Some states permit end-users to “obtain” energy generated at a remote location, without requiring such end-users to pay the utility to which they and the generator are interconnected for the delivery and ancillary services required to move the energy to the end-user’s load. Such “virtual net metering” is a key element of some community (or shared) solar programs. Examples of end-users that pay no delivery charges for energy delivered from “off-site” or “remote” generation are reflected in an Oregon commission’s recent May 23, 2018 order and in Minnesota, where the local utility continues to credit customers of community solar gardens at the full retail rate. In contrast, (most) other end-users must pay delivery charges when consuming energy delivered over the utility’s wires, whether the energy they consume is largely produced a block away or hundreds of miles away. (On-site net-metering programs also may result in free delivery service for end-users, but that issue is not the focus of this post.) The focus of this post is whether a state or state utility commission may lawfully mandate that energy produced at one location can be deemed to have been consumed by an end-user at another location without that end-user having to pay for delivery service if the utility’s wires are used for such delivery. As discussed below, there are a variety of legal grounds on which virtual net-metering laws, regulations, or tariffs could be challenged by utilities, customers to whom delivery costs may be shifted, and competing generators as relates to the free (or reduced cost) delivery service aspect of virtual net metering. Continue Reading Virtual Net Metering –Vulnerabilities of Free Delivery Service to Legal Challenges

Based on the two-day FERC Technical Conference on DERs, where varying opinions were presented on a variety of technical and operational issues relating to DERs and DER aggregation, the following are overarching takeaways that the Commission and its Staff should consider before taking the next step on DERs’ and/or DER aggregations’ participation in wholesale markets.

  • Identify where/whether need exists. The need for ISO/RTO rules for DER aggregations or DER participation in wholesale markets may vary widely, especially as a preference for participation in “the retail market” (e.g., net metering; distribution system support; distribution facility deferral) may result in very little DER participation in wholesale markets, even where market penetration of DERs is significant.
  • The UDC rules this domain. The role of the Utility Distribution Company (UDC) in wholesale market participation will be significant. The notion that a DER aggregator would interface only with the ISO/RTO, although supported by DER aggregators at the conference, appeared to be a non-starter for UDCs and ISOs/RTOs. The message that the UDC or a Distribution System Operator ultimately had to have operational control over the distribution system was clear.
  • Plug and play is not here today. The readiness for significant DER penetration varies widely from UDC to UDC and any FERC rule must take this into account, particularly as state commissions are the entities ultimately authorizing UDC “spend” on distribution system modernization.
  • Jurisdictional, regulatory, and legal issues must be resolved first, not as an afterthought. Technical/operational issues cannot be fully divorced from jurisdictional, regulatory, and legal issues. Establishing rules and policies should precede any discussion of technical implementation, but have been largely ignored to date (and purposefully omitted from the Technical Conference). Examples: 1) is it practical for DERs that do not have or cannot obtain qualifying facility (QF) status to sell into wholesale markets (whether directly or through a DER aggregator) under the existing regulatory system (requiring quarterly EQR filings and maintaining market-based rate eTariffs)?; 2) Currently, QFs selling to the market must take FERC-jurisdictional interconnection service under existing FERC policy; if aggregators are considering aggregating entire neighborhoods of PV owners (which are QFs as a matter of law if under 1 MW), is this approach to interconnection practical? When and how are such issues going to be addressed?
  • Multi-use applications will take time to address. Compensation and cost recovery relating to DERs offering both FERC- and state-jurisdictional services and/or taking FERC- and state-jurisdictional services raise implementation issues that are very complex. Although they are solvable issues, significant time and effort is required to solve them, particularly at the state commission level.

Those persons that believe that the Federal Power Act left exclusive jurisdiction over local distribution facilities (and everything that occurs on such facilities) to the states have been told that they are wrong. The courts have told them they are wrong. FERC has told them they are wrong. Yet, whenever FERC mentions the distribution system, state regulators and others object vociferously that FERC is intruding into state-jurisdictional matters. Indeed, the Commission’s Final Rule on Storage, which assumes that many if not most storage devices will be connected to distribution, actually raises no meaningful jurisdictional issues that have not already been addressed by the courts. Nonetheless, several rehearings raising jurisdictional issues related to storage devices located on the distribution system were filed in response.

Successful appeals are unlikely on jurisdictional grounds, assuming FERC does not appease the states as it has on other occasions, such as with regards to non-QF interconnections to distribution. NARUC and some utilities have objected to certain aspects of the Final Rule that permit participation by storage resources interconnected to distribution in wholesale markets. FERC jurisdiction over all wholesale sales in interstate commerce is well-established. And, FERC jurisdiction over the usage of a distribution system to engage in wholesale market transactions rests on FERC precedent more than two decades old. FERC jurisdiction over wholesale distribution service was affirmed in New York v. FERC, and Detroit Edison Co. v. FERC. Continue Reading Untangling Jurisdiction Issues for DERs