FINAL_Standby Rates for Combined Heat and Power Systems_FINAL_04!08!14

April 9, 2014

Purpose of the Study Analytical assessment of the rates, terms and

conditions for standby service

Focus on combined heat and power (CHP) applications

Identify opportunities for improvement in selected utility standby tariffs

Estimate the economic impact of the suggested tariff improvements on a selected set of proxy CHP customers

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Standby Service Defined Set of electric utility products for customers with on-

site, non-emergency generation

Provides a utility backstop for on-site generation facilities

Important factor in determining the economics of CHP applications relative to utility full requirements service or purchasing power from a competitive supplier

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Illustration of a Self-Generator’s Purchase Requirements

Dem

and

Supplementary Power

Standby Power

Plant Requirement

Generation

Time

Forced Outage:Backup Power

Planned Outage:Maintenance Power

Planned Outage(Coinciding with Plant Shutdown)

4

Typical Standby Rate Structure

Capacity reservation charge

As-used capacity and energy charges

Maintenance capacity charge

Facility charges

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Standby RatesBest Practices Allocation of Utility Costs

Generation, transmission, and distribution charges should be unbundled

Generation reservation demand charges should be based on the utility’s cost and the forced outage rate of customers’ generators on the utility’s system

Higher-voltage delivery charges should recognize load diversity

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Standby RatesBest Practices Appropriate Incentives

Pro-rated daily demand charges

Daily maintenance demand charges -- discounted

Customer Options

Interruptible standby service option

Customers should be able to procure standby service from the open market

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Analytical ProcessSelected Jurisdictions and Tariffs

State Utility Tariff(s)Arkansas Entergy Arkansas, Inc. Standby Service Rider

Colorado Public Service Company of Colorado Schedule PSTSchedule TST

New Jersey Jersey Central Power & Light Company Rider STB

Ohio AEP-Ohio Power Company Schedule SBSSchedule OAD-SBS

Utah Rocky Mountain Power Schedule 31

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Analytical ProcessDescription of Analytical Methods Economic analysis performed for each utility

standby tariff analyzed

Selection of customer usage characteristics

Discussions with state regulatory commission staff

State customer databases

Small, medium and large non-residential customers

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Analytical ProcessModeling Methods Customized Microsoft Excel spreadsheet

Key model inputs

Load factor

Peak demand

Generating unit net capability and outage hours

Utility rates for standby and supplemental service and applicable tariff riders

Costs modeled under existing and modified standby rates

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Analytical ProcessDevelopment of Tariff Modifications

Reviewed the standby tariff components

Evaluated against best practices in standby rate design

Identified tariff adjustments

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Common Tariff Recommendations

Generation, reservation and daily demand charges

Seasonal and on/off-peak charges

Scheduled maintenance daily demand charge

Dedicated distribution investment charge

Load diversity for transmission and shared distribution

Interruptible option

Open market standby – if available

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State Specific RecommendationsArkansas – EAI’s SSR TariffMore rate transparency

Better price signals

Increased flexibility

Better clarity

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State Specific RecommendationsColorado – PSCo’s Schedules PST and TST

The Grace Energy Hours provision should be eliminated and replaced with a generation reservation fee and a daily demand charge

Charges developed based on common tariff recommendations

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State Specific RecommendationsNew Jersey – JCP&L’s Rider STB Scheduled maintenance hours should be allowed for

all standby customers, irrespective of when the customer commenced service

Standby service should be available to all customer-generators regardless of the availability factor of their generating unit

Standby tariffs should be concise and easily understandable

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State Specific RecommendationsOhio – Ohio Power’s Schedules SBS and OAD-SBS

Two separate rate zones

Separate standby rates for bundled and choice customers

Eliminate menu of forced outage rates for bundled customers

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State Specific RecommendationsUtah – RMP’s Schedule 31

Currently no reservation generation charge

Daily on-peak backup charges

Excess power charge > $40 per kW

Single customer limit – 10 MW

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Conclusion

Standby rates can benefit from a reassessment to enhance their effectiveness for CHP applications

Existing rates, terms and conditions can be modified

Better match utility costs

Provide clearer price signals

Provide improved incentives for the operation of self-generation units

Enhance flexibility for customers

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Questions ?

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We would like to thank the Oak Ridge National Laboratory and the United States Department of Energy’s Office of Energy

Efficiency and Renewable Energy for their support and involvement in this project.

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