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HomeMy WebLinkAboutStaff Report 399-10TO: FROM: ATTENTION: DATE: SUBJECT: REQUEST HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: UTILITIES FINANCE COMMITTEE NOVEMBER 2, 2010 CMR: 399:10 Adoption of a Resolution Adopting Utility Rate Schedule E-NSE-1 of the City of Palo Alto Utilities Rates and Charges Pertaining to Electric Service The Utilities Advisory Commission (UAC) and staff recommend that the Finance Committee recommend that the City Council Adopt a Resolution Adopting Net Surplus Electricity Compensation Rate Schedule (E-NSE-1) as attached. The rate schedule, if approved, would become effective January 1,2011. , EXECUTIVE SUMMARY State law requires Palo Alto's City Council to establish a Net Surplus Electricity Compensation Rate Schedule to be effective January 1,2011. This rate will be used to compensate eligible Net Metering customers, who choose monetary compensation, for the electricity produced by their onsite system in excess oftheir annual consumption at the end of each twelve-month period. The City's Electric Utility currently has 409 eligible customers in the Net Metering program with a total generating capacity of 2,578 kWor 1.4% of the Electric Utility's peak system demand of 186 MW in Fiscal Year (FY) 2010. For FY 2010, only 42 of these 409 net metering customers were eligible for net surplus compensation, meaning they had generated more electricity than they had consumed during the prior twelve-month period. Due to its simplicity, and its ability to represent local conditions and costs impacting all electric utility ratepayers, staff recommends that the average cost of electricity in the renewable portfolio (at $0.058411KWh) be used as the best valuation for the Net Surplus Electricity Compensation Rate. At its October 6, 2010 meeting, the UAC accepted staff's recommendation to use the 'average cost of electricity in the renewable portfolio to set the Net Surplus Electricity Compensation Rate in a 5-2 vote. BACKGROUND State law Assembly Bill (AB) 920 (2009) modified the Public Utilities Code's terms and conditions for Net Energy Metering (PUC Section 2827). AB 920 requires the City Council to 399:10 Page 1 of7 establish a Net Surplus Electricity Compensation Rate Schedule to be effective January 1, 2011 to compensate eligible customer-generators for electricity produced in excess of on-site load at the end of each twelve-month period. Eligible customer-generators are residential or small commercial customers of an electric utility, who use a solar or a wind turbine electrical generating facility, or a hybrid system of both, with a capacity of not more than one megawatt that is located on the customer's owned, leased, or rented premises, is interconnected and operates in parallel with the electric grid, and is intended primarily to offset part or all of the customer's own electrical requirements. The City's PV Partners program provides rebates based on system size of newly installed solar photovoltaic (PV) systems, and Net Metering allows participants to receive a financial credit for excess energy generated by their onsite system and fed back to the utility. The credit is calculated using the default retail electric rate and is used to offset the customer's electricity bill. Prior to AB920 utilities carried forward monthly credits for customers who were net generators in any given month, and allowed those credits to be used toward electric charges incurred in subsequent months. Electric utilities, however, were not obligated to provide credits for surplus electricity generation after a twelve-month period and any such customer surplus was deemed canceled annually. The City of Palo Alto did not cancel customer credits, but allowed the surplus generation to carry forward indefinitely;. The total credits that could have been canceled I ' out are estimated to be less than $4,000 annually for about 200 customers. AB920 required utilities to notify eligible customer-generators by January 31, 2010 to make an election for how they wanted to be compensated for their net surplus electricity. Customers may choose to receive compensation as a monetary bill credit, or may carry forward the net surplus electricity in kilowatt-hours for the next settlement period. Settlement periods are twelve­ months and are deemed to start when the utility receives the customer's completed and signed election form. Electric utilities are not obligated to offer compensation or carry forward the net­ surplus electricity if the customer fails to make an election; indeed, California law requires the City to claim the surplus as its own. AB 920 requires that utilities determine a compensation rate by January 1, 2011 to be used for net surplus electricity compensation. The law also states that upon adoption of the net surplus electricity compensation rate by the ratemaking authority, the net surplus electricity purchased by the electric utility shall count toward the electric utility's renewable portfolio standard (RPS) annual procurement targets. In January 2010, City of Palo Alto Utilities sent a letter notifying all eligible customer-generators that they have the option to either a) elect to receive compensation beginning in 2011 for any net surplus electricity generated during the prior 12-month period, or b) be allowed to apply any net surplus electricity as a future credit for electricity, measured in kilowatt-hours, supplied by City of Palo Alto Utilities. In May 2010 (CMR 223:10) significant revisions were made to Utilities . Rule and Regulation (Rule) 29 that addresses Net Energy Metering Service and Interconnection for qualifying customer-generators. The revisions to Rule 29 reflected changes in the California Public Utilities Code due to AB920 and resulting modifications to the Utilities billing procedures for Net Energy Metering. CMR: 399:10 Page 2 of7 Further minor revisions to Rule 29 as shown in Attachment D will be taken to the City Council with the proposed E-NSE-l Rate Schedule. The City currently has 409 eligible customers in this program with a total generating capacity of 2,578 kW or 1.4% of the Electric Utility's peak system demand of 186 MW in FY 2010. As of September 2, 2010, 284 customers made an election with 146 electing compensation and 138 electing future credit for electricity. DISCUSSION AB 920 defines net surplus electricity compensation as a per kilowatt-hour rate offered by the electric utility to the net surplus customer-generator for net surplus electricity that is set by the ratemaking authority. The relevant sections of the law are below: PUC section 2827 (h) (4) (A): The net surplus electricity compensation valuation shall be established so as to provide the net surplus customer-generator just and reasonable compensation for the value of net surplus electricity, while leaving other ratepayers unaffected. The ratemaking authority shall determine whether the compensation will include, where appropriate justification exists, either or both of the following components: the vaJue of the electricity itself the value of the renewable attributes of the electricity PUC section 2827 (h) (4) (B): In establishing the rate pursuant to subparagraph (A), the ratemaking authority shall ensure that the rate does not result in a shifting of costs between solar customer-generators and other bundled service customers. The requirements for setting the compensation rate, therefore, are that: a) The payment must be just and reasonable compensation to be determined by the City Council; b) The compensation is restricted to net surplus kilowatt-hours (kWh), and is not intended for customers that h~ve excess credits on their bill but no net kWh; c) The rate is to be a "per kilowatt hour rate"; and, d) The rate should not result in the shifting of costs to other bundled service customers. Value of electricity and renewable attributes generated during the settlement period Based on the criteria defined by AB920 as presented above, a number of alternatives can be used to establish the value of electricity and renewable attributes generated during FY2010. The table below presents these alternatives. CMR: 399:10 Page 7 ompeI1~atiQ~rVi~Juation· Optio 2 RPS Eligible REC 3 Average Cost of Supply Including Renewables Less Transmission Most Expensive Renewable Supply Residential System Average Retail Rate 7 Average Bill Credit for City's Net Metering Customers for Excess Energy (*) Value as of Aug 2010 $0.01500 $0.06059 0.0584.1,: $0.11600 (*)$0.15130 The first five alternatives include the energy and renewable attribute values that other utilities are considering (from staff's research). These first five alternatives do not include transmission costs. 1. Pacific Gas and Electric Company (pG&E) LAP -Peak This value represents the average cost of electricity during peak usage hours in the Northern CalifornialPG&E area, referred to as the PG&E load aggregation point (PG&E LAP), in FY 2010. It is the price that the City pays for purchases of electricity during the peak hours and is a good proxy for avoided costs when the utility receives net kWh from customer-generators. At $0.04296 pet kWh this value does not include any renewable attributes that solar photovoltaic net surplus customer-generators would offer to the City and, therefore, is not recommended to be used alone, but could be used in addition to a value representing renewable attributes. 2. RPS Eligible REC The average value of Renewable Energy Credits (REC) in FY 2010 that are RPS eligible. An estimate of this value is $0.01500 per kWh for FY 2010. This value represents the renewable attributes only, and therefore, is not recommended to be used alone, but could be used in addition to a value representing the value of electricity alone such as PG&E LAP discussed above. 3. Average Cost of Supply Including Renewable Attribute Excluding Transmission Average cost of electricity supplied by the City to all ratepayers in FY2010 including renewable power and excluding transmission costs is estimated to be $0.06059 per kWh. This value has the advantage of including the average cost of renewables included in the utility's supply procurement portfolio. Thus, it already contains an imbedded green/renewable value. This value could be used as a just and reasonable compensation for the value of electricity supplied by net surplus customer-generators as it represents average cost of local electricity delivered to all ratepayers. However, it includes all supplies, not just the renewable supplies, so the compensation to net surplus generators would not reflect 100% renewable supplies. CMR: 399:10 Page 4 of7 4. Average Cost of Renewable Supply Excluding Transmission The City's existing renewable supply contracts yield a weighted average price of $0.05841 per kWh for FY 2010. This could be used as a representative valuation for the electricity supplied by net surplus customer-generators in FY 2010. This has the advantage of representing both the value of the electricity and the value of the renewable attributes. It has the additional advantage of simplicity and understandability. It is also a good representation of actual local conditions and represents 100% renewable supplies. 5. Most Expensive Renewable Supply Contract Price Excluding Transmission The most expensive renewable supply contract price is $0.06295 per kWh in FY 2010. It could be argued that this value represents the marginal price of electricity supplied by renewable power in FY 2010 and should be used to value the electricity supplied by net surplus customer generators in FY 2020. It is, however, unclear whether the highest price is the price of the incremental resource, or whether it is a function of timing of when the particular transaction occurred. It is, therefore, not recommended as the best choice for the compensation value to be used. 6. Residential System Average Retail Rate The residential system average retail rate is $0.1160 per kWh for FY 2010. This rate includes not only the electricity generation value including renewables but also the transmission, distribution, public benefits and fixed customer service costs that need to be collected from electric utility's residential customers. Using this value would result in shifting costs to other bundled customers which is contrary to the AB 920 requirements. It is, therefore, not recommended to be used as the compensation rate for this purpose. 7. Average Bill Credit for Net Metering Customers for Excess Energy As of Aug 2010, net surplus customer-generators had a total of $5,580 in total bill credits for excess generation of 36,871 kWh. This represents an average rate of $0.1513 per kWh. As net surplus generator bill credits include the retail price of electricity valued at higher tiers, this value is even high~r than the system average retail rate, and therefore, is not recommended to be used for this purpose. Proposed Valuation for Energy and Renewable Attributes Due to its simplicity, and its ability to represent local conditions and costs impacting all utility ratepayers, it is recommended that Option 4, the average cost of the renewable supply portfolio, be used as the best valuation for the Net Surplus Electricity Compensation Rate. This value represents both the value of the electricity, excluding transmission, and the value of the renewable attributes associated with net surplus electricity provided by net surplus customer­ generators. It also does not shift costs between solar customer-generators and other bundled service customers, and therefore, meets all of the requirements of AB920. BOARD/COMMISSION REVIEW AND RECOMMENDATIONS The UAC considered staffs recommendation at its October 6, 2010 meeting. The Commission discussed the components included in the proposed rate, impacts to incentives for PV Program participation, and cost implications of implementing the rate. CMR: 399:10 Page 5 of7 Commissioners noted that the proposed compensation rate was less than that used currently for net metering customer credits. Staff responded that the proposed rate only applies to the surplus electricity at the end of each twelve-month period and that the retail electric rate used to calculate credits would still be maintained. Therefore existing incentives for PV systems would not be reduced by the new rate schedule. The Commission also asked why the proposed rate doesn't include transmission cost savings. Staff explained that including transmission cost savings would result in cost shifts to other customers, which would not meet the state requirements. The Commission also discussed the potentially high cost to automate the billing system to accommodate the changes and expressed concern that the cost could far exceed the annual total expected compensation to net surplus generators. Staff responded that it was evaluating the cost of implementing the changes manually as well as billing system automation. A future recommendation will be prepared if changes to the billing system are recommended. The commission voted 5 to 2, with two Commissioners opposing, to recommend that the City Council adopt staffs recommended Net Surplus Electricity Compensation Rate Schedule (E­ NSE-l) based on the average cost of the renewable supply portfolio. Two Commissioners opposed the motion because they wanted staff to first return to the UAC with the billing system CIP recommendation. Draft notes from the UAC's October 6, 2010 meeting are provided as Attachment E. RESOURCE IMPACT Resource impacts from the proposed recommendation include impacts due to: 1) net surplus electricity compensation for eligible customers; and 2) billing system related changes 1) Resource Impact due to Net Surplus Electricity Compensation for Eligible Customers It is expected that the resource impact of the proposed net surplus electricity compensation rate schedule will be negligible. Net surplus electricity compensation applies to eligible net surplus customer-generators that have made the election to receive compensation. For the twelve-month period from July 2009 to June 2010, only 42 of the 409 net metering customers were eligible for net surplus compensation, meaning they had generated more than they had consumed during the prior twelve-month period. Of the eligible customers, only 11 elected monetary compensation while 24 elected net surplus electricity to be applied as credit for electricity subsequently supplied by CPAU (i.e., kWh credit), and 7 still have to indicate their preferred option. For the twelve-month period from July 2009 to June 2010, total net surplus electricity generation for the 42 customers was 36,871 kWh, or 878 kWh per customer. Those that made the election for compensation had 7,836 kWh of net surplus generation. Valued at $0.05841 per kWh, this represents a total monetary compensation of $458, or $42 per customer for the 11 that elected monetary compensation. 2) Billing System Related Changes There is a potential resource impact from utility billing system implementation of AB920 requirements, which is independent from the rate adopted. Currently customers' kWh credits are not carried forward; instead credits are carried forward as dollar values. Cumulative kWh credits 399:10 Page 7 are required in order to calculate customer's net surplus customer-generator status and compensation eligibility at settlement. AB920 also requires that customers are provided information on their kWh credit balance. Currently utilities staff manually keeps track of this information for each billing period. Eligible customer-generators are sent a monthly letter separate from the utility bill showing both kWh and dollar credit balances. Additional changes must be made for instituting the settlement periods for each customer. The first implementation of net surplus compensation will be in February of 2011. Staff is looking at alternatives for implementation options ranging from manual processing to a fully automated process through the utility billing system. Costs and benefits will be evaluated once all options are identified. Staff has had a $327,200 estimate for a full automation involving outside consultants performing the billing system configuration. However, further investigation suggests that less costly options are likely to be available. POLICY IMPLICATIONS This recommendation does not represent a change to current City policies. ENVIRONMENTAL REVIEW Adoption of this resolution does not meet the California Environmental Quality Act's definition of a project, pursuant to California Public Resources Code Section 21065, therefore no environmental assessment is required. ATTACHMENTS A. Resolution B. Net Surplus Electricity Compensation Rate Schedule C. PUC Code Section 2827 D. Utility Rule and Regulation 29 Excerpted Draft Minutes from the UAC October 6th, 2010 meeting PREPARED BY: REVIEWED BY: IPEK CONNOLLY .--Iv Sr. Resource Planner DEBRA LLOYD '\) L Acting Assistant Director, Resource Management DEPARTMENT APPROVAL: CITY MANAGER APPROVAL: CMR: 399:10 VAL~NG ~:g~ctor ofUtihtjes a"-f\----L-. _ ;:1~~~t~ ,.(;; ( iA.MES KEENE J~ity Manager Page 7 of7 !ATT ACliMENT A Not Yet Approved Resolution No. ---- Resolution of the Council of the City of Palo Alto Adopting Utility Rate Schedule E-NSE-l of the City of Palo Alto Utilities Rates and Charges Pertaining to Electric Service The Council of the City of Palo Alto does hereby RESOLVE as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule E-NSE-I (Net Metering Net Surplus Electricity Compensation) is hereby added [by definition, if a schedule is being added, then it is new]to read in accordance with sheet E­ NSE-I, attached hereto and incorporated herein. Schedule E-NSE sets forth the compensation rate for net metering net surplus electricity that is paid to a net energy metering customer who makes an election to receive compensation. The foregoing Utility Rate Schedule, as amended, shall become effective January I, 20 II. SECTION 2. The Council finds that the revenue derived from the authorized adoption enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. SECTION 3. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act, California Public Resources Code section 21080, subdivision (b )(8). INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: City Attorney 101022jb 0073432 Mayor APPROVED: City Manager Director of Utilities Director of Administrative Services ATTACHMENTB NET METERING NET SURPLUS ELECTRICITY COMPENSATION UTILITY RATE SCHEDULE E-NSE-l A. APPLICABILITY: This schedule applies to eligible residential and small commercial net metering Customers who, at the end of an annual settlement period, as defined by Rule 29, are net surplus customer-generators of electricity and who elect to receive monetary compensation as such preference is indicated on the net surplus electricity election form. B. TERRITORY: Applies to locations within the service area of the City of Palo Alto. C. RATES: Per kWh Net energy compensation rate $0.05841 D. SPECIAL CONDITIONS 1. Net surplus compensation eligibility will be determined as specified in Rule 29. The determination of a Customer's net surplus electricity measured in kWh will be based on a twelve-month settlement period. The twelve-month settlement period starts on the date ofInterconnection of the facility, or for Customers with dates ofInterconnection of their facilities prior to February 1, 2010, on the day after CPAU's receipt ofthe Customer's net surplus electricity election form .. Net surplus electricity, as specified in Rule 29, if applicable, will be multiplied by the above compensation rate to determine the Customer's annual net surplus electricity compensation stated in dollars. This compensation will be provided to the Customer as a credit applied to the Customer's Utility account. 2. If the Customer does not provide CPAU with an election form selecting a compensation option, the Customer will be deemed to not make an election as required by law, and no compensation will be provided to the Customer for net surplus electricity. 3. In the event a Customer terminates Service prior to the natural expiration of the twelve-month period, the net surplus electricity status will be evaluated at that time. Compensation, if applicable, will be provided in accordance with D.2 above. 4. For all other terms, conditions and definitions please refer to Rule 29, Net Energy Metering Service and Interconnection. CITY OF PALO ALTO UTILITIES Issued by the City Council CITY OF PALO AL TO UTILITIES {End} Effective 1-1-2011 Sheet No.E-NSE-l ATTACHMENT C PUBLIC UTILITIES CODE SECTION 2827 2827. (a) The Legislature finds and declares that a program to provide net energy metering for eligible customer-generators is one way to encourage substantial private investment in renewable energy resources, stimulate in-state economic growth, reduce demand for electricity during peak consumption periods, help stabilize California's energy supply infrastructure, enhance the continued diversification of California's energy resource mix, and reduce interconnection and administrative costs for electricity suppliers. (b) As used in this section, the following definitions apply: (1) "Electric service provider" means an electrical corporation, as defined in Section 218, a local publicly owned electric utility, as defined in Section 9604, or an electrical cooperative, as defined in Section 2776, or any other entity that offers electrical service. (2) "Eligible customer-generator" means a residential, small commercial customer as defined in subdivision (h) of Section 331, commercial, industrial, or agricultural customer of an electric service provider, who uses a solar or a wind turbine electrical generating facility, or a hybrid system of both, with a capacity of not more than one megawatt that is located on the customer's owned, leased, or rented premises, is interconnected and operates in parallel with the electric grid, and is intended primarily to offset part or all of the customer's own electrical requirements. (3) "Net energy metering" means measuring the difference between the electricity supplied through the electric grid and the electricity generated by an eligible customer-generator and fed back to the electric grid over a 12-month period as described in subdivision (e). Net energy metering shall be accomplished using a single meter capable of registering the flow of electricity in two directions. An additional meter or meters to monitor the flow of electricity in each direction may be installed with the consent of the customer-generator, at the expense of the electric service provider, and the additional metering shall be used only to provide the information necessary to accurately bill or credit the customer-generator pursuant to subdivision (e), or to collect solar or wind electric generating system performance information for research purposes. If the existing electrical meter of an eligible customer-generator is not capable of measuring the flow of electricity in two directions, the customer-generator shall be responsible for all expenses involved in purchasing and installing a meter that is able to measure electricity flow in two directions. If an additional meter or meters are instal the net energy metering calculation shall yield a result identical to that of a single meter. An eligible customer-generator who already owns an existing solar or wind turbine electrical generating facility, or a hybrid system of both, is eligible to receive net energy metering service in accordance with this section. (c) (1) Every electric service provider shall develop a standard contract or tariff providing for net energy metering, and shall make this contract available to eligible customer-generators, upon request. 1 (2) If a customer participates in direct transactions pursuant to paragraph (1) of subdivision (b) of Section 365 with an electric supplier that does not provide distribution service for the direct transactions, the service provider that provides distribution service for an eligible customer-generator is not obligated to provide net energy metering to the customer. (3) If a customer participates in direct transactions pursuant to paragraph (1) of subdivision (b) of Section 365 with an electric supplier, and the customer is an eligible customer-generator, the service provider that provides distribution service for the direct transactions may recover from the customer's electric service provider the incremental costs of metering and billing service related to net energy metering in an amount set by the commission. (d) Each net energy metering contract or tariff shall be identical, with respect to rate structure, all retail rate components, and any monthly charges, to the contract or tariff to which the same customer would be assigned if such customer was not an eligible customer-generator, except that eligible customer-generators shall not be assessed standby charges on the electrical generating capacity or the kilowatthour production of an eligible solar or wind electrical generating facility. The charges for all retail rate components for eligible customer-generators shall be based exclusively on the customer-generator's net kilowatthour consumption over a 12-month period, without regard to the customer-generator's choice of electric service provider. Any new or additional demand charge, standby charge, customer charge, minimum monthly charge, interconnection charge, or other charge that would increase an eligible customer-generator's costs beyond those of other customers in the rate class to which the eligible customer-generator would otherwise be assigned are contrary to the intent of this legislation, and shall not form a part of net energy metering contracts or tariffs. (e) For eligible residential and small commercial customer-generators, the net energy metering calculation shall, be made by measuring the difference between the electricity supplied to the eligible customer-generator and the electricity generated by the eligible customer-generator and fed back to the electric grid over a 12-month period. The following rules shall apply to the annualized net metering calculation: (1) The eligible residential or small commercial customer-gerierator shall, at the end ~f each 12-month period following the date of final interconnection of the eligible customer-generator's system with an electric service provider, and at each anniversary date thereafter, be billed for electricity used during that period. The electric service provider shall determine if the eligible residential or small commercial customer-generator was a net consumer or a net producer of electricity during that period. (2) At the end of each 12-month period, where the electricity supplied during the period by the electric service provider exceeds the electricity generated by the eligible residential or small commercial customer-generator during that same period, the eligible residential or small commercial customer-generator is a net electricity consumer and the electric service provider shall be owed compensation for the eligible customer-generator's net kilowatthour consumption over that same period. The compensation owed for the 2 eligible residential or small commercial customer-generator's consumption shall be calculated as follows: (A) For all eligible customer-generators taking service under tariffs employing "baseline" and "over baseline" rates, any net monthly consumption of electricity shall be calculated according to the terms of the contract or tariff to which the same customer would be assigned to or be eligible for if the customer was not an eligible customer-gen'erator. If those same customer-generators are net generators over a billing period, the net kilowatthours generated shall be valued at the same price per kilowatthour as the electric service provider would charge for the baseline quantity of electricity during that billing period, and if the number of kilowatthours generated exceeds the baseline quantity, the excess shall be valued at the same price per kilowatthour as the electric service provider would charge for electricity over the baseline quantity during that billing period. (8) For all eligible customer-generators taking service under tariffs employing "time of use" rates, any net monthly consumption of electricity shall be calculated according to the terms of the contract or tariff to which the same customer would be assigned to or be eligible for if the customer was not an eligible customer-generator. When those same customer-generators are net generators during any discrete time of use period, the net kilowatthours produced shall be valued at the same price per kilowatthour as the electric service provider would charge for retail kilowatthour sales during that same time of use period. If the eligible customer-generator's time of use electrical meter is unable to measure the flow of electricity in two directions, paragraph (3) of subdivision (b) shall apply. (C) For all residential and small commercial customer-generators and for each monthly period, the net balance of moneys owed to the electric service provider for net consumption of electricity or credits owed to the customer-generator for net generation of electricity shall be carried forward until the end of each 12-month period. For all commercial, industrial, and agricultural customer-generators the net balance of moneys owed shall be paid in accordance with the electric service provider's normal billing cycle, except that if the commercial, industrial, or agricultural customer-generator is a net electricity producer over a normal billing cycle, any excess kilowatthours generated during the billing cycle shall be carried over to the following billing period, valued according to the procedures set forth in this section, and appear as a credit on the customer-generator's account, until the end of the annual period when paragraph (3) of subdivision (e) shall apply. (3) At the end of each 12-month period, where the electricity generated by the eligible customer-generator during the 12-month period exceeds the electricity supplied by the electric service provider during that same period, the eligible customer-generator is a net electricity producer and the electric service provider shall retain any excess kilowatthours generated during the prior 12-month period. The eligible customer-generator shall not be owed any compensation for those excess kilowatthours unless the electric service provider enters into a purchase agreement with the eligible customer-generator for those excess kilowatthours. (4) The electric service provider shall provide every eligible 3 residential or small commercial customer-generator with net electricity consumption information with each regular bill. That information shall include the current monetary balance owed the electric service provider for net electricity consumed since the last 12-month period ended. Notwithstanding subdivision (e), an electric service provider shall permit that customer to pay monthly for net energy consumed. (5) If an eligible residential or small commerci'al customer-generator terminates the customer relationship with the electric service provider, the electric service provider shall reconcile the eligible customer-generator's consumption and production of electricity during any part of a 12-month period following the last reconciliation, according to the requirements set forth in this subdivision, except that those requirements shall apply only to the months since the most recent 12-month bill. (6) If an electric service provider providing net metering to a residential or small commercial customer-generator ceases providing that electrical service to that customer during any 12-month period, and the customer-generator enters into a new net metering contract or tariff with a new electric service provider, the 12-month period, with respect to that new electric service provider, shall commence on the date on which the new electric service provider first supplies electric service to the customer-generator. (f) A solar or wind turbine electrical generating system, or a hybrid system of both, used by an eligible customer-generator shall meet all applicable safety and performance standards established by the National Electrical Code, the In9titute of Electrical and Electronics Engineers, and accredited testing laboratories such as Underwriters Laboratories and, where applicable, rules of the Public utilities Commission regarding safety and reliabil A customer-generator whose solar or wind turbine electrical generating syste~, or a hybrid system of both, meets those standards and rules shall not be required to install additional controls, perform or pay for additional tests, or purchase additional liability insurance. (g) This section shall remain in effect only until January 1, 2003, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2003, deletes or extends that date. 2827. (a) The Legislature finds and declares that a program to provide net energy metering for eligible customer-generators is one way to encourage private investment in renewable energy resources, stimUlate in-state economic growth, enhance the continued diversification of California's energy resource mix, and reduce interconnection and administrative costs for electricity suppliers. (b) As used in this section, the following definitions apply: (1) "Electric service provider" means an electric corporation, as defined in Section 218, a local publicly owned electric utility, as defined in Section 9604, or an electrical cooperative, as defined in Section 2776. "Electric service provider" also means an entity that offers electrical service to residential and small commercial customers, as defined in Section 394, if that entity offers net energy metering. Any entity that offers net energy metering to 4 residential and small commercial customers shall comply with this section. (2) "Eligible customer-generator" means a residential customer, or a small commercial customer as defined in subdivision (h) of Section 331, of an electric service provider, who uses a solar or a wind turbine electrical generating facility, or a hybrid system of both, with a capacity of not more than 10 kilowatts that is located on the customer's premises, is interconnected and operates in parallel with the electric grid, and is intended primarily to offset part or all of the customer' 's own electrical requirements. (3) "Net energy metering" means measuring the difference between the electricity supplied through the electric grid and the electricity generated by an eligible customer-generator and fed back to the electric grid over a 12-month period as described in subdivision (e). Net energy metering shall be accomplished using a single meter capable of registering the flow of electricity in two directions. An additional meter or meters to monitor the flow of electricity in each direction may be installed with the consent of the customer-generator, at the expense of the electric service provider, and the additional metering shall be used only to provide the information necessary to accurately bill or credit the customer-generator pursuant to subdivision (e), or to collect solar or wind electric generating system performance information for research purposes. If the existing electrical meter of an eligible customer-generator is not capable of measuring the flow of electricity in two directions, the customer-generator shall be responsible for all expenses involved in purchasing and instal a meter that is able to measure electricity flow in two directions. If an additional mete~ or meters are installed, the net energy metering calculation shall yield a result identical to that of a single meter. An eligible customer-generator who already owns an existing solar or wind turbine electrical generating facility, or a hybrid system of both, is eligible to receive net energy metering service in accordance with this section. (4) "Ratemaking authority" means, for an electrical corporation as defined in Section 218, or an electrical cooperative as defined in Section 2776, the commission, and for a local publicly owned electric utility as defined in Section 9604, the local elected body responsible for regulating the rates of the utility. (c) (1) Every electric service provider shall develop a standard contract or tariff providing for net energy metering, and shall make this contract available to eligible customer-generators, upon request, on a first-come-first-served basis until the time that the total rated generating capacity used by eligible customer-generators equals one-tenth of 1 percent of the electric service provider's aggregate customer peak demand. (2) On an annual basis, beginning in 1999, every electric service provider shall make available to the ratemaking authority information on the total rated generpting capacity used by eligible customer-generators that are customers of that provider in the provider's service area. For those electric service providers who are operating pursuant to Section 394, they shall make available to the ratemaking authority the information required by this paragraph for each eligible customer-generator that is their customer for each service area of an electric corporation, local publicly owned 5 electric utility, or electrical cooperative, in which the customer has net energy metering. The ratemaking authority shall develop a process for making the information required by this paragraph available to energy service providers, and for using that information to determine when, pursuant to paragraph (3), a service provider is not obligated to provide net energy metering to additional customer-generators in its service area. (3) Notwithstanding paragraph (1), an electric service provider is not obligated to provide net energy metering to additional customer-generators in its service area when the combined total peak demand of all customer-generators served by all the electric service providers in that service area furnishing net energy metering to eligible customer-generators equals one-tenth of 1 percent of the aggregate customer peak demand of those electric service providers. (4) If a customer participates in direct transactions pursuant to paragraph (1) of subdivision (b) of Section 365 with an electric supplier that does not offer net energy metering and is therefore not an electric service provider, the customer is not an eligible customer-generator and the electric corporation, as defined in Section 218, that provides distribution service for the direct transactions, is not obligated to provide net energy metering to the customer. (5) If a customer participates in direct transactions pursuant to paragraph (1) of subdivision (b) of Section 365 with an electric supplier that offers net energy metering and is therefore an electric service provider, and the customer is an eligible customer-generator, the electric corporation, as defined in Section 218, that provides distribution service for the direct transactions may recover from the customer's electric service provider the incremental costs of metering and billing service related to net energy metering in an amount set by the commission. (d) Each net energy metering contract or tariff shall be identical, with respect to rate structure, all retail rate components, and any monthly charges, to the contract or tariff to which the same customer would be assigned if such customer was not an eligible customer-generator. The charges for all retail rate components for eligible customer-generators shall be based exclusively on the customer-generator's net kilowatthour consumption over a 12-month period, without regard to the customer-generator's choice of electric ser~ice provider that offers net energy metering and is subject to this section pursuant to paragraph (1) of subdivision (b), in accordance with subdivision (e). Any new or additional demand charge, standby charge, customer charge, minimum monthly charge, interconnection charge, or other charge that would increase an eligible customer-generator's costs beyond those of other customers in the rate class tO,which the eligible customer-generator would otherwise be assigned are contrary to the intent of this legislation, and shall not form a part of net energy metering contracts or tariffs. (e) The net energy metering calculation shall be made by measuring the difference between the electricity supplied to the eligible customer-generator and the electricity generated by the eligible customer-generator and fed back to the electric grid over a 12-month period. The following rules shall apply to the annualized net' metering calculation: 6 (1) The eligible customer-generator shall, at the end of each 12-month period following the date of final interconnection of the eligible customer-generator's system with an electric service provider, and at each anniversary date thereafter, be billed for electricity used during that period. The electric service provider shall determine if the eligible customer-generrtor was a net consumer or a net producer of electricity during that period. (2) At the end of each 12-month period, where the electricity supplied during the period by the elect~ic service provider exceeds the electricity generated by the eligible customer-generator during that same period, the eligible customer-generator is a net electricity consumer and the electric service provider shall be owed compensation for the eligible customer-generator's net kilowatthour consumption over that same period. The compensation owed for the eligible customer-generator's net 12-month kilowatthour consumption shall be calculated as follows: (A) For eligible customer-generators taking service under tariffs employing "baseline" and "over baseline" rates, any net monthly consumption of electricity shall be calculated according to the terms of the contract or tariff to which the same customer would be assigned to or be eligible for if the customer was not an eligible customer-generator. If those same customer-generators are .net generators over a billing period, the net kilowatthours generated shall be valued at the same price per kilowatthour as the electric service provider would charge for the baseline quantity of electricity during that billing period, and if the number of kilowatthours generated exceeds the baseline quantity, the excess shall be valued at the same price per kilowatthour as the electric service provider would charge for electricity over the baseline quantity during that billing period. I (B) For eligible customer-generators taking service under tariffs employing "time of use" rates, any net monthly consumption of electricity shall be calculated according to the terms of the contract or tariff to which the same customer would be assigned to or 'be eligible for if the customer was not an eligible customer-generator. When those same customer-generators are net generators during any discrete time of use pericid, the net kilowatthours produced shall be valued at the same price per kilowatthour as the electric service provider would charge for retail kilowatthour sales during that same time of use period. If the eligible customer-generator's time of use electrical meter is unable to measure the flow of electricity in two directions, paragraph (3) of subdivision (b) shall apply. (C) For all customer-generators and for each monthly period, the net balance of moneys owed to the electric service provider for net consumption of electricity or credits owed to the customer-generator for net generation of electricity shall be carried forward until the end of each 12-month period. (3) At the end of each 12-month period, where the electricity generated by the eligible customer-generator during the 12-month period exceeds the electricity supplied by the electric service provider during that same period, the eligible customer-generator is a net electricity producer and the electric service provider shall retain any excess kilowatthours generated during the prior 12-month period. The eligible customer-generator shall not be owed any 7 · ' compensation for those excess kilowatthours unless the electric service provider enters into a purchase agreement with the eligible customer-generator for those excess kilowatthours. (4) The electric service provider shall provide every eligible customer-generator with net electricity consumption information with each regular bill. That information shall include the current monetary balance owed the electric service provider for net electricity consumed since the last 12-month period ended. Notwithstanding subdivision (e), an electric service provider shall permit that customer to pay monthly for net energy consumed. (5) If an eligible customer-generator terminates the customer relationship with the electric service provider, the electric service provider shall reconcile the eligible customer-generator's consumption and production of electricity during any part of a l2-month period following the last reconciliation, according to the requirements set forth in this subdivision, except that those requirements shall apply only to the months since the most recent l2-month bill. (6) If an electric service provider providing net metering to a customer-generator ceases providing that electrical service to that customer during any l2-month period, and the customer-generator enters into a new net metering contract or tariff with a new electric service provider, the l2-month period, with respect to that new electric service provider, shall commence on the date on which the new electric service provider first supplies electric service to the customer-generator. (f) A solar or wind turbine electrical generating system, or a hybrid system of both, used by an eligible customer-generator shall meet all applicable safety and performance standards established by the National Electrical Code, the Institute of Electrical and Electronics Engineers, and accredited testing laboratories such as Underwriters Laboratories and, where applicable, rules of the Publ Utilities Commission regarding safety and reliability. A customer-generator whose solar or wind turbine electrical generating system, or a hybrid system of both, meets those standards and rules shall not be required to install additional controls, perform or pay for additional tests, or purchase additional liability insurance. (g) This section shall become operative on January 1, 2003. 2827.5. The Legislature finds and declares that the repeal of the provisions of the net metering program for large customers merely reflects a legislative desire to revisit and more closely evaluate the cumulative value and effect of the state's policy regarding renewable energy sources on the economics of investment in solar and wind sources for large net metering customers and to ensure further legislative discussion regarding this issue. 2827.7. Generation eligible for net metering that is installed on or before December 31, 2002, shall be entitled, for the life of the installation, to the net metering terms in effect on the date of installation. 8 NET ENERGY METERING SERVICE AND INTERCONNECTION RULE AND REGULATION 29 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 601-01-20102011 Sheet No. 1 A. APPLICABILITY 1. This Rule and Regulation 29 is applicable to any customer-generator of CPAU who signs the Net Energy Metering and Interconnection Agreement. A customer-generator includes: (1) an “eligible customer-generator,” as that term is defined in Section 331(h) of the California Public Utilities Code to refer to a residential or small commercial Customer, and, (2) a customer-generator who is other than a residential or small commercial Customer, as defined, of CPAU, which includes a medium commercial and a large commercial (industrial) Customer, who uses a solar or wind turbine electrical Generating Facility, or a hybrid system of both. The facility must be located on the customer-generator’s owned, leased or rented Premises, must have a capacity of not more than one (1) megawatt (or 1,000 Kilowatts), must be Interconnected and operated in parallel with CPAU’s Electric utility Distribution System, and must be intended primarily to offset part or all of the customer-generator’s own Electric Service requirements. 2. The customer-generator will be required to sign a Net Energy Metering and Interconnection Agreement (NEMIA) or an agreement containing substantially the terms and conditions of the referenced NEMIA and agree to be subject to applicable Utility Rates and Charges and Utility Rules and Regulations in order to be eligible for Net Energy Metering Service provided by CPAU. CPAU will make available all necessary forms and contracts for Net Energy Metering Service for download from the Internet. 3. CPAU shall process a request for the establishment of Net Energy Metering and Interconnection from the customer-generator within the time period not exceeding that for Customers requesting new Electric Service. Such time period will not exceed thirty (30) days from the date of (1) receipt of a completed Application form for Net Energy Metering Service and Interconnection from the customer-generator, (2) Electric inspection clearance from CPAU, and (3) building inspection clearance from the City of Palo Alto Building Inspection Division. If CPAU is unable to process the request within the thirty-day period or other applicable period, then CPAU shall notify the customer-generator of the reason for its inability to process the request and the expected completion date. B. TERRITORY: NET ENERGY METERING SERVICE AND INTERCONNECTION RULE AND REGULATION 29 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 601-01-20102011 Sheet No. 2 Within the jurisdictional boundaries of the City of Palo Alto. C. SPECIAL CONDITIONS: 1. Net Energy Metering Net Energy Metering means measuring the difference between the electricity supplied through CPAU’s Electric utility Distribution System and the electricity generated by the customer-generator’s facility and delivered to CPAU’s Electric utility Distribution System over a specified twelve-month period. 2. Metering Equipment Net Energy Metering shall be accomplished by using a single Meter capable of registering the flow of electricity in two different directions. If the customer-generator’s existing Meter is not capable of measuring the flow of electricity in two directions, then the customer- generator shall be responsible for all expenses involved in purchasing and installing a Meter that is able to measure electricity flow in two directions. In lieu of one Meter, an additional Meter to monitor the flow of electricity in each direction may be installed with the consent of the customer-generator, at the expense of CPAU. The additional Meter shall be used only to provide the information necessary to accurately bill or credit the customer-generator and/or to collect solar or wind Electric generating system performance information for research purposes. 3. Billing for Net Energy Metering a. At the end of each twelve-month period following the date of Interconnection of the facility, or for a Customer with a date of Interconnection of the facility commencing prior to February 1, 2010, the day after CPAU’s receipt of the Customer’s net surplus electricity election form, and at each annual settlement anniversary date thereafter, CPAU will determine whether the customer-generator is a net electricity consumer or a net surplus customer-generator, as such terms are defined in California Public Utilities Code sections 2827(h)(2) and 2827(h)(3) during that period. CPAU will bill the customer-generator for the electricity used during that twelve-month period, whether the customer-generator is considered a net electricity consumer or a net surplus customer-generator. NET ENERGY METERING SERVICE AND INTERCONNECTION RULE AND REGULATION 29 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 601-01-20102011 Sheet No. 3 b. At the end of the twelve-month period, where the electricity supplied by CPAU during that period exceeds the electricity generated by the customer-generator’s facility during that same period, the customer-generator is a net electricity consumer during that period, and the customer-generator will owe compensation to CPAU. The compensation shall be calculated according to the terms and conditions of the NEMIA or other applicable contract referred to in Section A above and/or to the applicable utility rates and Charges for baseline quantity of electricity, to which class of utility Customers the customer-generator would be assigned. The net balance of money owed by the net electricity consumer to CPAU will be carried forward as a monetary value until the end of the twelve-month period in the case of a residential or small commercial Customer, or the residential or small commercial Customer may elect to pay the balance due at the end of the month immediately following the twelve-month period. If the customer-generator is a medium commercial or large commercial (industrial) Customer, then payment of any net balance due shall be made on a monthly basis. c. At the end of the twelve-month period, where the electricity supplied by the customer-generator’s facility during that period exceeds the electricity supplied by CPAU during that period, the customer-generator is a net surplus customer-generator during that period. Upon the City’s receipt of the customer-generator’s affirmative election, CPAU either will provide net surplus electricity compensation, as such term is defined in California Public Utilities Code section 2827(b)(8) , in accordance with Electric Utility Rate Schedule E-NSE, for any net surplus electricity generated during the prior twelve-month period, or will allow the net surplus electricity to be applied as a credit for electricity (expressed in Kilowatt-hours) subsequently supplied by CPAU to the customer-generator. If the customer-generator fails to make an affirmative election to receive Service pursuant to net surplus electricity compensation, then CPAU shall retain any excess electricity (expressed in Kilowatt- hours) generated during the prior twelve-month period, and it shall not be obligated to pay net surplus electricity compensation nor shall it be obligated to allow the application of net surplus electricity to be used as a credit for Energy subsequently supplied by CPAU., unless there is an agreement which provides for the same. Any excess electricity that in accordance with the election is to be applied as a credit shall be carried forward to the following billing cycle as a monetary value and shall be recorded as a credit to the extent credit is available on the customer-generator’s Account until the end of the twelve-month period. NET ENERGY METERING SERVICE AND INTERCONNECTION RULE AND REGULATION 29 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 601-01-20102011 Sheet No. 4 d. CPAU will allow a Customer to change the election option once each settlement period provided that the Customer provides notice to CPAU one month prior to the beginning of new settlement period. de. CPAU shall provide the customer-generator with net electricity consumption information with each monthly bill; that information shall include either the current monetary balance owed to CPAU or the current amount of excess electricity produced since the last twelve-month period. ef. A Residential or Small Commercial Customer The net Energy consumer customer- generator or net surplus electricity customer-generator failing to make the affirmative election, who is a residential or small commercial Customer, as defined, may elect to pay the electricity Charge (measured in Kilowatt-hours) portion of the billing statement each month, or at the annual settlement. , but such option shall not be available to any customer-generator who is considered a medium commercial or large commercial (industrial) Customer of CPAU. For medium commercial or large commercial (industrial) Customer, electricity Charges are due and payable per applicable monthly billing schedules. The customer-generator’s bill payment will not be considered delinquent, unless the customer-generator does not pay a final billing statement within twenty (20) days of the date of issuance of that final billing statement. g. For Residential Customers electing single billing for the twelve-month settlement period, for each monthly period, the net balance of moneys owed to the electric service provider for net consumption of electricity or credits owed to the customer- generator for net generation of electricity shall be carried forward until the end of each twelve-month period. Any excess kilowatt-hours generated during the billing cycle shall be carried over to the following billing period, valuedcalculated according to the procedures set forth in this section, and appear as a credit on the customer- generator's account, until the end of the annual period when paragraph (3) of subdivision (b) shall apply. h. For all customer-generators on monthly billing, and for each monthly period, the net balance of moneys owed to the electric service provider for net consumption of electricity shall be paid in accordance with the electric service provider's normal NET ENERGY METERING SERVICE AND INTERCONNECTION RULE AND REGULATION 29 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 601-01-20102011 Sheet No. 5 billing cycle, except that if the residential and small commercial customer-generator is a net electricity producer over a normal billing cycle, any excess kilowatt-hours generated during the billing cycle shall be carried over to the following billing period, valuedcalculated according to the procedures set forth in this section, and appear as a credit on the customer-generator's account, until the end of the annual period when paragraph (3) of subdivision (b) shall apply. h. If an electric service provider providing net metering to a residential or small commercial customer-generator ceases providing that electrical service to that customer during any twelve-month period, and the customer-generator enters into a new net metering contract or tariff with a new electric service provider, the twelve- month period, with respect to that new electric service provider, shall commence on the date on which the new electric service provider first supplies electric service to the customer-generator. fi. If the customer-generator terminates the contractual relationship with CPAU, then CPAU shall reconcile the customer-generator’s consumption and production of electricity during any part of the twelve-month period following the last annual settlement and reconciliation. If the electricity supplied by the customer-generator’s facility during that period exceeds the electricity supplied by CPAU during that period, the customer-generator will be deemed a net surplus customer-generator during that period, and compensation will be provided in accordance with Electric Utility Rate Schedule E-NSE. If the electricity supplied by CPAU during that period exceeds the electricity generated by the customer-generator’s facility during that same period, the customer-generator is a net electricity consumer during that period, and the customer-generator will owe compensation to CPAU based upon the applicable Electric Rate Schedule. 4. Safety Standards The facility will meet all applicable federal, state and local safety and performance standards, including those established by the National Electrical Code, the Institute of Electrical and Electronic Engineers, and accredited testing laboratories such as Underwriters Laboratories and, as applicable, the rules of the California Public Utilities Commission regarding safety and reliability. The customer-generator whose facility meets those standards and rules will not be required to install additional controls, perform or pay for additional tests, or purchase additional liability insurance. NET ENERGY METERING SERVICE AND INTERCONNECTION RULE AND REGULATION 29 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 601-01-20102011 Sheet No. 6 5. Interconnection Standards (Design) a. Customer-Generator will conform to the applicable National Electric Code (NEC) Standards [NEC 690] and applicable building codes. b. Customer-Generator will have a dedicated circuit from the inverter to the Service panel with a circuit breaker or fuse [NEC 690-64(b)(1)]. c. Customer-Generator's overcurrent device at the Service panel will be marked to indicate solar power source [NEC 690-64(b)(4)]. d. Customer-Generator's inverter will establish the following minimum specifications for Parallel Operation with CPAU’s Electric utility Distribution System. e. Customer-Generator will install a visible break, lockable AC disconnect switch in the dedicated circuit to the inverter. This switch will be located where it is easily accessible by CPAU personnel and will be equipped with a CPAU padlock [CPAU Rule and Regulation 27]. f. Customer-Generator’s inverter will be UL 1741-aprpoved and have the following specifications for Parallel Operation with CPAU’s Electric utility Distribution System: 1. Inverter output will automatically disconnect from CPAU’s utility source upon the loss of CPAU’s utility voltage and will not be reconnected until at least five (5) minutes after normal utility voltage and frequency have been restored [UL 1741]. 2. Inverter will automatically disconnect from CPAU’s utility source within 120 cycles (2 seconds) if CPAU’s utility voltage isles than 106 volts or greater than 132 volts on a 120-volt base [UL 1741]. 3. Inverter will automatically disconnect from CPAU’s utility source within 10 cycles (0.17 seconds) if CPAU’s utility frequency fluctuations is less than 59.3 hertz or greater than 60.5 hertz [UL 1741] cycle. 4. Inverter output will comply with IEEE 519 standards for harmonic distortion [CPAU Rule and Regulation 27]. ATTACHMENT E EXCERPTED DRAFT MINUTES OF UTILITIES ADVISORY COMMISSION Meeting of October 6,2010 ITEM 2: ACTION: Net Surplus Energy Compensation Rate Recommendation Senior Resource Planner Ipek Connolly summarized the report. She explained that State law passed in late 2009 requires Palo Alto's City Council to establish a Net Surplus Electricity Compensation Rate Schedule to be effective January 1, 2011 to compensate eligible Net Metering customers for electricity produced by their PV system in excess of their annual consumption at the end of each twelve-month period for the customers who choose monetary compensation. Due to its simplicity, and its ability to represent local conditions and costs impacting all electric utility ratepayers, staff recommended that the average cost of electricity in the renewable portfolio be used as the best valuation for the Net Surplus Electricity Compensation Rate. This value represents both the value of the electricity, excluding transmission, and the value of the renewable attributes associated with net surplus electricity provided by PV Partners participants. It also does not shift costs between PV Partners participants and other bundled service customers, and therefore, meets the latest requirements of state law. Commissioner Keller expressed concern that the new rate was significantly less than that currently used to calculate credits for Net Metering customers. Staff clarified that the Net Surplus Electricity Compensation rate would only apply to the excess {or net surplus} electricity at the end of each twelve-month period and would not change the retail electric rate used to calculate credits within each customers twelve-month settlement period. Therefore existing incentives for PV systems would not be reduced by the new rate schedule. Commissioner Keller also asked if the rate should include transmission cost savings. Staff explained that certain transmission cost savings would be hard to identify because it would be difficult to match the time of the net surplus generation to the time that costs are incurred. Also, this is an additional (new) credit now required under state law for the net surplus electricity at the end of a 12·month period and the compensation rate must not result in cost shifts to other customers, therefore staff is recommending a rate that meets the state requirements. Commissioners Foster and Cook also discussed the cost implications of implementing the compensation rate, voicing concern that they would be recommending something that came at high cost for the utility. Staff replied that at this time they were not recommending an automation of the billing system to implement the Net Surplus ElectriCity Compensation rate. If staff evaluation results in favoring the billing system automation, then a recommendation will be presented to the Council at that time. Staff is currently evaluating the cost of manual computation and tracking of the billing system related requirements as an alternative to an automation of the billing system changes. ACTION: Commissioner Foster moved, and Commissioner Cook seconded, that the UAC accept the staff's recommendation but require that they first return to the UAC with the CIP recommendations. Commissioner Eglash moved, and Commissioner Keller seconded, a substitute motion that the UAC recommend that the City Council Adopt Net Surplus Electricity Compensation Rate Schedule (E-NSE) as proposed. The substitute motion passed (5-2) with Commissioners Foster and Cook opposing.