Forbes on utility objections to combined heat and power 11

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1. 

   amazingdrx Posted 12:06 am
   10 Jul 2008

   Imagine individualsFaced with this kind of opposition, when installing a (grid connected) renewable energy system in their home or business.
   "Take the case of MIT, which spent years researching and developing a 22-megawatt cogeneration plant for its campus. Some $40 million later, the plant was ready in 1995. Instead of being welcomed, however, MIT's utility, the no longer in existence CELCo, hit the university with a $6 million charge."
   "CELCo said it developed its system to meet the power needs of MIT--its second-largest client--and the charge was needed to cover the loss. Under regulations then in place, the Massachusetts Department of Public Utilities agreed with CELCo. The charge was knocked down to $4.5 million, but still represented more than 10% of the cost of the plant. The legal wrangling continued."
   "MIT finally prevailed three years later, and only after a change in state law nullified the utility's ability to charge the fees. CELCo was swallowed away in a merger."
   It would be better for customers of utilities, who invest in a 100% renewable home or business (orginal design or conversion) to just remain disconnected and let the utility come to them as fuel prices soar.
   Except that we have rules that say the utility has to use net metering for generation capacity under certain limits.  A utility here in Wisconsin does better than that voluntarily.  Paying solar generating customers 23 cents per kwh and extending retail prices up to a 100 kw wind system.  
   Not all utilities are standing in the way, some are willing to adapt.  Even net metering does not allow renewable rooftop solar or farm biogas combined heat and power generation to compete with central power generation.  It only gets your bill down to zero, what about paying for the extra power generated?
   MIT was powerful enough politically to push this utility out of their way, maybe legal changes and precedents impelled by powerful actors like this can help make the grid a renewable electricity super highway.  
   But I think environmental groups should get together and help out too.  They aren't doing that now.  Don't members support groups like NRDC to be proactive?  Instead these groups seem to give lipservice to real energy/ag policy reform, and serve the old energy economy behind the DC curtain.
   Maybe every utility that refuses to adapt can be "merged" with a renewable energy cooperative?  before they are all "merged" with halliburton?
   
   
   
   http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

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2. 

   Sean Casten Posted 12:35 am
   10 Jul 2008

   You're absolutely rightAnd too often, the environmental groups don't understand how important those regulatory issues are, thinking that the goal is technology R&D (or tax-subsidies to specific techs) rather than fixing the underlying regulatory problems.  
   If you'll humor a self-referential link, check out Bill McKibben's article on precisely this issue.

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3. 

   Max8806 Posted 1:56 am
   10 Jul 2008

   Another (flawed) defense of standby feesSean, after your paper on the legal case against standby fees, I've been doing a bit more research myself. You claimed the utilities' case was based on a takings allegation.  The argument I've seen in my reading defends standby rates as necessary to cover the cost of the generation that must be kept to cover the utilities' continuing obligation to serve.  That is, if MIT's cogen plant stopped working, the utility is still "on standby" (hence the name).  
   It seems to me that the crucial flaw with that reasoning is that it assumes the distributed units are more likely to fail than the utility's generation itself, on a perMW basis.  And in fact if one unit did, it could easily be covered at little additional cost on the wholesale spot market, and to the extent it was higher cost the utility could pass that through if it wanted to be totally fair about only charging incremental costs.  But the idea of needing their old generation plants to continue to standby would assume a burden DG might bring that couldn't be covered in the wholesale market, or at least would force them way up the supply/cost curve.  This seems like it would only happen if several DG plants across an area failed simultaneously at peak load.  
   I guess my point here is a standard economic one - don't consider the cost (or risk) of something without considering the cost of the alternatives.  There's no basis for charging for the risk of failure of DG's unless that risk is demonstrably greater than that of the failure of what you would be using without them.  And if the risk of widespread DG failure simultaneously at peak load is not demonstrably more likely than the failure of any one of their own plants that would otherwise be covering that demand, then theres no additional risk and so no justification for the standby rates, at least under the defense of them I've outlined here.
   I know this is sorta preaching to the choir to you Sean, but I don't know anyone "in the trenches" on the other side.  So, do you see any flaw in my reasoning (or facts) here?

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4. 

   Sean Casten Posted 2:22 am
   10 Jul 2008

   You've got it right MaxAnd I'll add two more nuances from the choir:
   
   
   The argument for standby fees - a la the MIT example - ought to apply just as equally to anywone who reduces their purchase of power from the grid in a manner that cannot be 100% guaranteed to be permanent, since it is essentially arguing that the utility must keep all backup capacity in place should that demand rise again.  (Indeed, this is the legal basis for "non-discriminatory" treatment in rate-making, which says that a class can only be given a differential rate if it can be shown that the class imposes differential costs.  Thus, I can charge a higher rate to residential customers based on their peaky, low-voltage service relative to industrials, but I cannot selectively charge a higher rate only to Chinese residential customers without first showing that their Chinese-ness causes a demonstrable change in the costs they impose on the utility.)  Thus, a proponent of standby rates ought to logically also require anyone who installs more efficient lightbulbs to pay a standby fee.  And, for that matter, any factory that temporarily curtails production, going from 3 shifts to 2.  There is no way politically that a utility could ever get such rates of course - but this simply highlights the crux of the problem.  Standby rates exist because they are politically possible - not because they are technically or legally defensible.
   More broadly, the whole concept only exists in the construct of government-backed monopolies.  I personally have quite a bit of experience working really hard to sell to a customer and then having them buy from someone else.  I've also had repeat customers stop buying from me in spite of the great service I was providing them.  Selfishly, I would love to see a law that mandated that those greedy bastards paid me for all the overhead I expended in anticipation of future sales.  Keep me whole, and make it hard as hell for my competitors to steal my customers.  And if any regulator ever wants to offer a law specifically for my company that would give me that protection, I will absolutely accept.  But I have a really hard time arguing that's good policy.  (I suspect my customers would agree.)  So while I agree with you that you should not consider the cost without also considering the cost of alternatives, we also shouldn't lose sight of the fact that - outside of regulated monopolies - there is no logical basis for even spending time thinking about that consideration.  Customers do a fine job of picking winners.  Governments don't.
   
   

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5. 

   Max8806 Posted 3:55 am
   10 Jul 2008

   Standardized Interconnection ProceduresThanks Sean, I guess you can implement your (2) on day two of your reign as king, right after the production based carbon pricing.  One more question though.
   Interconnection to the local transmission system is another obvious opportunity for a utility to place undue burdens on a DG facility.  FERC has taken some steps to remedy this with its Large Generation Interconnection Procedure (LGIP) and Small Generator Interconnection Procedure (SGIP; <20MW).  While obviously FERC only has direct jurisdiction over those transmission providers operating interstate transmission, I found the following in a report by DOE/FERC commissioned by EPAct2005 on DG:
   "While municipal and cooperative utilities are not under FERC regulation, FERC has obtained their involvement and cooperation in transmission rules and requirements--such as for interconnection--by using a "reciprocity" provision: municipal and cooperative utilities are not allowed to take advantage of open access transmission or regional markets unless they offer their own systems to others on comparable terms."
   My question is are you seeing any progress on this on the ground, or is this just a paper protection?  Obviously interconnection procedure does not encompass the range of discrimination faced, this has nothing to do with standby fees, exit charges, etc.  Still it would be encouraging if this was improving things, and the 'reciprocity' card could be played in promulgating other standards to remedy other problems as well.

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6. 

   Sean Casten Posted 6:19 am
   10 Jul 2008

   MaxYes, but it's a wholly separate issue.  I've lost track of how many states have standard interconnection standards now but there are >20.  While I don't want to overstate the current position, the interconnect fight is substantially over and has been won by the good guys.  Not because the standards are perfect (indeed many of them still have plenty of utility discretion and latitude for abuse), nor because they are universal.  But rather because there are simply too many standards in place and working for any utility to still credibly make the argument that their system is somehow unique.  
   This is by no means to suggest that everything is lovey-dovey - just that the battles are no longer framed as technical interconnection battles, at least not nearly to the extent that they once were.
   Two minor points to bear in mind though:
   
   
   Re FERC, there is a FERC standard, and it is a template that many states are currently using for their own rules (not just technical, but also in terms of the application fees, insurance, dispute resolution, etc.)  But in the specific instance, the FERC standard is largely irrelevant due to jurisdictional constraints.  The FERC standard applies to interconnects <20 MW, but only on FERC jurisdictional elements of the grid - essentially, high-voltage transmission.  Since as a practical matter, there are very few opportunities to built <20 MW projects connected to 135 kVA transmission sections, the FERC rules really aren't used to do very many specific interconnects, even while they do provide useful templates for state models that do apply.  (Given your interest in the law, it bears noting that "FERC Jurisdictional" has never been fully defined in the courts, so there is the potential for the existing FERC rules to become more specifically appropriate given differential legal interpretations, but those would almost certainly require a test case to resolve that seems unlikely.)
   There is one massive section of the grid that remains paleolithic in its approach to interconnection: namely, that of so-called "network" grids.  The standards that exist are for radial systems, wherein one feeder runs from the substation to the load with various taps along the way.  A network system by contrast is one in which multiple electric feeders connect to an individual load, and is typically found in densely populated urban areas.  With the exception of NY City, most network grids in the country remain damn-near impossible to connect to by virtue of the fact that the state regs have still bought into the utility arguments that those systems are unique.  As an example, the network rules in MA allow you to connect only if your generator is (a) <10 kW; (b) inverter-based and (c) <1/15th of the minimum facility load.  (a) and (b) mean that the regs essentially only apply to PV, which are the only technologies that are that size and inverter based (just about).  And (c) means that your ability to connect PV is a function of the building load at night, when the sun doesn't shine.  This is one of the few network standards in the country, which gives you some sense of how far we have to come until we actually have a technically rational network interconnect - but this is primarily an urban issue that doesn't affect the majority of the local generation opportunities, at least on a MW basis.
   
   

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7. 

   stopgreenpath Posted 7:18 am
   10 Jul 2008

   right on, amazingdrxin CA, "net metered" power, no matter how much is generated, is not counted towards a utility's RPS, nor towards a "savings" or "free input" column in their books.  neither are any of the savings from the conservation programs they have ludicrously been put in charge of.
   no, all that power they are not required to pay to generate (either because we generate it or because we conserve) is written off as a "loss" to the utilities.  the excess we must hand utilities for free is a loss, then a pure-profit proposition for them, but we do not get to write that giveaway off as a "loss" on our own taxes.
   this may not be exactly the same as a "standby" argument, as i'm not clear on the justifications they use to cook the books in this way, but it does show how utilities manipulate the facts to suit their profit motivations.
   on a related note, there is a process called RETI in CA, designed to further entrench Big Energy Monopolies by implementing a massive grid of several thousand miles of new transmission (on our properties and our dime) to and from faraway, wasteful, remote new solar and wind power plants.  when we approached them with the good news that no new transmission would be required because grid congestion (the excuse FERC used to designate all of SoCal an NIETC) would be eliminated by ubiquitous point of use systems, and also that no remote power plants would need to be built, they responded with a formal position that NO MATTER HOW MUCH POINT OF USE POWER IS GENERATED, even if it far exceeds CA's 33%RPS (the stated goal of the transmission overdose), NONE OF IT WOULD BE CONSIDERED in power plant or powerline siting and "necessity" decisions.  They will simply pretend that it does not exist...
   CA needs fewer than 20,000 mW of renewable power to hit that 33% goal, which could VERY easily be completely handled by point of use renewables, but even if that number is met, they will forge ahead with massive eminent domain and habitat destruction in order to shove more government-sponsored monopolies down our collective throats.  i, for one, am gagging already.
   the book-cooking and Energy Empire Building by the unholy alliance of Big Energy (including Big Renewables) and our government is astonishing, and has gamed the system entirely away from a free market.
   
   the greenest energy is that which you needn't ever produce.

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8. 

   stopgreenpath Posted 12:22 pm
   10 Jul 2008

   A scathing report from SD City AttorneySean, you gotta read this thing - it's all about how Sempra/SDG & E has been conspiring to prevent ratepayers from installing PV systems and/or to interconnect them because they have been frantically building and fueling these "peaker" plants which directly compete with solar.  
   They manipulated gas supplies to CA, diverted gas from CA during the Energy Crisis of 2001, intentionally refused to support point of use systems, instead relying on a powerline (reaching, it is said, to their gas plants in N. Mexico) for so-called "renewables" to meet their RPS.  it's just a scorcher, but i don't know how to get it to you?
   Big Energy are pigs and should NOT be allowed to control the residential/commercial point of use renewable power programs in CA, nor the conservation programs.  I always knew they had severe conflicts of interest, and this proves it.
   
   the greenest energy is that which you needn't ever produce.

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9. 

   amazingdrx Posted 12:39 pm
   10 Jul 2008

   Complex stuff green!We sure need simple legal reform.  I think Sean knows what is needed.  Examples sure help.  Like you both presented.
   But we have to try to get it into simple enough terms so legislators can understand it.  I get maybe 3 minutes and a handshake with most of my reps, maybe twice a year.  And a few emails and a phone call with staff.
   Most people get even less.  This has got to be explainable in simple short sentences somehow.
   We have to keep decipering Sean and other's explanations and force them to come down onto the amateur level we operate on.   So we can get our simple minded legislators to understand it.  Hehey.
   
   http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin

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10. 

    Sean Casten Posted 10:23 pm
    10 Jul 2008

    SGPWhat thing?  Can you post a link?

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11. 

    stopgreenpath Posted 6:19 am
    11 Jul 2008

    link to city attorney reporthttp://www.sandiego.gov/cityattorney/reports/pdf/interim3 ...
    
    the greenest energy is that which you needn't ever produce.

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