Report: Oregon Looks At Knocking Down Barriers to Expand Distributed Generation

The Oregon Public Utility Commission [OPUC] issued a report, "Distributed Generation in Oregon: Overview, Regulatory Barriers and Recommendations. The report describes how customers and utilities are using DG technologies, their benefits, as well as current and projected costs. This report stands out since very few states have devoted resources to investigate policy options to increase distributed generation.

Currently the DG projects in place around Oregon, primarily at large industrial operations, represent around 500 megawatts (MW) of energy. In addition, several hundred small renewable energy systems serve Oregon homes and businesses.

The report concludes that 384 MW of additional, economical DG systems could be installed by 2025, without incentives or reduction in technology costs. In a scenario with incentives, reduced costs and other favorable conditions, the OPUC estimates 1,831 MW in additional DG systems could be installed in the next 20 years.

The OPUC finds the following regulatory barriers to DG in Oregon:

The state does not have uniform technical standards, procedures or agreements that allow for quick, inexpensive and simple interconnection of small generators with utility systems, where appropriate.

Rates for backup power may not properly reflect actual costs.

Some PURPA policies in Oregon may be outdated and need refinement.

Customers can’t easily sell power from on-site generation to the utility through a competitive bidding process, to a marketer or to other customers directly.

Utility planning for energy and capacity needs is done in isolation from distribution and transmission system planning, and neither generally considers distributed generation.

The utilities’ revenues are based on how much power they sell and move over their wires, and they lose sales when customers develop generation on site. Utilities also do not earn a return on non-utility resources or make profits on them through operational efficiencies.

Policy recommendations to remove barriers to DG in Oregon are outlined as follows in an eight point plan:

1. The Commission should implement uniform technical standards, procedures and agreements for interconnecting generators. 2. The Commission should adopt in PacifiCorp’s rate case (UE 170) standby tariffs that properly reflect the costs and benefits of serving customers with distributed generation. 3. Through UM 1129, the Commission should extend the contract length for Qualifying Facilities, increase the size eligible for standard purchase rates, establish Commission approved standard purchase agreements for facilities eligible for standard rates, and review methods for valuing avoided costs when a utility is resource-sufficient. To mitigate risk to ratepayers of long-term, must-take contracts, the Commission should allow fixed pricing under standard PURPA rates and contracts only for small Qualifying Facilities. 4. The Legislature should add biomass as a qualifying resource for net metering and allow the Commission to increase the eligible project size for Portland General Electric (PGE) and PacifiCorp. 5. The Commission should explore issues related to customer-generators selling power to other retail customers over the distribution system. 6. The Commission should investigate how to include distributed generation in utility planning and acquisition processes to meet energy, capacity, distribution and transmission system needs at the lowest cost. 7. The Commission should explore mechanisms for removing disincentives for utilities to facilitate cost-effective distributed generation at customer sites. 8. The Commission should consider approval of a utility’s request for accounting treatment that would allow a return on its capital investments in customer-owned distributed generation, similar to that previously approved for investments in conservation.

Full Text of Distributed Generation in Oregon: Overview, Regulatory Barriers and Recommendations – OR PUC, February 2005
New Rules Project’s section on DG BarriersRemoved