1. LAKELAND ELECTRIC Pricing to Meet Net Meter Rules APPA 2009 Business & Finance Conference Sept 14, 2009 Jeff Sprague Manager Pricing & Rates

2. Disclaimer The thoughts expressed herein are those of the presenter only, intended to spark technical discussions among fellow rates professional and industry managers, and should not be taken as disclosing any pending or future decision by the City of Lakeland. 2

3. Florida Net Meter Rule (2)(c) “Net metering” means a metering and billing methodology whereby customer-owned renewable generation is allowed to offset the customer's electricity consumption on-site. (8)(h) …customer shall continue to pay the applicable customer charge and applicable demand charge. Rule 25-6.065, FL Administrative Code 3

4. From the utility perspective, lost revenues, cross-customer subsidies, grid-integration issues and other precedent-setting disruptions have been discussed, but the practical implication have been less than revolutionary. Mike Taylor, Solar Electric Power Association, “When Net Metering Goes Mainstream”, ELP July-August 2009 4

5. Utilities might begin to experience business model disruptions similar to those that occurred with cell phones. Mike Taylor, Solar Electric Power Association, “When Net Metering Goes Mainstream”, ELP July-August 2009 5

6. 6 Renewable Generation Biomass Wind Solar photovoltaic Solar thermal Geothermal Landfill & waste methane

7. 7 Solar PV Incentives to install Generation capacity System capacity needs Net meter and feed in tariffs Excess energy Production and Distribution systems cost recovery

8. 8 Solar PV Incentives Hobbyist & retired engineer Federal tax credit of 30% Florida rebate (so long as it is appropriated) Utility rebate – none Price – net meter, feed-in tariff

9. 9 Solar PV Capacity Lakeland typical Residential customer is electric heat/heat pump, AC and Hot Water 1,220 KWH/MO requires ~9.4 KW-DC Assume 4 KW is practical system size

10. 10 System Capacity Needs Lakeland is Winter peaking @ 8 am Solar day 7 am to 5 pm; 70% of capacity by 10 am Average Residential customer 4 KW How much does Solar PV contribute to system peak requirements? 8,000 KW of Interruptible Commercial load

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12. 12 Solar PV Billing Net Metering in Lakeland –Credit for excess energy –2 customers with capacity to be net provider –Renewable Energy Credits belong to _______ Feed in Tariff –Similar to Power Purchase Agreement with Sun Edison for 24 MW over 10 years $280.99 to $95.43 per MWH >>$149.33 average

13. 13 Solar PV Excess Energy “Purchase” of excess energy at average pricing Time of Use pricing and Peak Critical Period pricing Bank energy and Form 1099 to IRS? Lakeland cashes out when account closes but Form 1099 (none yet)

14. 14 Solar PV and Cost Recovery Proper cost allocation for the Production, Transmission, and Distribution systems –Rate study allocation to entire class –Net meter billing contributes nothing Recovery of capacity costs –PV Standby Service –Access charge for consumption regardless of generation source

15. 15 Solar PV Alternate Rate Design PV Standby Service –Demand meter –Non-demand meter Access charge (identical to retail access) –Total consumption covers delivery cost –Charge for utility purchased energy only –Uses same metering required for Renewable Energy Credits

16. Residential Demand Rate Design $13.54 per KW Cost of Service $0.00277 per KWH Cost of Service $0.05261per KWH average of 3 tiers $7.00per KW for Commercial $0.02019per KWH for Commercial $5.94per KW Commercial Standby @ Dist. 4 KW average Residential demand 16

17. Residential Demand Rate Design $13.54 per KW Cost of Service $0.00277 per KWH Cost of Service $0.05261per KWH average of 3 tiers $7.00per KW for Commercial $0.02019per KWH for Commercial $5.94per KW Commercial Standby @ Dist. 4 KW average Residential demand 17 4 KW x $5.94 = $23.76 4 KW x $7.00 = $28.00 4 KW x $13.54 = $54.16

18. Residential Demand Rate Design $13.54 per KW Cost of Service $0.00277 per KWH Cost of Service $0.05261per KWH average of 3 tiers $7.00per KW for Commercial $0.02019per KWH for Commercial $5.94per KW Commercial Standby @ Dist. 4 KW average Residential demand 18 Customer expected to resist large fixed charge of $24/mo or $54/mo

19. Access Charge (Unbundled Price) $13.54 per KW Cost of Service $0.00277 per KWH Cost of Service $0.05261per KWH average of 3 tiers $7.00per KW for Commercial $0.02019per KWH for Commercial $5.94per KW Commercial Standby @ Dist. 4 KW average Residential demand 19

20. Access Charge (Unbundled Price) $0.04984 per KWH Access Charge $0.00277 per KWH Energy Charge(COS) $0.05261per KWH average of 3 tiers $0.03242per KWH Access Charge $0.02019per KWH Energy Charge (GSD) $0.05261 20

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25. Summary 40,890,430 KWH lost 2.4% Directly increases energy cost to others –24 MW of PV $1.06 per MWH increase –SHW @ 1.1% $0.47 per MWH increase –Customer owned ?? Mitigate with rate design change that continues to meet net meter rules. 25

26. Philosophy What are you going to do now? How do I know? I’m making it up as we go along. Indiana Jones, Raiders of the Lost Ark 26

27. Questions? 27