The Kentucky Civil Service Commission issued an order last week establishing, among other things, a rate at which customers would be compensated for energy returned to Louisville Gas and Electric and Kentucky Utilities (LG & E / KU) through net metering. This rate would apply to eligible installations that will be commissioned as of September 25, 2021.
On June 30, 2021, the Board issued an order regarding LG & E / KU rate adjustments and other matters. However, the Commission has deferred decisions on the companies’ proposed rate changes for net metering and qualifying installation (QF) pending further review. LG & E / KU has proposed a revised Net Metering Tariff (NMS 2) for new generator customers, as permitted by the 2019 General Assembly Amendments to the Kentucky Net Metering Bylaws. This impacts clients who might consider installing solar panels on their property.
The June 30 Commission order directed LG & E / KU and interveners to file additional evidence for the net metering export compensation rate using the avoided cost elements established in a previous proceeding, that of Kentucky Power. (file n ° 2020-00174, issued May 14, 2021). These components are avoided energy, ancillary services, generation capacity, transmission capacity, distribution capacity, carbon and environmental compliance costs, and employment benefits.
While the companies provided estimates for avoided ancillary services, generation capacity, transmission capacity, and distribution capacity costs, they offered a recommended total avoided cost of 2.319 cents per kilowatt hour (kWh), based solely on on their estimated avoided energy costs. The September 24 ordinance establishes an NMS 2 export rate of 6.924 cents / kWh for LG&E and an NMS 2 export rate of 7.366 cents / kWh for KU. These rates are based on the avoided costs in each of the categories listed above.
The Commission notes that LG & E / KU’s calculations of avoided costs contain inconsistencies and, in some cases, are based on false or unreasonable assumptions. Their assumptions and costing process were also inconsistent with the guidelines set out by the Board in the Kentucky Power Net Metering Order. In particular, the Commission finds unreasonable the companies’ assertion that net metering customers are unlikely to lead to avoided costs of generation, transmission and distribution capacity or to avoided carbon costs.
The Commission used a modified Value of Solar methodology developed in Minnesota to establish the avoided transmission capacity and distribution capacity costs. This methodology is a recognition of the determination that net metering customers do incur deferred system costs, the Board noting, for example, that each net metering customer provides a small incremental reduction in the overall load for which the customer should be. appropriately compensated.
In addition to establishing NMS 2 export rates and making changes to several other tariffs (eligible facilities, green tariff, and solar sharing program rider), the September 24 ordinance reiterates the guiding principles that LG & E / KU and other utilities should follow to determine compensation for eligible beneficiaries. generating customers in future depots. Commission says utilities must learn how to cost-effectively integrate Distributed Energy Resources (DER) into their planning, procurement and operations processes if they are to ensure that taxpayers do not pay more costs. students. DERs are small-scale power generation units that operate locally and connect to the larger power grid, usually at the distribution level. Additionally, utilities should not, as LG & E / KU did in this case, rely on the integration issues of DERs from jurisdictions that have very high levels of DER to claim that distributed generation results in more costs than benefits.
The Commission also considers that further information regarding Advanced Distribution Management Solutions (ADMS) and Distributed Energy Resource Management Systems (DERMS) is needed. This is due to LG & E / KU’s plans to spend large sums on such systems to address potential issues with a dynamic distribution system, even though the volume of DERS on LG & E / KU’s systems is minimal and more alternatives. affordable to ADMS and DERMS exist.
The September 24 order also directs LG & E / KU to submit a case that details how companies will increase the transparency of their production cost model (used to determine avoided energy costs). Companies are also required to submit a dossier explaining how non-fuel O&M costs are determined as variable and fixed costs. These deposits are due within ninety days. Within thirty days, companies are also required to file with the Commission a recommended notice to customers regarding how their joint accounts will be treated under the NMS tariffs.
The Commission held an evidentiary hearing on August 17-18, 2021.
The interveners in both cases are: the Attorney General for the Commonwealth of Kentucky; Kentucky Industrial Utility Customers, Inc .; Kroger Company; Walmart, Inc .; Kentucky Solar Industries Association, Inc .; Sierra Club; United States Department of Defense and all other federal executive agencies; Mountain Association; Kentuckians for the Commonwealth; Kentucky Solar Energy Society; and Metro Louisville / Jefferson County Government (LG&E) / Urban County Government of Lexington-Fayette (KU).
The command and other case files are available at psc.ky.gov. The case numbers are 2020-00349 (KU) and 2020-00350 (LG&E). The cases remain open pending a final decision on the issues for which LG & E / KU were granted a new hearing in an order dated August 12, 2021.
Commissioner Butler did not participate in this proceeding.
The PSC is an independent agency attached administratively to the Cabinet de l’Energie et de l’Environnement. It regulates more than 1,100 gas, water, sewer, electrical and telecommunications utilities operating in Kentucky.