PC-DC Office of the People's Counsel f>.DVOCAC'f I EDUCATION I PROTECTION

VIA ELECTRONIC FILING

Ms. Brinda Westbrook-Sedgwick Commjssion Secretary Public Service Commission

of the District of Columbia 1325 G Street N.W. Suite 800 Washington, D.C. 20005

* * *

Sandra Mattavous-Frye, Esq. People's Counsel

Ju ly 24, 2017

Re: Formal Case No. 1130, In the Matter of the Investigation into Modernizing the Energy Delivery Structure for Increased Sustainability

Dear Ms. Westbrook-Sedgwick:

Enclosed please find the "Reply Comments of the Office of the People's Counsel for the District of Columbia Regarding Pepco's Comments on the Office of the People's Counsel's Value of Solar Study."

If there are any questions concerning this matter, please contact me at (202) 727-3071.

Sine rel~ i fd4

~ ·"'-'--...... urton, ~q.

Assistant People's Counsel

cc: Parties of record

D.C. Office of the People's Counsel 1133 151h Street N.W. Suite 500 Washington, DC 20005-2710

(202) 727-3071 I TIY/TDD (202) 727-2876 I Fax (202) 727-1014 I info@opc-dc.gov

BEFORE THE PUBLIC SERVICE COMMISSION

OF THE DISTRICT OF COLUMBIA

In the Matter of the Investigation Into Modernizing the Energy Delivery System for Increased Sustainability

Formal Case No. 1130

REPLY COMMENTS OF THE OFFICE OF THE PEOPLE'S COUNSEL FOR THE DISTRICT OF COLUMBIA IN RESPONSE TO COMMISSION ORDER NO. 18812

I. INTRODUCTION

Pursuant to the Public Service Commission of the District of Columbia's ("PSC" or

"Commission") Order issued on June 2, 2017 in the above-captioned proceeding, 1 the Office of

the People's Counsel for the District of Columbia ("OPC" or "Office"), the statutory

representative of District of Columbia utility ratepayers and consumers, 2 hereby respectfully

submits the Reply Comments of the Office of the People's Counsel for the District of Columbia in

Response to Commission Order No. 18812 ("Reply Comments") in this proceeding.

II. PROCEDURALBACKGROUND

On June 21, 2017, the Commission issued Order No. 18812, wherein it granted Potomac

Electric Power Company's ("Pepco") motion to initiate a formal comment period on OPC' s

Distributed Solar in the District of Columbia Report ("Value of Solar Report"). Comments were

due July 12, 2017 and reply comments are due July 24, 2017. DC Solar United Neighborhoods

("DC SUN") filed its Initial Comments on July 11, 20173 and Pepco filed its Initial Comments

on July 12, 2017.4 Through this pleading, OPC is submitting its Reply Comments.

1 Formal Case No. 1130, Jn the Matter of the Investigation into Modemizing the Energy Delive1y System for

Increased Sustainability ("Formal Case No. 1130"), Order No. 18812, rel. June 21, 2017 ("Order No. 18812").

2 D.C. Code § 34-804 (Lexis 2017).

3 Formal Case No. 1130, Comments of DC Solar United Neighborhoods on Office of the People's Counsel Value of Solar Study, filed July 11, 2017.

III. SUMMARY OF REPLY COMMENTS

OPC appreciates the comments filed by parties on OPC's Value of Solar Report and

welcomes the opportunity to specifically respond to Pepco's comments that provide another

perspective on the topic of distributed solar in the District of Columbia ("DC" or "District"). As

OPC's Reply Comments indicate, there are several areas where OPC concurs with Pepco's

comments and other areas where OPC disagrees or concludes Pepco's comments and the

analysis therein could benefit from clarification and/or further explanation. OPC's Reply

Comments highlight that the Value of Solar Report can contribute significantly to the

stakeholder discussions and Commission deliberations in this proceeding.

OPC is pleased to acknowledge that Pepco has made substantial improvements in its

interconnection process, and applauds Pepco' s performance improvements in this area.

However, OPC notes stakeholders should continue to monitor perfonnance in this area in order

to ensure that it does not again become a barrier as the volume of applications grows. OPC

acknowledges that Pepco has expanded and enhanced its outreach and education efforts and

looks forward to continuing to work with Pepco and other stakeholders in this area. With respect

to the value of solar, OPC notes that Pepco is correct to observe that the value of solar will vary

by location and customer, and it is reasonable for Pepco to explore these variations and

encourage even more aggressive solar deployments for the customers whose usage profile and/or

location suggest the value is greatest. OPC recommends that the determination of the highest-

value locations be conducted in an open and transparent manner, with data made available to

stakeholders. OPC agrees with Pepco that future updates of the Value of Solar Report should use

4 Formal Case No. 1130, Comments of Potomac Electric Power Company on the Office of the People's

Counsel Report on Distributed Solar in the District of Columbia ("Pepco's Comments"), filed July 12, 2017.

2

the most recent values for marginal losses and welcomes additional discussion regarding the

choice of discount rate which Pepco believes may be too low.

On other issues OPC disagrees for various reasons. For example, with respect to the

adjustments Pepco made to OPC's estimated value of the avoided generation capacity, OPC

notes that the value of solar analysis should be periodically updated to include the most recent

values. However, it is inappropriate to update only one component of the value of solar without

updating every other value stream. OPC also has concerns with Pepco's suggested range of

capacity values and notes, for example, that Pepco's removal of the first three years of capacity

value is one-sided. OPC rejects Pepco's criticisms of the distribution value of solar as being

unfounded , agrees with Pepco that resources should be evaluated on whether they reduce total

costs to the system (or society), rather than based on an evaluation of only a subset of costs or

benefits. However, OPC does not agree that price suppression effects should be excluded from

the estimated benefits provided by distributed solar. OPC notes regarding hedge value that

while it is difficult to assign a specific value to hedging activities, this is not a reason to exclude

the value that hedging provides as Pepco recommends. Pepco believes avoided RPS compliance

costs should not be included in the value of solar calculation, however, OPC notes that Pepco

seemed to conflate two distinct categories of environmental costs (the avoidance of

environmental externalities and the avoidance of costs associated with environmental

compliance) and explains their differences.

3

IV. REPLY COMMENTS

A. Pepco's Interconnection Process

Pepco claims that "OPC' s use of 2014 data to assess Pepco' s interconnection process

provides a dated view of Pepco's interconnection process,"5 and that "Pepco's interconnection

process has been streamlined and improved since 2014 and continues to evolve to meet the needs

of distributed generation in the District of Columbia."6

OPC agrees that Pepco has made substantial improvements in its interconnection process,

and this may be one of the reasons why solar is growing so rapidly now in the District. OPC

commends Pepco's performance improvements in this area. However, OPC notes continued

monitoring of performance in this area is critical, in order to ensure that it does not again become

a barrier as the volume of applications grows.

B. Pepco's Education, Outreach, and Training Program

Pepco states that it "agrees that education, outreach, and training are critical, which is

why in 2015 Pepco rolled out a customer and contractor education campaign to improve

customer understanding of and satisfaction with the net energy metering and small generation

interconnection processes." 7 Pepco lists several activities that it has undertaken.

5

6

7

o Pepco developed and provided to interconnection customers, contractors, and installers printed educational material.

o Pepco has issued bill inserts to all District of Columbia customers focused on helpful resources and tools customers can use to plan for a solar generating system.

o Pepco substantially revised its NEM-related web pages.

Pepco•s Comments at 4.

Id. at 3.

Id. at?.

4

o In 2015, the Company began hosting live webcasts educating customers and contractors on the application process.

o Pepco also held face-to-face meetings with solar contractors with high numbers of applications returned as incomplete to educate them on the application process.

o On September 15, 2016; Pepco filed its Behind-the-Meter Solar Generation Promotion Communications Plan ("Communications Plan") for the District of Columbia in accordance with Merger Commitment No. 125. Pepco incorporated feedback from Solar Stakeholder Collaborative sessions into its Communications Plan.

o In 2017 Pepco created the Solar and Distributed Energy Resources Advisory Council. The Solar and Distributed Energy Resources Advisory Council met for the first time at the end of March and will meet again in September with the primary objective of discussing solar and other distiibuted energy resources ("DER") topics relevant to Pepco, the utility industry generally, and to Pepco's Distiict of Columbia customers. 8

OPC recognizes that Pepco has taken significant steps over the past two years to improve

its education and outreach. OPC is pleased that Pepco has taken these initial steps. OPC

remains convinced that consumer education is central to the successful deployment of solar

resources. OPC submits active stakeholder participation is essential and looks forward to

continuing to work with Pepco and other stakeholders in this area.

C. Locational Conditions and Installation Designs

Pepco claims that "Additional information, discussion and data beyond what is presented

in the OPC Solar Report are needed," such as "how the VOS vaiies by customer, location,

configuration, and technology (e.g., coupling with batteries or use of smart inverters), and how

that value may change over time as market and system conditions change."9

OPC observes that many utility costs vary by customer, due to location, service

requirements and specific consumption profile, among other variables. The value of solar is no

8 Id. at pp. 7-10.

9 Id. at 13.

5

different. Just as utilities make investment and cost recovery decisions based on aggregate costs,

the value of solar study estimates an aggregate value.

Pepco is correct to observe that the value of solar will vary by location and customer, and

to that end, it is reasonable for Pepco to explore these variations and encourage even more

aggressive solar deployments for the customers whose usage profile and/or location suggest the

value is greatest. OPC recommends that the determination of the highest-value locations be

conducted in an open and transparent manner, with data made available to stakeholders. Such

data should include circuit-level system data such as the available capacity on each circuit, the

peak load hours, and load forecasts. Such data could be collected in the instant proceeding, or in

a separate docket for distribution system planning or non-wires alternatives.

D. Value of Solar Estimates

1. A voided Generation Capacity

A voided generation capacity was estimated based on forecasted PEPCO Zone market

clearing prices for capacity in PJM' s Reliability Pricing Model ("RPM") auctions. Pepco states

that it "agrees with the OPC Solar Report's use of visible market prices and market price

forecasts to facilitate the development of the estimated value of any avoided generation

capacity." 10 However, Pepco states that it has concerns with the estimated value of avoided

generation capacity (described below) 11 and provides an alternative range of $0/MWh to

$8/MWh for the estimated value of avoided generation capacity. 12

10 Id. at 18.

11 Id.

12 Id. at 20.

6

Pepco's first concern is that "Solar resources alone cannot sell capacity into the

Reliability Pricing Model ("RPM") auctions without assuming excessive performance risks, so

that basis for valuing avoided generation capacity costs is questionable," 13 and the RPM auction

"comes with an obligation to perform during all hours of a year when called upon. Because of

the seasonal and intermittent nature of the output of solar resources, these resources may be

unable to perform during those hours. Consequently, distributed solar resources generally cannot

be relied upon to provide the same societal value for capacity as that received by capacity bid

into the PJM RPM auctions."14

Pepco acknowledges that behind-the-meter "solar resources can reduce the RPM capacity

obligation, which, in tum, reduces capacity costs over time." 15 However, Pepco states that

"Since RPM auctions are for capacity obligations three years ahead, however, this reduction

would not be effective immediately. As a result, for the purposes of these comments, Pepco has

made an adjustment to the OPC Solar Report's estimated value of the avoided generation

capacity to remove the first three years of value because reductions in capacity procured by PJM

due to behind-the-meter solar may not yet be realized. This adjustment reduces the estimated

value of avoided generation capacity from $16/MWh to $13/MWh."16

Regarding updated RPM results, Pepco notes that "since the time that the OPC Solar

Repo1t was issued, the results of the PJM Base Residual Auction for the 2020-2021 planning

year have been released, and the market clearing price for the PEPCO Zone is approximately

13 Id. at 18-19.

14 Id. at 19-20.

15 Id. at 19.

16 Id.

7

$86/MW-day. This value is roughly half of the approximate $150/MW-day value that forms the

basis for the OPC Solar Report's estimates for 2021 and beyond. Consequently, Pepco has made

a second adjustment to the OPC Solar Report's estimated value of avoided generation capacity,

applying the current $86/MW-day capacity price for 2021 and beyond. This adjustment further

reduces the estimated value of avoided generation capacity to $8/MWh for the purposes of the

OPC Solar Report." 17

As an initial matter, OPC notes that the value of solar is the aggregation of many

individual value streams, each of which can fluctuate over time for a variety of reasons. For this

reason, the analysis should be periodically updated to include the most recent values. However,

it is totally inappropriate to update only one component of the value of solar without updating

every other value stream. While it is true that a capacity auction post-report coming in at a lower

price suggests that the capacity component of the value of solar may be lower, to simply update

one cost category and not consider updating all cost categories amounts to che1Ty-picking.

In addition, OPC has the following concerns with Pepco's suggested range of capacity

values: Pepco's characterization of solar's ability to participate in the wholesale capacity market

is not accurate. Solar resources can, and do, participate in the RPM, even under the relatively

new Capacity Performance (CP) mechanism. In fact, PJM facilitates aggregation of seasonal

resources to support their participation in the market. Resources that tend to operate on a

seasonal basis are allowed to aggregate across locational deliverability areas. More importantly,

intermittent resources are allowed to offer in as seasonal CP resources. Thus solar resources

could offer in for the summer capacity period only (May through October). PJM clears annual

17 Id.

8

and seasonal offers independentl y to ensure that sufficient capacity of summer and winter

resources are procured. 18

While solar resources are allowed to offer in to the RPM as seasonal resources, the

vast majority of solar resources cLmently participate as annual resources. PJM reports that 125

MW of solar resources cleared in the 2020/2021 auction (330 MW of nameplate capacity) .19 Of

these, 119 MW cleared as the Annual Capacity Performance Product and 6 MW cleared as the

summer seasonal Capacity Performance product.20

Pepco is correct that solar can also impact the capacity market as a behind-the-meter

resource, and that there is a delay in when behind-the-meter reductions will be realized.

However, Pepco 's removal of the first three years of capacity value is one-sided. If Pepco

removes the first three years, it should add three years at the end of the study period, since

Pepco's capacity requirement is determined using historical load data. Thus while the load

reduction of a new solar generator may not immediately be incorporated into Pepco's load

forecast for capacity requirements, the converse is also true. In other words, if a solar generator

ceases to operate, this will also not immediately be factored into Pepco's load forecast for

capacity requirements.

Market prices fluctuate signifi cantly from year to year, and thus it is unreasonable to base

a forecast for the study period using onl y one year of data. For this reason, Synapse used a 10-

year average to develop a forecast of capacity market prices for 2020/2021 and later.

18 PJM, Seasonal Resources a11d Aggregatio11 i11 RPM. April 7. 20 17, available at:

http://www.pjm.com/-/media/commi ttees-groups/subcomm i ttees/drs/20 170407 /20 l 70407-item-04a-i nterm ittent­resou rces-in-rpm-train in g.ashx.

19 PJM applies a capacity factor of 38% to these resources, meaning that the 125 MW of cleared solar capacity translates to approximately 330 MW of nameplate solar capacity that is expected to be available in the 2020/2021 Deli very Year.

20 PJM, 2020/202 1 RPM Base Residual Auction Results. available at http: //www.pjm.com/-/media/marke ts­

ops/rom/rpm-auction-in fo/2020-202 l -base-residual-auction-report.ashx.

9

Incorporating the most recent capacity market results changes Synapse's forecast very little, due

to the averaging over a IO-year period. Applying the capacity auction forecast using the most

recent auction results changes Synapse's forecasted capacity price downward by 6.8 percent.

2. A voided Distribution Capacity

Pepco states, "It is inappropriate at this time to assign a positive default value for avoided

delivery system costs due to distributed solar resources." 21 Pepco gives several reasons:

"First, the actual value is location-specific and could be a cost or a benefit. For example,

depending upon load conditions and trends, additional infrastructure may not otherwise be

needed and, hence, may not be avoided by distributed solar resources. Furthermore, depending

upon the locational conditions, additional distribution system costs may need to be incurred to

maintain system reliability once the distributed solar resource is installed."22

Pepco comments that OPC's Solar Report assumes that Pepco "can depend upon the

incremental solar resources to produce sufficient amounts of electricity to change its decisions

about how much delivery system capacity is needed. But, solar generation can be interrupted

when cloud cover or other factors reduce or eliminate the output that a distributed solar resource

provides. Whether or not these resources reduce peak load, and thereby provide the benefit

assumed by the OPC Solar Report, depends on the coincidence of the resources with the time of

peak load on a particular distribution system component." 23

Additionally, Pepco states that load reductions do not reduce costs associated with past

investments. "Assigning a positive value for avoided system investments that actually are

21

22

23

Id. at 22.

Id.

Id.

10

'sunk' and crediting customers that own distributed solar resources for this assumed value

imposes that cost instead on other customers." 2-1

As a preliminary matter, OPC notes that the Value of Solar Report clearl y states that the

"value of solar study is designed to analyze the impacts of a small amount of additional solar

installed in the near-term, rather than large quantities of the resource installed many years in the

future. Thus the results in this study should not be assumed to still hold for s ignifi cant increases

in PY deployment, or for many years into the fu ture."25

All of Pepco's criticisms regarding the distribution value of solar are unfo unded, as these

were addressed by the Value of Solar Report's methodology, as explained below.

OPC agrees that the actual value is location-specific and could be either a cost or a

benefit. However, at the time of writing, Pepco 's restricted circuit map26 showed no restricted

circuits in the District, indicating that it would be unlikely that a small quantity of additional

solar in the District would result in a cost to upgrade the distribution system in the near-term.

Further, in response to OPC Data Request 4-8 , Pepco stated that " the customer pays all costs for

requested upgrade for purposes of interconnection if a system modification is necessary and the

Company has not incuffed any costs to upgrade the system to date solely for the purpose of

connecting an individual PY customer. "27

24 Id. at 23.

25 Value of Solar Report at 13. 11 6.

26 Avai lable at http://www.pepco.com/community-commitment/renewable-energy/green-power­

connection/restricted-circui t-map/ 27

Formal Case No. 1050. / 11 the Mauer of the l11ves1igatio11 of !111ple111e111a1io11 of /11terco1111ectio11 Standards i11 1he Districl of Columbia ("Formal Case No. I 050"), Potomac Electric Power Company Response to OPC Data Request 4-8. filed November 15, 2016.

11

Conversely, Pepco's filing in Formal Case No. 1139 contained a distribution construction

forecast of $185 million related to load growth, as shown in the table below.28 If additional

distributed solar resources reduce peak load growth, it is reasonable to expect that load-related

distribution expenditures will decrease as well.

Pepco DC 2016 - 2020 Capital Budget & Forecast (Dollars in Millions)

Distribution Bud2et Forecast Construction 2016 2017 2018 2019 2020 Total Reliability

$92.8 $96.4 $129.8 $158.5 $163.3 $640.8 Pro2rams Emergency

$22.0 $18.4 $14.4 $15.7 $15.5 $86.0 Restoration Load $41.5 $43.5 $45.2 $34.7 $19.9 $184.8

Customer Driven $77.1 $68.7 $57.9 $54.8 $59.4 $317.9

Subtotal $233.4 $227.0 $247.3 $263.7 $258.10 $1,229.5

DC PLUG $7.0 $29.8 $85.8 $68.4 $100.3 $291.3

TOTAL $240.4 $256.8 $333.1 $332.l $358.4 $1,520.8

OPC concurs with Pepco's statement that the ability of solar resources to defer

distribution system investments "depends on the coincidence of the resources with the time of

peak load on a particular distribution system component."29 As stated in the Value of Solar

Report, "Because solar PV may not be generating at full nameplate capacity during times of peak

load, the capacity value of solar must be reduced to the solar capacity contribution value-the

amount of expected power being generated during times of peak load. "30

In order to most accurately estimate the coincidence of additional solar resources with

peak demand, circuit-level load data and circuit-level forecasts of distributed generation are

required. Absent this data, it is reasonable to take an overall estimate of the coincidence of solar

28 Formal Case No. 1139, In the Matter of the Application of Potomac Electric Power Company for Authority to Increase Existing Retail Rates and Charges for Electric Distribution Service ("Formal Case No. 1139"), Direct Testimony and Exhibits of Potomac Electric Power Company Witness Verner (Part I) at 10, filed June 30, 2016.

29 Pepco Comments at 22.

30 Value of Solar Report at 124.

12

generation with Pepco's system. To do so, the Value of Solar Report reduced the solar capacity

from nameplate to its solar capacity contribution value using the value established by PJM, 38

percent. 31 The Value of Solar Report acknowledges that this capacity value is an overall system

average, and will vary by circuit: "Although some circuits peak later in the day and will not

receive as much distribution system cost avoidance, other circuits peak closer to noontime and

will receive more distribution cost avoidance than the solar capacity contribution value allows.

Therefore, the results should only be used for high level cost-benefit analysis and not be applied

on a feeder level." 32

If more accurate estimates are desired for future analyses, OPC recommends that Pepco

report circuit-level peak load data (peak hours, percent available capacity, etc.) and circuit-level

solar adoption forecasts.

OPC agrees that load reductions do not reduce costs associated with past investments,

and thus did not assign a value of avoided distribution capacity based on historical investments.

Instead, for all cost and benefit categories, the Value of Solar Report used future costs that were

marginal and avoidable. As the Report states, "Non-coincident area peak distributional marginal

costs were taken from Pepco DC' s marginal cost of service study. These costs were based on

forecasted marginal primary distribution and secondary distribution capacity costs for the 2015-

2019 timeframe, expressed in $/kW." 33

31

32

33

Id. at 125.

Id.

Id. at 124.

13

3. Price Suppression

Pepco states that "Resources should be evaluated on the basis of whether they lead to an

overall system cost reduction accounting for all stakeholders, not just a reduction in a subset of

the costs or the cost to a subset of stakeholders. "34 Further, Pepco asserts that it is not

appropriate to credit distributed solar "beyond their true value to society" in hopes that the

additional generation will result in excess supply in the market, lowe1ing prices. Pepco claims

that doing so would be inefficient, since "less expensive resources would be replaced by more

expensive resources. If less expensive resources are replaced by more expensive resources, the

overall system cost, when factoring in all costs, would result in an increased cost to society, not a

cost reduction."35

OPC agrees that resources should be evaluated on whether they reduce total costs to the

system (or society), rather than based on an evaluation of only a subset of costs or benefits.

However, OPC does not agree that price suppression effects should be excluded from the

estimated benefits provided by distributed solar for two reasons:

First, solar is an inframarginal resource in the wholesale markets, and thus can reduce the

market clearing price. This reduction in the market clearing price is then extended over the

entire quantity of energy or capacity purchased, generating significant savings for customers.

Such savings are an artifact of the market construct, but nevertheless result in real savings to

customers.

Second, the purpose of a value of solar study is to determine the total value that the

resource contributes to the grid or to society, rather than evaluate whether the cost of procming a

resource outweighs the benefits. The results of a value of solar study can be used in a cost-

34

35

Pepco Comments at 25.

Id.

14

effectiveness analysis in which the value that distributed solar provides to the grid (or society) is

compared to the cost of procuring distributed solar resources. Cost-effectiveness results are

typically presented in terms of a benefit-cost ratio and a net present value. These results can then

be used to make policy decisions, such as the appropriate compensation rate for distributed solar.

4. Hedge Value

Pepco asserts that it "is inappropriate to include this 'Hedge Value' in the VOS estimate"

because "the OPC Solar Report has not provided evidence of cost volatility reduction due to

distributed solar resource adoption. "36 Pepco claims that "such adoption could result in greater

cost volatility due to its uncertain effects on the transmission and distribution system, its

intermittent nature, and other factors." 37 In addition to questioning the use of hedge value, the

Pepco comments also specifically question a value of 10 percent.

OPC recognizes _that although risk valuation and mitigation is prevalent throughout utility

processes, it can be difficult to assign a specific value to hedging activities. However, this is not

a reason to exclude the value that hedging provides, for the reasons discussed below.

It is quite common for financial risks associated with an uncertain future to be mitigated

with hedging. Indeed, financial hedges are common in across the utility sector, ranging from

long term purchases of natural gas on a futures market to Washington DC-specific SREC annuity

programs. Therefore, the inclusion of a financial hedge in the Value of Solar Report is both

36 Pepco Comments at 27.

37 Id.

15

consistent with industry practices associated with mitigating risk and with other value of solar

studies.38

The hedge calculations apply to both potential costs associated with solar, as well as

avoided costs. To the extent that solar imposes greater cost risk on the system, that cost is

grossed up by the hedge premium in the analysis.

Synapse used a 10 percent hedge value because it was similar to several other risk

premium multipliers for demand-side resources, including Vermont, Oregon, the New England

Avoided Energy Supply Cost studies, and value of solar studies conducted in New Jersey and

Pennsylvania. The risk factors that Synapse analyzed are shown in the table below.39

38 See, for example: Contreras, J.L. et al, Photovoltaics Value Analysis, 2008. Navigant Consulting for the

National Renewable Energy Laboratory; Perez, R. et al, The Value of Distributed Solar Electric Generation to New Jersey and Pennsylvania, 2012. Clean Power Research for the Mid-Atlantic Solar Energy Industries Association and the Pennsylvania Solar Energy Industries Association; Non-is, B. et al, The Value of Distributed Solar Electric Generation to San Antonio, 2013. Clean Power Research for DOE Sunshot Initiative; Xcel Energy, Inc., Costs and Benefits of Distributed Solar Generation on the Public Service Company of Colorado System, 2013. Xcel Energy for Excel Energy; Stanton, E. et al, Net Metering in Mississippi, 2014. Synapse Energy Economics for The Public Service Commission of Mississippi.

39 Elizabeth A. Stanton et al., "Net Metering in Mississippi Costs, Benefits, and Policy Considerations"

(Synapse Energy Economics, prepared for the Public Service Commission of Mississippi, September 19, 2014), 54, http://www.synapse-energy.com/sites/default/files/Net%20Metering%20in%20Mississippi.pdf.

16

Vermont

Oregon

Adder to the cost of supply alternatives when compared to demand-side management Cost adjustment factor to cost of avoided electricity supply in efficiency screening; represents ri sk mi tigation but also environmental benefi ts and job creation

2009 Wholesale risk premium applied to wholesale energy and capacity prices 20 13 (non-Vermont) Wholesale risk premium applied to wholesale energy and capacity prices 20 13 (Vermont) Wholesale risk premium applied to wholesale energy and capacity prices

~~~11tm1mmc-· OWN portfolio

DWC portfolio

Sixth Power Plan

Insurance premium for Demand-Side-Management-Wind-Natural Gas portfolio Insurance premium for Demand-Side-Management-Wind-Coal portfolio

No disti nct value, risk index relative to other resources

10%

10%

8- 10% 9% 11.1 %

3.5%

2.5%

~~~~~~~~~~~~~

20 13 1RP - 10%

CPR NJ/PA Fuel price hedge values as percentage of value of solar - 10% NREL Natural gas hedge value as percentage of avoided costs 0- 12%

Source: Stanton, et al. "Net Metering in Mississippi Costs, Benefits, and Policy Considerations." (2014}

5. Social Cost of Carbon

Pepco states that it "accepts the inclusion of a social cost of carbon estimate with the

caveat that any compensation for the avoided social cost of carbon should be extended to all

DER and clean energy generating resources." .io OPC agrees that the avoided soc ial cost of

carbon should be applied to all clean energy resources. However, this report only evaluates

solar, so such di scussion was not necessary in this report. The value of solar arrived at in the

report should not be reduced due to this factor.

6. A voided RPS Compliance

Pepco states that inclusion of avoided RPS compliance costs is not appropriate for two

reasons:

-10 Pepco Comments at 27.

17

First, the environmental benefits to society already have been captured in other categories of the VOS estimate, most notably in the social cost of carbon component. As a result, inclusion of the avoided RPS compliance cost would constitute double-counting. Second, instead of relating to the societal benefits of solar resources, the avoided RPS compliance cost estimate relates to the possibility that, given the existing RPS structure and the existing net metering treatment of behind-the-meter solar, less total financial support would be provided to other renewable generation resources if distributed solar resources were further developed in the District of Columbia. The OPC Solar Rep011 proposes that the reduction in financial support for other renewable resources be treated as a positive value in the value of solar estimate. However, this would not be a societal benefit and should not be included in the value of solar estimate.

Pepco Comments at 28. Pepco conflates the avoidance of environmental externalities

with the avoidance of costs associated with environmental compliance. These are two distinct

categories, and the inclusion of both does not represent double-counting. Under current policy,

energy suppliers in the District must procure a certain amount of renewable energy certificates

(RECs) to be in compliance with the District's RPS policy. These costs are then passed on to

customers through the cost of electricity. Because distributed solar reduces the number of RECs

that must be purchased, the cost of complying with the District's RPS policy is reduced,

providing a monetary benefit to customers.

In contrast, environmental externalities are approximated by the social cost of carbon. As

defined in the report, the social cost of carbon "is an estimate of the damages caused globally due

to increased carbon dioxide emissions and climate change. It is intended to reflect the resulting

damages to agricultural productivity, human health, property, and ecosystems."41 These costs

are not avoided compliance costs, rather they are an estimate of avoided damages due to climate

change.

Pepco correctly notes that a reduction in the cost of complying with RPS requirements

will result in less financial support for other renewable resources. However, distributed solar

41 Value of Solar Report at 149.

18

may enable electricity suppliers to comply with the RPS at a lower cost, thereby benefitting

customers.

7. Avoided System Losses

The value of solar study assumed a 4.5% value for marginal transmission losses, based on

a 2007 gene1ic average on-peak loss percentage across PJM of 3%, multiplied by an estimated

1.5 factor to convert average system losses to marginal losses. Pepco notes that "recent

locational marginal price data indicates that the applicable marginal loss percentage for the

PEPCO Zone is roughly 2%. As a result, Pepco supports applying this more up-to-date and

location-specific marginal loss percentage to the avoided energy component of the value of solar

estimate."42 OPC agrees that future updates of the Value of Solar study should use the most

recent values for marginal losses.

8. Other

Pepco notes that societal value of distributed solar is $194/MWh, but the final chart

shows a total value of $189/MWh. Pepco argues that since there is no explanation for the

missing $5/MWh, it should not be included.43

Pepco is conect that the sum of values on the final chart showing the levelized societal

value of solar (Fig. 32) are inconsistent with the total societal value of solar of $194.40 (2015$)44

This discrepancy is the result of an enor in producing the charts shown in Figures 31 and 32, not

with the calculations or methodology. In fact, the Risk component as calculated is $14.69

42

43

44

Pepco Comments at 29.

Id.

Value of Solar Report at 153.

19

(2015$), not $7.95 (2015$) as shown in the two charts. Please note that the apparent $7 delta

differs from Pepco 's observed $5 delta due to rounding.

9. Discount Rate

Pepco states that the discount rate used may be too low, and should be stud ied in any

further efforts to characterize the value of di stributed solar resources .-+5

OPC welcomes additional discussion regarding the choice of discount rate. OPC notes

that the National Standard Practice Manual (released in 2017 by the National Efficiency

Screening Project) may prove helpful in this discussion.-+6 Chapter 9 of the National Standard

Practice Manual discusses the choice of discount rates in depth . While the manual was

developed to assess the cost-effectiveness of energy efficiency resources, the concepts in it can

also be applied to other distributed energy resources.

Pepco Comments at 30.

46 National Efficiency Screening Project, ·'National Standard Practice Manual for Assessing Cost­

Effectiveness of Energy Efficiency Resources,"' May 18, 20 17, https://nationaleffic iencyscreening.org/wp­content/uploads/201 7 /05/NSPM May-201 7 final.pd f.

20

V. CONCLUSION

WHEREFORE, for the foregoing reasons, OPC requests the Commission accept OPC's

Value for Solar Report as valuable support in its deliberations on local solar initiatives in this

proceeding.

Dated: July 24, 2017

andra Mattavous-Frye, Esq. People's Counsel D.C. Bar No. 375833

Karen R. Sistrunk, Esq. Deputy People's Counsel D.C. Bar No. 390153

Laurence C. Daniels, Esq. Director of Litigation D.C. Bar No. 471025

Travis R. Smith, Sr., Esq. Trial Supervisor D.C. Bar No. 481129

Barbara L. Bmion, Esq. Assistant People's Counsel D.C. Bar No. 430524

21

CERTIFICATE OF SERVICE

Formal Case No. 1130, In the Matter of the Investigation into Modernizing the Energy Delivery Structure for Increased Sustainability

I hereby certify that on thi s 241h day of Jul y, 2017 a copy of the "Reply Comments of the

Office of the People' s Counsel for the District of Columbia Regarding Pepco' s Comments on the Office of the People' s Counsel' s Value of Solar Study" was served on the following parties of record by hand delivery, first class mail, postage prepaid, or, electronic mail :

Christopher Lipscombe, Esq. General Counsel Public Service Commission of the District of Columbia 1325 G Street NW, Suite 800 Washjngton, DC 20005 cl ipscombe@psc.dc.gov

Brian R. Caldwell , Esq. Assistant Attorney General DC Office of the Attorney General 441 Fourth Street, N.W. Suite 650-S Washington, DC 20001 Bri an.caldwell @dc.gov

Peter Meier . Esq. Vice President, Legal Services Potomac Electric Power Company 701 Ninth Street NW Suite 1100, 10th Floor Washington, DC 20068 peter.meier@pepcoholdings.com

Randy E. Hayman, Esq. General Counsel District of Columbia Water and Sewer Authority 5000 Overlook A venue, S.W. 20032 Washington, DC 20032 Randy.Hayman@dcwater.com

Cathy Thurston-Seignious, Esq. Washington Gas Light Company 101 Constitution Avenue, NW Suite 300 Washington, DC 20080 Cthurston-seign ious@washgas.com

John S. Tobey, Esq. U.S. General Services Adrninj stration 1800 F Street, NW Room 2012B Washington, DC 20405 john.tobey@gsa.gov

Barbara Burton, Esq. Assistant People' s Counsel