*00/ 0 0 System sizesize limitlimit:: 10kW/Commercial,'10kW/ Commercial, Industrial,Industrial, Residential

Eligible classesclasses:! Commercial, Industrial, Residential

Net excess generation Credited to next billbill or purchased atat avoided-cost at end of annual billinghilling cycle

Limits on enrollmentenrollment: None

EliglEligibleble technologiestechnologies: Solar Thermal Electric, Photovoltaics, Landfill Gas, Wind, Biomass, 0 Hydroelectric, Geothermal Electric, Fuel Cells, Municipal Solid Waste, 0 Hydroelectric, • CHP/Cogeneration, Microturbines

External shut-.offshu t-off: Yes " AdditionalAcjditionaj insurance No

Utilities involvedinvolved: Investor-owned utilities andand cooperatives

* Growth is calculatedcalculated aszerozero becausebecause thethe statestate did not exceed 67 participatingparticipating customerscustomers per million customers(seeAppendix A).

InIn 1999.1999,the New Mexico Public Regulation Commission (PRC)[PRC)requiredrequired all utilities to offer netnet metering toto small power producerswith systems up toto 10 kilowatts (kW) inin capacity_capacity. Municipal utilities,utilities, which are not regulatedregulated bythethe PRC, areexempt,exempt. Thereisis no statewide cap on the number of systems eligieligiblehieforfor net metering.

For net excessgenerationgeneration (NEG),thethe utility must either credit thethe customer forfor thethe netnet kilowatt-hours of energysuppliedsupplied to the utility or pay thethe customer forthethe net energysuppliedsupplied toto the utility at thethe avoided cost, Monthly banking of NEGis allowed, IfIf a customercustomer with credits exits the system,system, thethe utilityutility must paypay the customer forfor any unused credits at thethe utility's avoided costcost rate.rate. Customer-generators retain ownershipownership of all renewable-energyrenewable-energy credits (RECs)(RECs) associated with the generation ofof electricity.electricity,

Developments since 2004: In 20052005, Governor Bill Richardson proposed expandingexpanding the state's net metering program to increaseincrease system size limits to lOOkW,100kW, but cap totaltotal capacity at 1%of utilities' aggregate peak load,load. The New MexicoSenate amended thethe bill to includeinclude rural cooperatives, added severalseveral other requirements and attached a renewable portfolio standard. GovernorRichardson pocket vetoed the finalfinal version of thethe legislation.legislation,

InIn a status report issuedissued inin October 2006, NMPRC staff recommended thatthat thethe Commission change thethe state's net metering program to increase system sizesize limitslimits toto lOOkW,100kW, butbut give utilities thethe discretiondiscretion to charge customer-generators forfor additional equipment and liabilityliability insurance.insurance. Recommendations: •~ Increase1creasesystemsystem sizesize limitlimit for commercial andand industrialindustrial classesclasses up to 2MW2MW • Remove the requirement forfor an additional external shut-offswitchshut-off switch o~ Reject PRCstaff recommendationsrecommendations givinggiving utilitiesutilities discretion to charge additional interconnectioninterconnection fees and reQrequire_ire additional liabilityliability insurance forfor systemssystems largerlarger thanthan 50kW50kW

5O50 New k

Number of customerscustomers 2004 : 87 0 Change per million customers [2002-2004)(2002-2004) 0%*

System size limitlimit 10kW'10kW (solar)/Residential,(solar)/ Residential, Agricultural; 400kW (biogas)(biogas) 125f25 kW (wind)(wind) // ' Agricultural; 25kW (wind)/Residential(wind)/ Residential ' Eligible classes Residential, Agricultural

Net excessexcess generation : Credited to customer's next bill; purchasedpurchased at avoided-costavoided-cost i: at end of annual billing cycle ' Limits on enrollment i. 0.1%0.'t% peak capacity or $2 million annualannual impactimpact

Eligible technologiestechnologies i Photovoltaics, Wind, Biomass

External shuboffshut-off : Yes

Additional insuranceinsurance i: No z Utilities involved !: All utilities

* Growth isis calculated asas zero becausethethe state did not exceed 67 participating customers per million customerscustomers (see Appendix A).

The NewYorkState legislaturelegislature gavenetnet metering itsits first push inin thethe mid-nineties, creating legislation applicable onlynnly toto residential photovoltaicphotovnltaic systemssystems with a maximum capacity of lOkW.10kW. The bill's language was similar toto California's.California's, with a fewfew notablenntable exceptions prohibiting extraneousextranenus insurance, fees,fees, orcontrols27controls. " However.However, mum capacity language " GovernorPataki vetoedvetned thethe bill citingciting "grave concerns relatingrelating to safety standards and thethe exposure of citizens and utility workerstoto seriousserious or fatalfatalinjury,injury," Utilities that opposednpposed the bill raised thesethese same safetysafety issues28issues. "

Whenthethe governorvetoedgovernor vetoed thethe bill,bill, he made aa commitment toto instituteinstitute incentivesincentives forfnr solar energy,energy. As a result,result, hehe proposed legislationlegislatinn that createdcreated a residential solarsolar 'o' tax credit and net metering for solar systems?systems, "9 The "SolarChoice ActofAct of 1997" passed_assedthroughthrough thethe statestate legislaturelegislature and was signedsigned intointo law)law. °° Developments inin net metering legislation occurred inin 2002.2002, when SB 6592 made agricultural biogas systems eligible forfor net metering; in 2004, SB 4890-E (of(of2003)2003) further increasedincreased tilethe scope ofof netnet metering legislationlegislation to permit residential wind turbinesturbines up toto 25 kWand farm-basedfarm-based wind turbines up toto 125 kW.kW. Recommendations: -~ Increase system-sizeI!err(e,limitslimits toto atat least 2 MW o~ Purchaseallall NEGat retail raterate °~ RemoveRemnve limits onnn aggregateaggregate enrollmentenrollment °~ Remove reqrequirementJirement forfor external disconnect switchswitch

'"' '"*,:. '(7 stair fi rr,::::,rolr f err:, !(',:e tlnImr rlftonrrcerri)l; et er&y or re(ciy s in) tioi '::!'!avoi !Io y iiit:„:; .. nr::gnome()tave'nrr't er(nt! I !inn! (': ( (iK( ste1( ii( i c'; :„",it(-::e Kali(rrt::: Ii(rieeni) eerier 1 I )boron)n I (il if! voI !: Hn i'tnf:, 'e:::;v. r I . )v'n'ia!) i: erer. :r(r is I(tin: ' 99O)at S_a_eRenewabiei-i_eSeato frnnr('auie i (tierrai_'_ i',lewsNate ['_ati_n,:!;t_enewab[eEnerp,aattnn(ii 'I'(Oner'al(ie f nernyyL:-_t_ola_(_l_,I ii)nratr iy Summ_anni r r(r ]Ygllani V',;iV 'I 66 r,._I'In 2Z it!!In_[_,''Wywlrel_ov,'arl,:!iv'_[s.'_i_:l_,sl_n[':htiTl["..; e( nial en(ran((irer 'er(tnretr(r(l, 'him! ' '. I it ": ':awe( trit(I Iri ) ytt tie !tenn(', ;n Io., :ni;y! (Ve IJ(i nr'. If!((tot'nt)ierr (na ifnn)rn(aery Virm)r loca( V !Vo . Ictn, (trot!!o;';n)aiy i.'(;r:ri("r ii!a

51 North

Number of customerscustomers 20042004: 4 ' Change per million customers (2002- 2004) 0%*

System size limitlimit: !10000 kW

Eligible classesclasses: Commercial, Industrial,Industrial, Residential

Net excess generationgeneration: Purchased by thethe utility at the avoided cost monthly \ Limits on enrollment:enrollment None

Eligible technologiestechnologies: Solar, Wind, Hydroelectric, Biomass, Geothermal, CHECHP, Municipal Solid Waste

External shut-offshut-off: No 4 Additional insurance:insurance No

Utilities involvedinvolved: Investor operated utilities

* Growthisis calculatedaszerobecausethethe statedidnotnot exceed67 participatingcustomerspermillioncustomers(seeAppendixA).

inln January 19911991,theNorthDakota PublicServiceCommissionpasseditsits netmeteringruling,ruling, NDAdministrativeCode69-09-07-09. Therulingestablishednetenergy billingandreQrequiredL_iredthatthat investor-ownedutilities Daypay for power purcllasedpurchased fromfrom qqualifiedJalifiedfacilities. HoweverHowever, the NorthDakotaLegislativel,egislative Council'sCommitteeon AdministrativeRulesobjectedtothethe PSCruling,ruling, basedonthefactthatthat 1991SB2463.2463, whichwouldhaverequiredrequired netmeteringforsalesinvolvinginvestor-ownedutili- tiesties and ruralrural cooperatives,failedto passpassthethe Senate on a vote of 6 to 43. Asa result,ruralrural electriccooperative membersarenotsubjectto net meteringlegislationinin NorthNonh DakotaDakota, and netmeteringisis provided_rovidedonly bythe threethree investor-ownedinvestor-owned utilities underthethe PSCPSC.

NorthDakota'snet-meteringrulesrules apply bothboth toto renewable-energygeneratorsandcombined-heat-and-combined-heat-and-powerdowersystemssystems up toto 100kWin capacity. There isis nostate-state- widelimitonon thetotal capacity of all net-metered systems.Atthe endof a monthlybillingperiod,the utility mustpurcllasepurchase anyNEGatthethe avoided-costrate. Recommendations: o~ Increasencreasesystemsizelimitlimit toto at leastleast 2 MW °~ Includeruralrural electric cooperativemembersundernetmeteringrulingruling °~ Allow bankingandcarryoverof NEG month-to-month

52 J

' Number of customerscustomers 2004 18IB * Change per million customers (2002-(2002- 2004)2004): 00/0%* 0 0 System size limitlimit: No limitlimit for renewable energy; 100IOO kW for micro turbinesturbines

Eligible classesclasses:• Commercial, Industrial,Industrial, Residential

Net excess generationgeneration: Credited to the next bill atat the unbundled-generation raterate

Limits on enrollmentenrollment: 1%I% of a utility'sutility's peak demand

Eligible technologiestechnologies '. Solar, Wind, Biogas, Hydroelectric, Fuel Cells, CHP/Cogeneration

External shut-offshut-off: No (if system isis smaller than 10 kW)

" Additional insurance . No

Utilities involvedinvolved: All utilities

* Growth is calculated as zero becausethethe statestate ddidd not exceedexceed 67 participatingparticipating customers permillion customers (see Appendix A).

Ohio's net metering law took effecteffect inin 1999 asas part ofnf electric-utilityelectric-utility restructuringrestructuring legislation, requiring investor-owned utilities to provide_rov de net metering totn customers using wind.wind, solar,solar, biomass, landfill gas, hydropower,hydropower, fuel cells or microturbinesturbines for electricity generation. Systems mustexplicitlyexplicitly be designed to offset part orallall of thethe customer-generator's electricity demand, and therethere isis nonn cacap_ on system size.size, exceptforfor microturbines,turbines, which are limited toto lOOkW.100kW. Each utility is requiredrequired offernffer net metering until totaltotal generatinggenerating capacitycapacity reaches 1%of thethe utility's aggregatecustomercustomer oeakpeak demand inin Ohio. The Public Utilities Commission of Ohio (PUCO) initially orderedordered utilities toto credit NEGatat the retailretail rate. However,inJuneJune 2002, the Ohio Supreme Court (Case(Case No. 01- 0573}0573) decided thatthat suchsuch exchange was illegal, despite thethe comments submitted inin s_supportpport of PUCO'spolicypolicy by the American Solar EnergySociety (ASES),American Wind EnergyAssociation (AWEA),(AWEA), Solar EnergyIndustriesindustries Association (SEIA), Ohio Partners forfor Affordable Energy(OPAE),Ohio Environmental Council (OEC)[OEC)and thethe Ohio Consumers' Council (OCC).(OCC),_°1"' Based uponupon the SuoremeSupreme Court ruling,ruling, utilities must credit NEGtotheto the customer atatthethe utility's unbundled generation rate.

Developments since 2004: In December 2005, the PUCOopenedopened a docketdocket (Case(Case No. 05-1500-EbCOt)05-1500-EL-COI) to evaluate the state's currentcurrent interconnectioninterconnection standards and net-meteringnet-metering rulesrules, _o2"' Recommendations: •~ Credit NEGat avoided costcnst rate.rate, at minimum •~ Eliminate cap on totaltotal generating capacity

' :, r SI&. OOOI( O-nu !0!1ui Giem_( Inr lr [[rlf:I nr c,&X Or_to(chin OhioI hiv SufrrnmvSur reme Cohlt(fnvrl [,_nlilSt n lfO»'OiNet _,,4etefiltgf':Ofnr Oa iilC(_l]i.l',,_I IOOII&I;O I][[D:,,'IIrii": I WWWI':;, I;lnvnrllrOI;;I[_ Pe[tl;ii_r,_'! 'q"frln_ o or£,Ornn lJ"_j_Or(O i;Inllnl _p:-l_eId--:]2[_&f&ireefd. . _:tf;c_ss_?ctn;rr £)-zb..OI3uif

frlJu2 ' f(r'f'OrlR_,I }fl bV'v l}telilrr i'qbliCf':.I(rifi'. [ItllJtlO.Sl;[llYlili!S:,lOn(filfl(IOOI(OI llrr!O: IOII nlOl (rflilrlhi_ (':_'l_;,('. 1"_'_Ji';(r 0_'--or;-.I''n!o0-(r_O0*EL-(:OI( (rf Aii_[u<_tx I';ll ".: 2_",. ;!line)l 6

53 Oklahoma

Number of customers 20042004: 31 0 Change per million customers (2002-2004)(2002- 2004): 0%* 0 0 System sizesize limitlimit: 100700 kW (up(up to 25,00025,000 kW a year)

Eligible classesclasses: Commercial, Industrial, Residential ....

Net excess generationgeneration: Granted to thethe utility monthly or credited toto next bill at avoided cost

Limits on enrollmentenrollment: None

Eligible technologies '. Solar, Wind, Hydroelectric, Biomass, Geothermal, CHP, Municipal Solid Waste

External shut-offshut-off:: No ' Additional insuranceinsurance ! No , Utilities involvedinvolved:: All utilities

* Growth is calculated asas zero because the statestate did not exceedexceed 67 participatingparticipating customers perper million customers (see(see Appendix A).

Net metering inin Oklahoma was firstfirst established by Oklahoma Corporate Commission [OCC)(OCC) OrderOrder 326195326195 inin 1988. TheThe orderorder requires investor-owned andand municipal utilitiesutilities uunder7der thethe OCC's jurisdictionjurisdiction toto filefile net-metering tariffstariffs applicableapplicable to customer-generators with renewable energyenergy and cccombined-heat-and-powerllbined-heat-and-power facilities.facilities. NoNo statewidestatewide limit forfor aggregate net-metered capacity has been established,established, though individualindividual system*sizesystem-size isis limitedlimited toto 100 kW.RW. Under the order, ruralrural co-operatives areare not regulatedregulated by thethe OCC, and thereforetherefore cannot be requiredrequired to offer net metering to their customers. Utilities areare also not required to purchase netnet excess generation fromfrom customers,customers, thoughthough a customercustomer may requestrequest it,it. IfIfthethe utilityutility agrees, NEG is purchased attheat the avoidedavoided cost rate)rate, '"°3 Because of lacklack ofof public support, Oklahoma has been unsuccessful inin addressing utilityutility company opposition toto net metering,metering. Since 1999, several billsbills havehave oeenbeen proposed byby Rep. James Covey (D)(D) with the intent ofof creating a statewidestatewide netnet metering rule, thoughthough none of thesethese have become lawlaw duedue toto opposition by utilities. Developments sincesince 2004: TileThe Oklahoma Wind Power Assessment Committee.Committee, establishedestablished by SBSB 1212 inin 2004, has recommended thatthat statewide netnet metering provisions encompassingencompassing all utilities bebe implemented in Oklahoma. Recommendations: •~ Include allall utilities under net metering ruling -~ Require purchase of all NEG fromfrom customer-generatorscustomer-generators at retailretail raterate , IncreaseInrrease system-size limitlimit toto atat leastleast 2 MW

". "1!Il: I". (1(1 1031oa PSIl!['.OhioIm.eIt~sinr (ri;::nI r«;-rrti;;-.llVeMO_H,bh_'V,;_bles,Jrl','1[:llici{_,nc_!er!'&rrr, ::;«II.:cent! i'':fr«inn«1 ilU[...'V,W_(I:qirvi&: ".;en« ri:nerrennr,_ 30_ ."!IrhrnrnnrIii'ar:_,,hichJdes.,in:.<_kv_rue«!Irnnrrrt n:"; t_hn_?h_ceIRiv_-C_d_!..t_`_1i:_&state.._K&{_rr_ritP_[`_._.`_`[_L:_.l_.E:_._rnnvirnerrtive (««fe trlurirra-. tete (IK,'.(urr, :ntirrr, e(o I, .Fl:1 Ar'rnree:u::tiegs,:t ttgt_6e

54 Oregon

Number of customers 20042004:: 232 ' Change per millionmrlllon customers (2002- 2004) i 1019%*10't9%*

0 System sizesize limitlimit:: 25 kW

Eligible classes . Commercial, Industrial, Residential

Net excess generationgeneration: ." Credited atat retail raterate to customers next bill or purchased by utility at avoided : cost raterate

Limits on enrollmentenrollment: : 0.5%0.5% of a utility's peak load

EligibleEIigible technologies i.'Solar,Solar, Wind, Hydroelectric, Fuel Cells

External shut-offshut-off:i No

" Additional insurance No 4 Utilities involved :."AllAll utilities

* Growth isis calculated aschangechange inin thethe number of net metedngmetering customers perper million utility customerscustomers toto accountaccount forfor variable population densities (See{Seepage18).page 18),

Oregon's original 1999 net metering law.law, HB 3219, was sponsored bythethe Committee on Commerce upon the recrequestuestofof the Renewable Northwest Project and the Solar EnergyIndustry Association of Oregon. ItIt passed unanimously inin bothboth the House and Senate, and was supported by overtwentytwenty environmentalenvironmental groups, industryindustry associations and utilities statewide. The law allowed netnet metedngmetering forfor customers with solar,solar, wind, or hydropowerhydropower systems up to 25 kW.

Presently,residential and commercial customers are permitted to net meter upup to a totaltotal installed capacity of 0,5%0.5% ofot a utility's historichistoric single-hour peak load.load. When installed cacapacitypacity exceeds this limit,limit, net metering may be limited bythethe regulatoryregulatory authority,authority. Net excessgeneration isis purchasedpurchased atat the avoided cost rate or credited to thethe customer-generator'scustomer-generator's nextnext monthly bill, At thethe end of an annualannual period, any unused credit isis granted toto thethe electric utility.

Developments since 2004: InJuneJune 2005, SBSB84 expanded net metering to includeinclude landfill gas,gas, digester gas,waste, dedicateddedicated energy crops, and low-emission, nontoxic biomassbiomass derivedderived fromfrom wood, forest, orfieldfield residues,residues. Furthermore, thethe OregonPublicPublic UtilitiestJtilities Commission isis authorized toto increaseincrease thethe 25-kW systemsystem limit for customers of investor-owned utilitiesutilities. Recommendations: •~ Remove limits con_ enrollment •~ Increase systemsystem sizesize limitlimit to at least 2 MW •~ Purchase NEGat retailretail rate •~ Credit excessexcess NEGat end of annualannual _eriodperiod toto customer-generator

55 Penn

Number of customers 20042004: 89 0 Change per million customers (2002-(2002-2004):2004) _ 0%* 0 0 System size limitlimit:: lOkW'I OI&W

Eligible classesclasses:: Commercial, Industrial, Residential

Net excessexcess generationgeneration: i Granted toto thethe utility monthly

Limits on enrollmentenrollment: None

Eligible technologiestechnologies: Renewable energy and fuel cells

External shut-offshut-off:: No

Additional insurance:insurance : No

Utilities involvedinvolved: : All utilities

* Growth isis calculated aszerozero becausebecause thethe state diddid notnot exceed 67 participating customerscustomers per million customers (see Appendix A).

Pennsylvania law introduced met-metering i_in 19961996 under the Electricity Generation Customer Choice and Competition ActtoAct to includeinclude all renewable energy sources (including fuelfuel cells up toto lOkw).10kw)._°4""

Developmentssince 2004: InIn November2004, Governor EdwardRendeilRendell signedsigned the Alternative EnergyPortfolio Standards Act requiring net metering and interconnection standards to be set within 9 months. TheThe ruleswere heavily influencedinfluenced bythethe Mid-Atlantic Distributed ResourcesInitiative.Initiative, or MADRI.MADRI, consisting ofof a coalition of regional statestate utilityutility commissions including Pennsylvania.Pennsylvania, thethe FederalFederal EnergyRegulatory Commission (FERC),PJMInterconnection LL.C.LLC. (a largelarge Mid-Atlantic and Northeast utility company), thethe U.S.U.S. Department of Energy,the EPAand thethe InstituteInstitute of Electrical and Electronics Engineers Standard forfor Interconnecting Distributed Resourceswith Electric PowerSystemseorr"tEEE"IEEE 1547"?1547"."'°s The PUC issuedissued net metering andand interconnectioninterconnection regulationsregulations inin Juneandand August ofof 2006.2006, increasing system size limits toto 50kW for residentialresidential andand 1MWfor non-residential. Additionally net excess generation isis credited at thethe end of thethe month toto thethe customer attheat the utilities' avoided costcost,log'" Recommendations: •~ Increase systemsystem sizesize limitlimit to 2MW •~ Purchase net excessexcess generation annually •~ Create interconnectioninterconnection standards similarsimilar to thosethose recommended by FERCor IREC •~ Credit customers at retailretail rate annually for net excess generation

' :", :, ". ','vv::, aittttL!!&t~;.Rf't!n, r rr&!t', 'I&!t!& r.:I't p&t or&. I li !I I":ttt:.:s&t;:ttti!& I('nl "s!&tv R'. gttl;::t;:tt'r Re:turt;:,:.:I,:tivrt'lt! et!tnt. !&It!'n. I!t:ttit!f!t. !,;t :"Rit!1 I!Ip., ; ttit!t , '*'", Irs a(!I:"v.: I&&!tri!I:;;!!!I&pttl&li:tltiliLrcprptni.',:ir!!t Iht!I'pttrt. :;it,tti;e!!lip!it! zs!I:::(I;'!cia !I&It[&:, , tt lt.ttttilr!Ii!t:&!!!".,p&!Lv;',.v!It".'tits!.", :!':,"!Ifcl!!ml '.'&! tnvit!I&~ri&tt, "tuil::) ptp!zf tcvtttt;:. C!&". &. -I&,0 ltts p&&!&tt."&It !&!ti:.In;v ttn is fv' it&trw'. .!&tulvv !&t!Ll i'lltvvtttv 13~'i &Lvt.;v vf stat~I!nvvr!t::vs I"t Il.'ni, ;&I lv I t!&r&r svf!1 zul 6 I!!!p&'!!vv!I.:I!&t!;!vrfutiutv&ry, .Lite:.Latp- I'Asc!!trent!&:&„'..:.ll)-!!LRL-li':I'I:: I

56 1

Number of customers 20042004: 25 " Change per million customers _2002-(2002- 2004) 0%*

System size limitlimit: 25kW

Eligible classesclasses» Commercial, Industrial, Residential

Net.Net excessexcess generationgeneration' »CreditedCredited toto the followingfollowing month; granted toto utility at the : end of a 72-month12-month period.

Limitslimits on enrollmentenrollment: : 17 MW l

Eligible technologiestechnologies: i Solar, Wind, Biomass, Hydroelectric, Geothermal Electric, : Municipal Solid Waste, CHP/Cogeneration, Fuel Cells

External shut-offshut-off':i No

Additional insuranceinsurance' :»NoNo

Utilities involvedinvolved: i Narragansett Electric Company

*' Growth is calculated aszero becausebecause thethe state did not exceed 67 participatingparticipating customers per million customers (see Appendix A).

In 1998.1998,afterafter hearing a compellingcompelling casecase made by several state-based renewable energyexperts, the Rhode IslandIsland Public Utilities Commission (PUC)(PIJC) requiredrequired Narra- gansett Electric toto orovideprovide net metering to customer-generators usingusing renewableenergyenergy sources,sources, including fuel cells, up to a 25 kW system limit_limit. EligiEligiblehietechnologiestechnologies are listed in Rhode Island'sIsland's Utility Restructuring Act.Act, R.I.G.L.R I G L. §39-2-1.2(b)_$392- 12(b).

At the end of each month.month, NEGisis credited to the followingfollowing month, andand unused credits aregranted to thethe utility at thethe end of a 12-montl12-month _period.oeriod. Narragansett Electric's aggregate net-metered capacity limit isis one megawatLmegawatt. Recommendations: o Removesystesystem-n size limit and aggregateaggregate capacity limitlimit °. Reimburse NEGattheat the retailretail rate ,~ involveInvolve more utilities

57 Numberofcustomers 20042004: 16'16

Changepermillioncustomers{2002-2004)(2002-2004): 0%*

System sizelimitlimit: 50 kW

Eligible classesclasses: Commercial, Industrial, Residential

Netexcessgenerationgeneration: Purchased by the utility monthly at thethe avoided cost

Limitsonenrollmentenrollment: None

Eligibletechnologiestechnologies: Solar, Wind, Hydroelectric, Fuel Cells, Hydroelectric, Tidal, : Wave, Geothermal, Microturbines

Externalshut-offshut-off: Yes

0 Additionalinsuranceinsurance: No

Utilities involvedinvolved: : Investor operated utilities

* Growth is calculated as zero becausethethe state did not exceed67 participating customers perper million customers (see{seeAppendixAppendix A).

Net metering inin Texas,ordered byby The Public Utility Commission ofofTexas under Substantive Rules.Rules, Section 23.66(f)(4),23.66(t)(4), took effecteffect inin 1986,1986. Part ofof the objective inin promotingpromoting net metering wastoto promote small wind power andand PVmarkets within thethe state. Beginninginin 19991999,howeverhowever, statewide electricityelectricity market deregulatio_deregulation significantly hindered thethe efficacy of Texas'net metering rule.rule. Thoughthethe rightright toto interconnectinterconnect to thethe grid was generally strengthenedstrengthened duringtheduring the deregulation process,process, the ability toto net-meternet-meter thesethese interconnections diminishedJdiminished. '"°7 Following deregulation, electric utilities comprised two categoriescategories with respectrespect to net metering: (1) integratedintegrated IOUsIOUs outside thethe ElectricElectric Reliability Council of Texas(ER-(ER- COT)with a clearclear regulatoryregulatory obligation to permit net metering up to 50 kWforfor facilities using renewable resources,resources, andand (2)(2) electric cooperatives,cooperatives, municipal utilities and riverriver authorities with no obligationobl gation toto permitpermit net metering,metering. For deregulatedderegulated entities within ERCOT.ERCOT, clearclear netnet metering rulesdodo not existexist, and no modifications toto existing rulesrules havehave been made in order to resolveresolve this ambiguityJambiguity. '"'°8

Developments since 2004:2004:The TexasMillion Solar RoofsProgram.Program, Texas Renewable EnergyIndustriesIndustries Association.Association, and Conservation Services Group are among the organizationsorganizations which coordinated the Texas RE=ConnectRE-Connect Project, wNchwhich aublishedpublished itsits final reportreport in Aori12005,April 2005. TheThe objective of the reportreport wastoto assist Texasutilities inin sharing bestbest practices and creatingcreating voluntary net metering and interconnectioninterconnection 3rogramsprograms forsmallsmall renewablerenewable energyenergy systems. Recommendations: •~ Requireallall utilities to permit net meteringthroughthrough revision/clarificationrevision/clarification of existingexisting 'ulesrules •~ Remove externalexternalshut-offshut-off requirementrequirement .~ IncreaseIncrease system-size limit toto atat leastleast 2 MW •~ Credit all NEGtoto customer-generator at retail rate

F: ', '&e l'tti && & I c'c 107iri? V_qe_;tVn:. _. Steve!Sh&v&n&!&Ir_4 &uliohrln i- tiollli,_ri&uffner {.finn!n ScottScuu, ]arlelane Pui;;J,_kit, n&nevi!'rP,u.%e[ SmiLiltiU& 200_:pr&00 lu;r,.o&i:r.»nr&!r!m!_e:limltin'& andatni _',,et&'I!!II_4.et!_lhI&leterin,g„nf. of Sih:dlISn&ell!'leuc&v;l&lcR,:,uew_3[lle I i),.r[<_& &&f1 b:eueratolsoen& r&!u v ;,,in _£_:as:ier!;v; _:irl.qif tr&0 R_:_e;lil&c'p &tl oIul tile0&(' lexa._:I;-'c&alii't,_[ (.onne,:r&n &.I t'. F+rai_:,t,iI':nl «Z Miihorl!lilt! n £[_[;_Snl;, i{oot_Fiu; l"le:I r', lectec:[ Iurl£luna 11]. I hltp:i&t!p. ;./www'v vcn lreiat &a& (,_1_,)drn!0,',&elf If !E'_..'lte&,'I in;_i&net t{er?+)liI'&epntt 'nil_dl

f'&r»' ;". '&tn'I&'cf&", & ?tv&f'& & '&v&!& &Iaf&&&& & at' t I_18l»a [)SI[_FI)all!0 :7006[exa_hice+tI_ve_dolI c &0";, &Ic&r r_e_+_v,'abieR&r! v &l&i! Enet_vanat&1&& ilttp>t&l!Fn?wwwii,_ilr,u<:aolf_nr»l&lh_7'iI_,:lude,_;,'m_;ent_ve::.'I!acr&t&cr I?_ &&Irn?In!:frn?lrmenttw-:t&tr e Cu&1&'&rsvp,JefX[ 2R:_,_'I!ele&ate.aleq;4&Clxf'f!&&rr»&&ter»xi[Il __ _Prl.,,.D"II!'I'!0-If'cr-'&&:rE+_&EE"_A,:c{,_55edx&nee ecl i0.c_io 0-ciil)G

58 Numberofcustomers 20042004:: 10 ' Change per million customers (2002-{2002-2004)2004) i 0%*

System size limitlimit:: 25kW

Eligible classes : Commercial, Industrial, Residential 0 \ Net excess generagenerationtion : Credited to the next bill at thethe retail rate; granted to thethe utilityutility at the end of : annual billing cycle

Limits on enrollment : 0.1%0.1%of a utility's 2001 peak loadload 0 Eligible technologiestechnologies : Solar, Wind, Hydroelectric, Fuel Cells

" External shut-offshut-off _. No 0 0 AdditionalinsuranceAdditional insurance: : No

Utilities involvedinvolved: ! Investor-owned utilities, Electric cooperativescooperatives

*"Growth is calculated as zero because the state did not exceed 67 participating customers perper million customers (see(see Appendix A),A).

On March 15, 2002, GovernorMichael O.0. Leavittsignedsigned intointa law HBH6 7, Net Metering of Electdcity,Electricity, sponsored byby Rep. GoGordon'don E. SnowSnaw _R).(R). The bill was recommendedrecommended byby the Public Utilities and TechnologyInterimInterim Committee.Committee, and passed unanimously inin both thethe Houseand Senate°Senate. The legislationlegislation receivedreceived support from a broad coalition of interestedinterested parties, including environmental groups andand Utah Power.Power,

UtaUtah'sh's net-metering lawlaw requiresrequires all electric utilities and cooperatives, excluding municioa[municipal utilities, toto 9ermitpermit interconnectioninterconnection of renewablerenewable energysystems toto tilethe electricelectric grid. Eligible renewable energysystems include fuel cells,cells, solar, wind oror small hydropowerfacilitiesfacilities with a maximum generating capacity of 2525 kilowatts. Total participation of customer-generatorscustomer-generators is restricted toto 0.1%0.1%ofof the 2001 cumulative generatin[_generating capacity of thethe electrical corporation's peak demand. The utility is required toto creditcredit thethe customercustomer for anyNEGatat the utility's avoidedavoided cost rate or highenhigher. NEGis carriedcarried over monthly toto thethe nextcustomefscustomer's next bill untiuntil the end ofof each calendar year, at which point any remainingremainin_ NEG is granted toto the utility. Utilities areare notnot permitted to issueissue additional charges orfeesfees forfor net-meterednet-metered customerscustomers, uun-n- less authorized toto dodo so byby the Utah Public Service Commission. Recommendations: ,~ Increase s_stemsystem sizelimitlimit toto atat leastleast 2 MW ,~ Eliminate thethe capcap onon total eligible capacitycapacity •~ RequireReamremunicipal utilities to permit interconnectioninterconnection ,~ Requirepurchasepurchase of NEGat retailretail rate

59 ' Numberofcustomers2004: 67 0 ' Change per million customers (2002-(2002-2004)2004) 152%*

System size limitlimit: "15'15 kWkW for Residential andand Commercial; 150150 kW forfor Agricultural

Eligible classesclasses: Residential, Commercial, Agricultural

Net excess generationgeneration: Credited to the next bill at the retail rate; granted toto thethe utilityutility : at the end of annualannual billing cycle

Limitslimits onon enrollmentenrollment: 1% of peak demand for 1996 or current year 0 ' Eligible technologies . Solar Photovoltaic, Wind, Biomass, Fuel Cells

External shut-off:shut-off Yes 0 Additional insuranceinsurance: Yes

Utilities involvedinvolved: All utilities

* Growth is calculated as changechange inin thethe number of net metering customers per million utilityutility customers toto account forfor variable population densities (See(See page 18).

Vermont's limited to renewable energy systems under 15 kW. However, farmers who generate electricity using eligible renewable- Vermont's net metering program isis generally limited to renewable energy systems under 15 kW. rlowever,farmers who generate electricity" using eligible renewableenergyenergy resourcesresources may net meter systems up toto 150 kW.kW, based on certain conditions,conditions. Thereisis also aa provisionprovision for "group"group net metering,"metering, allowing farmfarm systemssystems to credit on-siteon-site generation against all meters designated to thethe farmfarm system.The state public serviceservice commissioncommission may allow net metering for up toto 10 systems peryear forfor non-farm generators greatergreater than 15 kW.kW, butbut nono greaterthanthan 150150kWkW ofof capacity,capacity. A utility andand on-farm system owner may also jointlyjointly petitionpetition thethe PSBPS8 for permission toto exceedexceed the 1%aggregate enrollment cap,cap. NEGisis granted toto thethe utility without corncompensation9ensationtoto thethe customer-generatorcustomer-generator annually.annually,

Vermont's initialinitial netnet metering legislation.legislation, H.605.H. 605, was sponsored by RepKathleenKathleen C, Keenan(D),(D), and became lawlaw on April 22.22, 1998. DesoiteDespite reservations expressed by utility companies.companies, H.605H, 605 was ameamendedqded in 1999 by H.705.H. 705, and inin 2002 by S,]38.S.138,increasingincreasing the maximum capacitycapacity of farm systems and expanding eligible energy sousourcesrcesfor net metered systems.systems. Developments since 2004:2122004: 212 net-metered systems (54(54 wind.wind, 157 solar and one farm-waste methane), with an aggregateaggregate capacitycapacity ofof 811 kW.kW, had received a "Cer- tificate of Public Good" inin Vermont as of November 20052005, Recommendations: •~ Removecacapacity_acitycapcap on totaltotalenrollmentenrollment o~ Increase system size limit toto at leastleast 2 MW o~ Require utilities toto purchase NEGattheat the retailretail price annuallyannually

6O60 ® • glnla

Number of customers 20042004: 19 * Change per million customers (2002-(2002- 2004)2004): 0%*po/

System size limitlimit: 10 kW for Residential; 500 kW for Non-Residential 0

Eligible classesclasses: Residential, Commercial, Nonprofit, Schools, Government ' Net excessexcess generation . Purchased at retail raterate for renewablerenewable energy; purchased at avoided 0 cost forfor non-renewable energy " Limits on enrollment : 0.1%0.1% of annualannual peak demand

Eligible technologies . Solar, Wind, Hydroelectric

External shut-offshut-off: Yes

Additional insuranceinsurance: Yes

Utilities involvedinvolved: : All utilities

* Growth is calculated aszerozero becausethethe statestate did not exceed 67 participatingparticipating customerscustomers per million customers (see(see Appendix A).

Net metering inin Virginia was originally established irin 19991999as part of SB 1269.1269,anan amendment toto thethe Virginia Electric Utility Restructuring Act. The netnet metering rules were developed inin part through a July 1999 Commission surveysurvey senttoto utilities and renewableenergyenergy stakeholders. Under SB 1269.1269, Virginia's net-meteringnet-metering lawlaw appliedapplied toto residential systems up toto 1010 kWinin capacity and non-residential systems up to 25 kWkW inin capacity. Eligible systems werelimitedlimited to solar, wind or hydro energy sources,sources, and customer-generatorscustomer-generators were not creditedcredited forfor NEGunless a _owerpower purchasepurchase agreement was established with the utility. Aggregate enrollment capacity was established at 0.1%0.1% of eacheach electric utility's peak demand forecast for the previous year.

Developments since 2004: In 20042004, maximum capacity for non-residentianon-residential distributeddistributed generation systemssystems was increased from 25 kWtoto 500 kWbySB 651.651. On March Governor Tim Kaine signed HB 1541, extending eligibility to all renewable energy generation systems based upon "energy derived from sunlight, 31.2006.31,2006, Virginia GovernorTim Kaine signed HB 1541, extending eligibility to all renewable energy generation" systems based upon "energy derived from sunlight, wind.wind, falling water, sustainable biomass,biomass, energyfromfrom waste, wavemotion, tides, and geothermal power."power. (Previously,(Previously, net metering was limited toto solar,solar, wind or hydro resources.)resources ) HB 15411541 also permitted net-metering systemstosystems to be eligible forfor leaselease financing.financing, Recommendations: o~ Eliminate cacapp on total enrollment capacitycapacity o. Purchase allall NEGattheat the retailretail rate °~ Eliminate requirements forfor externalexternal disconnect switch and additional insurance -~ Increase system-size limitlimit to at least 2 MW

67 ®

Number ofcustomers20042004: 73

Changepermillioncustomers(2002-20041(2002-2004): 0%*

System sizelimitlimit: 25kW ' Eligible classes Commercial, Industrial, Residential

Netexcessgenerationgeneration: i Credited toto thethe next bill at thethe retail rate; granted to the utility : at the end of annual billing cycle ' Limitslimits onenrollment!»0.0.25%25% of a utility's 1996 peak load ' Eligibletechnologies:. Solar, Wind, Biogas, Hydroelectric, FuelFuel Cells, CHP/Cogeneration

External shut-offshut-off:i No

Additional insuranceinsurance: : No :0 " Utilities involvedinvolved :. All utilities

* Growth isis calculated aszerozero becausebecause thethe statestate did not exceed 67 participating customerscustomers permillionmillion customers (see(see Appendix A).

Net metering in Washington State was first enacted in 1998 bythethe RevisedCode of Washington chapter 80,60,80 60, establishing the limitlimit onan total capacity at 0.25%0 25% of a utility's peakpeak demanddemand during 1996.1996, and reservingreserving at leastleast..05%05%forfor productionproductinn fromfrom solar,solar, wind.wind, or hydropower,hydropower. Under the original code, NEGwas credited attheat the retail raterate to thethe customer'scustomer's nextnext bill, with remainingremaining NEGgranted to thethe utility without compensationcnmpensation to thethe customer at thethe beginningbeginning of thethe calendar year,year. Developments since 2004: SubstituteSubstitute HB 2352 of 20062006 increasedincreased systemsystem sizesize limitslimits fromfrom 25 toto 100 kW, and expandedexpanded the definition ofofrenewablerenewable energyenergy to includeinclude solar,wind, hydro, biogasbiogas from animal wastewaste, orar combined heat andand power technologiestechnologies (including(including fuel cells),cells). HB 2352 also increasedincreased the total capacity cap totn 0.5%0.5% of a utility's peak demand in 1996, effectiveeffective 2014, UnusedNEGisis still credited to the utilities on April 30 of each calendar year.year.

The revised bill wassponsoredsponsored by Representatives Morris, Hudgins, and B. Sullivan, with supportingsuppnrting testimonytestimony provided byaa representativerepresentative of thethe Department of Com-Cnm- munity,Trade & EconomicEcanomic DevelcDevelopment.Dment.Despite opposing testimonytestimony by a representative of Avista Corporation.Corporation, HB 2352 passed9assedwith an overwhelming majority inin both thethe ttouseHouse andand Senate and took effecteffect on June 7.7, 2006. Recommendations: •~ Eliminate thethe capcap on totaltotal eligtbleeligible capacity •~ IncreaseIncrease the system size limit toto at least 2 MW •~ Require utilities toto purchaseaurchase NEGattheat the retail rate annually

62 Wisconsin

0 Number of customerscustomers 20042004: 212 0 0 Change per million customers (2002- 2004)2004): 127%*

System size limitlimit: 2O20 kW

Eligible classesclasses: Commercial, Industrial, Residential 0 Net excess generation '. Purchased at retailretail rate for renewable energy;energy; purchased : at avoidedavoided cost forfor non-renewable energy

Limits on enrollment:enrollment : None

Eligible technologiestechnologies i.'Solar,Solar, Wind, Biomass, Hydroelectric, GeotheCeothermalrmal Electric, Municipal Solid : Waste, CHP/Cogeneration 0

External slnut-offshut-off:i Yes 0 Additional insurance:nsurance i Yes

Utilities involvedinvolved: : Investor-owned utilities

* Growthis calculatedcalculated as changechange inin the number of net meteringmeteding customerscustomers per million utilityutility customerscustomers toto accountaccountforforvariablevariable population densities (See{Seepage 18).

Wisconsin's net metering legislationlegislation isis based upon a letterletter order issuedissued bytilethe PoblicPublic Service Commission ofof Wisconsin (PSCW),{PSCW),confirmedconfirmed on September 18.1992.18, 1992, and aapplicable_plica_letoto atlall investor-owned utilities. ThoughThough ruralrural electric coooerativescooperatives inin Wisconsin aare_enot rate-regulatedrate-regulated by PSCW,they often voluntarily abideabide by the Commission's rulings:rulings; several rural electric cooperatives areare preparingpreparing to offer net meteringtoto their customers)customers. "'°g

InIn Wisconsin, net metering isis available toto customer-generatorscustomer-generators with a maximum systemsystem capacity of 20 kW, All systems are eligible, includingincluding renewable energy and combinedcombined heatheat and Dower.power. Utilities pay tilethe retail raterate for NEGproduced by renewable energy-run systems, while customer-generatorscustomer-generators usingusing non-renewable resources receivethethe avoided-cost rate,rate.

Developments sincesince 2004: In January 2006, thethe PSCaccepted a oroposalproposal byby investor-ownedinvestor-owned We Energiesto permit customerscustnmers with wind turbinesturbines ranging fronlfrom 20-100 kWkW in c_capacitypacity to bebe eligible for net metering. The first 25 eligible applicants will be permitted totn participate inthisthis programprngram forfor aa lO-year10-year term. Recommendations:Recnmmendations: °~ Increase7creasesystemsystem sizelimitslimits toto at least 2 MW o~ Includenclude ruralrural electric cooperatives under net metering legislationlegislation .~ Do not reqrequireaire an external disconnectdisconnert switch or additional insuranceinsuranre

": ':. '! io'! st';I» i »:t.'»»mv»i»l a»»»:!r.:»c.»!!'r Ivi,":;,''»';", . s»r»»»!i»» o'~:&, !»!»!-'".», -u»»»»ui.. "!rI!r»i :»".'~i i zs!!e

63 Mfyoming

Numberofcustomers 20042004:: 111'I * Change perper million customers (2002- 2004) i 0%*00/ 0 System size limitlimit : 25 kWI&W ' Eligible classesclasses Commercial, Industrial,Industrial, Residential 0 4 Net excess generation : Credited to next bill; purchased at avoided cos!cost ' at thethe endend of thethe annualannual billing cycle " Limits on enrollment . None ' EligiEligiblehie technologiestechnologies . Solar, Wind, Biomass, Hydroelectric 0

External shut-offshut-off:! Yes

Additional insuranceinsurance ": No

Utilities involvedinvolved :"« Investor-owned utilities, Electric cooperatives .... =

* Growth isis calculated aszero becausebecause thethe state did not exceed 67 participating customers per million customerscustomers (see Appendix A).

OnFebruary 2222, 2001, GovernorJim Geringersignedsigned intointa law HBHB195'",195n°, requiringWyoming's investor-ownedinvestor-owned utilities,utilities, includingincluding electric cooperatives and irrigationirrigation districts, to offeroffer net metering forfor solar, wind, and hydroelectric systemssystems of 25 kWorless.less. The legislationlegislation tooktook effect on July 1, 2001.20012"m Upon the passageofof Senate Bill 106 on July 1,1,2003,2003, biomass also became an eligible renewablefuelfuel. Net excessgenerationgeneration in one month isis credited tota thethe following month. At the end of an annual billingbilling period, thethe utility must pupurchase,chase unused credits at thethe avoided-cost raterate,

Developments since 2004: InIn 2006, TheThe Wyoming Public ServiceCommission (PSC)(PSC) proposed toto adopt and incorporate twotwo sections of EPAct2005 verbatimverbatim into itsits ProceduralPracedural Rules and Special Regulations, requiringrequiring utilities toto allow interconnectioninterconnection based on thethe IEEEEEE1547 standard, and requiring utilities toto offer net meteringtoto "-' customers,customers. AA publicpublic hearingtookhearing took place on November 1,1,2006 toto addressaddress thisthis issue,issue. n2 Recommendations: •~ Increase system-size limit toto at leastleast 2 MW •~ Remove requirement forfor external disconnectswitchdisconnect switch .~ Purchase NEGattheat the retail rate

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64 The crafting of the net metering programs inin Indianallndliana and Arkansas provides a useful illustration of how the good intentionsintentions of state legislators can go astray during the evolution of policy through the regulatory process.

While our analysisanalysis did not rankrank eithereither Arkansas or IndianaIndiana as havinghaving the worst net metering program, we did findfind thatthat both thethe IndianaIndiana Utility Regulatory Commis- sionsion (IURC) and the Arkansas Public Service Commission (APSC) failedfailed to establish effective net metering programs largelylargely because of undue deference given to utilities during thethe rulemaking process.

In the absence of explicit federalfederal legislationlegislation to guide the development of individualindividual state net metering programs, both thethe IndianaIndiana and thethe Arkansas state legislature delegated thethe task of developing comprehensive net metering rulesrules toto their respective state com-commissions. Both commissions releasedreleased draft proposals of theirtheir net metering rules for public comment. In addition, each held atat least one public hearing during which staffstaff heard commentscomments onon net metering from utilities, individualindividual customers, public interest groupsgroups andand other stakeholders.

Despite the diversity of thethe comments by stakeholdersstakeholders inin both states, key provisionsprovisions of the resulting regulations (effective as of 2006) reflectreflect thethe concerns of regulatedregulated utilities, most of whom proposed modifications toto thethe draft rules that effectively restricted the number of eligible customerscustomers and often unfairly InNn the firstfirSt twotwo yearsyeavs of itsIts program,pvogll'am, limited the economic benefitsbenefits of net metering. Arkansas recordedrecoNllecll exactlyexactlly zerozevo APSC's decision to give utilities net excess generation at thethe end of participating customers. By 2004, month instead of facilitating month-to-month banldng can be each month instead of facilitating month-to-month banldng can be Arkansas andanIIj |ndianaIlndliana couldcoulld not tracedtraced to utility concerns about cross subsidy issues and fearsfears of lost count more than 20 participating revenue.revenue. Similar concernsconcerns by utilities inin Indiana led its commission count, more than 20 partIcIpatIng to adopt very restrictiverestrictive limits on eligible systemsystem sizes and exclude customers between them. many customer classes altogether.altogether.

Utility concerns over lostlost revenue were more effectively allayedallayed thanthan anyoneanyone may have imagined. InIn thethe first two years of its program, Arkansas recordedrecorded exactly zero participating customers. By 2004, Arkansas and Indiana could notnot count more than 20 participating customers between them.them.

65 Despiteoverwhelmingsupport fora netmeteringbtlbill passedunanimouslybythethe IndianaIndiana HouseofRepresentativesinFebruary2004,StateSenatorJamesMerritt, 'ljl .. Chairofthethe IndianaSenate Utilityand RegulatoryAffairsAffair Committee,Commirtee, refusedref'used to consider theissue,issue, _a'" claimingthat it "invaded the provinceoflURC"ofIIJRC" and that the "4 Commissionaloneshouldberesponsible fordevelopingnetmeteringrules. _°

InSeptember2004,theIURCadopted a formalnetmeteringruleforIndiana,Indiana, " "albeitonamoremodestbasis,"basis, thanproposedunderHB 1212orrequested bythespecificstatelegislators)legislators. '"is Unlikethethe billpassedinin theStateHouse, whichwouldhaverequiredthestate'selectricutilitiestomakenetmetering availabletoanycustomer witharenewableenergysystem up to2MWinin size, thenetmeteringprovisionsissuedissued byIURConlyrequirethethe state'sinvestor-ownedinvestor-owned util- itiestomal(emake netmeteringavailable forresidential customersorK-12K-12 schools withsys- temsuptoto 101 0 kW.In addition,IURCIURC requiredrequired eligiblecustomer-generatorstoobtain insuranceinsurance fornetmeteredsystems ofatleastleast $100,000$100,000 and gaveutilitiesthe discretion toto require an additionalexternalshut-off switchinstalled at thecustomer'sexpense.

InIn 2002,longlong beforeissuing itsits net-meteringrules,IURCIURC begancollectinginformation about distributedgenerationthatthat wasto be usedinin thedevelopmentof thestate'sstate' s comprehensive netmeteringrules,rules. lm" IURCIURC issuedarequestrequest forresponsestoalistlist of technicaltechnical questionsassociatedwith initiatinga statewide netmeteringprogram.By Marchof 2002,eightof thestate'sutilitiesaswellastheCitizenActionCoalition (CAC)submittedtheir commentsinin responsetotheIURC'sIURC's request.1_7'" Althoughthe Commissioninitiallyintendedintended forfor the programtoto provideincentivesincentives for individualindividual customerstoinvestinin small-scale renewable generation, _8" thethe languageofof'itsitsfinalrules reflectssubstantially thecommentsmadebythestate's utilities.

Onemainargument madebyIndiana'sutilities involvedinvolved unfoundedclaimsthatnet meteringresults in "thesubsidizationof customerswith net meteringby other customersandby theutility,,'_'"'"l_0" an argumentknownas'cross-subsidization''cross-subsidization' (see pages70-71).In ordertolimit this problem,the utilitiessuggestedthat,that, "netmetering shouldbelimited to asmallgenerator(i.e.(i.e. maximum1010 kWnameplate rating)forprimarily " residentialresidential orsmall commercial application."application. _=i"'

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66 The final rulesrules revealreveal that the utilities were effective at persuading the IURC to limitlimit eligibleeligible system sizes toto 10kW, despite entreaties by Indiana'sllndliana's experience with net the state legislaturelegislature to allow net metering of systems up toto 2 MW. metering reflects how state One IndianaIndiana utility, Richmond Power and Light, argued for restricting regulationsreguIations craftedcrafte(III to protect eligible customer classesclasses because "in the context of industrialindustrial or'or " the economic interestsinterests of one commercial customers,"customers, who may be capable of generating aa substantial amount of theirtheir electricity demand on-site, allowing month-to- sector (electrical{electricall utilities)utillities) may ""' month bankingbanking would be "disastrous and confiscatory:confiscatory. ''122 IndianaIndiana have unintendedunlntentllecll negativeAegatllve con-coA- Technology andand Manufacturing Companies, ITAMCO, with 75 sequences on other sectors (like{llike employees in its 100,000-square-foot100,000-square-foot factory,Factory, "where precision sequences " work requires costly air conditioning,"conditioning, countered that on-site powerpower precision tooltooll manufacturing). generation would reduce operational costs and make thethe company ' more economically competitive.competitive. 123' David Neidig, marketing VP at ITAMCO, explained that the company's interest in participating inin net metering was partly because it "is aa greatgreat way for (ITAMCO) to be more competitive asas an Indiana manufacturer, and at thethe same timetime be environmentally conscious, and be aa good neigh- " ' bor of the community."community. 124' ITMACOITMACO noted that, because a 1.51.5 MW wind turbineturbine would cost the companycompany about $1.5$1.5 million, net metering was "essential toto (ITAMCO's)(ITAMCO's) cost equations" when planning toto investinvest inin the its renewablerenewable energy system. InIn the end, IURC'sIURC's net metering rules excluded commercial and industrialindustrial customers and IndianaIndiana companiescompanies likelike ITAMCO were unable toto benefit fromfrom net metering.

Indiana'sIndiana's experience with net metering reflects howhow state regulationsregulations crafted toto protect the economic interests of one sector (electrical utilities)utilities) may have unintended negative consequences on other sectors (like(like precision tool manufacturing). More importantly, Indiana's experience revealsreveals how,how, inin thethe absenceabsence of explicit statutorystatutory guidance, state public utilityutility commissionscommissions can thwartthwart the intentionintention of legislatorslegislators seekingseeking to more effectively balance thethe economic interests of the state.state.

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In responseto increasingdemand for energy in Arkansas,on April 13, 2001, the state legislatureenacted the Arkansas Renewable Energy Development Act ofoF 2001, which mandated that electric utilities make net metering available toto residential,residential, commercial and agricultural customers. 12s' ' The legislaturelegislature intendedintended the program to increaseincrease thethe use of renewable energy sources, decrease the useuse of foreignforeign fossilfossil fuels and encourageencourage customers to investinvest in renewable energy technology. 126" Eligible technologiestechnologies under thethe Act included solar,solar, wind, hydroelectric, geothermal, andand biomass systems with generatinggenerating capacitiescapacities up to 25kW for residentialresidential

I'iietrihutv&I 1.22132 IndiarlapolisIn&fit&&anni&op»!&vce&P0w(_" _zSt!&!eye(lee&elilift&i(i&t!&&perryi_.il_(_oH)_l!w [:!(!()23(t!)«3 C;i)ii_[ilf_iil£Cri i!ti!etileuit&l;_lffAttal;hAaicltrtmrti.ii_ llstoIuA!Ivurtei'&IA( var I-iRuuoe'4ot '.3 oor r»run&!i!eiilitulernakiltgor&_ro_3I _ t d Ru .-"laa .:ig o _ Di._;tributed 'k!v ht &if R..'!s.nlilcesRelent&re&!e I[]RCIilRC; Feb]5,2002;cali. I'k p()C&') PI' 33 ii IIlp vr'aiv:,'/"',_;x_/_' }tn _{oJAc!",_iurrru / & _tiktic::i_es'ec;iRv'ch'+:'_rw'v&erevktivi' it&!IeeKi.q× Yl _!¢ess_.d._la! c c'see&i!iti A_gl,A&it&i')i 13I() 20063A!)6

l'it& 3&II t»enelit ill-»r. &Ie po":or &venr re!»is So iih Brniu ir ht no (lndt- !231«3 DeAp...onstino,()eAZotistino, MaIvla I n [200,! ii) Conlp_my('ompru&y Ioot,:sInr»intr»to windv inci lotIor savings:eavtnas; [_ii bel elils snlalI-scaIeem power p,enelato_s Soulh Bend Ir_blin_ (h!diana}enal hlo:tua,Moudm, Marshalllvla ai!all Edit[o_!f:uitioi! Feb.'eh ;6I" PIv C]ei

12,'112'I il)idiht!I

125I'i!; Av,elyAvery Ch_!]«h!ri I20fi2tSul;ev_,ffl,e_isl:_ti!m&3&)nit . _ !inri 290!." t'()I glkai_sas(',.enera!Assen_blyA&karen!e(lie&era! Aesv& itpy R,*'!Sl_ialedRe&i &etc!I&i!riuh_dustri,qstrois 24«1liU ANik Ii li,tle[,_{x',kII!ref&&!!kl R!,_I'eii!i._'__,_ih 600i&!n)

]26) 3(») Jh,,.}lim g_t{_lns.}sA&kin&et&a Ren_';wabff!i'»cetovrnhk', [Ene_;ysr&&i&i(y()cv».De,,,eiocipn!&in&)ment ActA&1 o[ol 200131!ii Ark/»ri! Code&I'cni Ann §ss 23«'3 18ia GO2(a)('»ii"(ri!

67 customers and 100kW100k& for commercialcommercial and agricultural customers. However, although thethe statutestatute makes net metering available forFor severalseveral technologiestechnologies and multiple customer classes,classes, it does notnot establish thethe rates, terms or conditions forfor net metering contracts. Instead,Instead, the legislature allocated this tasktask to thethe Arkansas Public Service Commission (APSC). As inin Indiana, utility influenceinfluence over thethe finalfinal design of the Arkansas' net metering regulations effectively undermined As in Indiana, ufiUity influence the legislature'slegislature's intentions by creatingcreating economic disincentives forfor over3l7QI' the(hQ finaU$)pp) designfIjp&Igp ofOf Arkansas'sApkp+S@s p investments inin renewable energyenergy systems.

e II ('&' 0 netAfE'. ( meteringmCtfE'. I'IIAg regulationsVfLgUIIRIIIOllS effedive[yCmfCd'jVfL~Q InsteadInstead of allowing a net metered customer toto bank net excessexcess undermined the legislature's)@gag(gfoyp~g in-jp- generation each month, Arkansas's net metering rules grant all excess the at the end of an bill- tentions by creating economic excess generation to the utility at the end of an applicable bill- period. The limitation on banking in the final rule reflects the disincentives for investments in inging period. The limitation on banldng in the final rule reflects the suggestions of thethe regulated utilities and indicates that APSC staff renewableileneWalblle energyeneVgy systems.SyStemS. was more deferential toto utility comments thanthan toto thethe public's interestinterest in expanding the use of renewable technologies.

Initially,Initially, APSC prepared two versions of draft net metering rules,rules, thethe firstfirst draft on December 7, 2001 and a revised draft on February 20, 2002. APSCAP SC received comments submittedsubmitted in responseresponse toto each draft and held a public hearing toto gather additional information on net metering. Despite thethe strong support forfor allowingallowing month-to-month banking by Arkansas's Attorney General and individualindividual utility customers,customers, thethe Commis- sion adoptedadopted thethe position of thethe utilities, holding that net excess generation shouldshould be '-"' donated to the utility at the end of every monthly billing cycle)cycle. 27

The APSC supported itsits decision byby parroting thethe argumentsarguments submittedsubmitted by regulatedregulated utilities. First, thethe utilitiesutilities argued thatthat allowing month-to-month banking would enable thethe customer-generator toto "become"become a quasi-power suppliersupplier to the electric utility as "' s opposed to offsetting customer'scustomer's requirements for electricity. "_28This argument rests on a definition without a distinction. Customer-generators that are offsetting generation fromfrom the utility are necessarily supplying that generation to themselves.themselves. Monthly bank- inging does not directly compensate aa netnet metered customer for electricityelectricity generation. It merely credits the same customer toto offset futurefuture demand so that self-generating cus-customers are not artificially beholden to the monthly billing cycles of regulated utilities. If offsetting demand makes sense as a matter of publicpublic policy, thenthen so does monthly banlung, especially as banking allows excess generation from j:s monthly banking, especially as banking allows excess generation from one customer toto be used toto meet another customer'scustomers demand.

Second, Arkansas utilities claimed thatthat banking would over-compensate the customer-generator, sincesince NEG would be creditedcredited atat thethe retail price of electricity, which includesincludes costscosts associated with transmission,transmission, distri- 129 bution and administration. " Electricity generated andand consumed by the customer always offsets electricity supplied by thethe utility at the retailretail rate, regardless of whether thethe electricity isis consumed this month or next. Monthly bankingbanldng allows excessexcess generation produced thisthis month

' t;'. &I! li It It(&!&rrr.„'Prt!I&r I3n&I, 'I Iio ]_!I?7 ArkP.Ib:i_!_.', ;..tt;, , PBI;4k:i't I ft:. St.S,_R,";Ic;. ice Corllli_issiI!¢l(, r t to;iInrr, (_(I0'it(r."_}", IIrrri lhlit.,_['_4aI;., b?rrr;I:,q _i Cliff&'cn:ric,! rk: Procee(ihPntot' in„:!&g to EFclnl_k_ :_ _I Nli&!_ ii 9,',_ri !_, R i n, DO{ ket [',Io n20?;irlrir} i iS R (_d_31;I::.Ior k..'oI'to 33 APSe(tf'St, }urle3It.:boa P 5.'-: YI

', 1.28I.'9 I: lrnrl,_ WWIV"'!I I)()(C (nit"} in ieVltie,:; Ma!&rt( r ofIf t!'otro(e ic I'ro(;n&lirtr,;0{:(;{! g 'Inf':t::Z_ rl!I:;.S'Ir NItnt ,_;ltnt&tritrr;(12{i«rior.esi(;, it&&:",ket['{_if&&&!Sn (20.]6[a,(I !Pirl I!,II!}tial(;orlff_l(ilib3o_Ir I!inl(orr'nr, ;rnw oi

Ani,zTdC:!ll{:h_!(ttioit&la:irnttr t I,:&!ti.P{,_wel,Incwr'r, llicltr; Stylisnt ilw&:.v,';_ 'ItntnFI.n l_{ & lric!'&rt[i{ );'<<'!_Cori r corttp&rt,pray Ai'SC"I's(, fi,ntttiit)iil2,2002. ~orr2 p.+_it 3 t 12_) t_wrl& " _ _'I&e _] ( _ SS ( r { }2 n &lr&t v ' a (3&!&!.[;e '"irr( Pr&to; ( _{ lo['7 _sl I'i&I'_:!1 [',.4(d,:,Intr I'rtrtf'I_t_:!Itttir-',o'S ftncin!!r'okOleLNo 02-(M(;-'!I fin incor! I rrl!I o rt et ( titttttn'. cion I?&3rt?) tn iiotl&tr nf n torltrtp lo!ntr!I!I:;:I: ("I(:- R,It, ',%iei('ni&. r!'i&rb_o 3.'I APSC",IPS(; .IIr!:ttt:ti le :] FtP I],7rr,

68 toto offset the samesame ldndlund ofof'electricityelectricity consumed thethe next. Ifthethe electricity isis nono different,different, why shouldshould thethe price of the offset change?change? As well, thethe excessexcess generationgeneration not creditedcredited toto thethe customer in one month isis consumed by the grid and sold toto other customers at the retailretail raterrate. By profiting from the excess electricity produced byby customer-generators,customer-generators, are not utilities being 'overcompensated''overcompensated' forfor electricity they did not produce?

wr...... Finally, utilitiesutilities argued that banking would provide more benefits to thethe customers alreadyalready participating inin net metering rather than States thatthat allowalllow monthlymonthlly encouraging more customers toto participate. By this logic,logic, thethe banking of net excess generationgenellation entire netnet metering programprogram shouldshould be rejected asas merely providing lian'gem" economic compensation for customers with existing renewable (NFG)I'NEG) experience larger andandi energy systems°systems. Since the ability to bank net excess generationgeneration fasterfasten" growthgll"owth inIA participationpavtlIcllpatlloA decreases the payback timetime for renewablerenewable energy installations,installations, it than states that disallowdliisalllow it.ilt. provides as much of an economiceconomic incentive to invest inin new renewable systems as the inherentinherent ability ofof'anyany net metering programprogram doesdoes by FourIFoUI' outoot of five of thethe states that offsetting customer utility bills inin any given month. experiencedexpeli" ience(III the greatestgm'eatest growthgm'owth More importantly,importantly, thethe argument thatthat monthly banking does not in netAet meteringIetem"IIAg participationpal'tmcllpa. tlloA encourage greater rates of participation isis contradicted by empirical by fromft"OAl 2002-2004200220 -2004 allowallllow month-to data. Our!Our analysis of participation ratesrates in state net metering programs fromfrom 2002-2004 findsfinds that statesstates thatthat allow monthly -month"Alonth bankingba nking of NEG. bankingbanldng of NEG experience largerlarger and fasterfaster growth inin participation ...... thanthan states that disallow it. Four out of five of thethe states that experienced thethe greatest growthgrowth in net metering participation fromfrom 2002-2004 allowallow month-to-month banking ofNEG)of NEG '303°

In Arkansas, APSC's decision toto preventprevent monthly banking of NEG increasedincreased thethe ' ' pay-back period for individual net metered systems significantly. TM Consequently, the longer pay-backpay-back periods effectively discouraged customer investmentinvestment inin renewable ' technology and impeded thethe expansion of renewable energy sources. 132 Although the state's Attorney General and three individual electric customers raisedraised many of the points we raiseraise here, APSC maintained thatthat no evidence suggested thatthat allowing customers toto bank excessexcess generation would encourage more customers to investinvest inin renewablerenewable technology.

APSC furtherf'urther limited customer participation inin net metering by agreeingagreeing with utility suggestionssuggestions thatthat thethe rules should limitlimit the sizesize of eligible net metered systemsystem so asas not toto "exacerbate" cross-subsidization issues. 133'

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69 tilities argue that net metered. utility mnnnpolymonopoly is the resultresult ofnf policy tilities argue that net metered U customersrustomers continuerontinue totn benefit made ostensibly toto promotepromore thethe public fiomfronl transmissiontransmission lineslines andand other good, policymalcustomer- the meterineter runsruns backward.barkward. It is onlynnly generatorsgcneratnrs based ollon retailreiail rates,rates, they vwhenhen thet:he meter runs backwardbaclcward thatthat may effectivelycffectiv ly avoida oid some of thesethese the utility isis crediting thethe customer fixed costs (e.g.(e.g. fixed T&DTRD costs), folfoi net excess generatiolrgeneral:ion contributedrontributed althoughalthough they continue to benefitbenefit fiomfiom to thethe grid. Until then,then, throetheie is nono themthem (e.g.(e.g. standbystanclby service). Second, moremnre cross-subsidycross-subsidy inherent inin tilethe power productionprodurxion from customer-customer- arrangeme,rtarrangement thanthan the_eihere would be when generatorsgenerarors that isis credited by thethe utilityutility aa. utility customer,customer, forfor example, installsinstalls may coincidecoincide with periodsperiods of the day an enerenergyD, efficient air'air conditioner. NotNoi oror },earyear when powerpower isis less valuable (e.g.(e.g. demaaldingdemanding asas muchinuch electricityelerxriciiy fromfiom diethe summersummer days), yet customer-generators grid isis not diethe samesame thingthing asas requiring thethe may consumeconsuine utility powerpnwcr at zero utility toto creditcredit excessexcess electricityelectriciry at diethe netllci' costcost duringdiiililg periodsperiods when powerpowcl" isIs retailretail rate. It is simply demanding less. more valuable. Finally, net metering programs mayinay entailentail additional costscosts EvenEven whenwhcll netnci meteredIllcici ccl cilsioillcfscustomms areare generatinggenerating excess electricity,clcctricity, therethei'e that are recovered from all ratepayers,"' not justjust program participants. ''134 isis little justificationjustification for limitinglimiting netnct metering111CI'CI'Iilg in111 someSonlC eludeCi IICIC attemptattCIllpt to10 \VhileWhile couched inin a levellcvcl of economiccronomic spreadspread thethc fixed costs of transmission sophistication,sophisticatinn, the cross-subsidization and distribiitiondistribution equitably among argumentargument isis a contortion of logic ratepayers.ratcpaycrs. To begin with, many borderingbordering on tilethc absurd. ItIt isis aldnakin toto utilitiesutilitics already'unbundle' fixedlixed costsrosts byby a_guingaiguing that customersriistomcrs who use lessless charging anan initialinitial connection l-_efcc and/and/ electricity,clcrtricity, and thus pay less,less, shouldshould orOi delineatingdCliilCaiiilg separateSCpaiatC transmissionI'railSilliSSIOII have toto pay a monthly feefcc to make upup and distribution charges onon a customer'scustomer' s tilethe difference.diffeicnrc. Otherwise,Othcnvise, therhe utility bill. Under thesethcsc circumstances, thethe will increaseincrease costs for thethc customersrustomcrs fixedfixe transmission, distributiondistribution and whov ho useusc moremorc electricitl:clcrtricity. administrationadminisrration costs associated with managing thethc grid arearc not subsumedsubsumed Whatever merit exists toto the cross-cioss- by thethc retailretail rate ofnf' electricity andand subsidization argument stems entirelyentirely tht,thuss thethc cross-subsidization argument fromfrom the factfact that utilities enjoyenjoy aa is not a justificationjustification forfor denying netnci' monopoly on the transmission andand meteledmetered customers thethc fullfull credit forlor distribution systems that allall customer-_custclmer- the electricity theythey generate.gencrarc. generators are required to use. Utilities do not enjoy a monopoly on Cross-subsidization(.,ross-subsidization alreadyalready occursoccurs asas transmission by divine right. SinceSinre a resultresult of fixingfixing transmission costs inin = I', i. 13dI;:~i P._Ilf_.AI_d_!r,_eFfur f!n Ar.:rfrr, ur (t99g,r I,!rir!)b(i l'._,, nrI_F'_;,-r_tfn::, r;r!HHunrun_ the first place. Presumably,1'resumably, customers

& '' [k_vi,:$frni I 5:_lzukiSu!us!IF(H!_KI_H}Oh:urnrrfufi )r:QU.;_Wa"rilur'u (t)I!) VHIVill _ hRp:lrnf . z_ benefit fromfrom the tiansmissiontransmission grid inin v'.'_*,_n, r, if;nrrinirruiu_, Z k_ ur;&,[' frfi'I':"'l:£!l]l)'if'(:Iunn I!:If ways not reflected by theirtheir electricityelectririty

7O billbill. ItIt costs,nuchmuch more to transmit generation froml'rotn net meteredInetered systems electricityelectricity to some areas thanthan others. and charging otherother customers thethe fulllull Customers who consume electricity price_price. Talk about cross-subsidization!cross-subsidizarion! closeclose toto where itit isis generated subsidizesubsidize Without paying t:0rfor artyany additional the transmission of electricityelecuicity toto infiastructureinfrastructure investment,investinent, the utilib,utility customers who residereside farfar from power isIs simplyslnlply commandeeringconllnanrlccl'Ing thethc enerenergyD, plants. Retail prices dodo not ret]ectreHert thethe generatedgcncr'atcd. by netncl metered111cl'cled customers,custon1cIs, unequal costs of u'ansmissionuansmission lines and selling it toto non-net metered customerscustomers load losses. Instead,Instead, _dlall customerscust'omers areare and pocketing thethe profit.profit. charged as ifif theythey contributedconrributed equally toto transmission expe,ases.expenses. Even today,today, qqaeThe finalfinal component of thethe cross- transmissiontranslllission systemsvstcII1 controllerscontlollcl's must111ust subsidizationsubsidization argument raises tirethe use brownouts and rolling blackoutsblaclrouts specterspecter of unspecifiedunspecihed "additional"additional costs"costs" rather themthan electricityelectr'icity price toto manageInanage associated with net metering thatthat mustn1ust' demand in excessexcess of capacitycapacity'aa_.. These be recovered fromfiom all customers,customers, not just crudecrude toolstools requirerequire somesome ratepayers toro participants. One can only speculate subsidize electrical retiabilitreliabilityT for others. whatwhar these feeslees may entail, ifif not thethe samesame And yet utilities remain largely silentsilenr. fixed costs we have already dealt with about these inherent inequitiesinequities until above. Some possibilities (application{application thethe issueissue of net metering isis raised. processing fees,fees, interconnectioninterconnection safet3;safety, insuranceinsurance and indemnification)indemnifiration) simply "lqae11&e second component of therhe cross- constitute biddenhidden participationpal ticipation feesfees subsidizationsubsidizarion argument (that{that crediting tbatthat we have already demonstrated excess generation rewardsrewai ds off-peak areare unnecessar):unnecessary. Whatever nominal generation at on-peakon-peak prices) is even costscosts result fromfrom interconnecting net more preposterous. Multiple empirical metered systems areare farfar overwhelmedovenvhclmed studies demonstrate thatthat renewablerenewable byby tirethe benefitsbenefits net metering bringsblings toto energy DG systemssysrems (particularly{particularly solar electricityelectricity reliabilit3;reliability, national securitysecurity PV systems) generate excessexcess electricityelectricity andand the environment,environment. tar ' during peak demand periods)periods. a6 Rather thanthan net metered customerscustomers claiming credit for excess electricity when itit isis "cheap" and applyingapplying the creditcredit when electricityelectricity isis "expensive", inin practice the opposite has been thethe case. By providing excess electricityelecn. iciry toto thethe gridgrid during periods of peak demand, tbethe net metered customer not onlyonly is helping the resource-constrained utility meet itsits demand, but is oEsettingoffsetting thethe most expensiveexpensive typet)7C of electricity, that provided byby pricey "peaking facilities" thatthat comecome online only when basebase loadsloads are exceeded. What's more, if the utilityutility failsfails toto creditrredit excess generation atat the retail price of electdcit3;electricity, the utilityuriliry will simplysimply be taldngtalring therhe excess

:", 13!5 _ fa¢,_ gr_eak_,l_l::)»::n/_rdemahd), .»Bt, thel'4ewi)Ia', vi::; YorkYork fJWr,'ny ii_ay0r'siiiaynks 0ffic,_ofrtc: requir,adrt-rt!)Inrti le_geI:rtae 0pe_ali0H_.opt«attn:ta ,9to use'taetltheirair _vrl]e_alolgS))i orators i)li)i olderntri-rtoto ielievetol e'ia s_,.slgn]islet« gtre_s; trees tCald;,_ell,to'ii'. Ir eli, l)ial_eIdion!) al,triiiii taIatttt,lie's,, _,_,atenl_'I !,10)rttiisi36) gity._city s.Sha_egy")i)a e,".". HelpedIieli)e I Avertyi!=rt Widwrwtd, )r [:aslI as& SlOestile Pro,eelnn. ;et t:ailmeI aikne kie.New , ¥1)rl;iilr_e.sYnrirl'Itnas Aug{Is[rtcpitd 155;) (' Br' 13613 . Nakarado,i iakafriil, Garyiiri) Li. (200f_)I ')Boll) Ofttf Red i Ik:_rmg,I In)i)i'IB $t_o,_'St«ltv ' ' ' " 't ' l i'. ) N_n,I I:ik,andnd {heih . U#jlyUxl; Ducldin[{tt t:cktktB Grov<.:ISroin iJJPl) Pr(-_<,r_tcdPrr::nr ti d i37i :I S, i,va::a),:_o"r) &4 r;ol)pi,o o p u.l (:._(II ". ( I 'k' ,_ I :ao_;I,i:,k:i: [deansiii )in , 13o'?r, n : T:tI,.;i i) atai PiJRFWsPtlBIIVs r.;e;tIlol Moteril,ghlolttrnts St:_m_ar,i:Sl in)ter I: NetI!t;Berne;B:;icfttit orin C[]_'oCcrc io[tiir ari_iriA(l_iq{:_}!_i)der).:toed H'qIi)i)ion«ii011_I[._:]I}{]_*i[!ceo,)a'Bioi i_}[301[Poi tir:::,( if.r) ' NotNo:: Delrim,:mt,D. trim r I, EdgonBdtsott ElertrkLicit.r.:r, Instlti,qgIri litt;) tc:[-[0tq_r!-I n«, r S[_mduI(iSic)i'kiid i:l_;t;tdci!y.lo!_Inn!)Stt-I ..Icpt, nn Ji_r_e!one '.','2.".I ". b_:!lI.iir !rpppp I!«;)z;19-32i

71 IfIf thethe cross-subsidizationcross-subsidization argument were true,true, it would justifyjustify rejecting the entire net metering program, ratherrather thanthan limiting system sizes with an artificial (and ineffective)ineffective) "mitigation" of the problem. Limiting the size of eligible systemssystems does not address the problems raisedraised by cross-subsidization. Even with stringentstringent sizesize limits,limits, non-participating customerscustomers would, in theory, stillstill be subsidizing a largelarge number of smallsmall systemssystems instead ofof'aa smallsmall number of largelarge systems. The sizesize of eligibleeligible systems has little relationrelation toto thethe total amountamount of net metered energy that would be "cross-subsidized".

Presumably, by voting toto establish aa net metering The lacklusterllackllustev participation ratesvates inin program at all, the Arkansas legislature already rejected the Arkansas providleprovide a goodgoodl example of cross-subsidization argumentsarguments raised by regulated utilitiesutilities during rulemaldng. Howevel,However, thethe APSC used cross-sub-cross-sub- how restrictions inin one areaavea (eligible(elligiblle sidization as a justification forfor substantialsubstantial limitslimits toto eligible system sizes), adoptedadloptedl inin an attempt systemsystem sizes and ended up adopting aa cure worse thanthan thethe to 'balance''Ibalance' customer interestsinterests with disease.disease. With only two residentialresidential customers andand one commercialcommercial customer participating in net metering inin thethe interestsintevests of the regulatedvegullatedl corn-com- Arkansas as of 2004, the results of AtkansasArkansas program speak munity, may have the unintendedunintendedl for themselves. By giving deference toto ill-conceivedill-conceived utility arguments, APSC crafted final net metering rules that consequence of destroyingdlestroyiing the arguments, APSC crafted final net metering rules that consequence of effectively undermined the intentionintention of thethe state entire program. legislature and did little to encourage thethe use of renewable energy technologiestechnologies in Arkansas.

72 ii?i ¸ IC iiii!ii _!ii_iiiiii_I_iliill!ii_:iii{_I_I!II!i!...... %1 _!:i!!}!iiTi?[_ y_;_i!_i_...... _ii_i_,: _...... i__ N EW j ERSEY

inIn the quiet New Jerseyjersey hamlet of Verona, ProutP&rout Funeral HomeHorne Ibecamebecame the first funeral home in the northeast to install and operate a solar system that not only willwilli power thethe entire operation, but will turn a profit.profit

hehe Prout story isis thethe result of a unique combination of an enterprising moldcianmortician and Tthethe landmarklandmark restructuring of its net metering program in 2004. Since 2004, New Jersey's incentives forFor small-sc_ilesmall-scMe renewable energy;energy, especiallyespecially itsits generous net metering program, have been widely considered thethe best in thethe countrycountry and our analysis of 34 statewide net metering programs confirms that New Jersey's program is the most effective. 139'14°"' net metering programs New program the most .?

Two simplesimple metrics quickly confirm the success of New Jersey's approach: First, thethe number ofof' net metered customers after thethe program was implemented; and second, the cumulative potential capacity of the small-scale renewable energy systems installed since the program was initiated.initiated. By both of thesethese measures, New Jersey has instituted a comprehensive program thatthat other states would be wise toto emulate. / Early resultsresults indicateindicate thatthat New Jersey is experiencing a tremendous raterate of growth inin both customer participation and the cumulative capacity ofof' installedinstalled renewable en-energy systems)systems. "'41 InIn 2004, thethe first year under New Jersey's restructuredrestructured net metering program, thethe number of net metering customers in the statesstates increased from zero toto ( more than .300.300.la2" ' Since then, thethe number of solar panels in New Jersey has increased .._d. more thanthan fivefold to 1,665.1431,665."'

The rapid growth in customer participation can be traced toto thethe process by which New JerseyJersey restructuredrestructured itsits program. By testingtesting proposed changeschanges againstagainst objective research and a clearly defined goal, New JerseyJersey was able to craft net metering regulations that avoided thethe pitfalls bedeviling many other statestate programs.

New Jersey first adopted a net metering program in 1999. However, in 2004, New Jersey'sJersey's Board of Public Utilities (BPU)(BPUl ordered amendments which strengthened the program significantly. 144""Without doubt, thethe strength of New Jersey's newnew program is due largely toto how itit originated asas part of a comprehensive strategy, includingincluding generous rebatesrebates and taxtax incentives,incentives, to expandexpand renewablerenewable energyenergy statewide.

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73 ,I ._.,r 3

Although New Jersey already hadhad demonstrateddemonstrated a strong commitment to clean energy, in 2003200.3 Governor JamesJames McGreevey createdcreated a Renewable Energy Task Force chargedcharged with making recommendations on how the state could increaseincrease itsits consumption of renewable energy. 14s'" The Task Force concluded that the state should double its require-requirements for renewable energyenergy production by 2008, and also recommended a statewide goal of producingproducing 20% of its energy from renewable sources by 2020.1462020." Although the Task Force did not specificallyspecifically recommend aa new net metering law,law, thethe recommendationsrecommendations laidlaid the foundation forfor significant amendmentsamendments to the state'sstate's existingexisting program.

The Board of Public Utilities (BPU)(BPUl was charged with implementing thethe recommendations of thethe Governor's Task Force. Although the Task Force had recommended a substantialsubstantial increaseincrease in renewable energy generation, particularly solar, itit had not specified exactly how toto accomplish thethe increase. BPU's President, Jeanne Fox, who had also served as Task Force's chairwoman,chairwoman, felt that a strong net metering law was necessary to meet thethe Task Force goal of 20% renewable production by 2020.14r2020."' Fox believed that itit was necessary to enable customers toto purchasepurchase andand installinstall larger systemssystems than the state's previous net metering legislationlegislation if the statestate was to meet its renewablerenewable energy production goals. At Fox's recommendation,recommendation, in 2004 the New Jersey legislaturelegislature adopted a systemsystem size limit forfor net metered systemssystems of 2 MW, the largest systems eligibleeligible '" underunder any existingexisting net metering program in the nation. 148

<2,

Unlike many other states, New JerseyJersey did not begin the process of amending its net metering regulations by tryingtrying to establishestablish a consensusconsensus position with all stakeholders. A powerful Renewable Energy Task Force led by thethe President of the state'sstate's utility commission resulted in an approach toto net metering lawlaw that kept as its focusfocus the goal of allowingallowing small-scale renewable energy toto compete equallyequally with conventionalconventional power.

According toto drafters of the legislation,legislation, New JerseyJersey began the process of amending thethe state'sstate's net metering statute byby trying to determine what would attract the distributed generation (DG) industryindustry toto thethe state.state. Drafters solicited thethe inputinput of utilityutility companies, but only adopted the recommended changes when they did not compromise the primary goal ofof'expandingexpanding the state's DG market. Changes that would have impededimpeded the development of statewide DG industryindustry generally were overruled.

For example, New Jersey'sJersey's statue allowsallows only residentialresidential or "small"small commercial customers" toto participate inin thethe state's net metering program. The precise definition of small commercial customers was critical to determining who would be eligible. A narrow definition would excludeexclude customer classesclasses that couldcould provide more generation for meeting the

t14945 Renew,,-_bir..'Rene;(rib(re Enelg7Lnetg; fasl',_:orc¢f isl', F'urer; (2003)(20(! 1? the!hr; P,Reneen(L(lieel_ewabie t!ner_D,I!or:rg; ]askI isi:.ForceI ore(( ReportI'(epo(1,Submittedubmitter?::oio GovemolGr.'eront Jameslames rvl1-1 McGleeve,¢_frlcGrer(, , Aprillipril 24 hhttpp,p ,.'www";:",:(', sstalea e n._ .LIS/_'.(srbpurreportpO/ego S/_enE(Rentitargyii:Rlergyll:P, pclp(lf

1,_'16I!Ai N{._Wff(('r!ern'FJersey 13(l_riJBo irb (ifnf F'tI''tibltcil Ll(tli(iesI t tie ?2003)( Airs!!Mct:;Ic(neerel}eev{. y P,,_'c',,7Rerrryesi s I'oner7o _ew._itilrite EnergyFn",!Bi!anl]a_ _ For_I:rc:e DR tl _(,rtrt Septe_iS:!t(ntb(r!-;b{_t 5 tItttpu!'r!'r(':,ttp:/,v.,v,,,;>, state't ne rijni tlsi(ts, b_}l)lJ/{erlewEnersyiPt)(he tn('rl nr. "gy(iran!, f{Ji_[li('r_v((e gu Slltlt_i.!itrni ll' ]z]I' }' [J_:wff(ea I!!l.*;,qylersn? ]:{e_iJl_lio_;Ri gulnliort [_!×.',I;;"1 12()03'}(2!Y!!!NJA_';!IJR(:t,4:,1I"; 1 99 i.1 9(t;,2, . 9;,9 ;:;, 0r? 4(I thoutltru!?g l1:;} Proposedloop(su(J [£uh.Rule_ Di) '.!:m't:lnbil er()1_'r O1 20032A(?. BoardRior in!o Pub,Ru! lielip (JliiilicsJlilili :,_, BPLJBpt! Dock_.-t!)o(l,:(i!un(INunlb,-'!Ier!t:×X 03100Aalt)br!!Bg95

1I,_iF!_". IbidIlti(l

74 state's goal. A broader definition would allow more potential customers to participate. The bill's drafters reviewed the programs in other statesstates and decided on a definition of "small"small commercial customer" as non-residential customers with less than 10MW1 OMW of pealcpeak demand -—a definition that was supported by the solar industry.industry. The utilities,utilities, however, strenuously objected to thisthis definition, andand proposed aa much smaller limit of 150kW2491 50kW. 149 Had thethe utilities' definition been adopted, itit would have greatly reduced thethe number of commercialcommercial customers eligible forfor New Jersey'sJersey's net metering program and would have artificially excluded largerlarger generators. InIn the end, New Jersey's drafters rejectedrejected thethe utility recommendations andand adopted a final rule thatthat allowed systems up toto 2MW in size toto qualify as small commercial customers)customers. "_°

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New Jersey'sJersey's amendment of itsits net metering program coincided with anan aggressiveaggressive expansion of the state's Renewable Portfolio Standard (RPS). RPS are laws that require utilities to produce a certaincertain percentage of theirtheir power from renewablerenewable resources. New Jersey, which has hadhad an RPS law sincesince 1999,1 999, made changes inin 2004, which requiredrequired each utility servingserving retailretail customers to include 22.5%22.5% renewablerenewable energyenergy inin its electricity ' mix by 2021._202 1 .

Electricity suppliers were allowedallowed to meet RPS requirements by By tnkingllinking net metering to thetlhe investinginvesting inin theirtheir own renewable energyenergy generation or by purchasing state's RPSR PS mandates,m andi ates, New renewablerenewable energy certificates (RECs). RECs are credited toto renew- _ersey createdCI'cater anaA economicccoAornllc able generators and represent thethe monetary value attachedattached toto thethe jcrsc'y renewablerenewable nature ofof'thethe electricityelectricity theythey generate. New Jersey'sJersey's RPS incentive for regulatedregulatedl utilities toto statute issuesissues RECs for renewable energyenergy generated by customer- pursuepull'sue aggrcsslvcaggressive expansioncxpaAslon of generators. However, New Jersey went a stepstep furtherfurther by allowing the state's net meteringrnctcrllAg program. regulatedregulated utilities to apply RECs fromfrom customer-generators towardtoward thc state s Act program theirtheir RPS mandates only ifif those customers were alsoalso eligibleeligible for FveryEvery new netn et meteringrn ete r in g customer net metering. By linking net metering toto thethe state'sstate's RPS mandates, By became a potential new source New Jersey created an economic incentiveincentive for regulated utilities toto pursue aggressiveaggressive expansion of thethe state'sstate's net metering program. of renewablerenewalblle energy to helphellp the Every new net metering customercustomer became a potential newnew sourcesource of utilityutillity meet its RPS requirements,requirements. renewable energyenergy to help thethe utilityutility meet its RPS requirements.requirements. t ' 'r r '" r'zrgnr' t @!, "~/u", /Ap ~g, , Eyr) I ~"faut 41' i "/'urn r

New JerseyJersey treated itsits net metering program as part of a broad package of incentivesincentives designed toto encourage thethe adoption of renewable energy. 1_2' Recognizing that net metering alonealone isis not sufficient to offset thethe high initial costs associated with on- site renewable energyenergy generation, New JerseyJersey adopted a variety of rebate andand taxtax reimbursementsreimbursements toto reduce capital costs even further.further.

InIn addition to taxtax incentives,incentives, New Jersey collected a "Societal Benefits Charge" onon allall public utility customers and adopted aa broad-based rebate program that pays renewable generators a premium on each kilowatt of electricity generated by small solar, wind t49t4t IbidItu:-: '! ]IBA5'.1 fqewI!n;. li)r,<;e}yI truu, P,I!Bttlu!!urteglA_}iion Texlitri [,.'.!ACI !'f;]4:zlI!Al 9 ],I 9 ';r 99 3h 9

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75 and sustainable biomass generators. The rebate isis scaled to provide greater payment for initial kilowatts and less as generation increases.increases. By making the rebaterebate progressive in this way, New JerseyJersey tiltedtilted thethe economic incentive toto favor aa larger number of small generators.

Rather thanthan instituteinstitute a number of individualindividual state subsidies, New Jersey linkedlinked taxtax incentives, progressive rebates and a broad-based net metering program toto create market-based inducementsinducements for investmentinvestment inin small-scale renewable energy.energy.

r «*

InIn addition toto generous system size limits, New Jersey'sJersey's net metering program includesincludes specific components thatthat help expandexpand both thethe number of participating customer'scustomers andand thethe total amount of renewable capacity that isis eligible.

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A hallmark of New Jersey'sJersey's net metering programprogram is its streamlined and transparenttransparent application process. New Jersey designed its application regulationsregulations both toto overcome customer concerns about thethe complexity of the process and to minimize the extent to which utilities may delay applications. Prior toto New Jersey amendingamending itsits program, the U.S.U.S.Depart- ment of Energy released research indicating thatthat customers who encountered major delays ' in application processing ultimately were discouraged from participating in net metering,metering. ls3' To address this issue,issue, the drafters of New Jersey'sJersey's statutestatute proposed a rule requiringrequiring utilities toto respond promptly toto customer applications. If aa utility does not approve or deny a standard residentialresidential customer's application within 20 days of having received the application, thethe rule considered the application approved automatically=automatically. 154""Not surprisingly, utilities objected to ' thisthis proposal and requestedrequested a longer timetime period to review applications)applications. 5s Ultimately,Ultimately; New Jersey'sJersey's lawmal{erslawmakers rejected an extended reviewreview period and adopted thethe 20-day rule.rule.

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Interconnection standardsstandards govern the manner inin which customers canran connect toto the powerpower grid. Effective net metering legislationlegislation is only possible ifif thethe interconnectioninterconnection standards enable customer-generators to connect to the gridgrid with minimum difficulty. The New JerseyJersey BPUfur(understood thethe importanceimportance of interconnection standards to net metering andand adopted model standards developeddeveloped by the Interstate Renewable Energy Commission (IREC) and National Association of Regulatory Commissioners (NARUC). Is6' New Jersey's standards allow all DG technologies to interconnect, do not require the customercustomer toto purchase additional insurance and impose aa minimal applicationapplication feefee (which isis waived altogetheraltogether in certain cases))cases). 'sr'

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When New JerseyJersey was establishing its net metering lawlaw in 2004, drafters recognizedrecognized thatthat many utilities were using safetysafety concerns toto require customers toto install external disconnect switches thatthat couldcould be accessedaccessed easily by utility company workers. New Jersey's lawmakers suspected that the external disconnect switch might be redundant with safety mechanisms inherent inin all certified inverters and fearedfeared that thethe requirementrequirement was acting as a disincentive toto customers who wanted to installinstall renewable energyenergy systems.systems.

With aa grant from thethe nationwidenationwide Million Solar Roofs campaign,campaign, the New Jersey PublicPublic Utilities Commission contractedcontracted with Chris Cook,Coolt, TheTlhe externalexternaI switch requirement an expertexpert in interconnection standards, toto investigate the issue)issue. "s9 Cook may even beIbe harmfulharrnfull to workers thoroughly researched external disconnect switches and foundfound that may even to workers the switches were rarely, if ever, used by utility companycompany workers and bothbotlh by giving themtlhem a falsefallse sense did almost to the workers that they did almost nothing to protect the workers anyway.anyway. of security and by requiring themtlhem In fact,fact, Cook found that the external switch requirement may eveneven to traversese private property to be harmful to workers both by giving them a falsefalse sense of secu- by access the switches.switclhes. rityrity andand byby requiring them toto traversetraverse private property to accessaccess the switches. InIn addition,addition, the added expense ofof'externalexternal switches created an incentiveincentive forfor customers toto connect unauthorized systems thatthat present a much greater safetysafety concernconcern toto workers. An entire underground movement of illegalillegal interconnectioninterconnection ' has sprung up inin some states as a result of suchsuch requirements,requirements. m°

InIn thethe end,end, New Jersey's statute prohibitedprohibited utilitiesutilities from requiring unnecessary and expensiveexpensive additionaladditional safety equipment. Pre-tested, off-the-shelf renewable units are certified as safesafe and thethe certification removesremoves the necessity forfor additionaladditional equipment. By basing its statutestatute on a thoroughthorough investigation of utility concerns, New JerseyJersey helped pave the way forfor customer-friendlycustomer-friendly interconnection standards thatthat better protect utility ' industry workers. 161,162"

New Jersey allows renewablerenewable energyenergy systems up to 2 MW to be eligible forfor netnet metering, the highest limitlimit of any net metering legislationlegislation in the nation. A high systemsystem size limit allows non-residential customers, who have greater loads than most residencies,residencies, toto participate inin net metering and gives business owners anan incentive toto installinstall systems capable of generating thethe entire on-site demand. InIn New Jersey,Jersey, many businesses andand schools have takentaken advantage of thethe 2 MW Cat'&Ilimit and installed DG systems up to the allowableallowable limit)limit. '63Because thesethese non-residential customers consume largerlarger amounts ofof' I&erin. power,power, their DG systems have the added benefit of significantlysignificantly reducing demanddemand on thethe transmissiontransmission grid while furthering New Jersey's goalgoal of expanding statewidestatewide production of renewablerenewable energy to 20% by 2020.

f'!tr 158166 ThisTh is sei,liorisaclinrt isis b_}s_.xibosn! oilor) aa Det)artmentOepar!rn'nr ofof {it>?rgy.lf'_!iNQil1 nor&y, V liirni Sol_ffSol tr Roofsgnr fop«hi!ca!i(n!t:!u[)[ic_llJoq Fo[ Dn oreo o iln Rm(ortn!liar!I(.}{ic I ,s(_o;sco: NatirNolinnnl_1iI gert«(or&olrb_nevv.%'.le Elfnrrg&r*ro;, tt', I!!6(t!abor;Jto!vt (I!i' (2005)(6006,'frit!!Irt,¢iiiiil:_lt! Sol,i!Sof tt Roofs6 s {'aDo( asr! SilidT:Sl!(d, ; Ove!c:oming(t3Nr t(r tr'!tn(& NetNei Meteringi(lair'!'!!!pamiari(! h_[e3rconrlectiol_Int! !(!onr!(!lion Ot:qecliollsOI"., '. efforts lto!'!,}ew Ic_rsr,;._,.,"rMSiVSFI i:_;f&r&rlt!!r-I 3 -

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77 +

High systemsystem sizesize limits alone are not sufficientsufficient to enableenable commercial classes to participate inin net metering programs. As mentioned, New Jersey's statute provides anan expansive definition of "small commercial customers". Without thisthis explicit customer class, commercial customerscustomers may have beenbeen restricted and the high system size limit would be rendered largely irrelevantirrelevant since most residential customer-generators would never approach 2MW of capacity. New Jersey's statuestatue allowed no room forfor regulatory interpretations that would excludeexclude largerlarger customer-generators.

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Our analysis found that monthly bankingbanlung of net excess generation isis one of thethe most importantimportant factors in thethe effectiveness of any net metering program. For net metering customers, thethe grid acts like an energy bank;bank; theythey deposit energy intointo thethe grid when theirtheir system produces more than they consume andand withdraw energyenergy when demanddemand exceeds what theirtheir systems can supply. To be successful,successful, a net metering program must facilitatefacilitate banking so that customer-generatorscustomer-generators can receivereceive credit for excess energy generated during the seasons when renewablerenewable output is highest andand apply itit towardtoward their consumption when output isis lower.

New Jersey's statute facilitates month-to-month banking inin twotwo ways. First, forFor thethe firstfirst 12 months of a customer's participation, the utility is required to credit customers forfor excessexcess generation atat thethe retailretail rate of electricity. This isis important because the excess powerpower contributed to the grid by netnet metered customers is sold toto other consumers at the retailretail price. If not for monthly banking, regulatedregulated utilitiesutilities would get toto pocket the profits from renewablerenewable energy thatthat they did not IfIf not forII'or monthlyIITIonthlly banking, energy create. By passing those profits on toto thethe generators of renew-renew- regulatedregulatedl utillitiesutilites wouldwoulldl get able energy, New Jersey'sJersey's net metering programprogram provides a strongstrong tot.o pocketpocll&et thethe profitspro&'ts fromf'rom incentive forfor customers toto purchase systemssystems large enough to produce an abundance of clean power. These largerlarger systems, inin turn, help renewablerenewabme energy that they energy they reduce demand on thethe transmissiontransmission grid and save the utility thethe added didclllcl notnot. create. expense of costly additional plats thatthat come online only during periods of peak demand.

One potential limitationlimitation of New Jersey'sJersey's program is that, at the end ofof' the initial 12-month period, the added economic incentive created byby thethe requirementrequirement toto credit net excess generation at thethe retail raterate disappears. From thatthat point on, utilities are required to purchase net excessexcess generation at thethe wholesale raterate (or(or "avoided cost"). That is, no renewable energyenergy generator can receive actual paymentpayment for excess energy at more than the wholesale raterate".64.. Since the wholesale rate of electricity isis generally less than the retailretail rate, thethe requirement diminishesdiminishes thethe incentive toto installinstall systemssystems thatthat exceed on-site demand.

ihr lf-,'ltf!I ItIt i?_i questtori_.lbi(.)quash«!ri il!!eel:._,t;he[iler r _[i!!«&;;«r:i9 (.iveri Ie_s;iIr«!i!f,3rIor _h_ala!oslo,'s l o i)_;ssease legIrd«i&sia&irin,ma :io _ theftih it";euler&'eu_oukl reqq r_,'ro !11iuii!&iceit_.)s t{"I!l_moInrun«scizi:,;_3netn(tee&a!sue×c_!ss i,'_(_lI o& eraera&i(rnion atal i!&&l!'!!i!eri'«ii! au&tided 'i'i!I!lie i «'s a_tythm 8 _:_th_.;r!thanII!an tile',I!ioavoiUed {;()st(!&i!'«!1!(ii'he I_;deraiIeeliual Pubt{; UtilitiesU&ilitio Regttl_tor7!!,:;i!i ory .':){_iiciesI'o!ici:-s Actnet;(PURPA)VII::!Iv«di rc-:qtA!esr(ul&h &:::n_ttiiesiil l.oin ptm;kaseuurci as. eiec[H¢il.y& !e;Ii::i!y «r fron_lriini (!il_}iifted(i i!!!ii'd rc,re!!or!&!n e_,,:.'..kd,aI er_elgyner,"I:,"ac!id!osfacifties al.el Iheih&i ,'.woidneo&dudeU cos{"os!an',,',carl!!slatessi«!!esl;h;_ti hat maldatei'rl'ii!date;!iiy31y ol:heio!I!rr!!rirpfioe e mapin&is beti&!,.-i,:e_)ltie{Jecon!ed h_ii: viola{ionviu!ader! ofof ii'u& '. I'iriyi PLIRPAI'Lilt!'A Ci)t_risr!s haveI r!. !!el7oi h)u! <..etiles«!I!:,wl_{:.lIu!!h'rslaiesher sl ares have _ll!imatei!Iiirn itrr!urisclirlir,j!.lti:.;di_::li,:m:!!o. h) d_k_mimed(!I!nn nr tileI!!oral:eralr!:!I,':ll wlfie.hy&l irh!i'II_et meb:,redin&iered olectric:ityoirrldrit!'ri!estmtlc_t {)_!t!o

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78 ...... _._ _ ....._i.,_.,L_;_y

Some statesstates placeplace aa cap on the total amount of electricityelectricity that can be generated by all net metered systems (i.e.(i.e. 0.1%0.1% of a utility's total capacity). This limits bothboth thethe number of customers who will participate as well as the total amount of electric- ityity producedproduced by renewablerenewable DG systems. Placing aa cap on the number of Placingpll aa. capCap onoA thethe numberAUlAlbeI' customers who cancan net meter isis counter-productive, potentially impeding g thethe growth of thethe veryvery technologies net metering isis designed toto promote. of customersstomems who can net New no limit on New Jersey places no limit on capacity from net metering customers and metermetet. isIls counter-productive,connteI"-pII'ocllllctllve, has helped sparkspark a robust DG market as a result. potentiallypotentialllly impedingimpelling the growthgm owth ofo(thethe veryvel y technolo-technollo- of' One of the greatest assetsassets of New Jersey's net metering lawlaw isis its inclu-inclu- giesgieS netAe t Aletei'IAgmetering isIIs designedcfesllgneR sive definitiondefinition of eligible technologies.technologies. Solar (photovoltaic)(photovoltaic) and wind to promote.PII'o Al ote. power areare the twotwo most popularpopular distributed generation technologiestechnologies forfor residential use, and somesome net metering policies includeinclude only thosethose two technologies. New Jersey's lawlaw is inclusiveinclusive of aa diversity of renewable technologies (fuel(fuel cells, biomass, smallsmall hydro, landfill gas, tidaltidal and wave energy),energy), which isis important for two reasons:

One of the most importantimportant goals of net metering is to encourage thethe adoption andand use of distributed renewable resources.resources. While most state programsprograms includeinclude common renewable technologiestechnologies like solarsolar PV andand wind, New Jersey'sJersey's program allows fuelf'uel cells, biomass, small hydro,hydro, landfilllandfill gas and tidaltidal and wave energy This broad definition of renewable energyenergy helps spurspur thethe further development of novel ways of harnessing diverse renewablerenewable sourcessources of distributed generation.

An inclusive definition ofof'renewablerenewable energyenergy also facilitates a more diverse net metering customer base. For example,example, customerscustomers involved inin agriculture can use biomass, like wood pellets and switch grass, inin ways that residential customerscustomers might not. It is impor-important to includeinclude thesethese customers inin aa net metering programprogram since theythey use substantially more energy than residentialresidential customers and their participation can leadlead toto more signifi-significant reductions inin demand.

__. f ...... _"_ _- _j._......

Virtually all state-level net metering legislation incorporates some type of reporting requirement. New Jersey requiresrequires utilities to submit annualannual reports that include information on all customer generators in general, and net metering customers inin particular. This informationinformation isis valuable in judging thethe effectiveness of a state's net metering legislation and in determining the true costs andand benefitsbenefits of net metering toto customers and utilities.

79 Rules Matter: Michiganvs.Wisconsin

IsconsinSCOnsin ElecuicFlecnic Power Company providesprovides elecuicelecuic serviceseIvice toto areasareas offMichigan'sMichigan's Upper Peninsula as well asas parts of Wisconsin. _lllisThis uniqueunique situation allows usus to anal)_eanal)ve two similar statesstates thatrhat share a utility,utility, but have vastlyvast'ly differingdifFering net metering policim.policies. Both Michigan andand Wisconsin havehave electricity ratesrates under 10C/kWh104/kWh and their utility customers share similarsimilar demographics (see(see table 4.a).4.a). WEWF. Energies,Fnergies, a subsidialysubsidiary ofofWisconsinWisconsin Elecu'icFlectric Power Co. is Wisconsin's largest enerD,energy providerprovider and alsoalso servessetves Michigan_Michigan's Upper1Jpper Peninstfla,Peninsula, which indudesindudes 22,00022,000 calstomet_customets inin thethe FAisonFxlison Sault Elecn'icElecnic (another(another subsidimysubsidiaty of Wisconsin Electric)Flectric) region (US Census Bureau, Wisconsin ElecuicFlecn ic Power). Customers inin thethc twotwo states have thethc abilityability toto interconnectinterconnect with thethe same electricelectric utility; however, customers in Michigan have lessless of an incentive toto do so because ofof' its lack of aa net metering program. Michigm_'sMichigan's program requiresrcquircs a $100 minimum filing feefcc and the statestate grants net excess generation (NEG) toto tilethe utility at thethc end of thethc annualannual billing cycle.cynic. Wisconsin's utilities,utilitics, on thethc other h_md,h;used, buybuy NEG at thethc retailretail raterate and only m WeNe Energies:,Energies: Gas Set,riceService Area I charge feesfees onon systemssystems greateigreater tha_lthan 20kW, which is about five times greater G We Energies:Ettergies: Electric8ectric Service Area thanthan aa t)_,ic_lt)7iml residential customer load.load.

&, 3+j,WÃIY-:;:

' Wisconsin . $21,27!$2'1,271 '. $46,538$46,538: 68.4%68.4% 9.9889.988 C/kWhtt//kWh

Michigan $22,168$22,168 $46,29'1$46,29'1 73.8%73.8%, 9.3139.313C/kWh9/IEWII

Data: Wisconsin Electric Power (WE Energies), US Census Bureau

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'i Michigan 4 E 4 O%0%.:737981;73,981 54.154.

Wisconsin 70 :: 79 13% 1,060,3331,060,333 74.74.55

Data: Wisconsin Electric Power (WE(WE Energies)

80 A comparisonof Michiganand qhePhe primalprimal'T goal of Wisconsin's program, Wisconsin demonstratesthatincentivesincentives howevel,however, isis expanding the use of renewable associatedwithstatenetmeteringlaws enerD*,energy. qlleIhe state'sstares net metering program playa role in p,omotingpromoting renewable is part of larger state-wideslate-wide initiativeinitiative enerenergyD,DGsystems.Table4.b4.b shows that priorizes eneleneigyD, production inin therhe flaatthat Wisconsinsaw 13%growthinin the followingfollowing manner: 168 rate from 2002 to 2004 _ateofparticipationfiom2002to2004 1. EnerFflclgyD, conservationconscf vilnof1 andhas20timestherawnumberofnet and efficiencycfficicncy meteringcustomersas Michigan. 2. Noncombustible renewablerenewable I'(»soUIccs AccordingtOto Tom Stantonof energyenergy resomces Michigan'sPublicServiceCommission 3.5. Combustible renewablerenewable (PSC),thestate's current net metering energyenergy resources provisionsprovtstons a'eare simplystnlpl&' not generousgencI'oUs 4. Nonrenewable combustible to customers./_5customers. ' On the other hand, eneIgyenergy resourcesresources Patrick Kelly,I&eilyi a representativerepresentative of WE Energies, believes Wisconsin customersrustomers The differingdiHering policypolicy priorities between are net metering at a higher raterate becausebecause Michigan and Wisconsin demonstratedemonstrate of thethe econotniceconomic incentive provided byby how net meteringmct'clulg rulesrUlcs cancal'I influencelnHUcnce Wisconsin's net metering program,progratn, customer participation and investmentinvestment which requires utilities to purchase" decisions, 'allall other factorsfartors being equal. NEG at thethe retailretail raterare of electricity.electriciry. 166 WE Energies customerscustomers inin Michig,Michiganm madand Wisconsin aeare nearlynetuly identical, but _u'eare _Ihe differences in the twotwo statesratc net The differences in rhc subjectsllblcct toto dil}_:tingdl&crlng netnct' meteringrnctcIIng laws.laws. metering programsprogf ams reflectrcHcct differingdiffering goals. Wisconsin has seen significant growthgrowrh Michigan's customers Michigan's policypolicy discouragesdisrouragcs customers inin participation Michigan hashas not. from installinginstalling renewablercnctvablc energy systemssystems with capacitiescaparitics greatergreater. than on-siteon-sire demand. _aeThe primary aim of Michigan's program, accordingaccording toto Steve StublesldStublcski of Michigan'sMichigafj's Consumers EnerD;Energy, "is"is toto allowallow customers toto self- generate electricityelectririty to meetmcct their energy needs,ncccls, " cnclgy not becomebcromc a supplier."supplier. TheIhc program isis not seeldngseeking toto advocatteadvor. ttc renewable energyenergy generation,generat'ion, but merelymcrcly toro give customerscustomers the option of generating theirrhcir own electricit3:clcctricity. The program treats non- rencwablerenewable DG in thethc samesame manner asas rencwab]erenewable generation. 167'

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How to MaKE Net Metering WORK

Model Net MeteringMetell ing Statute andandi Regulations DevelopedDPVP!opeci by the InstituteInstitute for Energy &E the Environment, Vermont Lawi aw SchoolSchool'"_°9

hishis model net metering statute and interconnectioninterconnection standards are Tapplicable to all retail utilities operating within the state. The adoption of interconnection standards and regulations is delegated to thethe state utility regulatoryregulatory commission.commission.

InIn an attempt toto reach a broader class of customers, filethe statutestatute allows customerscustomers who generate lessless thanthan 2MW of capacity toto qualify for net metering. Renew- able energy sourcessources havehave also been defined broadly to encourage increasedincreased participation. Additional effortsefforts toto encourage participation are demonstrated through thethe proposed credit system.system. Customer-generators are allowedallowed toto "bank" excess powerpower toto thethe next billingbilling period until the end of the annual billing cycle, when they are thenthen compensatedcompensated by the utility for anyany excess.

Retail utilities are not allowed to discourage net metering by imposingimposing additional feesfees and charges thatthat are not ordinarilyordinarily charged to customers who do not participate in net metering. Utilities are also prohibited from requiring additional equipment and insurance forfor systems thatthat areare inin compliance with acceptedaccepted standards.

Program progress is tracked inin an annual reportreport compiled by thethe retail utility and submitted to thethe statestate utility regulatory commission. This reportreport serves as a checkcheck on thethe utility to ensureensure that itit is inin compliance with thethe statutestatute and isis not discouragingdiscouraging customers fromfrom participating inin netnet metering.

We have provided thethe option of includingincluding additional renewable energy sourcessources in thethe definition of renewable energy. Group net metering is alsoalso encouraged becausebecause itit couldcould increaseincrease rates of participation. Group net metering allows forFor thethe cost of thethe renewable energy systemssystems toto be divided among a group (farm compacts, residential co-ops,co-ops, etc.)etc.) so more people are able to utilize renewablerenewable energy at a decreased cost.

Educating the community about availableavailable alternatives to buying electricelectric energy fromFrom thethe retailretail utility allows customerscustomers toto make more informed decisions about their energy choices.choices. Once more customers areare awareaware that net metering isis an available option, we believe more customers will choose self-generation asas their primaryprimary electricelectric supply.

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83 I_7_,_.__.._i_;:__ ,..._,,__:___.._.,.,_,;,,. ii_¢. I::liii< __!_y ' _:___ "'_'_:"_i;;_ii__;"c':_'/a_:"_{

Subchapter 1:I:Scope andanti Implementation

(a) This Chapter sets forth net metering requirementsrequirements and interconnectioninterconnection standardsstandards that apply to Retail Utilities operating within the state.state.

(b) The state utility regulatoryregulatory commission shall, after notice and opportunity forfor mmment,cx&mment, adopt interconnection standards and regulations as necessary to implement thisthis statute and promote renewable netnet generation (as authorized by this Chapter) throughoutthroughout the state. Standards adopted pursuant toto thisthis Chapter may thereafter be amended,amended, adopted or readopted byby the statestate utility regulatory commission, but shall not, absent aa finding of urgent publicpublic necessity, be modified soso as to reducereduce the value of customer-generationcustomer-generation investmentsinvestments upon less thanthan 36 months prior notice.

Subchapter 2: DefinitionsDe6nitions

The followingfollowing words and terms, when usedused inin thisthis Chapter, shall have thethe followingfollowing meanings, unless thethe context clearly indicates otherwise.

'_nnualized"Annualized Period" means all billing periods within a single year. A customer-generator'scustomer-generator's firstfirst annualizedannualized period begins onon the first day of the firstfirst full billing period afterafter thethe customer-generator'scustomer-generator's facilityf'acility is interconnectedinterconnected and isis generating electricity.

"Applicant" means a person who has filedfiled an application toto interconnect a customer-customer- generatorgenerator facilityfacility to an electricelectric delivery system.system.

"Customer-generator" means a residential, commercial, industrial,industrial, nonprofit, school, utility, agricultural,agricultural, institutional,institutional, locallocal government, state government,government, or federalfederal government customer thatthat generates renewable electric energy on thethe customer's side of the meter.

"Customer-generator Facility" means the equipmentequipment used by aa customer-generatorcustomer-generator toto generate, manage, and monitor electricity. A customer-generator facilityfacility includes anan electric generator and/or an equipmentequipment package, asas defined herein.

"Electric"Electric Delivery System" means the infrastructureinfrastructure constructedconstructed and maintained by aa Retail Utility, as defined herein, to deliver electricelectric service toto end-users.

"Group System" means aa groupgroup of physicallyphysically contiguous customers located in a single electrical service provider territoryterritory thatthat has electedelected toto combine meter'smeters as a singlesingle billing entity inin order toto offset thatthat billing against aa net metered generation facility located on property owned by a group member and physicallyphysically contiguous toto thethe group members.

"Net Metering" means that thethe customer-generator is billedbilled according to the difference between the amount of electricity suppliedsupplied by thethe Retail Utility in aa given billing period and thethe amount of electricity delivered fromfrom thethe customers' side of the meter using renewablerenewable energy systems, where customer-generatorcustomer-generator electricity delivered inin excess of electricity supplied is creditedcredited over anan annualized period.

"Renewable HectricElectric Energy" means energy generated through the use of suchsuch resources as: (1) Solar Thermal Hectdcity;Elecuicity, (2) Photovoltaic.Photovoltair„(3)(3) Landfill Gas, (4) Wind, (5) Biomass, (6) Hy- droelectric, (7) Wave or Tidal Power, (8) Geothermal Electridt_Electricity, (9) Waste-to-Energy (induding(induding Municipal Solid Waste andand Agricultural Waste), (10)(10) Fuel Cells using Renewable Fuels.

84 "RetailUtility"meansany utility offeringretailelectricserviceinin the State.

"ServiceEntranceCapacity"meansthethe ratingof the customer'selectricservice, determinedbymultiplying:

(1)thethe voltageprovidedtothecustomerbythe RetailUtility

(2)(2) thethe ampereratingofoF thecustomer'sprimaryover-currentprotectiondevice (fuseor circuit breaker)

(3)theappropriatemultiplierforfor multi-phaseservice andgenerators.

Subchapter 3: NetMeteringGeneralProvisionsPmvisions

(a) All RetailUtilitiesshalloffernetmeteringtoto customer-generatorswith renewable energygeneration that areinterconnectedwiththeRetailUtilitypursuanttointer- connectionrules adoptedto implementimplement thisthis statute,providedthatthat thethe generating capacityofthethe customer-generator'sfacilityfacility meetsbothof the followingcriteria:

1.Theratedrated capacity of thegenerator doesnotexceedtwomegawatts(MW);

andan cl

2.]-heThe ratedcapacityof the generatordoesnornot exceed the customer'sservice entrancecapacity.

(b)TheRetailUtility shall developanetmeteringtarifftariff thatprovidesforcustomer- generatorstobecredited,inldlowatt-hoursldlowatt-hours (kWh),ata ratioof1:1,forfor anyproduction by the customer's generatingfacilityFacility thatthat exceedsthecustomer-generator'son-site consumption of kWh._heThe creditshallbeappliedin thebillingperiodfollowing thebilling periodofexcessproduction.However,anyexcesskWhcreditsshallnot reduceany fixedfixed billingperiodcustomerchargesimposedbythethe RetailUtility.

Lc}]c_ _/]aeThe Retail Utility shall carrycarry over anyany excessexcess kWh creditscredits earned by customer-customer- generators under paragraph (b) and applyapply those creditscredits to subsequentsubsequent billing periods to offset any customer-generator consumptionconsumption inin those billing periods. "l-heThe carry over will continue until all credits are usedused or the end of thethe annualannual billing cycle isis reached.reached.

(dd(d)}AtAt thethe end of each annual billing period, thethe Retail Utility shall compensate the customer-generator forfor anyany excess kWh credits at thatthat customer-generator's otherwise applicable retail rate for marginal electric energyenergy usage.

_(_(Qe If aa customer-generator terminates itsits service with the Retail Utility [[or switche_.suitches electrici.tyelectricity supplierr]],suppliersII, thethe Retail Utility shallshall compensate the customer-generatorcustomer-generator forfor any excess kWh credits atat that customer-generator's otherwiseotherwise applicable retail rate forfor marginal electricelectric energyenergy usage, over the billing period immediatelyimmediately prior to terminationtermination of service.

(f)(f') A customer-generator facilityFacility used forFor net metering shallshall be equipped with metering equipmentequipment that can measure the flow of electricityelectricity inin both directions at the same

85 rate.Forcustomer-generatorfacilitiesfacilities lessthan10kilowatts (kW), thisthis may bebe accomplished throughthrough use of a single,single, bi-directional electricelectric revenuerevenue meter thatthat has only a singlesingle register forfor billing purposes.purposes.

(g)(g) A customer-generator may choose toto use an existing electric revenue meter ifif the followingfollowing criteriacriteria areare met:

l_The1.The meter is capable of measuring the flowflow of electricityelectricity both into andand out of the customercustomer generator's facility at thethe same rate and ratio; and

2_The2.The meter is accurateaccurate toto within plus or minus 5 percent when measuring electricity flowing fromfrom thethe customer-generator facilityfacility toto the electric distribution system.

h(_h)_Lhh If the customer-generator's existing electric revenuerevenue meter doesdoes not meet thethe requirements atat (g)(g) above, thethe Retail Utility shall installinstall and maintain aa new revenue meter forfor thethe customer-generator, at the Retail Utility's expense. Any subsequentsubsequent revenue meter changechange necessitated by thethe customer-generator, whether because of a decision toto stop net metering oror for any other reason, shall be paid for by the customer-generator.

(ji(_ The Retail UtilityIJtility shall not requirerequire more thanthan one meter per customer-generator. How- ever,ever, an additional meter may be installed under either of thethe followingfollowing circumstances:

1,1. The Retail Utility1Jtility may installinstall anan additional meter at its own expense ifif the customer-generatorcustomer-generator consents; or

2_2. The customer-generator may request thatthat the Retail Utility install a meter, in addition to the revenue meter addressed in (g) above, at the customer-generator's expense. InIn such a case, thethe Retail Utility shallshall charge the customer'-gen-customer-generator no more thanthan thethe actual costcost of the meter and its installation.installation.

-(i)- A customer-generator owns the renewable energy credits (RECs)(RECs) of the electricity it generates, and may apply to the statestate regulatoryregulatory commission or its authorized designee for issuanceissuance of solarsolar RECs (S-RECs)(S-RECs) or RECs as appropriate and based on actualactual on-site electric generation, or the calculated estimate of on-site electricelectric generation for generators less than 10 kW inin rated capacity and as furtherfurther defined inin

Section [[reference anyany statestate renewable portfolio standard (RPS)(RP5) requirement_requirements here]].here] I .

Lk) A Retail Utility shall provide toto net-metered customer-generators electric serviceservice atat non-discriminatory rates thatthat are identical, with respect toto rate structure, retailretail raterate components, and any monthly charges, to the rates thatthat a customer-generator would be charged ifif not a customer-generator.

.(!_(1) A Retail Utility shall not charge a customer-generator any fee or charge, or requirerequire additional equipment, insurance,insurance, oror any other requirement not specifically authorized under thisthis paragraphparagraph or the interconnectioninterconnection rules adoptedadopted toto implement this statute, unless the fee,fee, charge or other requirement would apply to other similarly situated customers who are not customer-generators.

~m)(m_ Each Retail Utility shallshall submit an annualannual net metering reportreport toto thethe statesrate regulatory commission. The report shall be submitted byby the end of each calendar year, andand shallshall include the following information forfor the previous compliance year:

86 1_1. thetotaltotal numberofof'customer-generatorcustomer-generatorfacilities;

2_2. thetotaltotal estimated ratedgeneratingcapacityofits net-meteredcustomer-generators;

3. thethe total estimated net kilowatt-hours received fromfrom customer-generators, expressed as both an aggregatedaggregated absolute amount and, also, as a percentage of totaltotal ldlowatt-hourskilowatt-hours provided to retail customers by the Retail Utility;

4_4. thethe total estimated amount of energy produced by thethe customer-generators;customer-generators; and

._5, outreach and information effortsefforts engaged in by the Retail Utility in order toto inform customers about the availabilityavailability of net metering service pursuant toto this chapter.

Subchapter 4: Other qualifying customer-generators [[[optional]][optional] ]

~a(a) Biomass generators thatthat run on-peal¢on-peak at 100% capacity and qualify for an airair permit or otherwise meet criteria established by the Department of Environment.

Lb}(b_ Combined heat and power (CHP) generators with efficiency greater thanthan twotwo times the system average (and qualifies forfor anan air permit or otherwise meets criteria established by thethe Department of Environment)°Environment).

~c Group Net Metering Systems that consist of a group of physically contiguous customers locatedlocated in a single electrical serviceservice provider territory that has elected to combinecombine meters as a single billing entityentity inin order to offset that billing against a net metered generationgeneration facility located onon property owned by a group member andand physically contiguous to thethe group members.

~d(d) Waste-to-Energy (including Municipal Solid Waste and Agricultural Waste).

Subchapter 5: General Provisions

£_(Qa If a net metering interconnection has been approved under the interconnectioninterconnection rulesrules of Section [reference statestate interconnectioninterconnection rules here], the Retail Utility shall not require a customer-generatorcustomer-generator toto test or perform maintenance on its facilityfacility except for any manufacturer-recommended testing or maintenance.

(b)_~b A Retail Utility shall havehave thethe rightright to inspectinspect a customer-generator's facilityfacility during reasonable hours andand with reasonable prior notice to the customer- generator. If the Retail Utility discoversdiscovers that the customer-generator's facility isis not inin compliance with thethe requirements of the interconnectioninterconnection rulesrules inin Section [reference statestate interconnection rules here] or the requirementsrequirements of IEEE Standard 1547, and thethe non-compliance adversely affects thethe safetysafety or reliabilityreliability of the Retail Utility's or otherother customers' facilities, the Retail Utility may requirerequire the customer-generator to disconnect thethe customer-generator facilityfacility until compliance isis achieved.

87 Subchapter6: Public Outreach andand. Understanding

Laa(a) _eThe statestate regulatoryregulatory commission shall conduct aa comprehensive statewide public outreach process regarding net metering and interconnection, [[focusedII focused on promot- inging renewable electric energy]].energy]]. _l_eThe state regulatoryregulatory commission shall develop andand implementimplement aa public outreach and understanding process through a requestrequest for proposals thatthat meet thethe following requirements:requirements:

1.1. provideprovide aa strong information dissemination component, in order to develop a sharedshared foundation ofoFcrediblecredible informationinformation that may serveserve as a basisbasis forfor engaging in meaningful dialogue;dialogue;

2=2. engage a broad base of citizens,citizens, includingincluding those who areare currently engaged in energy issuesissues as well asas those who havehave not yet beenbeen engaged;engaged;

3_=.3. reach throughout the state and establish aa model for educating the public about the electric energy supply challenges facing the state.

88 Subchapter1:I:Definitions

"Areanetwork"meansanelectricdeliverysystem served bymultipletransformerstransFormers inter- connectedinin anelectricalelertrical networkcircuit, ofthetypetype generally usedused in largelarge metropolitan areas thatthat are densely populated inin orderorder to provide high reliability of service, and having the same definition as the term "secondary grid network" as defined inin IEEE standards°standards.

"Customer" means aa potential customer-generator thatthat will generate renewable electric energy on the customer's sideside of the meter.

"Equipment package" means a group of components connectingconnecting an electricelectric generator with an electric deliverydelivery system, and includes allall interfaceinterface equipmentequipment including switchgear, inverters,inverters, or other interface devices. An equipment package may includeinclude an integrated generatorgenerator or electric source.

"Fault current" means electrical current that flowsflows throughthrough aa circuit and is produced by an electrical fault, such as to ground, double-phase toto ground, three-phasethree-phase toto ground,ground, phase-to-phase, and three-phase.

"Good Utility Practice" means a practice, method, policy, oror action thatthat isis engagedengaged in, and/or accepted by, a significantsignificant portion of the electric industry in a region, and that aa reasonablereasonable utility official would expect,expect, inin lightlight of the facts reasonably discernable at thethe time,time, toto accomplish the desired resultresult reliably, safely and expeditiously,expeditiously, but that is not inconsistentinconsistent with thesethese rules. This termterm has the same definition asas the termterm is used inin thethe interconnectioninterronnection rules promulgated by thethe FERC.

"Group"Group system" means a group of physicallyphysically contiguous customers located in a single electrical serviceservice provider territory, where the group has elected to combine meters as a single billing entity in order to offset thatthat billing against a net metered generation facilityfacility locatedlocated on property owned by a group member that is part of the physically contiguouscontiguous properties of the rest of the group members.

"IEEE""IREE"means the InstituteInstitute of Electrical and Electronic Engineers.

"IEEE standards"standards" means thethe standards published by thethe InstituteInstitute of Electrical and

Electronic Engineers, available at v,',_~ . . w.-;~.:.i,:_I:"ee._'.oioi L<°v, .

"Interconnection Agreement" means an agreement between a customer-generator and a Retail Utility, which governs the connection of thethe customer-generator facilityfacility toto thethe electric delivery system, as well as the ongoing operation of thethe customer-generatorcustomer-generator facility after itit is connected to thethe system.system. An interconnectioninterconnertion agreement shall follow the standardstandard form agreement developeddeveloped by the state utilityutility regulatory commission, which shall be postedposted on the state utility regulatoryregulatory commission's website.

"Minor System Modifications" are those activities that entail less thanthan 4 hours of work and not more thanthan 5% of total system costs in materials, suchsurh asas changing the fuse inin aa fuse holder cut-out,cut-out, changing thethe settingssettings on a circuit recloser, and other such activities.

"Point of Common Coupling" means the point in thethe interconnection of a customer- generator facilityfacility with an electric delivery system at which the harmonic limits are applied.applied. "I-hisThis termterm shall have thethe same meaning as in IEEE Standard 1547.

89 "Spotnetwork" means a typetype of electric delivery system thatthat usesuses twotwo or more inter-tiedinter-tied transformers to supplysupply anan electrical network circuit. A spotspot network isis generallygenerally used to supply power toto a single customer or aa smallsmall group of customers and has thethe same meaning as thethe term is used in IEEE standards.standards.

Subchapter 2: Interconnection Standards for Customer--GeneratorCustomer-Cjenerator Facilities

La)(a)_ There are two interconnectioninterconnection reviewreview paths for interconnectioninterconnection of customer-sited generation.

1_1. Simplified -—This isis forfor qualified inverter-basedinverter-based facilities with a power rating of 10 kW or less on radial or spot network systems under certain conditions.

2_2. Standard -—This isis for certified generating facilitiesfacilities thatthat pass certain pre-specified screensscreens and have aa power ratingrating of 2 MegaWatts (MW) or less.

~b(b) InIn order toto qualify forfor Simplified or StandardStandard InterconnectionInterconnection Procedures, generatorsgenerators no larger than 2 MW must be certifiedcertified pursuantpursuant to paragraph (c)(c) toto complycomply with thethe following codes and standardsstandards as applicable:

1_=1. IEEE 1547 Standard for Interconnecting Distributed Resources with Electric Power Systems or IEEEIEEE 929 forFor invertersinverters less thanthan 10kW in size

2_.2. UL 1741 Inverters,Inverters, Converters, and Controllers for Use in Independent Power Systems

3_=.3. When any listedlisted version of thesethese codes and standards is superseded byby aa revision approved by thethe standards-maltingstandards-making organization, then thethe revision will be applied under paragraph (c).(c).

LcC(c) Certification of Equipment Packages: InterconnectionInterconnection equipmentequipment shallshall be considered certified for interconnected operation if it has beenbeen tested and listedlisted by aa nationally recognized testing and certification laboratory (NRTL) for continuouscontinuous interactiveinteractive operation with a utility grid and meets the definition for Certification under FERC Order 2006.

_d_)_(Qd ScreeningScreening Criteria for Determining Grid Impacts: A proposed interconnectioninterconnection that meets thethe following applicable screening criteria shallshall be processed byby thethe Retail Utility under Standard Interconnection Procedures and, ifif qualified, for net metering.

1_1. For interconnectioninterconnection of a proposed generator to aa radialradial distribution circuit, thethe aggregated generation, includingincluding the proposed generator, on thethe circuit will not exceed 15% of the total circuit annual peak loadload as most recently measured at the substation.

2. The proposed generator, in aggregate with otherother generation on the distribution circuit, will not contribute more than 10% to thethe distribution circuit's maximum faultFault current at the point on the high voltage (primary)(primary) level nearest the proposed point of commoncommon coupling.

3_.3. The proposed generator, inin aggregateaggregate with other generation on the distribution circuit, will not cause any distribution protective devices andand equipment (including(including but not limitedlimited to substationsubstation breakers, fusefuse cutouts, and line

90 reclosers), or customer equipment on thethe system, toto exceedexceed 90% ofof' thethe shortshort circuit interruptinginterrupting capability; nor is an interconnectioninterconnection to be proposed for a circuit that alreadyalready exceeds 90% of thethe short circuitcircuit interruptinginterrupting capability.

4__=.4. The proposed generator, inin aggregate with other generation interconnected to thethe distribution low voltage sideside of thethe substation transformer feedingfeeding the distribution circuit where the generator proposes toto interconnect, will not exceed 10 MW in an area where therethere areare known or posted transienttransient stability limitations to generating units located inin the general electrical vicinity (e.g,(e.g, 33 or 4 transmission voltage level busses from the point of common coupling).

5. The proposed generator is interconnectedinterconnected to the Retail Utilityutility as shown inin the table below:

6_6. IfIf the proposed generator is to be interconnected on single-phase shared secondary, the aggregate generation capacitycapacity on thethe shared secondary,secondary, includingincluding thethe proposed generator, will not exceed 20 kiloVolt-Amps (kVA).

Z,.7, IfIF thethe proposed generator is single-phasesingle-phase and isis to be interconnected on a transformer center taptap neutral of aa 240 volt service, its additionaddition will not create an imbalanceimbalance between thethe twotwo sides ofthethe 240 volt service of more than 20% of nameplate rating of thethe service transformer.

8_.8. The proposed generator'sgenerator's Point of Common Coupling will not be on a transmission line.

Primary Distribution Line Configuration Interconnection toto Primary Distribution Line

IfIf a 3-phase or single phase generator, interconnectioninterconnection Three-phase, three wire must be phase-to-phase

If a 53 phase (effectively(effectively grounded) or single-phase Three-phase, four wire generator, interconnection must be line-to-neutral

Lee(e) Special Screening Criteria forfor interconnectioninterconnection to Spot Networks and Area Networks. The ScreeningScreening Criteria under thisthis paragraphparagraph shall be in addition to thethe applicable Screens in paragraph (d).

1_1. For interconnection of a proposed generator to a spot network circuit where thethe generator or aggregate ofoF totaltotal generation exceeds 5% of the spot network'snetwork. 's maximum load,load, the generator must utilize a protective schemescheme that will ensure that its current flow will not affectaffect thethe network protective devicesdevices including reverse power relaysrelays or a comparable function.

2_.2. For interconnectioninterconnection of aa proposed generator that utilizesutilizes inverterinverter basedbased protective functionsfunctions to an area network, thethe generator, in aggregate with other exporting generators interconnected on thethe loadload side of network protective devices, will not exceed the lesser of 10% ofoF thethe minimum annual load on the network or 500 kW. For a solar photovoltaic customer-generator facility, the ]10%0% minimum shall bebe determined as aa function of the minimum load occurring during an off-peak daylight period

9]91 3. For interconnection of generators to areaarea networks thatthat do not utilizeutilize inverter based protective functions oror inverterinverter based generators thatthat do notnot meet thethe requirements of subparagraph (e)(2) above, thethe generator must utilize reverse power relaysrelays oror other protection devices toto ensure that there will be no export of power fromfrom the customer's site, including any inadvertent export (under(under fault conditions) that couldcould adversely affect protective devices on thethe network circuit.

LO Each Retail Utility shallshall have a Simplified Interconnection Procedure forfor InverterInverter Based Generators not exceeding 10kW inin capacity,capacity, which shall requirerequire the following steps.

1_1. l-heThe customercustomer submitssubmits an application,application, filledfilled out properly and completely, indicating which certified generator or equipmentequipment package thethe customer intends toto use.use.

2__=.2. _[heIhe Retail Utility acknowledgesacknowledges to the customercustomer receipt of thethe application within .33 business days of receipt.

3. _i-heThe Retail Utility evaluates the application for completeness and notifies the customer within 7 business daysdays of acknowledgement of receiptreceipt that the application isis or is not complete, and whether thethe generating facilityfacility equipment passes screensscreens 1, 6, 7 and 8 inin paragraph (d).(d). If incomplete, or ifif' the generating facilityfacility equipmentequipment does not pass the appropriate screens,screens, the application isis rejected and returnedreturned to thethe customer with a listlist of items needed toto make it complete.

4_.4. If the application is complete, and the generatinggenerating facility equipment passes thethe applicable screens,screens, thenthen within 3 business days of the customercustomer notificationnotification under subparagraphsubparagraph (f)(3),(F)(3), the Retail UtilityIJtility will execute and sendsend aa Simplified Interconnection Agreement to customer.

5. If the Retail Utility does not notify a customer in writing oror by e-mail whether the interconnectioninterconnection is approved or denied within 20 business days afterafter thethe receipt of an application, thethe interconnection shall be deemed approved. The'Ihe 20 days shallshall beginbegin on thethe date that the Retail Utility sendssends the written or e-mail notice thatthat the application is received.received.

6_6. Upon receipt of thethe signed Simplified InterconnectionInterconnection Agreement and completion of installation,installation, the Retail Utility may inspect the generating facilityfacility for compliancecompliance with standards and may arrange for a witness test.

Z_. Provided thethe inspection/testinspection/test isis satisfactory, the Retail UtilityIJtility must notify thethe customer, inin writing, within 15 business days that interconnectioninterconnection isis allowed,allowed, and approved. If thethe inspection/testinspection/test isis unsatisfactory, thethe Retail UtilityIJtility must notify thethe customer, in writing, within 15 business days, explainingexplaining the reasonsreasons forFor disapproval of interconnection.interconnection. Final interconnection ofoF thethe generator isis subject toto approval by thethe appropriate electrical code officials.officials.

8_8. The Simplified InterconnectionInterconnection is provided at no costcost to thethe customer. Additional protection equipment not includedincluded with thethe certified generator or interconnection equipment package may be added at the Retail Utility's discretion as long as the performance of thethe systemsystem isis not negatively impacted

92 in anywayandthecustomerisnotchargedforanyequipmentin additionto thatwhichisincluded in the certified equipment package. _g_+ EachRetailUtilityshall have aStandardInterconnection Procedureforcustomer-sited generatorsnotsubjecttoto paragraph(f) aboveandnotexceeding2MWinin capacity thatthat willuseexisting customerfacilities,whichshallrequirerequire thethe followingsteps.

1_1. Toassistcustomersin theinterconnectioninterconnection process,theRetailUtilitywill designateanemployee orofficefromfrom whichbasicinformationinformation on the application canbeobtainedthroughan informalprocess.Onrequest,thethe RetailUtilityIJtility willprovidethecustomerwithallrelevantforms,documents,andtechnical requirements forfor filingacompleteapplicationforFor interconnection ofgenerators notexceeding2MW totheRetailUtility'selectric powersystem.Uponthe customer'srequest,request, thethe RetailUtilitywill meetwith the customer priortoto submissionofan applicationforStandardInterconnection.

ThecustomershallsubmitanapplicationforStandardInterconnectionInterconnecrion tothethe RetailUtilityIJtility and may,atthesametime,time, submitanInterconnectionAgreement executedbythethe customer.

3, Thecustomer will benotifiedbytheRetailUtilityIJtility within.33 business days of itsits receipt of an interconnectioninterconnection application.

4___, The Retail Utility will notify the customer within 7 business daysdays of aclmowledgementaclcnowledgement of receipt of the application whether it is completecomplete or incomplete.incomplete. If thethe application isis incomplete,incomplete, the Retail Utility will at the same time provide thethe customer aa written list detailing all information thatthat must be provided to complete thethe application. The customer will have 10 business days to submit thethe listedlisted information followingFollowing receipt of thethe notice.notice. If the customer does not submit thethe listedlisted information to thethe Retail Utility within the 10 business days, thethe application shall be deemed withdrawn. An application will be complete upon thethe customer's submission of thethe informationinformation identifiedidentified in thethe Retail Utility's written list.

Within 10 business days after the Retail Utility notifies customercustomer itit received a complete application, thethe Retail Utility shall perform an Initial Review of thethe proposed interconnection,interconnection, which shall consistconsist of anan application of the screening criteria set forthforth in paragraphs (d)(d) and (e).(e).The Retail Utility shallshall notify customercustomer of the results, providing copies of the analysis and data underlying the Retail Utility's determinations under thethe screens.screens. During thethe Initial Review, thethe Retail Utility may conduct, at its own expense, any additionaladditional studies or tests it deems necessary toto evaluateevaluate the proposed interconnection.interconnection.

6___, IfIfthethe Initial Review determines thatthat thethe proposed interconnection passespasses the screens setset forthforth in paragraphs (d) and (e)(e) as applicable, the interconnection applicationapplication will be approvedapproved andand the Retail Utility will provide thethe customer with an executableexecutable Interconnection Agreement within 5 business days after thethe determination.

93 7,7. If the Initial Review determines thatthat the proposed interconnectioninterconnection fails oneone or more screensscreens inin paragraphs (d) andand (e), but thethe Retail Utility determines throughthrough thethe Initial Review thatthat the small generator may neverthelessnevertheless be interconnectedinterconnected consistent with safety, reliability, and power quality, with or without minor system modifications, the Retail Utility will provide the customercustomer with an executableexecutable Interconnection Agreement within 5 business daysdays afteraf'ter thethe determination. The generator is responsible for thethe cost of anyany minor systemsystem modifications required.

8___.8. IfIfthethe InitialInitial Review determines thatthat thethe proposed interconnectioninterconnection failsfails one or more screens in paragraphs (d) and (e),(e), andand filethe Retail Utility does not or cannot determine fromfrom thethe InitialInitial Review that the generator may nevertheless be interconnected consistent with safety, reliability,reliability, and power quality standards,standards, then thethe Retail Utility will offer to perform an additional review if the Retail Utility concludes thatthat additional review might determine thatthat the generator couldcould qualify for interconnection pursuant to thethe Standard Procedures. The Retail Utility will provide a non-binding, but good faith estimate ofof' thethe costs ofoF such additional review when itit notifies thethe customercustomer that itsits proposed interconnectioninterconnection has failed one or more screensscreens in paragraphs (d) and (e).

g. Each Retail Utility will includeinclude in itsits net metering and interconnectioninterconnection compliance tariff thethe procedure it will follow for any additional reviewreview in-including the allocation of cost responsibility toto thethe customer.

__10. Final interconnectioninterconnection ofoF thethe customer's generator is subject toto commissioningcommissioning tests as set forthforth inin the IEEEIEEE standard 1547 (paragraph (b)) and approval byby the appropriate locallocal electrical code officials.ofFicials.

11=11. An application and processing fee may be imposed on customers proposingproposing interconnection of generators under Standard Interconnection Procedures provided the total of all feesfees toto complete thethe interconnection does not exceed $50 plus $1.00$1.00 per kilowatt of the capacity ofof' the proposed generator'.generator. Additional fees may only be charged toto customers if their generator interconnectioninterconnection requires minor system modifications pursuant to subparagraph (g)(7) oror additional review pursuant to subparagraph (g)(8).(g)(8). Costs forfor minor system modifications or additional reviewreview will be based on quotations for servicesservices from thethe Retail Utility and subject toto reviewreview by the state utility regulatory commission or its designee for such review.review.

~h An electric distribution company may not requirerequire aa customer-generator whose system(s) meets thethe Simplified or Standard InterconnectionInterconnection standards in paragraphs (b)(b) throughthrough (g) above, as applicable,applicable, to installinstall additional controls, perform or pay forFor additionaladditional teststests or purchase additionaladditional liabilityliability insurance, except as agreed to by thethe customer inin paragraph (g)(g) above.

(Qi Each custome>generatorcustomer-generator approved for interconnectioninterconnection shall at_affix toto theirtheir electric revenue meter a standard warning sign as approved byby thethe state utility regulatoryregulatory commission that notifies utility personnelpersonnel of the existenceexistence of customer-sited parallel generation.

94 Subchapter3: MiscellaneousMisce11aneous

~a(a) A Retail Utility thatthat charges a feefee forfor anan interconnection study shall provide thethe customer-generator with aa bill that includes a clear'clear explanationexplanation of all charges. In addition, the Retail UtilityUtility shall provide to thethe customer-generator, prior to thethe start of thethe interconnectioninterconnection study, aa good faith estimateestimate of the number of hours that will be needed to complete thethe interconnectioninterconnection study, andand an estimate of the total interconnectioninterconnection study fee.

_(b)_Lb} If a customer-generator's facilityfacility compliescomplies with all applicable standardsstandards inin subchaptersubchapter 2, thethe facility shall be presumed to comply with the technicaltechnical requirements of thisthis paragraph. InIn suchsuch aa case, the Retail Utility shallshall not require a customer- generator to installinstall additional controls (including(including but not limited toto a utility accessibleaccessible disconnect switch), perform or pay for additional tests, or purchasepurchase additional liability insuranceinsurance in order to obtain approval to interconnect.

_(cc]Igc Once anan interconnectioninterconnection has been approved under this paragraph, thethe Retail Utility shall not requirerequire a customer-generator toto test its facilityfacility except thatthat itit may require thethe following:

1_.1. an annual testtest in which thethe customer-generator'scustomer-generator's facility is disconnected fromfrom the Retail Utility's equipment to ensure that the generator stopsstops delivering power toto thethe grid;

2_=.2. any manufacturer-recommended testing; and

3. a test toto verify continued interconnection after a power outage.

Ld}(d_ A Retail Utility shallshall have thethe right toto inspect a customer-generator's facilityfacility both before and after interconnectioninterconnection approval is granted, at reasonable hours and with reasonablereasonable prior notice toto thethe customer-generator. IfIf thethe Retail Utility discovers thethe customer-generator's facility is not in compliancecompliance with thethe requirementsrequirements of subchapter 2 and the non-compliance adversely affects the safety or reliability of thethe electricelectric system, thethe Retail Utility may requirerequire disconnection of the customer- generator's facility until itit complies with this paragraph.

Subchapter 4: Group Net Metering [[[optionalj][optional]]

_(a_Qa} Electric energy measurement for net metering systems using a group systemsystem shall be calculated inin thethe following manner:

1_1. Net metering customers thatthat areare group systems may credit all on-site generation against all meters designated toto thethe group system.system.

2__a.2. If thethe electricity generated byby thethe group system is less thanthan the total usage of all meters included in thethe systemsystem during the billing period, the customer shall be credited for any accumulated kWh credit and then billedbilled forfor the net electricity supplied by thethe electric utility.

Lb}(b_ [[In[[In addition toto any other requirementsrequirements of an applicable statestate statute]],statute]j j, before a group systemsystem includingincluding more than one meter may be formed and servedserved by a Retail Utilit_Utility, thethe group system shall file with the state utility regulatory commission and thethe servingserving Retail Utility, thethe following information:

95 1_l. themetersto beincludedin thethe groupsystem,whichshallbeassociated withbuildingsand residencesresidences ownedoroccupiedbythethe personoperatingthe groupsystem, identifiedbythemostrelevant pre-existingaccountnumber andlocationor,if nosuchaccount numberexists,bylocationand proposed pointofinterconnectioninterconnection toto thethe utilitysystem

2_2. amethodfor addingandremovingmetersincludedin thegroupsystem;

3_3. a designated person responsiblefor all communications fromfrom the group system to tilethe RetailUtility,forFor receivingand payingbillsforfor anyservicesprovid- edbytheRetailUtilityfor'for thegroupsystem,and for'for receivingany other communicationsregardingthegroupsystem;and

4_=.4. abindingprocessfortheresolutionresolution of any disputeswithinthethe groupsystem relatingrelating to netmeteringthatdoesnotrelyrely on theRetailUtilityorthestate utilityregulatoryregulatory commission.

I}c_Groupsystemcustomersshall, atall times,times, maintainawrittendesignationto the RetailUtilityofapersonwhoshallbethesolepersonauthorizedto receiveandpay billsforf'or service providedbytheRetailUtility,andforfor anyothercommunications regardingthegroupsystem.

(dd(d_d_}TheThe Retail Utility shall implement appropriate changes to aa group systemsystem within thirtythirty daysdays afteraf'ter receiving written notification from the person designated under subchapter 4, paragraph (c). However, written notification of a change in the person designated under subchapter 4, paragraph (c) shallshall bebe effectiveeffective upon receiptreceipt by thethe Retail Utility. The Retail Utility shallshall not be liable forFor action based on such notification,tification, but shall make anyany necessary correctionscorrections and bill adjustments toto implement revisedrevised notifications.

_(_~e InIn casescases of non-payment of group system bills, the electricelectric utility may disconnect allall meters associatedassociated with thethe group system [[in accordanceaccorclance with thethe samesame state utility regulatory commissioncommi ssi on rules as are applicableapplicable to the mo_tmost nearly analogous customerscustomers withoutwi thout netmetering]].netmeteri ngj j.

Subchapter 5: Dispute Resolution

(_(Pa The state utility regulatory commission may fromfrom timetime to time designate a hearing officer or technicaltechnical master for the resolution ofinterconnectionof interconnection disputes. IfIfthethe state utility regulatory commissioncommission has soso designated, thethe parties shall use thethe hearing officer or technicaltechnical master to resolveresolve disputes relatedrelated toto interconnection and such resolution shall be binding on the parties.

_(bb_(Qb The statestate utility regulatoryregulatory commission may designate a Department of Energy national laborato_laboratory, college or university, or an approved Federal Energy Regulatory Commission (FERC) Regional Transmission Office with distribution system engineering expertiseexpertise asas the tedmicAtechnics master. Should thethe FERC identifyidentify a national technicaltechnical dispute resolutionresolution team, the state utility regulatory commission may designate said team as its hearing officer or technical master.

96 ' i!::._.._-t_.,_'__ \.t_:_0t_:_t:_l_"r_F_0 __....._...._..... I ii ,I. ), _;_i_i i<( i! i _

While individualindividual states cancan and should improve their'their net metering programs by adoptingadopting thethe model statutesstatutes we have recommended, the wide discrepancy in both thethe design and implementationimplementation of individual state net metering programs has createdcreated an uneven play- ing-field,ing-field, both for regulated utilities and forFor small-scale renewablerenewable generating facilities. Ideally,Ideally, a uniform national renewable energy policy would stem from federal leadership. Unifying thethe country behind the important goal of increasing renewable energy output could be achieved with a cleverly-designed national net metering policy thatthat standardizesstandardizes net metering procedures and overcomes the limitations often created by aa patchwork of state-based initiatives.

Our(Our analysisanalysis ofof',.3434 existing statestate net metering programs revealsreveals that most utilities are likelylikely toto embrace changes inin net metering mandates with the enthusiasm of aa taxtax auditaudit"lr°.. Because most utilities perceive net metering programs asas revenue-losers rather thanthan demand-reduction strategies,strategies, theythey have lobbied at the state levellevel forfor unnecessary restrictions, burdensome procedures and excessiveexcessive fees that limit participation.participation, in"' As we have shown,shown, in many statesstates thethe regulatory barriersbarriers established at the behestbehest of utilities havehave effectively thwarted thethe original intentions of thethe net metering programs.

Individual states that have been the most effective atat promoting clean energy have treated net metering as aa demand-reduction strategy that is part of a broad system of incentivesincentives toto encourage thethe adoption of renewablerenewable energy technologies. Because renewable systems typically produce thethe most electricity during hours of peal:peak demand (solar'(solar panels, forfor instance,instance, generate the most electricity inin the afternoon,afternoon, when demand on the grid is greatest),greatest), net metered customers generally consume electricity from thethe grid during off-peal:off-peak hours.hours. Therefore, net metering should be perceived as aa benefit to regulatedregulated utilities by reducing peak demand at thethe times when the grid isis most strained.

A novel way to create the perception among utilities that net metering is an effective demand-reductiondemand-reduction strategystrategy is to establish a national renewable portfolio standardstandard (RPS)(RPS) thatthat requires by a date certain thatthat all regulated utilities meet a percentage of net elec- tricitytricity demand through qualifiedqualified renewable resources. For example,example, aa national RPS statutestatute might mandate that byby 2020, allall regulated utilitiesutilities are required toto meet 20% of net electricity demand from electricity generated by qualified renewablerenewable sources. This approach sets thethe renewable energyenergy goal as aa functionfunction ofoFelectricityelectricity demand ratherrather thanthan electricity generation.Iv2generation. '

Calculating RPS goals as aa function of electricity demand providesprovides utilities with additional flexibility that some statestate RPS architecturesarchitectures do not. By making thethe national RPS goal a function of demand,demand, the ultimate compliance levellevel is placed squarely inin the hands of utilities, encouraging them toto view on-site renewable generation asas a demand

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97 reduction strategystrategy that helps themthem meet theirtheir regulatory requirements.requirements. Every reductionreduction in demand alsoalso reducesreduces the total amount of renewable energyenergy that utilities are requiredrequired to generate on theirtheir own. By creating a regulatoryregulatory frameworkframework where utilities view net metering programsprograms correctly as demand-reduction strategies, aa national RPS would promote increased participation in net metering programsprograms and encourage utilities to support higher capacity caps, expand thethe number'number of eligible customercustomer classes,classes, andand decrease the unnecessary regulatory burdens thatthat have tendedtended to discouraged participation inin many states.

For thethe renewablerenewable energyenergy services sector, aa national net metering A nalionalnatllonal programprogrBrn provides scheme would allow market forces to dictate thethe geography of energy investments. A national strategystrategy would allowallow certain technologiestechnologies to alevelallevell ofregulatoryprediciabilityofregullatorypre6 ictalbillity flourish where theythey are most useful andand encourage a greater diversity of thaithat shouldshoulldl beIbe embraced by electricity generationgeneration acrossacross states.

lhethe growing number of utilitiesutillities Standardized national net metering rules would also create a operating across stalesstates that uniform curriculumcurriculum for trainingtraining technicianstechnicians andand createcreate a more diverse pool of expertise that would reduce the amount of time are requiredrequiredl to developdlevellop net pool (and money) individualindividual states spend developing their own meteringmetering programs. curriculums and training theirtheir own technicians.technicians. National standards would also expand job opportunities for certified technicians by allowing greatergreater employmentemployment mobility. Expertise developed in one statestate would be justjust as useful in anyany other state.

For utilities, a uniform, federalfederal net metering program should proveprove more attractive than aa network of 50 state-basedstate-based regulatory schemes. A national program provides a levellevel of regulatoryregulatory predictability thatthat should be embraced by thethe growinggrowing numbernumber of utilities operating acrossacross statesstates that have yet toto develop net metering programs as requiredrequired byby EPAct. Even for utilities focusedfocused exclusively on the bottom line,line, the devil you know isis better than the devildevil you don't.don' t.

98 Explaining the Magic NumberNumber::::::

The Number of Net Metering Customers per Million Electric Customers as a Function of the Age of the Net Metering Program •~~450._ 450.0000 ...... ct) Q E E 400,00 0 0 400,00 yy=-1.= -1.4x4x+67*+ 67* --7 .... iz 350r00350,00 —— R Square = 0.00780 00ys | ...... U U t)G .L_& 300,00300.00 C °r"

'_rtr 250,,00250.00-- ct) u&

r-r 200.00200.00— 0c) z —150.00"'"" ~ ~ O0 r- 100,00 o- ct) loo,oo (t) Q.c). m 50.0050.00— E a 0 ~ w ~ ~ 2z &O00.00 --O--w--O--_--O--u~ W ~ s ~ OJ_-~ • 0 5 1010 1515 2020 25 Age of the Net Metering Program (gears)(years)

Data: DOE EIA, DOE EERE, and Union of Concerned ScientistsScientistsnaivs

Appendix A is a regressionregression comparing the number of net metering customerscustomers with thethe age of thethe net metering statute. The most recentrecent available customercustomer datadata isis from 2004 and therefore we based thethe age of thethe statute on aa 2004 starting point. We determined thatthat California, with over 13,00013,000 net metering customers,customers, is an outlier and not includedincluded inin thisthis analysis.

The results of the regression showshow that,that, although thethe equation isis negative, therethere is not a significantsignificant change inin the number of net metering customers over thethe course of timetime (p = 0.63).0.63).Although the slopeslope of thethe lineline isis not significant, we cancan inferinFer thatthat newer net metering programs tendtend to have more customers when compared to older ones.

The Y intercept -- 67 - is significant (p = 0.017),0.017), which means thatthat we havehave confidence thatthat anyany netnet metering program, no matter itsits age, should have atat least 67 customers. Therefore, we characterize effectiveefFective state net metering programs as having at leastleast 67 customers enrolled. Based on this analysis, we expect new statestate programs toto have enrollmentenrollment numbers of this size.

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99!99 _

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Breaki ag Ties

The tabletable below lists the reasons for breaking ties between states thatthat have thethe same indexindex score. Most tiesties were broken by evaluatingevaluating the raterate of growth in participation or thethe total number of participating customers.

„, 4, , A, , ,43,, 3,p,„„,, K,p,&„, ,...,, New Jersey 100% 305 Montana 97% 67 California 94% Oregon 91% Nevada 88% Minnesota 82% Greater growth rate New Hampshire 82% Wisconsin 79% 9 Hawaii 64% Greater growth rate Vermont 10 64% More participating customers per capita I 11 Wyoming 64% More customers participating per capita I

12 Ohio 64% More participating customers per capita i 13 Louisiana 64% I Utah 61% '15 Connecticut 48% More customers participating per capita I

16 New York 48% More participating customers per capita I 17 New Mexico 48% More participating customers per capita t Georgia 48% 19 Washington 36% 0 More customers participating per capita j 36n/ 20 Virginia 0 More participating customers per capita I 21 Kentucky 36% 0 Has participating rustomers 22 Maine 36%

I 23 Massachusetts 27% More participating customers per capita I Iowa 27% Has participating customers 25 Delaware 27%

' 26 Colorado 9% -2 More participating customers per capita .', 27 North Dakota 9% -2 More participating customers capita per I -2 f""""""28 Indiana 9% More participating customers per capita 90/ 29 Maryland -2 More participating customers per capita I Net excessexcess generationgeneration purchased, not 30 Texas ..... 9% 9% -2 ,2 granted'granted, by the Utilityutiliry inontlilymonthly [ 31 Arkansas F 9%90/ -2 ['!!777 3% 32 Rhode Island 3% ,:3 ...... More participarticipatingPatin...... g...... customers P.per...... er CacapitaP.ira .i t 33 Pennsylvania i:: :3%3% -:3-3 I 34 Oklahoma 00/ ,4 [_7;i'7 7777;77:;777779;;7'77;I[ :717!7777;777771;:'[U {

100100 i[iiii/!!i iii![iiill iiii!iiiii...... iF :iilii)' i!ii'iii!ii i iill

Glossary of Terms DG -—Distributed Generation

Also known as 'Community-Based'Community-Based Power', distributed generation is Electricity generation that occurs atat or near thethe sitesite of ultimate consumption as opposedopposed to most electricity which isis generated at aa remote site and transported by long-distance transmissiontransmission lines toto thethe consumer.

EIA -—Energy InformationInformation Administration (Department of Energy)

TileThe Energy Information Administration (EIA), as part of the U.S.U.S. Department of Energy;Energy, collects and disseminates data on energy reserves, production, consumption, distribution, prices, technology, and relatedrelated international, economic, and financialfinancial matters. Coverage of EIA's programs includes datadata on coal, petroleum, naturalnatural gas, electric, andand nuclear energy.energy.

EPAct -—Energy Policy Act of 2005

Also knowIcnow as '3_e'The Energy Bill, EPAct was intended toto establish aa comprehensive, long-range energy policy. It provides incentives for traditionaltraditional energy production as well asas newer, more efficient energy technologies,technologies, and conservation. More thanthan 1,7001,700 pages long,long, the Act has hundreds of provisions affecting energy generation and utility policy.

FERC -—Federal Energy Regulatory Commission

AnAn independentindependent federalfederal agency,agency, FERC regulates thethe interstateinterstate transmissiontransmission of electricity, natural gas, and oil. FERC also reviewsreviews proposals toto buildbuild liquefied natural gas (LNG)(LNG) terminals and interstateinterstate natural gas pipelines as well as licensinglicensing hydropower projects.

IEEE1547 -—InstituteInstitute of Electrical and Electronics Engineers standard

IEEE 1547 is the Institute's standardstandard for interconnecting distributeddistributed resourcesresources (DG systems) with electric power systems andand was approved by the IEEE Standards Board in June 2003. ItIt was approved asas an American National Standard in October 2003.

NEG -—Net Excess Generation

When a net metered customer produces more electricity thanthan itit consumes duringduring a utility billing cycle, the difference is calledcalled the net excess generation.

PUHCA -—Public Utility Holdings Company Act of 1935

A 'New'New Deal' law to protectprotect consumers andand investors.investors. It placed geographicgeographic restric-restrictions on mergers and limitations on diversification into non-utility lines of business and tal_eoverstakeovers of electric and gas utilities, and also establishedestablished regulatedregulated monopoly markets or serviceservice territoriesterritories forfor utilities.

101 PURPA -—Public Utility Regulatory Policies Act of 1978

PURPA was passed during thethe 1970's energyenergy crisiscrisis to encourage thethe conservation andand efficientefFicient use of energy resources and to encourage the development of alterna- tivetive power supplies capable of displacing the inefficientinefFicient useuse of oil and naturalnatural gas by electric utilities. PURPA requires electric utilities, when they need power,power, toto purchase power fromfrom qualifying alternativealternative energy facilitiesfacilities (QFs) at thethe utilities' avoidedavoided cost,cost, provide back-up power to QFs, interconnectinterconnect with QFs, and operate with QFs under reasonablereasonable terms and conditions.

PV-PV —Photovoltaic

Photovoltaics (PV)(PV) or solar'solar cells as theythey areare often called, are semiconductorsemiconductor devices thatthat convertconvert sunlightsunlight into direct current (DC)(DC) electrici_electricity. Groups of PV cells areare electrically configuredconfigured intointo modules and arrays, which can bebe used toto charge batteries, operate motors, and to power any number of electricalelectrical loads.loads. With the appropriate power conversionconversion equipment,equipment, PV systems can produce alternating currentcurrent (AC) compatiblecompatible with any conventional appliances, and can operate in parallel with, and interconnected to,to, the utility grid.grid.

RECs -—Renewable EnergyEnergy Credits

Also lmownknown asas Green Tags or Tradable Renewable Certificates (TRCs), RECs represent the environmental benefits associatedassociated with generating electricity fromfrom renewable energy sources. RECs function asas a non-governmental subsidysubsidy on pollution-free electricity generators. Within REC tradingtrading markets, a certifyingcertifying agency gives each REC a unique identificationidentification number to make suresure itit doesn'tdoesn' t get double-counted. The cleanclean energy isis then fed intointo the electrical gridgrid andand thethe accompanying REC can thenthen be sold separately from the electricity.

RPS -—RenewableRenew able Portfolio Standards

A policy set by federal or state governmentsgovernments that a percentage of the electricityelectricity suppliedsupplied by generators be derived fromfrom a renewable source by a datedate certain.

T&DTRD -Transmission—Transmission &Br Distribution

Electric power transmissiontransmission isis one process inin the transmittingtransmitting of electricity to consumers. The term refers toto the bulk transfer of electrical power fromfrom placeplace to place. Typically, power transmissiontransmission isis between the power plant and a substation near a populated area. This isis distinct from electricity distribution, which isis concerned with thethe delivery fromfrom the substationsubstation to the consumers. Due toto the large amount of power involved, transmission normallynormally takestakes place at high voltage (110 kV or above). Electricity is usually transmitted over long distance through overheadoverhead power transmission lineslines (such as thosethose in the photo on thethe right). Underground power transmission is used only inin densely populated areas (such(such asas largelarge cities) because of the high cost of installation and maintenance.

102 10103t3 - - - 0 r ~- L4 0 8 e %I