DG Values and Costs: An Open Spreadsheet Approach Residential Utility Consumer Office (RUCO) Lon Huber

‘You Can't Manage What You Don't Measure’ Are retail rates under or over compensating DG adopters? Arizona needs to establish a statewide framework to evaluate the costs and benefits of distributed generation. With as much stakeholder support as possible!

Unit of Measurement? How (what timeframe) and what (which costs and benefits) do we measure? There will be areas of debate Intellectual flexibility from stakeholders is essential A study will need to be done Long-term, non-snapshot, levelized The Commission will likely need to step in to a make a policy call – hopefully on a narrow set of issues

Standardize Once the standard of measurement is set, create a dynamic spreadsheet that can accommodate different technologies and be adjusted by utility Staff would house the model and periodically update it. Like many things in the utility world some of the assumptions will take our collective best guess and need to be sharpened by studies and review

Questions to Ponder Is there RPS avoidance value if utility scale renewables fall below the MCCCG? How do we calculate lost fixed costs? Do we have customers to pay their historic fixed costs or the system average? When do the incremental costs of DG integration start to escalate? How will EPA’s 111 (d) impact the value of DG? How can we encourage higher quality systems and smart inverters? Are there some technology synergies we should leverage? Are there impacts from technology aggregation?

Suggestions Time horizon of analysis Self-supply vs. export Commercial and residential Energy value fixed or floating Capacity savings lumpy or smooth Expected life of technology Everything Both Fixed Smooth with stacking

Toward a Solution Stakeholders get together and see what we can agree to regarding model scope Agree on study methodology If there are lingering issues, the Commission decides A valuation spreadsheet is constructed Numbers are tallied Solutions are negotiated Solution adopted

Concluding Observations This dynamic model will provide a best approximation of a breakeven point for non-participating ratepayers Breakeven point does not mean best value point Cannot facilitate investment without some basic level of certainty Improper price signals stifle innovation No solution will be easy – grandfathering, IT demands Be wary of unintended consequences

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