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New white paper examines rate, operational challenges of distributed generation

From the November 15, 2013 issue of Public Power Daily

Originally published November 15, 2013

By Jeanne LaBella
Sr. Vice President, Publishing

Rates designed to encourage customers to install distributed generation, particularly solar photovoltaics, have moved beyond successful. The Arizona Corporation Commission held hearings this week on a proposal by Arizona Public Service, an investor-owned utility, to charge customers with rooftop solar panels as much as $100 per month more in their electric rates. The charge would help the utility cover the costs of distribution. Under current rate structures, non-solar customers are subsidizing customers who have photovoltaic installations. Typically, more affluent customers can afford to install solar panels on their homes or businesses.

The rate inequity has escalated for IOUs, but it is also an issue for public power utilities.

Distributed generation offers potential benefits to electric utilities, APPA notes in a just-published white paper on the topic. Customers producing rather than consuming electricity at peak demand times mitigate the need to construct new generating capacity and can help a utility reduce transmission and distribution costs, the paper says.  But distributed generation presents rate and operational challenges to utilities. Paul Zummo, APPA manager of policy analysis and research, wrote the paper and presented his findings Nov. 13 to the association’s CEO Task Force on Climate Change and Generation Policy. 

Utilities typically compensate owners of distributed generation either through net metering (a credit on a customer bill for energy supplied to the grid from the DG resource) or a feed-in tariff, under which the utility pays a per-kilowatt-hour rate to a customer who owns a distributed resource, Zummo noted. The paper describes efforts by a number of public power utilities, including Gainesville Regional Utilities in Florida, and Austin Energy and CPS Energy in Texas, to re-examine their rate tariffs for distributed generation to address customer equity and grid operation issues.

The paper, Distributed Generation, An Overview of Recent Policy and Market Developments, is posted on



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Senior Vice President, Publishing 
Jeanne Wickline LaBella

Editorial Director
Robert Varela

Editor, Public Power Daily
Jeannine Anderson

Communications Assistant
Fallon W. Forbush

Manager, Integrated Media 
David L. Blaylock

Integrated Media Editor 
Laura D’Alessandro