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PSC Staff Not Persuaded Utility Ownership of Microgrids Is Appropriate, Recommends BGE Proposal Be Denied Without Prejudice

June 3, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Staff of the Maryland PSC said that it has not been convinced that utility ownership of microgrids is appropriate, and recommended that a pilot sought by Baltimore Gas & Electric to own two microgrid facilities be denied without prejudice in favor of a generic proceeding examining microgrids and related issues

"On the record that is currently before the Commission, Staff cannot recommend approval of BGE’s proposal. A proposal of this magnitude should be subject to an evidentiary proceeding, which would enable the Commission to establish an evidentiary record regarding: the feasibility of the project, the expected benefits, the logic underlying the choice of the project location, the portions of work on the project that will be sourced outside the company, the means of procurement for the outsourced portion, the appropriate allocation of risk between ratepayers and shareholders, and the means and level of cost recovery. Legislative proceedings are normally used to address general policy considerations. They should not be used to approve construction of $16.5 million in projects to be paid for by ratepayers, even if the project is only a pilot," Staff said in a recommendation to the PSC

"Even on a policy level, at this point Staff is not persuaded by the comments filed so far that a utility-owned microgrid is legal, let alone that it is of sufficient public benefit to warrant ratepayer financing. Accordingly, Staff recommends that the BGE proposal be denied, the tariffs rejected, and that the concept of public purpose microgrids be subject to a further generic proceeding or a workgroup. Staff suggests that this may be accomplished most efficiently in the upcoming 'grid of the future proceeding,' since the Commission has already ordered Pepco to initiate that proceeding by July 1, and has already ordered that it encompass microgrids as part of its subject matter. Staff’s preference would be for the Commission to make the 'grid of the future' case an evidentiary proceeding, because an evidentiary record generally forms a stronger basis even for a policy decision," Staff said

In any such future proceedings, Staff recommended that the PSC address:

1. The necessity for public purpose microgrids, in light of the widespread availability and use of backup generation;

2. Non-monetary pros and cons of microgrids as compared to current forms of power backup;

3. Expected costs of microgrids as compared to existing forms of backup power;

4. Whether microgrids should be considered generation;

5. Whether and how microgrids can or will be used to meet Maryland’s long-term electricity needs;

6. The potential for non-utility entities to develop, build, and operate microgrids, with or without utility ratepayer or shareholder funding;

7. The potential for utility affiliates to develop, build, and operate microgrids, with or without utility ratepayer or shareholder funding;

8. The relative merits of utility versus utility affiliate or non-utility development, construction, and operation of microgrids;

9. The incorporation of renewable energy and demand response resources in microgrids;

10. How a microgrid would be built and operate;

11. Allocation of microgrid costs and risks among microgrid customers, utilities, ratepayers, utility affiliates, and non-utility microgrid market participants; and

12. Appropriate processes to include key stakeholder participation/ input in the evaluation and selection of potential microgrid installation sites (including local municipal and state emergency planning & response personnel).

"The goal of the microgrid portion of the 'grid of the future' proceeding should be for the Commission to determine, whether public purpose microgrids are desirable from a policy perspective. Ultimately, if the answer to this question is 'yes,' then the Commission also needs to determine what level of utility ratepayer investment in microgrids is appropriate, and the conditions under which microgrids should be developed," Staff said

The Maryland Energy Administration also submitted comments stating that it could not support BGE's microgrid proposal at this time due to ratepayer impacts, though MEA supports the concept of public purpose microgrids

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