The National Association of Regulatory Utility Commissioners (NARUC) has released the final publication of its “Distributed Energy Resources Rate Design and Compensation” manual, and solar advocates have praised NARUC for its hard work and suggested the manual will help pave the way for solar-friendly policies.
Work on the manual began at the November 2015 NARUC Annual Meeting, with direction to a subcommittee to draft a distributed energy resources (DERs) manual to help states manage the myriad challenges associated with current rate design. A town hall meeting to discuss the draft version of the manual was held in Nashville at NARUC’s summer meeting in July. After that meeting, NARUC says, more than 70 comments from stakeholder groups were submitted to the subcommittee to consider for the final manual.
“This publication was a major undertaking by the staff subcommittee, and we appreciate their hard work and the many valuable comments we received from commissions and stakeholder groups,” says NARUC President Travis Kavulla of Montana, in a press release. “Although the manual is not the final word on the subject, it will be a useful practical resource for regulators.”
As noted in the manual’s executive summary, “The reason for this manual is that the nature of electricity delivery, consumption, generation, and grid itself are changing, and changing rapidly.” Among other things, it discusses how DERs – including solar and other resources, such as energy storage – affect existing regulatory and utility models, as well as offers rate design and compensation options.
In a statement, Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association, says NARUC “adopted a manual that was significantly improved due to their willingness to be open to input from stakeholders.”
“Time and again, state public utility commissions and independent researchers have found that distributed solar provides a net benefit to all consumers, and we’re happy to see this more adequately and accurately represented in the final version of this manual,” comments Gallagher. “Rate design is not a simple task, and it has far-reaching impacts. The manual recognizes that hard data and evidence is needed before imposing new rate structures on customers and that imposing class-wide rate design changes when DER penetration rates are low ‘would most likely be a disproportional response.’”
Rick Gilliam, director of Vote Solar’s DG Regulatory Policy Program Director, adds in a statement, “The manual contains a helpful balance between long- and short-term views, an open and more collaborative regulatory process, and a more expansive view of distributed energy resources, which actually include a broad and exciting range of clean technologies that can be deployed to add stability, control, and reliability to the electric grid.”
In an article on Vote Solar’s website, Gilliam points out some key conclusions made in the NARUC manual, including the following:
Since all electric systems are affected by DER increases differently, before a jurisdiction embarks on the journey to implement substantive reforms due to the growth of DER adoption, it should look closely at data, analyses, and studies from its particular service area before any such actions are taken.
For the jurisdictions with low DER adoption and growth, there is time to plan and take the appropriate steps and avoid unnecessary policy reforms simply to follow suit with actions other jurisdictions have taken. Reforms that are rushed and not well thought out could set policies and implement rate design mechanisms that have unintended consequences such as potentially discouraging customers from investing in DER or making inefficient investments in DER.
In a statement, Julia Hamm, president and CEO of the Smart Electric Power Alliance (SEPA), says, “Perhaps one of the most critical and, certainly, most contentious issues now facing electricity utility regulators, utilities and the customers they both serve is the need to redesign rates to reflect the technological and financial realities of the 21st-century energy system now emerging across the country.
“This manual is an important step toward addressing the disconnect between traditional regulatory rate-making time frames and the speed of change triggered by new distributed technologies – such as solar, storage, demand response and electric vehicles,” she continues. “We congratulate NARUC on recognizing the benefits DERs can bring to customers, utilities and the grid – and responding to the challenge of finding new rate designs that fairly value and balance the economic risks and rewards of these new technologies.”
SEIA, Vote Solar and SEPA indicate they look forward to working with NARUC and state commissions across the U.S. to, as Gallagher says, help “unlock the full value of DERs.”
The manual is available here.