In 2011, the Littleton Electric Light Department (LELD) began to allow its customers to interconnect distributed generation to LELD’s distribution system as long as the interconnecting customers followed the requirements and process laid out in LELD’s Interconnection Standards. Since then, the use of distributed generation is growing fast, not just here in Littleton but across the entire United States. As of October 2014, there was just less than 8,000 MW of installed solar capacity across the United States on residential and commercial rooftops. This growth has been stimulated by environmental concerns, economic stimulus, and utility rate structure that have provided a benefit to solar customers. Most utilities in the U.S., including LELD, use net metering to measure and compensate customers for the generation that they produce.
The Electric Power Research Institute (EPRI) conducted a national study that concluded that a typical residential customer uses 982 kWh of electricity per month. This typical bill can be broken into three distinct cost groups: $70 allocated to generation, $30 allocated to distribution, and $10 allocated to transmission. Transmission and distribution charges are fixed costs that do not vary on hourly customer loads, and roughly 80% of the generation costs are variable meaning that only $56 or 51% of a typical customer’s bill is variable. This is a significant dilemma, specifically with regards to grid-tied customer owned distributed generation, since LELD only charges a $5.00 base charge and collects the remainder of its fixed costs through a customer’s consumption.
Prior to May 2015, LELD’s net metering rate (rate 70) returned the full retail rate to solar customers for excess generation and did not recoup any of the fixed costs through a distribution charge. In May of 2015, the Board of Commissioners approved a new net metering rate (rate 70) that was a better balance between simplicity and accuracy, aligned costs and prices, supported environmental stewardship, and ensured that rates were well suited and equitable for all customers. This was accomplished by splitting apart the rate structure into a Purchased Power Charge (Cost of Energy) and a Distribution Charge (Fixed Costs).The net metering rate was amended to only return the Purchase Power Charge for excess generation and a solar distribution charge was introduced to recover some of the fixed costs.
The actual electricity generated by a solar PV system is a function of its size (nameplate rating), efficiency, sun exposure, and a variety of other factors. According to the Massachusetts Clean Energy Center, 1 kW of an optimal solar PV system will generally produce 1,320 kWh per year. This production spread over a 12 month period equates to 110 kWh per month per kW of an installed solar PV system. In the LELD net metering rate (rate 70), a solar distribution charge was established to recover some of the fixed costs that are not being recovered through customer consumption. For a residential customer the solar distribution charge is the product of 110 kWh, per 1 kW of installed distributed generation and LELD’s Distribution Energy Charge ($0.0265). According to the Massachusetts Clean Energy Center, residential solar PV systems are generally sized around 5 kW, which would equate to a $14.58 solar distribution charge to a LELD customer. Even with the solar distribution charge and customer base charge, LELD is only recovering approximately 37% of the fixed costs through fixed charges.