E7-15563. Notice of Determinations on the PURPA Standards Set Forth in the Energy Policy Act of 2005

SUMMARY:

At its meeting on August 1, 2007, in Knoxville, Tennessee, the TVA Board made its determinations on the PURPA Standards set forth in the Public Utility Regulatory Policies Act of 1978 (Pub. L. 95-617) as amended by the Energy Policy Act of 2005 (Pub. L. 109-58) (EPAct 2005). The standards considered are listed in subsections 111(d)(11)-(14) of PURPA as amended by EPAct 2005. The TVA Board considered the standards in accordance with PURPA and the objectives and requirements of the Tennessee Valley Authority Act of 1933 (TVA Act), 48 Stat. 58, as amended, 16 U.S.C. 831-831dd (2007).

FOR FURTHER INFORMATION CONTACT:

Carl Seigenthaler, Tennessee Valley Authority, 1 Century Place, 26 Century Boulevard, Nashville, TN 37214, [phone].

SUPPLEMENTARY INFORMATION:

The Public Utility Regulatory Policies Act of 1978 (Pub. L. 95-617) (PURPA), as amended by the Energy Policy Act of 2005 (Pub. L. 109-58) (EPAct 2005), requires TVA to consider adopting for itself and the distributors of TVA power five new PURPA standards. These five standards are identified as Net Metering, Fuel Sources, Fossil Fuel Generation Efficiency, Time-based Metering and Communications (or Smart Metering), and Interconnection. The TVA Board was charged with considering and making determinations on whether or not it is appropriate to implement each standard.

Data, views, and comments were requested from the public as to the need and desirability of adopting the standards. Open house informational sessions were conducted at 5 locations throughout the Valley. In addition to posting notices in the Federal Register on August 17, 2006 (71 FR 475567), and January 22, 2007 (72 FR 2721) , which described the standards and solicited public input on the standards, TVA also provided a PURPA Web site (http://www.tva.com/​purpa) for purposes of educating the public on the standards and soliciting public input. All public input received on the standards was submitted to the official record and made available to the public through the Web site.

TVA's process for considering and making determinations on the new PURPA standards was carried out pursuant to the provisions of (a) PURPA, under which TVA is identified as the regulatory authority for electric utilities over which TVA has ratemaking authority, and (b) the TVA Act. After consideration of the comments and materials received, TVA staff developed recommendations on each of the standards. These staff recommendations also were made a part of the official record and made available to the public through the Web site.

The TVA Board considered these standards on the basis of the PURPA purposes, which are the (1) conservation of energy, (2) efficient use of facilities and resources, and (3) equity among electric consumers, and the objectives and requirements of the TVA Act. In addition, the Smart Metering standard was considered in light of whether the benefits to the electric utility and its consumers were likely to exceed the costs of new metering and communications. The Board took into account these considerations as well as the official record developed during the consideration process in reaching the determinations below.

The Board's determinations follow.

Standard 11: Net Metering

I. Standard Under Consideration

Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves. For purposes of this paragraph, the term “net metering service” means service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.

II. Observations

In fiscal year 2003, TVA initiated the Generation Partners® pilot program as a response to requests for a net metering program in the TVA service area. After consultation with the Tennessee Valley Public Power Association (TVPPA) and individual power distributors, TVA adopted a dual-meter design under which TVA buys all electricity from eligible consumer-owned renewable generation systems primarily for the Green Power Switch® program. All output of the generator is purchased, and usage by the consumer is billed at the applicable retail rate by the power distributor. Upon adoption of a Net Metering standard, TVA would phaseout the Generation Partners pilot program and offer a program based on the adopted standard.

The primary issues raised with regard to this standard are safety and pricing. The safety requirements of the current Generation Partners design were developed with the input of power distributor advisors and have been well received by participating power distributors. However, some installers and renewable energy advocates view these requirements as unnecessarily expensive and overly redundant. Going forward, TVA will work with renewable energy advocates, contractors, and power distributors in an effort to modify the installation guidelines to reduce cost while continuing to maintain adequate safety.

The second issue is the price per kWh that TVA pays for the generation. The current purchase price under the Generation Partners pilot program is $0.15/kWh, which TVA established as a premium price guaranteed for ten years for the pilot program to promote and acquire onsite, renewable generation. For a Net Metering program, TVA staff (supported by TVPPA) is recommending that new customers be paid at a rate equal to the Green Power Switch® sales rate, which is approximately $0.10/kWh. Rather than a price based on operational economics, the Southern Alliance for Clean Energy advocates a higher purchase price, which it sees as more consistent with TVA's Strategic Plan that supports renewable energy.

Additionally, TVA's full-requirements contractual arrangements with its individual power distributors make a power distributor's purchase of electricity from a supplier other than TVA problematic. Accordingly, a dual-metering program with continued purchase by TVA at a uniform price is most appropriate and desirable in the TVA region.

III. Determination by the TVA Board

The standard under consideration is revised and adopted as follows:

TVA will make available to distributors of TVA power upon request the option to participate in a dual-metering purchase program modeled after TVA's current Generation Partners pilot program. Under this dual-metering purchase program, TVA will purchase all electric energy generated by an electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities, and accordingly, two meters will be used to separately measure electricity usage and electricity production.

Standard 12: Fuel Sources

I. Standard Under Consideration

Each electric utility shall develop a plan to minimize dependence on one fuel source and to ensure that the electric energy it sells to consumers is generated using a diverse range of fuels and technologies, including renewable technologies.

II. Observations

TVA's current resource planning process determines the proper mix of supply and demand side resources to achieve an optimal capacity and generation portfolio. In order to meet its growing load and reserve requirements, TVA must construct, purchase, or acquire capacity. Numerous proven technologies and diverse fuel resources, including renewable technologies, are considered in TVA's capacity and generation expansion alternatives. Detailed least-cost, risk-adjusted operational and financial analyses are performed to determine the most optimal expansion portfolio. Fuel and technology diversity, regulatory developments, and prospective current asset retirements, additions, and changes are also considered. Accordingly, TVA's current resource planning process satisfies the Fuel Sources Standard regarding maintaining fuel diversity and is examined regularly to ensure that it continues to maintain fuel diversity.

III. Determination by the TVA Board

The standard under consideration is adopted as written.

Standard 13: Fossil Fuel Generation Efficiency

I. Standard Under Consideration

Each electric utility shall develop and implement a 10-year plan to increase the efficiency of its fossil fuel generation.

II. Observations

As a part of TVA's ongoing efforts to improve the operations of its fossil fuel generation, efforts are under way to maintain and improve the efficiency of its heat rate at several facilities. Heat rate improvements come in the form of eliminating thermal losses (steam leaks, missing or damaged insulation, turbine wear, etc.) and identifying opportunities to install more energy efficient equipment (primarily improved turbine-generator components.) Fossil fuel plants with significant deviations from their expected heat rates have begun programs to systematically troubleshoot plant equipment to identify and eliminate losses. Methods are being standardized through a collaboration of TVA fossil fuel plant engineering managers to share and implement projects throughout TVA that have been demonstrated to be successful at specific plants.

The evolution of efficiency-improving technology, the current plan for deployment of additional clean air equipment, and the potential for significant regulatory increases, however, make it impractical and inappropriate to implement a 10-year plan for fossil fuel generation efficiency. The Fossil Fuel Generation Efficiency Standard otherwise provides for sound business practices.

III. Determination by the TVA Board

The standard under consideration is revised and adopted as follows:

TVA shall develop and implement a 5-year plan to increase the efficiency of its fossil fuel generation.

Standard 14: Time-Based Metering and Communication

I. Standard Under Consideration

(A) Not later than 18 months after August 8, 2005, each electric utility shall offer each of its customer classes, and provide individual customers upon customer request, a time-based rate schedule under which the rate charged by the electric utility varies during different time periods and reflects the variance, if any, in the utility's costs of generating and purchasing electricity at the wholesale level. The time-based rate schedule shall enable the electric consumer to manage energy use and cost through advanced metering and communications technology.

(B) The types of time-based rate schedules that may be offered under the schedule referred to in subparagraph (A) include, among others—

(i) Time-of-use pricing whereby electricity prices are set for a specific time period on an advance or forward basis, typically not changing more often than twice a year, based on the utility's cost of generating and/or purchasing such electricity at the wholesale level for the benefit of the consumer. Prices paid for energy consumed during these periods shall be pre-established and known to consumers in advance of such consumption, allowing them to vary their demand and usage in response to such prices and manage their energy costs by shifting usage to a lower cost period or reducing their consumption overall;

(ii) Critical peak pricing whereby time-of-use prices are in effect except for certain peak days, when prices may reflect the costs of generating and/or purchasing electricity at the wholesale level and when consumers may receive additional discounts for reducing peak period energy consumption;

(iii) Real-time pricing whereby electricity prices are set for a specific time period on an advanced or forward basis, reflecting the utility's cost of generating and/or purchasing electricity at the wholesale level, and may change as often as hourly; and

(iv) Credits for consumers with large loads who enter into pre-established peak load reduction agreements that reduce a utility's planned capacity obligations.

(C) Each electric utility subject to subparagraph (A) shall provide each customer requesting a time-based rate with a time-based meter capable of enabling the utility and customer to offer and receive such rate, respectively,

(D) For purposes of implementing this paragraph, any reference contained in this section to the date of enactment of the Public Utility Regulatory Policies Act of 1978 shall be deemed to be a reference to August 8, 2005.

(E) In a State that permits third-party marketers to sell electric energy to retail electric consumer, such consumers shall be entitled to receive the same time-based metering and communications device and service as a retail electric consumer of the electric utility.

(F) Notwithstanding subsections (b) and (c) of 16 U.S.C. 2622, each State regulatory authority shall, not later than 18 months after August 8, 2005, conduct an investigation in accordance with 16 U.S.C. 2625(i) and issue a decision whether it is appropriate to implement the standards set out in subparagraphs (A) and (C).

II. Observations

At the present time, TVA and the distributors of TVA power generally serve customers at “flat” (non-time differentiated) rates. An optional time-of-day rate for large customers (greater than 5,000 kW) is offered upon request. Customer participation is currently very low.

The Smart Metering Standard consists of the implementation of two components—the time-based rate structure and the installation of advanced metering and communications technology. The objective of the standard is to provide the consumer with the capability to manage energy usage. The standard does not mandate a particular type of time-based rate structure, but it does suggest several alternatives that could be considered. Additionally, this standard recognizes the need for utilities to assess the costs and benefits to the system.

The benefits to TVA of expanding the application of time-based rates include the benefits to the TVA region from prices reflecting more accurately the actual cost of power. Some of the benefits come from the savings to the customers when they respond to time-based pricing structures. Other benefits can come on the supply side, where customer response can help reduce the need for generation transmission capacity and for fuel, which can help reduce environmental emissions.

TVA has surveyed other utilities that have implemented rates and programs like those in the Smart Metering Standard. TVA is also currently pursuing a critical peak pricing pilot program approved by the Board. Further, TVA is open to market tests of other time-based rate structures that TVA and distributors may want to investigate.

However, because of the importance of working with the distributors of TVA power to test certain time-based rate structures to determine their effectiveness in the TVA region and because the wholesale power contract between TVA and the distributors sets forth a rate change process that governs the process by which a change in the current rate structure may be implemented, TVA has committed to its distributors that it will abide by these provisions in considering any change in rate structure based on the determination of this standard. Accordingly, only by taking this process into account is it appropriate to implement this standard.

III. Determination by the TVA Board

The standard under consideration is revised and adopted as follows:

TVA will initiate a rate change in accordance with the provisions of its wholesale power contract with the distributors of TVA power to assess in detail (1) the benefits and cost of implementing a mandatory time-based rate schedule for large retail customers, under which the retail rates reflect seasonal and time-of-day variations in the costs of generating and purchasing electricity, (2) the benefits and cost of implementing advanced metering and communications technology to help the electric consumer manage energy use and costs, and (3) other factors affecting the implementation of such structures as soon as feasible.

Standard 15: Interconnection

I. Standard Under Consideration

Each electric utility shall make available, upon request, interconnection service to any electric consumer that the electric utility serves. For purposes of this paragraph, the term “interconnection service” means service to an electric consumer under which an on-site generating facility on the consumer's premises shall be connected to the local distribution facilities. Interconnection services shall be offered based upon the standards developed by the Institute of Electrical and Electronics Engineers: IEEE Standard 1547 for Interconnecting Distributed Resources with Electric Power Systems, as they may be amended from time to time. In addition, agreements and procedures shall be established whereby the services offered shall promote current best practices of interconnection for distributed generation, including but not limited to practices stipulated in model codes adopted by associations of state regulatory agencies. All such agreements and procedures shall be just and reasonable, and not unduly discriminatory or preferential.

II. Observations

Under the intent of the Interconnection Standard interconnection services are to be offered by utilities based upon certain industry standards and procedures established whereby the services offered shall promote current best practices of interconnection for distributed generation. TVA has developed procedures and provides interconnection service for generators with output of greater than 20 MW. TVA staff has developed procedures and plans to provide, upon request, interconnection service for generators of 20 MW or less. Since generators of 20 MW or less are more likely to connect to a distributor's system than TVA's transmission system, each distributor will need to implement comparable procedures and interconnection service addressing distributor-specific requirements. TVA will work with distributors in developing and implementing such comparable procedures. Accordingly, it is appropriate at this time to implement the Interconnection Standard with modifications.

III. Determination by the TVA Board

The standard under consideration is revised and adopted as follows:

TVA shall make available, upon request, interconnection service for generators with output of 20 MW or less to any electric consumer that it serves. For purposes of this paragraph, the term “interconnection service” means service to an electric consumer under which an on-site generating facility on the consumer's premises shall be connected to the local distribution facilities.

TVA shall make such interconnection service available based upon codes and standards to be specified in small generator interconnection procedures, which procedures shall include the standards developed by the Institute of Electric and Electronics Engineers: IEEE Standard 1547 for Interconnecting Distributed Resources with Electric Power Systems, as they may be amended from time to time.

Power distributors served by TVA shall also make available, upon request, such small generator interconnection services to any electric consumers that the power distributor serves. In providing such service, the power distributor may at its option adopt procedures comparable to the TVA procedures discussed above, or other, comparable procedures which address distributor-specific safety, reliability, operating, and cost-recovery requirements.

In addition, agreements and procedures shall be established whereby such interconnection services offered by TVA and the distributors of TVA power shall promote current best practices of interconnection for distributed generation. All such agreements and procedures shall be just and reasonable, and not unduly discriminatory or preferential.

Dated: August 2, 2007.

Maureen H. Dunn,

Executive Vice President & General Counsel.