STATE OF INDIANAINDIANA UTILITY REGULATORY COMMISSION

IN RE: NOTICE OF PROPOSED RULEMAKING REGARDING NET METERING OF ELECTRICITY

IURC RM #09-10LSA DOCUMENT #10-662

OPENING COMMENTS OF THE INTERSTATE RENEWABLE ENERGY COUNCIL

I. Introduction

The Interstate Renewable Energy Council (‟IREC”) appreciates the opportunity to

submit these comments on the proposed amendments to Indiana’s net metering rule issued by the

Indiana Utility Regulatory Commission (‟Commission”) on December 29, 2010. IREC is a

non-profit organization that has participated in over thirty net metering and interconnection

rulemaking dockets across the country in the past three years. In particular, IREC has been active

in Commission workshops related to net metering over the past year, prior to the commencement

of this rulemaking. Funding for IREC’s participation in state rulemakings is provided by the U.S.

Department of Energy, which seeks to help states minimize regulatory barriers to deployment of

distributed renewable energy while maintaining utility grid safety and reliability, and not

adversely impacting utility rates.

In general, IREC supports the Commission’s revisions. We believe that an expanded net

metering program should provide significant net benefit to Indiana’s local economy and

specifically its renewable energy industry by creating jobs as well as benefiting individual

participants. At the same time, net metering should have a minimal impact, if any impact at all,

on rates.1 In addition to these economic and participant benefits, an expanded net metering

program will mean an increase in the environmental benefits resulting from distributed

renewable generation. IREC provided more detailed comments on the positive fiscal impact of a

revised net metering rule on November 16, 2010, and we refer the Commission to those

comments for more information on IREC’s positions.

In addition, on September 30, 2010, IREC provided comments on Commission Staff’s

proposed rules in advance of this rulemaking proceeding. We appreciate the Commission’s

incorporation of some of our suggestions in its current proposed rules. In these comments, IREC

reiterates and further supports three of our earlier recommendations, which we believe are

critical to the success of Indiana’s net metering program. These recommendations are:

1. Revise the definition of “net metering customer” to allow a customer to own, lease, or

otherwise contract for the operation of a third-party-owned net metering facility.

2. Clarify that net metering customers own any Renewable Energy Credits (‟RECs”) or

other environmental attributes associated with their net-metered generation unless

customers independently contract to sell or dispose of those RECs or attributes in a

separate transaction.

3. Revise the definition of “eligible net-metering energy resource” such that it is more

detailed and not tied to the definition in IC 8-1-8.8-10 as proposed.

IREC also offers several additional suggestions for the Commission’s reconsideration. We refer

the Commission to our September 30 comments for further detail on IREC’s positions. All rule

1 For more detail on the benefits of net metering, see Clean Power Research, The Value of Distributed Photovoltaics to Austin Energy and the City of Austin (prepared for Austin Energy) (2006); R.W. Beck, Distributed Renewable Energy Operating Impacts and Valuation Study (prepared for Arizona Public Service) (2009); Energy & Environmental Economics (E3), CSI Cost Effectiveness Evaluation (prepared for the California Public Utilities Commission) (2010).

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citations in these comments refer to the rules as revised and renumbered by the Commission in

the December 29 proposed rules.

II. ‟Net Metering Customer” Definition

IREC recommends a modified definition of “net metering customer” that would allow a

customer to own, lease or otherwise contract for the operation of a third-party-owned net

metering facility. We suggest the following language for Section 1(d):

“Net metering customer” means a customer in good standing that owns, leases, or otherwise contracts for the operation of a third-party-owned and operates an eligible net-metering energy resource facility that: . . . .

Our proposed definition is intended to allow customers to own or lease facilities while also

leaving open the possibility for customers to engage in power-purchase agreements (‟PPAs”)

with third parties. Leasing and other third-party ownership arrangements allow developers to

take advantage of generous federal tax credits and accelerated depreciation, and allow Indiana

citizens to use on-site renewable energy at lower cost than otherwise possible. Contrary to the

statements by the Indiana Energy Association (‟IEA”) in its pre-docket comments submitted on

September 29, 2011, leasing and third-party ownership are in line with Indiana public policy and

the state’s regulatory scheme. Specifically, they still encourage customers to offset their own

electricity needs through on-site renewable self-generation. Leasing and third-party ownership

do not “allow for-profit entities to use Indiana residents as a way to take advantage of federal tax

credits,” as the IEA alleged; rather they constitute alternative financing structures that allow

more Indiana citizens to generate power on-site and take advantage of the benefits of net

metering. Entities that can benefit most from a third-party ownership model include tax-exempt

entities such as schools, other government entities, non-profits, and churches, as well as entities

and individuals with small or no tax appetites—that is, individuals and entities that have minimal

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tax liability and therefore do not stand to benefit from tax credits. In states with active solar

programs, third-party PPAs are used for more than half of the installed capacity of solar energy

facilities. Denying this form of ownership in Indiana will effectively cut out half of the potential

market.

Stakeholders have recognized the importance of this issue and discussed it at the

Commission’s September 9, 2010 workshop. Participants raised the concern that a third party

might fall within Indiana’s definition of a public utility, which would therefore violate the right

of the existing utility to be the sole provider in its service territory under IC 8-1-6-3. The IEA

raised the same concern in its September 29 comments. However, IREC disagrees with the IEA’s

analysis of relevant Indiana statutes, rules, cases, and Commission decisions. Instead, we believe

that, under Indiana law, third-party-owned net metering facilities would not be public utilities,

and therefore that third-party ownership arrangements and PPAs are permissible.

Specifically, in the context of public utility fees, IC 8-1-6-3 defines “public utility” to

include “every corporation, company, cooperative organization of any kind, individual,

association of individuals, their lessees, trustees, or receivers appointed by any court whatsoever

that . . . may own, operate, manage, or control any plant or equipment within the state . . . for the

production, transmission, delivery, or furnishing of heat, light, water, or power, . . . for service

directly or indirectly to the public . . . .” (emphasis added) Although the definition in IC 8-1-2-

1(a), in the statutory chapter addressing Commission jurisdiction more generally, does not

include the language “for service directly or indirectly to the public,” Indiana case law has

clearly established that its absence is unintentional, and the definition should be read to include

the language.2 2 See U.S. Steel Corp. v. Northern Indiana Pub. Serv. Co., 486 N.E.2d 1082, 1084-85 (Ind. Ct. App. 1985), clarifying and denying rehearing from 482 N.E.2d 501 (Ind. Ct. App. 1985); see also Ind. Reg. Util. Comm’n, In the Matter of the Complaint of the Northern Ind. Pub. Serv. Co. against U.S. Steel Corp Because of Breach of Contract, Violation of Electricity Suppliers’ Service Area Assignments Act, etc., Causes Nos. 43363, 43369, at 23 n.9 (May 11,

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As the Commission and the IEA have recognized, the primary issue for determining

whether an entity is a public utility is its “public nature,” that is, whether it serves multiple

entities other than itself.3 In the case of a third-party owner of a net-metered facility, only a

single entity—the on-site net metering customer—is using the electricity generated by the

facility. Using the statutory language, any individual piece of “plant or equipment” is being used

to serve only one customer, and not “the public.” The electricity in question is being generated

and consumed on a single customer’s premises. Although the on-site facility may be owned by a

third party that is selling the electricity to the on-site customer via a PPA, that third-party is not

providing a service to the public. In simple terms, utilities have wires running down the road,

connecting generation with many customers, and third-party owners of distributed generation do

not. Based on this analysis, IREC believes that a third-party-owned net metering facility is not a

public utility, and that third-party ownership arrangements and PPAs are permissible.

III. Renewable Energy Credit (REC) Ownership

IREC recommends additional language that clarifies ownership of the RECs or other

environmental attributes associated with customer-generated, net-metered electricity.

Specifically, IREC suggests that net metering customers should own any RECs or other

attributes associated with the electricity that they generate, unless they explicitly and

independently contract with another party to sell or dispose of those RECs or attributes in a

separate transaction. Clarifying the ownership of RECs and other attributes promotes certainty in

2010) (“While the final bracketed phrase ‘either directly or indirectly to the public,’ is not present in the text of IC 8-1-2-1(a), it must be considered part of the statute.”)3 See Ind. Reg. Util. Comm’n, In the Matter of the Complaint of the Northern Ind. Pub. Serv. Co. against U.S. Steel Corp Because of Breach of Contract, Violation of Electricity Suppliers’ Service Area Assignments Act, etc., Causes Nos. 43363, 43369, at 23 n.9 (May 11, 2010) (“Once USS began transmitting and selling electricity to an entity other than itself, it became a public utility. We conclude that USS acted as a public utility under Indiana law by virtue of its distribution of electricity to a separate entity.”); Ind. Util. Reg. Comm’n, The Petition of BP Products North America, Inc., Cause No. 43525, at 38 (May 13, 2009) (“. . . BP's actions are not private. On the contrary, BP sells these services, pursuant to executed contracts, to multiple customers. Therefore, based on the evidence presented, the Commission finds that BP is a public utility providing services to the public.”).

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the REC market, which in turn helps net metering customers and REC aggregators to contract

freely.4 According to Freeing the Grid, as of 2010, approximately half of the states with net

metering policies explicitly allow customers to retain ownership of RECs, absent independent

contracts selling or disposing of them.5 Therefore, IREC suggests the following language and

associated renumbering in Section 7:

(a) An investor-owned electric utility shall determine net metering customer's monthly bill as follows: . . . .(b) A net metering customer owns any renewable energy credits or other environmental attributes associated with the electricity it generates, unless such renewable energy credits or other attributes were explicitly contracted for through a separate transaction independent of any net metering or interconnection tariff or contract.

IV. ‟Eligible Net-Metering Energy Resource” Definition

IREC recommends a more detailed definition for “eligible net-metering energy resource”

and suggests that the Commission not tie the definition to IC 8-1-8.8-10 as proposed. Providing

an independent, explicit definition in the net metering rule would allow the Commission to tailor

the definition to net metering in particular. In addition, an independent definition would ensure

that any revisions are undertaken as revisions to the net metering rule, with all of the procedural

safeguards that would entail. Otherwise, the definition could be revised independently during a

separate statutory revision, which may not consider the impacts of such a revision on Indiana’s

net metering program. At the same time, IREC supports aligning the definitions as closely as

4 See Edward A. Holt, Ryan Wiser & Mark Bolinger, Lawrence Berkeley National Laboratory, Who Owns Renewable Energy Certificates? An Exploration of Policy Options and Practice ix, 35-43 (2006), available at http://eetd.lbl.gov/ea/emp/reports/59965.pdf.5 Forty-three states plus Washington, DC, and Puerto Rico have net metering policies, and 20 of those states explicitly allow customers to retain ownership of RECs. See Network for New Energy Choices, The Vote Solar Initiative, Interstate Renewable Energy Council & N.C. Solar Center, Freeing the Grid: Best Practices in State Net Metering Policies and Interconnection Procedures (2010), available at http://www.newenergychoices.org/uploads/FreeingTheGrid2010.pdf.

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possible with IC 8-1-.8.-10. Therefore, we have based our proposed definition on IC 8-1-8.8-10

Version b, which went into effect on January 1, 2011.

IREC offers the following language for Section 1(e):

“Eligible net-metering energy resource” means alternative sources of renewable energy, including the following:(1) Energy from wind;A renewable energy resource as defined in IC 8-1-8.8-10.(2) Solar energy;(3) Photovoltaic cells and panels;(4) Dedicated crops grown for energy production;(5) Organic waste biomass, including any of the following organic matter that is available on a renewable basis:

(A) Agricultural wastes and residues;(B) Wood wastes, including the following:

(i) Wood residues; or(ii) Mill residue wood;

(C) Animal wastes;(D) Animal byproducts;(E) Aquatic plants; or(F) Algae;

(6) Hydropower;(7) Energy storage systems;(2)(8) Any Oother emerging renewable energy technologies the commission determines appropriate after notice and hearing; or(9) Hydrogen produced exclusively through the use of any of the alternative sources of renewable energy described in parts (1) through (8) of this section.“Eligible net-metering energy resource” does not include:

(A) Energy from the incinerations, burning or hearing of any of the following:

(1) Tires; or(2) General household, institutional, commercial, industrial,

lunchroom, office, or landscape waste; or(B) Treated or painted lumber.

Our proposed definition deviates from IC 8-1-8.8-10 Version b on a few points, which we

explain below.

“Agricultural crops” removed from the list of permissible organic waste biomass .

This change ensures that customer-generators do not use crops primarily intended as a

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food source, such as corn, for energy generation. At the same time, the definition of

still captures dedicated crops grown for energy production, such as switch grass.

“Wood” removed from the list of permissible organic waste biomass and “forest

thinnings” removed from the list of wood wastes. With this modification, the rule

would not permit generators to use lumber as a fuel source while still allowing them

to use other more sustainable wood-based sources, including wood wastes such as

wood residues and mill residue wood.

“From existing dams” qualification removed from subsection permitting hydropower .

Eliminating this qualification would allow for new, small-scale hydropower to qualify

for Indiana’s net metering program. Because of the limitation on nameplate capacity,

large hydropower will never be eligible for net metering and is therefore not a

concern.

“Energy from waste to energy facilities” removed from the list of resources . Given

the limitation on nameplate capacity, waste to energy facilities would always be

excluded from Indiana’s net metering program due to their large capacity. Moreover,

such facilities present significant concerns related to air pollution and toxic emissions.

Hydrogen produced through the use of any alternative sources of renewable energy

included as an eligible net-metering energy resource and “fuel cells” removed from

the list of eligible resources to avoid redundancy. This change would incorporate fuel

cells into Indiana’s net metering program along with any other potential hydrogen-

based generation. It also would ensure that any such hydrogen must come from

renewable resources instead of, for example, natural gas. Although IREC recognizes

the IEA’s concerns related to hydrogen that it raised in its September 29 comments,

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we believe that such technologies are appropriate and feasible today, and should be

explicitly included in the new rule.

Notice and hearing added as a requirement before the Commission could incorporate

new eligible net-metering energy resources. This change would ensure that some

degree of procedural safeguard would accompany any future revision to this

subsection.

V. Additional Comments

While IREC believes that the prior three points are most important to the success of

Indiana’s net metering program, we also offer the following additional comments for the

Commission’s reconsideration, which we believe will further improve the program.

A. Limited Governmental Exemption to Indemnification Provision

IREC suggests adding language exempting from the indemnification provision

governmental net metering customers that are restricted from entering into contracts with

indemnification provisions. By doing so, the Commission would ensure that such governmental

customers would be able to participate in Indiana’s net metering program as long as they are

otherwise qualified to do so. IREC recommends the following revision to Section 8(b):

The utility and the net metering customer shall indemnify and hold the other party harmless from and against all claims, liability, damages, and expenses, including attorney’s fees, based on any injury to any person, including loss of life or damage to any property, including loss of use thereof, arising out of, resulting from, or connected with, or that may be alleged to have arisen out of, resulted from, or connected with an act or omission by such other party, its employees, agents, representatives, successors, or assigns in the construction, ownership, operation, or maintenance of such party's facilities used in net metering. This indemnification provision is not applicable in the case of governmental net metering customers that are restricted from entering into indemnification provisions.

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In offering this suggestion, IREC acknowledges the IEA’s September 29 comments, in

which the IEA recommended that the Commission copy the language from IAC 4-4.3-10(b)—

the liability insurance and indemnity provision in the interconnection standards—into the net

metering rule. IREC appreciates the IEA’s reasoning that that the insurance and indemnity

provisions in the interconnection standards and the net metering rule should mirror each other

and be consistent. We believe that our suggested exemption is quite limited and does not

diminish the overall consistency between the interconnection and net metering provisions. In

addition, as discussed above, we believe the exemption is important in that it would ensure

participation in net metering is extended to all eligible Indiana customers.

B. ‟Nameplate Capacity” Definition and Limitation

IREC suggests raising the nameplate capacity limit in Section 1(d)(1) from one MW to

two MW. We appreciate the Commission’s proposal to increase nameplate capacity from the

previous limit of 10 kilowatts (kW). We also appreciate that the Commission left utilities the

discretion to permit higher nameplate capacities. Nonetheless, IREC believes that a two MW

nameplate capacity limit would be more appropriate for Indiana’s net metering rules. First of all,

a two-MW limit meshes with Indiana’s interconnection rules, which provide for streamlined

procedures up to two MW. In addition, a two-MW limit is more in line with the trend in other

states’ capacity limits, as sixteen states have adopted at least a two-MW cap in the past four

years.

In addition, IREC recommends modifying the definition of “nameplate capacity” to

include a specific reference to inverter-based net metering facilities in order to allow for a clear

and simple measurement process. We propose the following language for Section 1(i):

“Name plate capacity” means the full-load continuous rating of a generator under

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specified conditions as designated by the manufacturer. For an inverter-based net metering facility, nameplate capacity means the aggregate output rating of all inverters in the facility, measured in alternating current.

C. Aggregate Amount of Net Metering Facility Nameplate Capacity

IREC recommends raising the permitted aggregate amount of net metering facility

nameplate capacity in Section 4 to five percent of the most recent summer peak load of the

utility. While we appreciate the Commission’s proposal to increase the cap from 0.1 percent to

one percent, IREC believes that five percent is more appropriate based on activity in other states.

Numerous states have no cap or caps over five percent. At the same time, a five percent cap still

ensures that net metering has a minimal impact on rates, if it has any impact at all.

D. Aggregated Net Metering

IREC recommends the addition of language regarding aggregated net metering in

Section 6. Aggregated net metering is the aggregation for billing purposes of additional meters

on the same or contiguous property of the net metering customer. The need for this common-

sense provision is best exemplified by a farm with a wind resource on one end of the property

and a nearby meter for a small load, but with most of the customer’s load thousands of yards

away on the same property but on another meter. Meter aggregation allows such a customer to

avoid the needless installation of an electric line to connect the generator with the main meter. At

least eight states have recognized the utility of aggregated net metering, and permit it in some

form, and three additional states are considering it.

We propose the following language as a new Section 6(c), which is based on Net

Metering Model Rules:6

6 Interstate Renewable Energy Council, Net Metering Model Rules (2009), available at http://irecusa.org/wp-content/uploads/2009/10/IREC_NM_Model_October_2009-1.pdf.

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A investor-owned electric utility shall, upon request from a net metering customer, aggregate for billing purposes any additional meters on the same or contiguous property of the net metering customer, provided that:(1) The additional meter or meters measure electricity used only by the net metering customer.(2) The net metering customer provides at least thirty (30) days notice to the investor-owned electric utility of the intent to aggregate meters. The specific meters must be identified at the time of such request. In the event that more than one (1) additional meter is identified, the net metering customer must designate the rank order in which the net metering credits are to be applied;(3) Net metering credits will apply only to charges that use kWh as the billing determinant. All other charges applicable to each meter account will be billed to the net metering customer. (4) If in a monthly billing period, a net metering facility’s generation of electricity to a investor-owned electric utility plus any excess generation from previous billing periods exceeds the energy usage recorded by the net metering customer’s designated primary meter, the investor-owned electric utility will apply credits to additional meters in the rank order provided by the net metering customer, and any remaining credits after doing so will be rolled over to the designated meter for use during the subsequent billing period.(5) Net metering customers participating in meter aggregation do not have to have all meters on the same rate schedule.

IREC acknowledges concerns raised by the IEA in its September 29 comments, namely

that meter aggregation will result in increased administrative burdens and potential for conflicts

with utility customers. However, we believe that our suggested language addresses many of the

IEA’s issues, in particular the metering problems and the kWh crediting process. As for the

administrative concerns related to billing, utilities in other states have integrated meter

aggregation into their net metering billing process without experiencing the serious burdens that

the IEA describes, despite raising similar concerns during their respective rulemakings. IREC

anticipates that the Commission, the IEA, and the IEA’s member utilities would similarly find

the meter aggregation process less costly or burdensome than the IEA fears, so long as a well

designed rule is put in place up front.

If the Commission does not wish to extend aggregated net metering to all customer

classes, IREC recommends that it consider permitting meter aggregation only for agricultural

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customers. As discussed above, agricultural customers as a class stand to benefit most from

aggregated net metering. Allowing for meter aggregation in this limited form would also allow

the Commission and Indiana stakeholders to understand better how meter aggregation might

operate in practice in Indiana, and whether it would make sense to extend it to other customers at

a later date. In addition, a limited pilot should alleviate much of the administrative concern that

the IEA identified in its September 29 comments, given the more limited customer eligibility. It

would allow the IEA’s members to see whether their worries related to billing, metering and

crediting would be realized, and would permit the Commission to address any of these problems

as necessary. Other states have taken a similar approach. For example, New Jersey currently

offers limited meter aggregation as a pilot program for agricultural customers. In order to

implement such a limit in the rules, IREC suggests that the Commission add the word

“agricultural” in front of the words “net metering customer” in our proposed language above.

E. Limitation on Utilities’ Charges to Customers

For the sake of simplicity and clarity, we suggest the following revision to Section 6(b)

(1):

Additional mMetering required by part (a) of this sectionfor single-phase configurations installed by the investor-owned electric utility.

Specifically, we suggest this revision because Section 6(a) discusses single-phase configurations

installed by the investor-owned electric utility. Therefore, it makes most sense simply to refer to

the more clear language already contained in Section 6(a) rather than using the more vague

language currently proposed. Regardless of whether the Commission chooses to make our

suggested change to the language, IREC supports the meaning behind the sub-section; that is,

that utilities may not charge net metering customers additional fees for such meter installations.

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VI. Conclusion

IREC commends the Commission on its efforts to revise Indiana’s net metering rules and

expand the state’s net metering program. We appreciate the opportunity to submit these

comments and looks forward to participating in this docket.

Jason B. KeyesKeyes & Fox, LLP436 14th Street, Suite 1305Oakland, CA 94612jkeyes@keyesandfox.com

for the Interstate Renewable Energy Council

Dated: March 24, 2011

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