1. DG Interconnection Working Group Fees and Cost Support for DG Interconnections August 6, 2012

2. Agenda  Existing tariff provisions on fees and cost support.  Department precedent on cost allocation.  Utility support to facilitate and maintain interconnections (current and future).  Revision to fees and cost support mechanisms.

3. DG Interconnection Tariff Language and Department Precedent  Cost causation – “assigning cost responsibility to the class of customers for whom the costs were reasonably incurred.” (D.P.U. 94-101/95-36, p. 70)  Longstanding principle of the Department of Public Utilities.  When the DPU approved the model interconnection tariff in Docket D.T.E. 02-38, it considered the cost allocation terms of the tariff in light of its cost causation principle and sought to approve tariff terms that are consistent with this principle.  We will now revisit the DG interconnection tariffs in this DGG Working Group to facilitate the interconnection process.  Tariff changes recommended by this DG Working Group must be consistent with the Department’s rate making principles.

4. Existing DG Interconnection Tariff; Terms on Cost Support  Interconnecting customer responsible for reasonable costs incurred by a utility for review and study to “solely determine the requirements of the interconnecting Facility with the Company EPS.” (Tariff Section 5.1 and Table 2).  The word “solely” represents those incremental costs that a Distribution Company incurs in order to perform an interconnection. DTE 02-38-C, p. 13, n.16.  Interconnecting customer responsible for reasonable costs incurred by a utility “attributed to the proposed interconnection project in designing, constructing, operating and maintaining the system modification” (Tariff Section 5.3 and Table 2).  Separation of Costs (Tariff Section 5.4)  Interconnecting customers do not pay the costs of system modifications to serve other customers.  “Interconnecting Customer should only pay for portion of the interconnecting costs resulting solely from the system modification required to allow for safe, reliable, parallel operation of the facility with the Company EPS.”

5. Areas of Development and Revision For Cost Recovery Tariff Terms and/or Practices 1. Application fee structure outdated or incomplete.  No simplified fee.  Expedited and standard application fee structure set over 8 years ago. 2. O&M and other expenses to support ongoing maintenance of distribution upgrades.  Utilities state they are not collecting full amounts (e.g. property taxes). 3. New Studies  To the extent new studies will be available (e.g. feasibility studies), the recovery of such costs is already provided for in the tariff. 4. Staffing  Changes that increase staffing dedicated to facilitate DG Interconnections.; changes made inside and outside the DG Working Group.  Existing utility accounting and cost recovery. 5. Cost Accounting 6. Other

6. Update Application Fee Structure  2 Main Issues  Outdated (Expedited, Standard)  Incomplete (Simplified)  Need data from utilities to update and complete.  Establish a fee for a simplified application based on data.  Update fees for the expedited and standard applications based on data.  Adjustments to fees should take into account changes to existing application process established in this DG Working Group.  Mechanism to account for future increases in cost to process applications (periodic review based on actual data or inflator).

7. O&M & System Upgrade-Related Ongoing Expenses  Current tariff allows recovery of these costs.  Utilities state that they do not collect full amounts (e.g. not collecting property taxes).  Proposal to update tariff to reflect a system to recoup costs:  Develop a clear definition for all ongoing system upgrade- related expenses in the tariff.  Cost to maintain could be estimated at the impact study phase to provide developer with a sense of the level of ongoing system-related expenses for financing and planning purposes.  Assessing cost responsibility to DG developer/customer on actual cost.  Utilities assess a bill to DG developer/customer for the costs on a periodic basis.

8. Other Issues  Staffing  Utility accounting and recovery.  General increases.  Prevent Double Recovery  Incremental cost recovery from DG developers/customers.  Cost and revenue accounting for DG interconnections.  Other

9. Next Steps  Collect data needed to update application fees and determine level of incremental costs associated with DG Interconnections.  Identify incremental costs for recovery from DG customers.  Update Application Fees  Discuss options for recovering ongoing expenses from DG developers and to update application fees.  Other  Come to agreement on issues if possible.