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Getting Distributed Generation Right

State regulators wrestle with distributed generation and the new grid.

EDITOR’S NOTE: Travis Kavulla, a Montana state utility regulator, recently assumed the presidency of the National Association of Regulatory Utility Commissioners. He recently talked with the Energy Times about major issues facing state regulators. This is the first part of a two-part series. Next up in the January 7 issue, “Addressing Carbon & Cybersecurity.”

ENERGY TIMES: What are your top priorities as the newly installed president of NARUC?

Travis Kavulla // Courtesy of NARUC

KAVULLA: Well one very practical item is the establishment of a subcommittee of commission staff members dedicated to rate design. It’s going to report to the executive committee, which is a relatively small body of commissioners, and it’s going to have a very concrete, practical purpose of creating a rate design manual for distributed energy resources. A lot has been written about this topic, but almost invariably the publications that are out there are self-serving.  They argue for the systematic overcompensation or under-compensation for distributed generation.  I hope NARUC can offer not really a single recipe for rate design but tentatively endorse several of the best ones for use.

ENERGY TIMES: Do you think that will speed deployment of distributed generation?

KAVULLA: Our goal is not to promote or discourage any technology.  We need an accurate price signal to be conveyed, and with that price signal people can do what they will.  Net metering is a tool of convenience for the pricing of distributed energy resources. But it doesn’t convey an accurate price signal to distributed generators. It is perhaps even more important because of an issue coming down the pike, because of litigation that’s in front of the US Supreme Court right now. It is possible that the states by next year will have to address the pricing not only of distributed generators that have traditionally been compensated under a regime of net metering, but also of demand response.  There’s probably more than a 50 percent likelihood that the Supreme Court will uphold the District of Columbia Circuit Court of Appeals ruling that essentially removes demand response as a direct participant in the organized wholesale markets. The states will have to figure out how to price this product on a retail basis.  There needs to be a good resource out there for the 30 or 40 states that don’t have the personnel and human resources of the New Yorks and Californias of the world but who nonetheless want to have  economically sound pricing established.

ENERGY TIMES: So do you think that demand response might just go away as a tool?

KAVULLA: I hope not.  That would be crazy if it went away.  But the unfortunate reality to some degree is that the manner in which it is used in the organized wholesale market is under threat.  Ironically, it’s a vindication of states' jurisdiction on a matter where most states were not asking for this power.  But if the court finds that demand response transactions are the province of retail markets, states need to figure out how to price it.  I don’t think it’ll go away.






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