Net Energy Metering Panel Discussion Solar Energy Directions for Inland Southern California: “Where Is It Going?”

February 23, 2017

Marissa Blunschi

Senior Project Manager, Energy & Environmental Policy

Southern California Edison

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NEM is an optional rate schedule for customers who elect to install an eligible renewable generating facility to supply their energy needs

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How Current NEM Works:

ENERGY OUT (CHANNEL 2)SCE meter records the energy produced by the

customer that is not used onsite, but is exported to the grid (not all gen)

ENERGY IN (CHANNEL 1)SCE meter records the energy supplied to the

customer from the grid

NO DATASCE meter does not

record solar generation directly supplied to customer and used

onsite1

1 To get data on all generation, additional metering would be required at the output of the inverter or the inverter itself. 2 Current retail benefit of NEM averages ~26 cents per kWh for residential customers.

ILLUSTRATIVE

Every month, SCE bills NEM customers for net energy use: the

difference between Energy In (Channel 1) and Energy Out

(Channel 2).

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Any monthly net energy exports (kWh) receive retail credit (in $)

based on a customer’s electric rate schedule and can offset SCE energy

charges (in $) throughout a 12‐month Relevant Period.

Any excess energy (in kWh) at the end of the Relevant Period receives

Net Surplus Compensation at a wholesale price (~$0.026 / kWh).

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Key Takeaways: NEM is forecast1 to have 653,786 customers or 4,356 MW by 2020

Current forecast does not factor in effects of mandatory TOU for all residential customers in 2019

SCE’s NEM Growth History & Forecast

1Based upon SCE Power Supply Long Term Generalized Bass Diffusion Forecast – February 2016

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NEM Successor Tariff Decision (D).16-01-044

• On January 28, 2016 the California Public Utilities Commission (CPUC) voted (3-2) to adopt a successor to the existing NEM tariff

• The Successor Tariff largely maintains the current NEM tariff structure, with the following adjustments:

– NEM 2.0 customers will be required to take service under mandatory Time-of-Use (TOU) rates

– NEM 2.0 customers will be assessed nonbypassable charges (NBCs) at the metered interval level equating to ~2 cents/kWh

– NEM 2.0 customers will be assessed a modest interconnection fee ($75 for SCE customers)*

• Commissioners agreed that, due to uncertainties regarding benefits of distributed solar resources, the Successor Tariff structure should be revisited in 2019 to consider revisions to better align compensation with actual costs and benefits

*NEM 2.0 customers with generating facilities sized >1 MW must pay all interconnection costs.

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On the Horizon: Distributed Generation (DG) Tariff 3.0

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The CPUC Decision directs its staff to:

• “[E]xplore compensation structures for customer-sited DG other than NEM, including analysis and design of potential optional or pilot tariffs, with a view to considering at least an export compensation rate that takes into account locational and time-differentiated values of customer sited DG.” (D. 16-01-044, Section 3.4)

• Conduct analysis and take steps necessary to provide information for the Commission to consider in evaluating complementary policies to increase the value of customer-sited renewable DG.

• Investigate tariff duration and methodologies for calculating installed capacity fees for customer-sited renewable DG installations.

CPUC identifies Locational Net Benefits Analysis (LNBA)-derived locational values, from the Distribution Resources Plan (DRP) proceeding, as an input for the next iteration of the DG tariff structure (CPUC Memo on LNBA Use Cases. Jan 31, 2017).

Proposed Time-of-Use (TOU) Period Changes

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Season Existing Proposed

On-Peak Summer Weekdays: 12-6pm Weekdays: 4-9pm

Mid-Peak Summer Weekdays: 8am-12pm; 6pm-11pm Weekends: 4-9pm

Winter Weekdays: 8am-9pm Weekdays and Weekends: 4-9pm

Off-Peak Summer Weekdays: 11pm-8amWeekends: All

Weekdays and Weekends: All except 4-9pm

Winter Weekdays: 9pm-8amWeekends: All

Weekdays and Weekends: 9pm-8am

Super Off-Peak

Winter N/A Weekdays and Weekends: 8am-4pm

• Proposal is generally consistent with PG&E and SDG&E proposals

• Maintains existing seasonal definitions (Summer: June-Sept; Winter: Oct-May)

• Shifts daily “peak” period to 4-9pm

• Introduces “super off-peak” period from 8am-4pm on all Winter days

• Introduces time-differentiated weekend charges (currently all weekend hours are “off-peak”)

Appendix

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For Internal Use Only

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For Internal Use Only

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For Internal Use Only

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Note: NEM solar installations in SCE’s service territory include projects sized 1 MW and less (with the exception of the CDCR and Armed Forces).

Residential Solar Installations in SCE Territory

SCE Net Energy Metering Statistics (December 2016):

• 210,857 combined residential and non-residential projects

– 1,714 MW installed (of 2,240 MW cap)

– 99.9% solar

– 205,786 residential –1,093 MW

– 5,071 non-residential –620 MW

– Approximately 3,151,302 MWh/year generated

Monthly Installations and MW Installed

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Customers with TOU and NEM net their ENERGY IN with their ENERGY OUT within the same TOU bucket

How TOU and NEM work:

Customers “net” their energy use within each TOU bucket. TOU buckets with net generation receive credit associated with the retail price of

that TOU bucket; TOU buckets with net consumption are charged for energy at the

retail price of that TOU bucket.

1Charges and credits for all TOU buckets are

combined and the customer is billed or credited ($) for the month at retail rates based on the customer’s electric rate schedule. Net

energy credits ($) can offset SCE energy charges ($) throughout a 12‐month Relevant

Period.

Any excess energy (in kWh) at the end of the

Relevant Period receives Net Surplus

Compensation (~$0.026 / kWh).

2 3

Example

1. On-peak exported generation for the month is 300 kWh. On-peak consumption from the grid for the month is 200 kWh.

2. On-peak net generation is 100 kWh; therefore, customer gets 100 kWh of on-peak energy credit ($).

3. Customers can apply this energy credit ($) to off-peak and super off-peak energy consumption.

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NEM 2.0 Tariff Summary“Realigned NEM” – CPUC Decision (D.)16-01-044

Overall Structure • Continues basic NEM structure of netting kWh imports and exports over a 12-month Relevant Period, with monthly energy charges and credits based on the rates in a customer’s underlying retail rate schedule

Effective Date • NEM 2.0 projected to become effective in SCE’s service territory on July 1, 2017 (unless we hit our NEM 1.0 cap earlier); customers can apply for interconnection now

• Allowed to stay on NEM 2.0 tariff for 20 years from the date of interconnection (underlying retail rate schedule is not grandfathered)

Nonbypassable Charges (NBCs)

• NBCs are assessed on the net of imports and exports in each metered interval (pay more vs. NEM 1.0)• NBCs include the Public Purpose Program Charge, Nuclear Decommissioning Charge, Competition

Transition Charge and DWR Bond Charge (currently at $0.02040/kWh)

Mandatory TOU • All NEM 2.0 customers must be on a TOU retail rate schedule (residential default is currently TOU-D-A)

Sizing • Removes 1 MW sizing limit but generating facilities must still be sized to load

Interconnection Costs • ≤1 MW: $75 interconnection fee (SASH exemption) but retains exemptions from study costs, distribution upgrade costs, standby charges and departing load charges

• >1 MW: must pay all interconnection costs but retains exemption from standby and departing load charges

Virtual NEM Options • Retains MASH-VNM (income-qualified multifamily), NEM-V (multi-meter, multi-tenant) and NEM-A (multi-meter)

DA/CCA Customers • Direct Access (DA) and Community Choice Aggregation (CCA) customers are eligible provided their Electric Service Provider or Community Choice Aggregator also offers a comparable NEM 2.0 tariff

DAC Option • Defers adoption of alternatives for Disadvantaged Communities (DAC) to Phase 2 of the proceeding (currently ongoing)

Upcoming Changes • CPUC to review tariff structure options for customer-sited DG in 2019 • Shifting TOU periods to better align with costs (proposed 4 to 9 p.m. on-peak period; TOU period

grandfathering authorized under certain circumstances)

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