Microgrids & Energy Storages

2018 introduced legislation HB 1412 (Rep. Barrar, R-Delaware) authorizes electric distribution companies to propose energy storage and micro grid pilot programs. The criteria that the Commission must use to evaluate the pilot program include: (a) facilitating the use of diverse electric supply option in the Commonwealth, including distributed energy resources; and (b) enhancing electric distribution, resiliency and operational flexibility. However the criteria does not require an actual examination into whether the micro grid benefits all ratepayers, despite the fact that all customers will pay through distribution rates. Additionally the criteria does not cap the amount of money that can be expended in the "pilot" program. HB 1412 authorizes the recovery of return of and on the projects through distribution rates, and of the expenses to operate and maintain the facility. This recovery extends to all utility customers, not just those who use the micro grid or storage facility. Expenses to "operate and maintain" the facility includes fuel and other activities for the micro grid users.  From a cost-causation standpoint, customers who do not use the micro grid should not pay for the fuel or maintenance of the generator. The return is on the "original cost"—It is not clear whether this requires a reduction if there are grants or other government funding that is obtained for the micro grid.

- IECPA agrees that there could be broader public benefit of microgrids and energy storage. However the focus should be using the pilot micro-grids and distributed energy resources to support emergency preparedness projects that are not supported by individual customers or the competitive market.

- There are two components associated with microgrids. There is the distribution piece and the generation piece. The distribution component is the distribution system owned by the utility that will require upgrades and improvements to enable the microgrid. This component is still part of the regulated monopoly service and should receive traditional, regulated treatment. The generation component is composed of generating assets used to provide electric service to connected customers when in island mode and to the larger grid when in grid connected mode. House Bill 1412 moves away from the policy of the Commonwealth declared in the Electricity Generation Competition and Customer Choice Act that competitive market forces were to be used to control the cost of generating electricity rather than regulation.

- The majority of the electrical benefits from this equipment is local and very customer specific. House Bill 1412 does not reflect that micro-grids directly serve limited numbers and types of utility customers and would allow for recovery of costs from all electric distribution utility customers. Cost recovery needs to be limited to those electric distribution utility customers that directly benefit from the use of the equipment.

- The definition of distributed energy resources is overly broad for these targeted pilot programs and may impinge on other portions of the Public Utility Code and other pending Bills. For instance, energy efficiency and demand response should not be included in the definition of distributed energy resources. Energy efficiency and demand response are the subject of extensive regulation by the PUC under Act 129 of 2008 (66 Pa.C.S. §2806.1). Additionally the phrase “any other process, resource or technology approved by the commission” is excessively broad.

IECPA efforts will be to ensure there are appropriate large energy user customer protections added to HB 1412.

3/9/18 Update: On Monday (3/12/18) the House Veterans Affairs and Emergency Preparedness Committee voted and passed House Bill 1412 which would amend Title 66 and establish microgrid programs in the state. For months, the electric and natural gas utilities have lobbied the committee to have language inserted into the bill carving out their individual rights to own and operate a microgrid. As the legislation currently stands, only electric distribution companies have the explicit ability to own a microgrid.  IECPA will be working to get customer protections added like:

- Any and all projects would need to be approved through a contested case at the PUC which included a robust costs and benefits analysis

- Cost collection caps for industrial customers

- Any generation resources used in a microgrid cannot be owned by the regulated utility

IECPA Letter to Majority Leader Reed re HB 1412

HB 1412 - IECPA Edits

7/23/18 Update: This bill was not been taken up for a vote in the House.