State Regulators Adopt Compensation Rates for Customers Producing Solar Surplus

Go Solar California | June 9, 2011

June 9, 2011. The California Public Utilities Commission (CPUC) today adopted a net surplus compensation rate to compensate net energy metering customers for electricity they produce in excess of their on-site load at the end of a 12-month true-up period.

Net energy metering customers who produce excess power over a 12-month period are known as "net surplus generators." Specifically, the net surplus compensation rate will be calculated using an avoided cost derived from an hourly day-ahead electricity market price known as the "default load aggregation point" (DLAP) price. A utility's DLAP price reflects the costs the utility avoids in procuring power during the time period net surplus generators are likely to produce their excess power. Consequently, the DLAP price also meets the CPUC's obligation to comply with the avoided cost principles of the Public Utility Regulatory Policies Act of 1978.

The net surplus compensation rate will be a simple rolling average of each utility's DLAP price from 7 a.m. to 5 p.m. to match the hours that most net surplus generators produce electricity with their generating facilities. The simple rolling average will match the 12-month period over which a customer's net surplus generation is calculated. In 2009, this average DLAP price for Pacific Gas and Electric Company was approximately four cents per kilowatt hour.

Today's decision also finds that net surplus generators must meet certain preconditions, namely Renewables Portfolio Standard (RPS) certification by the California Energy Commission and renewable energy credit (REC) metering and tracking requirements approved by the California Energy Commission, in order to create RECs and for the utilities to count any net surplus generation they purchase toward RPS annual procurement targets. These requirements have not yet been established by the California Energy Commission.

Further, today's decision finds that the net surplus compensation rate should include payment for the renewable attributes of net surplus generation, but this payment cannot occur until the California Energy Commission completes its work to establish an RPS certification and REC ownership verification and tracking process for net surplus generators. Until the California Energy Commission completes this RPS certification and REC verification and tracking work, all net surplus generators will be paid at the net surplus compensation rate based on DLAP.

After the California Energy Commission process is complete, net surplus generators may be compensated at the net surplus compensation rate plus an adder for their renewable attributes based on an interim proxy rate derived from the Western Electricity Coordinating Council average renewable energy premium, published by the Department of Energy. This interim renewable attribute adder is currently calculated to be 1.83 cents per kilowatt hour. If the California Energy Commission authorizes retroactive RPS certification of net surplus generators, the utilities may retroactively pay the renewable attribute adder and utilities may retroactively count net surplus generation toward their RPS procurement goals.

Finally, net surplus generators seeking net surplus compensation payments for the renewable attributes of their electricity must certify they own any RECs associated with their generating facilities. Net surplus generators who do not own or do not transfer their renewable attributes to the utility purchasing their excess generation will be compensated at the net surplus compensation rate without the renewable attribute adder.

Today's decision fulfills the requirements of Assembly Bill 920.


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