2015 UNS Rate Case – DG Trends in Action Lon Huber, Director June 7, 2016

UNS Proposed: For non-DG customers For solar customers 5.8 cents/kWh offset with a demand charge ($6/kW & $9.95/kW after 7 kW) 24/7 demand charge Hourly exports at 5.9 cents/kWh linked to utility scale PV Energy offset is somewhat arbitrary Typical opening position

Solar Proposed: Status Quo NEM Maybe explore minimum bill Look into a optional TOU rate Equal treatment

RUCO Principles Do not inhibit conservation related price signals Reduce reliance on fixed charges Don’t rock the boat for 98% of UNS ratepayers No drastic changes Send more accurate price signals to DG DG neutral demand based TOU Create options for future solar customers RPS compliance driven fixed solar credit

DG Customers are Different After a certain point of self generation, DG customers are partial requirements customers: Masks load only during certain times and weather conditions Exports electrons to the distribution system Comes in and out of needing service unlike energy efficiency Can completely erase a monthly bill Impacts are mimics throughout the service territory at high penetrations Intra class equity and exclusivity issues

RUCO’s Proposal For DG Solar Customers Three options: Advanced DG rate RPS Credit Option Self consumption option

Avoided Costs from DG Followed Commission guidance on value of solar to determine starting rate. Gauge the value of solar by comparing it to the next marginal unit of generation needed to meet system peak. Straightforward to estimate once methodology chosen: Energy Capacity (assumed direct offset) Transmission related to capacity Environmental (mostly baked in avoided costs) Unknown or highly variable: Distribution System Transmission

2014 IRP Need new CT 2018-2019

LCOE of Units on the Margin

Aligning to system need

kWh usage per hour by the average customer Summer Peak kWh usage per hour by the average customer January July December

Peak Hours: 2:00 PM to 7:59 PM

Proposal For DG customers – Advanced DG Demand Rate Three core components $12 minimum bill 8.5 cent/kWh offset UNS IRP based value of solar Summer based demand charge TOU ~ $16.5 kW Monthly NEM with export

Option B for Solar Customers UNS has a residential renewable energy target. The utility needs ~10 MW of additional DG Create a procurement mechanism that drives costs down. Buy-all sell-all credit structure. Declining trigger based on capacity installed. Similar structure to incentive programs. Fixed 20 year rate that appears as bill credit.

REST Procurement Mechanism The price averages 8.5 cents/kWh (the value of solar) and the declines are set at the historic yearly system decline rate

Bombshell

Staff Proposed: Temporary 15% load factor floor to protect customers against adverse effects Company to build a communication and outreach plan For all customers $5.15/kw monthly demand charge $15/mo fixed charge Company Jumped Onboard! Basic Service Charge All kW All kWh Winter off peak Winter on peak Summer off peak Summer on peak $15.00 $5.15 $0.016760 $0.038610 $0.082800 $0.042830 $0.102251

Public Outcry

Next Up

Questions?

Linking to Bonbright Simplicity, understandability, public acceptability and feasibility of application and interpretation Stability of rates themselves, minimal unexpected changes that are seriously adverse to existing customers Fairness in apportioning cost of service among different consumers Avoidance of “undue discrimination” Efficiency, promoting efficient use of energy and competing products and services

KW Charge Similar to Commercial Large Power Service Time-of-Use (LPS-TOU)