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Exclusive: Oncor Proposes Minimum Charge For Residential Customers With Distributed Energy Resources

March 20, 2017

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Copyright 2010-17
Reporting by Paul Ring •

** Exclusive First Report By **

In a new rate case, Oncor is proposing that residential customers with distributed energy resources (DER) with a capacity of three kW or greater be placed on a new rate class that includes a minimum charge.

The new residential DER rate class would provide that, for customers on such class, the customer's retail electric provider would be billed the greater of either the minimum charge established under the DER rate tariff (based on either demand or energy), or the otherwise applicable residential rate schedule

The minimum charge itself under the residential DER tariff would be the lesser of $3.53 per kW of customer peak demand, or 3.7054¢/kWh of customer average energy.

In testimony, Oncor explained the application of the proposed residential DER as follows.

"When a customer notifies Oncor that he or she is going to install DER of three kW or more, Oncor would determine the peak demand (in kW) that the customer has incurred either since they moved into their premise or since advanced metering system ('AMS') meters were installed at their premise, whichever is more recent. That 'Peak Demand' would then be multiplied by the estimated 'Demand Rate' of $3.53 to determine the customer’s 'Minimum Charge,'" an Oncor witness said in testimony.

"Thereafter, each month after the customer installs DER, Oncor would determine which is the higher amount between (a) the Minimum Charge and (b) the amount the customer would have been charged if they were on Oncor’s standard Residential Service rate. The customer would be charged the higher of the two amounts," Oncor said in testimony.

"For example, if a customer’s prior Peak Demand was found to be 10 kW, then the customer’s Minimum Charge would be $35.30. If the customer’s Minimum Charge of $35.30 is then divided by the residential rate in this case, this would equal 952 kWhs. As long as the customer consumed less than 952 kWhs in a future month, then their total charge for T&D service in that month would be $35.30. If, however, the customer’s KWh [sic] consumption exceeded 952 kWhs, then the customer would be charged under the standard Residential Service rate," Oncor said in testimony

"Oncor does not intend for the DER Rate to be a penalty for those installing DER, so Oncor would not allow a customer’s Minimum Charge to exceed what the customer would have paid had they not installed DER. When Oncor determines the customer’s prior Peak Demand, Oncor would also determine the average monthly amount of kWh that the customer consumed during the 12 months prior to the month when the customer plans to install DER. Oncor would then multiply the average monthly kWh consumption by the per kWh rate for Residential Service determined in this rate case. The lower of the two numbers would be used to set the customer’s Minimum Rate (taking into account all of the applicable fixed charges, customer charges, and non-bypassable charges that the customer would have been charged)," Oncor said in testimony

All customers would continue to be charged non-bypassable charges such as the EECRF and NDF.

When the DER Rate becomes effective, Oncor would apply the DER Rate to customers who have already installed DER beginning in the subsequent month as if these customers had installed DER in the month that the DER Rate becomes effective

Oncor explained that it would need to wait until at least July 1, 2018, or six months after the final order of the rate case, whichever date is later, before implementing the DER Rate because Oncor is implementing a new customer information system in the fourth quarter of 2017. Oncor would not be able to modify that system to bill this new rate structure until after the new system is in place. Until the time that the DER Rate is implemented, Oncor would continue to bill customers who have installed DER based on the Residential Service rate, "realizing that we will be under-recovering from those customers until the DER Rate is implemented," Oncor said in testimony.

Oncor noted that the DER Rate would not affect customers’ energy portion of the bill. Each customer would continue to pay for their energy portion of the bill in accordance with the terms set between each customer and their individual retail electric provider.

In testimony, Oncor commits to provide notice to all REPs 45 days before the DER Rate would go into effect for the first time. Additionally, Oncor commits to provide the specific minimum charge and the particular method that was used to determine the minimum charge to the REP of each customer who would be placed on the DER Rate. Thereafter, Oncor would notify each REP in the ordinary course of business when a new customer is changed to a DER Rate.

Customers who elect to install standby or backup generation, which does not operate in parallel with the grid and does not generate when the premise is taking electricity from the grid, would be exempt from the DER Rate. The declaration of standby or backup use only is made at the time of the interconnect application and is a determinant of the rate assignment, Oncor said in testimony

Oncor said in testimony that the DER Rate is needed to prevent cost shifting to non-DER customers.

"In general, Oncor’s rates are designed to ensure that each customer pays its proportionate share of Oncor’s costs of providing service to those customers. A separate rate for Oncor’s residential customers who install DER is appropriate because in almost every case, the amounts those customers pay for T&D service under the Residential Service rate will not cover the cost to provide them T&D service. This is a result of the fact that the DSC and TCRF that are part of Oncor’s current Residential Service rate are calculated in large part based on the customer’s kWh consumption. Normally, after installing DER, a customer’s energy consumption – or kWh – will be dramatically reduced, although this is not true for all customers who install DER (which I will discuss later in my testimony). Therefore, customers who install DER reduce the amounts they pay for T&D service provided to their premise, but they still require the same level of T&D service they required before they installed DER," Oncor said in testimony

"If Oncor were to maintain a per kWh rate for customers who install DER, then the cost per kWh for all of Oncor’s other customers must increase in order to compensate for the revenues not received from customers who install DER, creating a subsidy in effect," Oncor said in testimony

"Oncor estimates that approximately $1.6 million in costs would need to be passed on to all Residential customers as of December 31, 2016, due to the loss in revenue attributable to those customers who have installed DER. However, this estimate is expected to grow. As of December 31, 2016, approximately 9,338 Oncor customers had installed DER on their premise. This number is expected to grow by approximately 400-500 Oncor customers per month who are installing DER," Oncor said in testimony

Docket 46957

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