HomeMy WebLinkAboutAgenda Report - July 6, 2016 C-18TM
CITY OF LODI
COUNCIL COMMUNICATION
AGENDA ITEM •%
AGENDA TITLE: Adopt Resolution Making Determination Net Energy Metering Aggregation (NEMA)
Results in Cost Shift to Customers Without Eligible On-site Renewable Generation
and to Prohibit NEMA in the Lodi Electric Utility Service Territory
MEETING DATE: July 6, 2016
PREPARED BY: Electric Utility Director
RECOMMENDED ACTION: Adopt a resolution making a determination that Net Energy Metering
Aggregation (NEMA) results in a cost shift to customers without
eligible on-site renewable generation and to prohibit NEMA in the
Lodi Electric Utility Service Territory.
BACKGROUND INFORMATION: Under current California law, Lodi Electric Utility (LEU) must offer
Net Energy Metering (NEM) to customers with on-site renewable
generation until the total combined generation capacity reaches five
percent of LEU's peak demand or approximately seven megawatts.
LEU currently has approximately 500 NEM systems within its service territory, totaling 3.8 megawatts of
combined capacity. While less than 10 percent of the total systems have been installed by commercial
customers, more than 40 percent of that capacity is generated by those systems.
With NEM, customers offset their retail energy usage with energy generated by an on-site renewable
generation facility, such as solar. By law, all NEM customers receive a one-for-one retail energy rate
credit for all generation. This would be like a company paying its wholesale suppliers retail prices for a
product it sells at retail without consideration of the company's variable and fixed expenses.
Like most utilities, LEU's rates are structured to recover a portion of its revenue requirement through a
bundled energy charge for both commodity (variable) and non -commodity (fixed) costs. This means that
non -commodity related costs are recovered largely when the customer is billed for energy. Because NEM
customers offset their energy usage with their own generation, these customers are able to avoid both
the commodity and non -commodity costs. Therefore, these fixed costs to serve the solar customers are
then shifted to customers without solar installations.
Senate Bill (SB) 594, effective January 1, 2013, allows an eligible customer generator with multiple
meters to aggregate the electrical Toad of the meters located on the property where the generation facility
is located and on all property adjacent or contiguous to the property on which the renewable generation
facility is located if those properties are solely owned, leased, or rented by the eligible customer
generator. However, the law also provides that Net Energy Metering Aggregation (NEMA) shall only be
allowed by a utility upon a determination that allowing NEMA will not result in an increase in the revenue
obligations of customers who are not eligible customer generators, or non -NEM customers. There are
currently no NEMA customers in the LEU service territory.
The cost shifts associated with NEM have become a point of discussion throughout the state, as well as
the nation. The California Public Utilities Commission (CPUC) recently submitted a report which projects
for non-residential, non -NEM customers, for systems installed between 2017 and 2025 that electric utility
bills will increase between 3.17 and 4.41 percent. However interestingly enough, the CPUC issued a
APPROVED:
t - chwabaue , City Manager
Adopt Resolution Making Determination Net Energy Metering Aggregation (NEMA) Results in Cost Shift to Customers Without
Eligible On-site Renewable Generation and to Prohibit NEMA in the Lodi Electric Utility Service Territory
July 6, 2016
Page 2of2
resolution in 2013 authorizing investor-owned utilities to implement NEMA. In making its decision, the
CPUC determined that non-residential customers (who would more likely participate in NEMA) in general
pay lower average rates than do residential customers — thereby resulting in a decrease in the non-
commodity revenue loss with more non-residential NEM systems installed under SB 594. However, while
the CPUC determined the revenue loss is less, they still recognized that NEMA represents a cost shift to
non -NEM customers.
With the exception of Palo Alto, other publicly -owned utilities such as Alameda, SMUD, Merced Irrigation
District, Redding, Roseville and Modesto Irrigation District do not allow NEMA in their service territories.
The average system size of a non-residential customer -owned solar system in LEU's service territory is
approximately 40 kilowatts. Table A below illustrates that NEMA under SB 594 would result in non -NEM
customers subsidizing NEMA customers. Notably, the subsidy in NEM increases under load aggregation
because load is offset differently with generation allocated to each eligible meter based on the proportion
of load served by all meters.
Table A
(Note: Assumes Customer Renewable System Generates 5,000 kWh/month)
Table A reveals that NEMA results in subsidies irrespective of whether one uses the costs of non -NEM or
standard NEM customers as a point of comparison.
Allowing NEMA under SB 594 will exacerbate existing subsidies borne by non -NEM customers, because
it permits the installation of larger generation facilities that otherwise would not have been installed under
the single meter construct and would permit retail credit of formerly ineligible energy usage. Expansion of
NEM to allow aggregation will accelerate full subscription of the five percent net metering cap, thus
shifting costs to non -NEM customers faster than would otherwise occur without NEMA. Moreover,
because most residential customers would not qualify for NEMA, since most do not have multiple meters,
any remaining capacity in the five percent cap would shift to commercial customers, therefore
disproportionately increasing the subsidy by non -NEM residential customers.
FISCAL IMPACT: Table A denotes the fiscal impact associated with NEMA
FUNDING AVAILABLE: Not applicable.
lizabeth A. Kirkley
Electric Utility Director
PREPARED BY: Melissa Price, Rates & Resources Manager
EAK/MP/Ist
Meter A
Meter B
Total (Meter A & B)
Monthly Consumption (kWh)
4,000
7.000
11,000
Percent of Total Load
36%
64%
100%
Non -NEM Scenario
Monthly Non -Commodity Charges
$551
$956
$1,507
Standard NEM Scenario
Monthly Non -Commodity Charges
$11
$956
$967
Monthly Subsidy
($540)
$0
($540)
NEMA Scenario
Monthly Non -Commodity Charges
$306
$527
$833
Monthly Subsidy
($245)
($429)
_ ($674)
NEMA Subsidy Increase Over Standard NEM
25%
(Note: Assumes Customer Renewable System Generates 5,000 kWh/month)
Table A reveals that NEMA results in subsidies irrespective of whether one uses the costs of non -NEM or
standard NEM customers as a point of comparison.
Allowing NEMA under SB 594 will exacerbate existing subsidies borne by non -NEM customers, because
it permits the installation of larger generation facilities that otherwise would not have been installed under
the single meter construct and would permit retail credit of formerly ineligible energy usage. Expansion of
NEM to allow aggregation will accelerate full subscription of the five percent net metering cap, thus
shifting costs to non -NEM customers faster than would otherwise occur without NEMA. Moreover,
because most residential customers would not qualify for NEMA, since most do not have multiple meters,
any remaining capacity in the five percent cap would shift to commercial customers, therefore
disproportionately increasing the subsidy by non -NEM residential customers.
FISCAL IMPACT: Table A denotes the fiscal impact associated with NEMA
FUNDING AVAILABLE: Not applicable.
lizabeth A. Kirkley
Electric Utility Director
PREPARED BY: Melissa Price, Rates & Resources Manager
EAK/MP/Ist
RESOLUTION NO. 2016-125
A RESOLUTION OF THE LODI CITY COUNCIL MAKING A
DETERMINATION THAT NET ENERGY METERING
AGGREGATION (NEMA) RESULTS IN A COST SHIFT TO
CUSTOMERS WITHOUT ELIGIBLE ON-SITE RENEWABLE
GENERATION AND TO PROHIBIT NEMA IN THE LODI
ELECTRIC UTILITY SERVICE TERRITORY
WHEREAS, Senate Bill 594 (2012) amended Public Utilities Code Section 2827
allowing certain customers to aggregate the Toads from multiple meters and net meter
them with an eligible generation facility located on the same or adjacent property; and
WHEREAS, Public Utilities Code Section 2827 states that a local publicly -owned
electric utility shall only allow eligible customer generators to aggregate their load if the
utility's ratemaking authority determines that allowing eligible customer generators to
aggregate their load from multiple meters will not result in an increase in the expected
revenue obligations of customers that are not eligible customer generators; and
WHEREAS, calculations show that a cost shift would occur under Net Energy
Metering Aggregate (NEMA) thereby resulting in increased revenue obligations of non -
eligible customer generators.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council hereby makes
a determination that Net Energy Metering Aggregation will result in a cost shift to
customers without eligible on-site renewable generation; and
BE IT FURTHER RESOLVED that in accordance with the forgoing determination
and Public Utilities Code Section 2827, Lodi shall not allow Net Energy Metering
Aggregation in the Lodi Electric Utility service territory.
Dated: July 6, 2016
I hereby certify that Resolution No. 2016-125 was passed and adopted by the
City Council of the City of Lodi in a regular meeting held July 6, 2016, by the following
vote:
AYES: COUNCIL MEMBERS — Johnson, Kuehne, Mounce, Nakanishi,
and Mayor Chandler
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — None
ABSTAIN COUNCIL MEMBERS — None
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NNNIFER,Ijri. FERRAIOLO
City Clerk
2016-125