Utility Regulators Oversee Planning for a Robust, Inclusive Grid in Minnesota

Date: 27 Apr 2020 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

In August 2018, the Minnesota Public Utilities Commission (PUC) ordered utility Xcel Energy (Northern States Power) to file an annual Integrated Distribution Plan. This plan was to be a detailed report on the utility’s distribution network and how the utility will adapt to a changing energy landscape.

As new technologies develop and the prices for them drop, more utility customers are turning to distributed energy resources (like rooftop solar and energy storage). In Minnesota, utility regulators have prioritized these resources and have incentivized them through policies like the community solar program. Requiring Xcel Energy to file the Integrated Distribution Plan complements existing programs and ensures that customers have access to a dependable grid, even as more distributed generation comes online.

On November 1, 2019, Xcel Energy filed its second annual Integrated Distribution Plan. As the Minnesota PUC serves in the public interest, the commission holds a comment period for stakeholders. John Farrell, Director of the Energy Democracy initiative, submitted comments on behalf of ILSR during the extended reply comment period.

In summary, ILSR’s comments reflect four beliefs:

  • That the proposed valuation method for non-wires projects (like solar, storage, and energy-efficiency) over-states their costs and does not not fully capture all of their benefits.
  • There must be a more robust analysis of “grid hosting capacity” for distributed energy projects.
  • Customers and third parties deserve greater data access, so that they have every opportunity to install distributed energy generation and cut their energy costs by capturing its full value.
  • The commission should deny certification of the Advanced Grid Intelligence and Security Initiative for cost recovery via riders.

In its comments, ILSR seconds many of the comments made by the Citizens Utility Board, the City of Minneapolis, the Environmental Law and Policy Center, the Interstate Renewable Energy Council, Vote Solar, and Xcel Large Industrials.

Read the full comments, submitted to the Minnesota Public Utilities Commission on April 10th, below.

The Institute for Local Self-Reliance (ILSR) respectfully submits the following reply comments on Xcel Energy’s Integrated Distribution Plan.

Short Shrift Given to the Non-Wires Analysis

As noted by several commenters, non-wires projects provide significant opportunities to reduce infrastructure and system costs (as well as return on equity for Xcel shareholders). However, we support several commenters in illustrating necessary improvements to the analysis proposed by Xcel:

  • Comments by ELPC / Vote Solar (henceforth “ELPC”) and the City of Minneapolis highlight the importance of calculating all value streams for non-wires projects, not just the avoided wires costs. The ELPC comments note that for the first listed project, Kasson solar plus storage, Xcel’s analysis would ignore the significant value of the produced solar electricity. A non-wires analysis is incomplete if it doesn’t adequately capture all meaningful costs and benefits, especially those that may supplement the avoided wires costs.
  • Multiple commenters also highlighted that Xcel may overstate the cost of non-wires projects, both based on its submitted figures and because these values haven’t been market-tested. To capture the maximum value for customers, non-wires projects should use a request for proposal from third parties to find the least cost (and greatest benefit) options.
  • Several parties also noted that Xcel’s proposed scope of non-wires analysis is too narrow for several reasons. The City of Minneapolis rightly notes that asset health projects may still benefit from non-wires options. ELPC illustrates that even for projects with N-1 risk, hybrid wires and non-wires projects may still provide lower cost options. The Commission should ask Xcel to broaden its scope of consideration for non-wires projects.
  • The Interstate Renewable Energy Council (IREC) also noted an important improvement necessary to support non-wires project development, Xcel’s hosting capacity analysis. ILSR agrees that the Commission should set a goal of replacing generic interconnection screens with a robust hosting capacity analysis that meets criteria set out by IREC.

In general, in failing to test its costs assumptions, artificially limiting the opportunity for non-wires projects, and undervaluing the potential revenue for non-wires projects, Xcel Energy’s non-wires analysis falls short of capturing the true opportunity to reduce system costs.

Room to Improve the Cost-Benefit Analysis

Fresh Energy illustrates several potential shortcomings in Xcel’s cost-benefit analysis, including: lack of clarity in a sharply increased budget for projects for System Expansion or Upgrades, potentially overstated benefits in the utility’s Fault Location, Isolation, and Service Restoration analysis, and a lack of commitment to a minimum benefit for customers from the Integrated Volt-Var Optimization. All of these holes should be filled in before the Commission approves this plan.

Minimum Standards for Customer Benefit: Data Access

ILSR supports several commenters (Fresh Energy, the City of Minneapolis, and Citizens Utility Board) in backing minimum standards for customer and third party data access. Citizens Utility Board, in particular, notes that the utility’s own cost-benefit ratio for certain components is less than one. The utility needs customers to help prove the value of its distribution system improvements. 

More importantly, however, Xcel Energy is a public utility, with a right to captive customers only insofar as it serves the public interest. If advanced metering infrastructure creates market opportunities for customers to cut their energy costs, then the Commission should require Xcel to maximize the customer opportunity to do so. ILSR strongly supports the requirements laid out by Citizens Utility Board, especially the requirements and deadlines for customer data access.

Project Certification

The City of Minneapolis, Fresh Energy, Citizens Utility Board, and Xcel Large Industrials all raised objections to certification of at least one component of the Integrated Distribution Plan. Most commenters found that the Commission lacked clear criteria for certification, and Xcel Large Industrials explicitly notes that the Commission lacks clear statutory authority to certify projects outside of a multi-year rate case.

It seems like a minimum requirement would be for the Commission to respond to the question of statutory authority before even considering the utility’s specific request. Should the Commission find that it has the authority to consider certification, the Institute for Local Self-Reliance would add three additional concerns in its opposition to certification for all projects:

  • Xcel Energy’s Smart Grid City project in Boulder, Colorado, remains the poster child for expensive smart grid programs. A full $16 million of cost recovery was denied to Xcel’s Energy’s Colorado subsidiary in 2013 due to costs eventually tripling the utility’s initial estimate. The doubling of costs associated with the Monticello nuclear plant retrofit in recent years suggests that the company’s Minnesota subsidiary is not immune from the challenge of accurate cost estimates. Allowing rider cost recovery may not sufficiently protect customers.
  • The concept of “priority” for certification implies a significant increase in distributed energy resources that was not reflected in the utility’s initial integrated resource plan filing late in 2019. It either implied a near-stop to community solar development or an under-estimate in distributed solar production, or both. Since these projects could form the basis of non-wires alternatives as well as customer-sited resiliency solutions, this seems unlikely. To be clear, we believe Xcel Energy’s forecasts to be in error, but the inconsistency in the Company’s expectations for distributed energy resources in this plan and its integrated resource plan should be noted.
  • Finally, the level of distribution system investment may seem novel compared to the historical focus on utility-scale and transmission-level resources, but it likely represents a new normal for grid operations. The Commission should not set a precedent that deploying significant resources to the distribution system merits special treatment for cost recovery.

Given the poor history of cost forecasting, the uncertain cost-benefit analysis, the coincidence of postponing the multi-year rate plan, and the uncertain statutory authority, ILSR strongly recommends that the commission deny certification of the Advanced Grid Intelligence and Security Initiative and push cost recovery into the utility’s next rate case.

Thank you for the opportunity to comment; we appreciate that there has not been any legislative preemption of this regulatory process.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update.

Featured photo credit: The Shiloh Temple community solar installation, Cooperative Energy Futures

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John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.

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Maria McCoy is a Researcher with the Energy Democracy Initiative. In this role, she contributes to blog posts, podcasts, video content, and interactive features.