1. Does owning a solar array make you a utility?...and other questions A presentation to the Kentucky Environmental Quality Commission Andrew Melnykovych Director of Communications Kentucky Public Service Commission June 5, 2014

2. KEY FACTS 1.Retail electric service in Kentucky is under the jurisdiction of the Kentucky Public Service Commission (exceptions: municipalities, TVA cooperatives) 2.PSC jurisdiction means that rates and terms of service are regulated 3.Since 1972, retail electric suppliers have had the exclusive right to provide service within their certified service territories (KRS 278.016-.018) 4.Kentucky currently has no specific rates or rules for solar power 5.All fuels compete on level playing field

3. KEY FACTS 1.Electric utilities are required to offer net metering to customers (KRS 278.465) System capacity limited to 30KW Excess power is credited as carry-forward to next billing cycle No cash payment for accumulated credits 2.Rules for small generators (qualifying facilities) are same as Federal Energy Regulatory Commission (807 KAR 5:054) Apply to both cogeneration and small power facilities Upper capacity limit is 80MW 75% of power must come from renewables, biomass or waste Entitled to interconnection if selling to utility Qualifying facility has certain obligation with respect to cost of interconnection

4. KEY FACTS Wholesale power producers selling electricity into the grid are not regulated by the PSC, but those with 10 MW or more capacity require siting approval from the Kentucky State Board on Electric Generation and Transmission Siting (Siting Board) Cogeneration (combined heat & power) or industrial power facilities of no more than 150 MW capacity facilities are exempted

5. In 2012, at the request of Secretary Len Peters of the Energy and Environment Cabinet, the Kentucky Public Service Commission prepared a staff opinion examining several possible scenarios involving the development of solar electric facilities in Kentucky.

6. Scenario #1 1.Developer constructs and leases solar arrays to residential and commercial customers 2.Lease rate is based on the capacity of solar array, not the actual amount of electricity it generates 3.Scenario contemplates interconnection to distribution system and net metering by the customer, either directly or via the developer/equipment provider

7. Scenario #1 Regulatory Implications 1.Not a violation of exclusive service territory rights 2.Not a utility subject to PSC regulation, although this issue might require clarification if large numbers of customers are involved 3.Not entitled to net metering, because customer does not own solar array; however, utility has option to allow cost-effective net metering under special contract or new tariff 4.Entitled to interconnect for purpose of selling power 5.Developer does not qualify for net metering

8. Scenario #2 1.Developer constructs solar arrays on customer property 2.Customer purchases power from the developer 3.Customer will eventually purchase the solar arrays from the developer

9. Scenario #2 Regulatory Implications 1.Violation of exclusive service territory rights – developer is retail supplier, future purchase plans not withstanding 2.Developer would be a utility subject to PSC jurisdiction 3.For systems under 30 KW, customer not eligible for net metering due to ownership issue; however, utility has option to allow cost-effective net metering under special contract or new tariff. Developer unlikely to qualify for net metering because doesn’t meet requirement to be utility customer 4.For systems over 30 KW, developer would qualify for interconnection, but would have to become a utility customer with a separate meter

10. Scenario #3 1.Developer constructs large centralized solar facility with intent to provide electricity to multiple customers 2.Customers can purchase panels or KW capacity 3.Customers can purchase electricity (by the KWH)

11. Scenario #3 Regulatory Implications 1.Purchase of panels would not violate exclusive service territory rights (similar to lease in scenario #1) 2.Purchase of capacity or quantity would violate retail territory exclusivity 3.Sale of panels would not trigger PSC jurisdiction; sale of capacity or KWH would 4.Utility would not be obligated to provide net metering to customers purchasing panels; however, utility has option to allow cost-effective net metering under special contract or new tariff.

12. Scenario #4 (not solar, but interesting) 1.Developer constructs combined heat/power system at industrial facility 2.Sells both electric power and thermal heat to facility

13. Scenario #4 Regulatory Implications 1.PSC has never ruled whether retail power sale to a single customer violates exclusive rights under territorial act 2.Staff opinion is that it is likely a violation 3.PSC has no jurisdiction over thermal heat sales by a cogeneration facility

14. The other questions

15. Who regulates siting and safety of natural gas liquid (NGL) pipelines in Kentucky? Safety – federal Pipelines and Hazardous Materials Safety Administration (PHMSA) Siting – no pre-approval required from Federal Energy Regulatory Commission (unless converting existing interstate natural gas transmission pipeline) Siting – no state siting requirement at present Siting – bill proposed during 2014 Regular Session of KY General Assembly to require approval by Siting Board – precedent: siting of CO2 pipelines

16. What happens in Kentucky if the Federal Communications Commission decides that broadband service is a common carrier? Would depend on precise wording of FCC decision In any event, retail service would remain deregulated because of 2004 state statute Could affect access to facilities and interconnection agreements between providers

17. Thank you