Montana to study customer-generator costs, benefits

Montana utility regulators are preparing to study the costs and benefits of distributed solar energy projects and other customer-generators.  The results could reshape the way net-metered customers are charged for electric service, including the creation of a separate service classification and rates for customer-generators.

Earlier this year, the Montana legislature enacted House Bill 219, a law requiring utility NorthWestern Corp. to "conduct a study of the costs and benefits of customer-generators," for submission to the state Public Service Commission to inform future ratemaking.  The law allowed the Commission to establish "minimum information requirements" for inclusion in the study.

On June 16, 2017, the Commission posted a Notice of Opportunity to Comment on potential benefit and cost elements and study questions.  That notice identified categories of potential benefits including avoided energy costs, avoided capacity costs, avoided transmission and distribution capacity costs, avoided system losses, avoided renewable portfolio standard compliance costs, avoided environmental compliance costs, market price suppression effects, avoided risk, avoided grid support services costs, avoided outages costs, and non-energy benefits.  It also identified categories of potential costs, including reduced revenue, administrative costs, interconnection, integration, and cost shifts in production, transmission, and distribution.

The Commission's notice also posed a series of questions relevant to cost-benefit studies, including:

• What, if any, assumptions regarding the adoption rate of solar or other net metering technologies should the Commission specify?
• What, if any, time frame for calculating benefits and costs should the Commission specify (e.g., 10 years, 20 years, etc.)?
• What, if any, assumptions regarding utility rates should the Commission specify (e.g., rate of increase, changes in rate design (time-of-use, other))?
• What, if any, methodology for cost-effectiveness tests should the Commission specify (e.g., standard practice manual or the Cost Benefit Framework developed by the Electric Power Research Institute)?
• What cost-effectiveness perspective(s) should the Commission require be evaluated (e.g., societal, utility/program administrator, ratepayer, participant)?
• Should the Commission specify the generating resource avoided by net-metered systems?  If so, what generating unit should be used?
• Should the Commission specify a particular locational attribute that counts as either a benefit or cost adder/subtractor?
• What, if any, other compensation approaches in addition to net metering should be assessed in the study NorthWestern is required to conduct?

The Commission invited interested persons to submit written comments addressing the potential benefit and cost elements and study questions identified above no later than July 7, 2017.  It also directed the utility to provide information on the scale and scope of data it has collected, or intends to collect, regarding variations in the usage profiles of customer-generators compared to other customers in the same rate class.