STATE OF INDIANA PETITION OF INDIANAPOLIS POWER LIGHT …€¦ · state of indiana indiana utility...

STATE OF INDIANA

INDIANA UTILITY REGULATORY COMMISSION

PETITION OF INDIANAPOLIS POWER & LIGHT ) COMPANY ("IPL") FOR (1) AUTHORITY TO INCREASE ) RA TES AND CHARGES FOR ELECTRIC UTILITY ) SERVICE, (2) APPROVAL OF REVISED DEPRECIATION ) RATES, ACCOUNTING RELIEF, INCLUDING UPDATE OF ) THE MAJOR STORM DAMAGE RESTORATION ) RESERVE ACCOUNT, APPROVAL OF A VEGETATION ) MANAGEMENT RESERVE ACCOUNT, INCLUSION IN ) CAUSE NO. 45029 BASIC RATES AND CHARGES OF THE COSTS OF ) CERTAIN PREVIOUSLY APPROVED PROJECTS, ) INCLUDING THE EAGLE VALLEY COMBINED CYCLE ) GAS TURBINE, THE NATIONAL POLLUTION ) DISCHARGE ELIMINATION SYSTEM AND COAL ) COMBUSTION RESIDUALS COMPLIANCE PROJECTS, ) RATE ADJUSTMENT MECHANISM PROPOSALS, COST ) DEFERRALS, AMORTIZATIONS, AND (3) APPROVAL OF ) NEW SCHEDULES OF RA TES, RULES AND ) REGULATIONS FOR SERVICE. )

PETITIONER INDIANAPOLIS POWER & LIGHT COMP ANY SUBMISSION OF CORRECTED SOLAR PILOT REPORT

Petitioner Indianapolis Power & Light Company ("IPL"), by counsel and in compliance

with the Order in this Cause dated October 31, 2018, hereby files the attached corrected Potential

Community Solar Pilot Program Proposal Report.

thorn

New Stamp

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Respectfully submitted,

By _ ~ ----=--~ - -Teresa Morton Nyhart (No. 14044-49) Jeffrey M. Peabody (No. 28000-53) BARNES & THORNBURG LLP 11 South Meridian Street Indianapolis, Indiana 46204 Nyhart Phone: (317) 231-7716 Peabody Phone: (3 17) 23 1-6465 Nyhait Email: [email protected] Peabody Email : [email protected]

Attorneys for INDIANAPOLIS POWER AND LIGHT COMPANY

CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the foregoing was served upon the following via

electronic email, hand delivery or First Class, United States Mail, postage prepaid this 11th day

of December, 2019 to:

Randall C. Helmen Jeffrey M. Reed Scott Franson Indiana Office of Utility Consumer Counselor Suite 1500 South, 115 W. Washington St. Indianapolis, Indiana 46204 [email protected] [email protected] [email protected]. gov [email protected]

Bette J. Dodd Joseph P. Rompala Anne E. Becker Tabitha L. Balzer Lewis & Kappes, P .C. One American Square, Suite 2500 Indianapolis, Indiana 46282 [email protected] [email protected] [email protected] [email protected]

Courtesy copy to: A [email protected] [email protected]

Jennifer A. Washburn Margo Tucker Citizens Action Coalition of Indiana, Inc. 1915 W. 18th Street, Suite C Indianapolis, Indiana 46202 [email protected] [email protected]

Kurt J. Boehm, Esq. Jody Kyler Cohn, Esq. Boehm, Kurtz & Lowry 36 East Seventh Street, Suite 1510 Cincinnati, Ohio 45202 [email protected] [email protected]

John P. Cook, Esq. John P. Cook & Associates 900 W. Jefferson Street Franklin, Indiana 46131 [email protected]

Kevin Higgins Energy Strategies, LLC Parkside Towers 215 South State Street, Suite 200 Salt Lake City, Utah 84111 [email protected]

Eric E. Kinder Lara R. Brandfass SPILMAN THOMAS & BATTLE, PLLC 300 Kanawha Boulevard, East P. 0. Box 273 Charleston WV 2532 1 ekinder(a),spi lmanlaw.com I brandfass(a).spi Iman law .com

Barry A. Naum SPILMAN THOMAS & BATTLE, PLLC 1100 Bent Creek Boulevard, Suite IO I Mechanicsburg, PA 17050 bnaurn(a),spilmanlaw.com

Geoffrey S. Lohman FILLENWARTH DENNERLINE GROTH & TOWE, LLP 429 E. Vermont St. , Suite 200 Indianapolis, IN 46202 glohman@fdgt laborlaw.com

Teresa Morton Nyhart (No. 14044-49) Jeffrey M. Peabody (No. 28000-53) BARNES & THORNBURG LLP 11 South Meridian Street Indianapolis, Indiana 46204 N yhart Phone: (317) 23 1-7716 Peabody Phone: (3 17) 231-6465 Nyhart Emai l: tnyhart(a),btlaw.com Peabody Emai l: [email protected]

Nikki G. Shoultz Kristina Kern Wheeler Bose McKinney & Evans LLP 11 1 Monument Circle, Suite 2700 Indianapolis, Indiana 46204 nshoultz(a),boselaw.com [email protected]

Brian C. Bosma Kevin D. Koons Ted W. Nolting Kroger Gardis & Regas, LLP 111 Monument Circle Drive, Suite 900 Indianapolis, IN 46204-5125 [email protected] [email protected] [email protected]

Jeffrey M. Peabody

Attorneys for INDIANAPOLIS POWER AND LIGHT COMPANY

DMS 159 18242vl

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IPL 2019 Community Solar Proposal Report 1

Indianapolis Power & Light Company Potential Community Solar Pilot Program Proposal Report

November 2019


Background

In compliance with the Indiana Utility Regulatory Commission’s (“IURC”) Order and Settlement

Agreement in Cause No. 45029, Indianapolis Power & Light Company (“IPL”) reconvened the Local

Green Power Advisory Committee (“LGP AC”) and worked in good faith with this Committee to

develop this community solar pilot proposal report. The meetings with the Local Green Power

Advisory Committee were open to all interested stakeholders.1

The Settlement Agreement in Cause No. 45029 states:

Community Solar. IPL agrees to reconvene the Local Green Power Advisory

Committee for a minimum of two meetings within six months of receiving a Final

Order in Cause No 45029 approving this Settlement Agreement and will work in

good faith with this Committee to develop a community solar pilot proposal

within one year. The meetings with the Local Green Power Advisory Committee

will be open to all interested stakeholders.

The LGP AC established the following goals:

• Leverage work from the 2016 & 2017 LGP AC

• Gather input on program design from the LGP AC

• Develop goals and desired outcomes for a community solar pilot proposal

• Determine key parameters of a community solar pilot proposal

2016 Local Green Power Advisory Committee Meetings and

Takeaways The first LGP AC met on January 8, 2016 to begin collecting LGP AC participant perspectives on a potential community solar pilot program for IPL’s. The LGP AC meetings met two more times that year (February 4 and March 16, 2016), where IPL presented, for discussion, potential designs for a community solar pilot program and received LGP AC participant feedback on those designs.

At Meeting 2 of the 2016 LGP AC, one participant presented on recommended Key Performance Indicators (KPIs) to consider for a potential community solar pilot program. Those five (5) KPIs were:

1) Financial – cost of project 2) Access & Equity – affordable for all customers 3) Displacement of fossil fuels/ Emission reductions 4) Number of subscribers 5) Customer satisfaction

1 Some of the stakeholders included IURC staff, Office of Utility Consumer Counselor (“OUCC”), Citizens Action Coalition (“CAC”), Hoosier Interfaith Power & Light (“HIPL”). These stakeholders are considered the “LGP AC participants”.


After analysis and feedback from the 2016 LGP AC, IPL and LGP AC members paused discussions regarding the pilot program. A potential community solar pilot program was too cost prohibitive to move forward at that time.


Takeaways In 2017, IPL reestablished the LGP AC because solar costs had declined considerably. The 2017 LGP AC meetings began on March 3, 2017 and met two more times, on March 24 and June 9, 2017. During that time, IPL was able to secure $20,000 in funding from the Smart Electric Power Alliance (“SEPA”) to conduct community solar customer market research through customer surveys and focus groups. IPL also conducted interviews with five Large Commercial and Industrial customers to assess interest. Based on the SEPA market research results, approximately 70% of residential customers and 89% of small business customers were interested in community solar, but only 24% and 19% of each respective group indicated a willingness to pay a small premium to participate in a potential community solar pilot program. Focus group discussions indicated customers believed that solar energy can save money in the long-term; however, few customers were willing to commit to a one-year contract. The customer interviews indicated that most have explored investing in on-site solar energy in the past but did not proceed due to cost. All LGP AC participants expressed interest in reducing their carbon footprint, as long as the methods were cost neutral. Additional research results are included in Appendix A. The 2017 LGP AC concluded with costs still being too prohibitive for a successful community solar pilot program.

Recent LGP AC Work


Takeaways In compliance with the Commission’s Order and Settlement Agreement in Cause No. 45029, IPL

reconvened the LGP AC to discuss a potential community solar pilot program. The 2019 LGP AC first

met on February 22, 2019 to review the work that had already been completed in the previous

meetings, recap the SEPA market research data collected from the surveys and interviews, and

introduce an updated economic model (see Appendix B for illustrative bill). Following Meeting 1, LGP

AC participants submitted a Design Factors Worksheet to understand LGP AC participant

perspectives of important design factors of a potential community solar pilot program. Table 1 below

describes the design factors.


Table 1. Potential Community Solar Pilot Program Design Factors

Design Factor Definition

Subscription Type How subscribers participate in the potential community solar pilot program.

Customer Monthly Credit Credits that are generated for the solar energy produced by a subscriber’s assigned portion of the solar facility each month.

Eligible Customers Criteria to be a subscriber in the potential community solar pilot program.

Customer Participation Limit The amount of a customer’s average usage that can be subscribed through the potential community solar pilot program.

Minimum Term Identifies a minimum contract length for the subscriber.

Subscription Transfers Subscription management if a customer moves out of the service territory.

Unsubscribed Blocks Treatment of unsubscribed blocks in the potential community solar pilot program.

Ownership Ownership of facility.

System Size How large of a facility to build for a potential community solar pilot program?

Location of Solar Array Where should the facility be built?

Program Length The amount of time a subscriber can receive benefits from the potential community solar pilot program.

The second 2019 LGP AC meeting took place on May 8, 2019. During this meeting, participants

presented on design factors and provided examples of community solar programs across the nation.

Following the participant presentations, IPL reviewed the design factors worksheet submissions

with the LGP AC.

Summary of Design Factors IPL received six design factor worksheet submissions from the following participants:

1. OUCC

2. Lugar Center

3. Englewood Development Corporation

4. Hoosier Interfaith Power and Light

5. Solar United Neighbors of Indiana


6. Joint Commenters2

Several design factors aligned among all participants, including IPL. These design factors are

summarized in Table 2 below.

Table 2. Summary of design factors that align

Design Factor Participant Consensus Response

Subscription Type A flat rate charge per month based on subscription size was viewed as appropriate.

Customer Monthly Credit The credit value should be based on the production of the subscribed blocks.

Eligible Customers Customers from any customer class in IPL’s service territory should be able to participate in this potential community solar pilot program.

Customer Participation Limit Residential customers should be able to subscribe for up to 100% of their average usage, but C&I customers are capped at a smaller percentage of usage to leave subscription availability to residential customers.

Subscription Transfers IPL should manage the transfer of subscriptions if customers unsubscribe from the potential community solar pilot program.

Location of Solar Array The most cost-effective location in IPL’s service territory should be pursued, taking into consideration options such as Brownfield sites and IPL owned land.

Program Length An asset life of 25 years would be the appropriate community solar pilot program length.

The design factors worksheet results also brought to light where differences exist amongst the

participants. These design factors are summarized below.

Customer Monthly Credit Many of the LGP AC participants stated that the monthly bill credit should not be limited to traditional

“avoided costs” calculations that reflect embedded system-wide costs for IPL’s existing generation

fleet. IPL’s perspective is that any credit should only include avoided energy and capacity value

realized by IPL’s non-participating customers.

2 Citizens Action Coalition, Earth Charter Indiana, Englewood Community Development Corporation, Environmental Law & Policy Center (ELPC), Greater Indianapolis Branch and Coalition partners, Hoosier Interfaith Power and Light, Indiana Distributed Energy Alliance (Indiana DG), Solar United Neighbors of Indiana and Sierra Club


Minimum Term Some participants in the LGP AC and the SEPA survey results pointed to a preferred minimum term

of one year. Other participants stated that there should be no commitment term or contract length

requirement as part of the potential community solar pilot program. To offer a successful pilot, IPL

would prefer the customer commitment to be longer than one year. Based on the agreed-upon

Program Length above, a potential community solar facility would be projected to have a 25-year

useful life. Shorter customer commitments over this period could present challenges in maintaining

a fully subscribed program and adds administrative complexity.

Unsubscribed Blocks When subscription blocks are not fully subscribed, there will be unassigned energy and a revenue

requirement deficiency associated with those blocks. To offer a potential pilot program, fair and

equitable guidelines to treat unsubscribed blocks are necessary. Participants expressed varying

approaches to accommodate this potential program feature. The incongruity in this discussion

amongst the LGP AC is related to determining who is responsible for the revenue requirement and

benefits from the unsubscribed energy and capacity value. Certain participants viewed the risk of

unsubscribed blocks should be shouldered by IPL and/or non-participating customers. Other

participants stated the cost of the unsubscribed blocks should not be passed on to non-participating

customers, but the generation from those unsubscribed blocks should be incorporated into IPL’s

generation mix. Specifically, the OUCC expressed its opposition to a Community Solar Program which

impacts the rates of non-participating customers. If pursued, IPL’s perspective is that the cost of

unsubscribed blocks should be allocated to customers benefiting from the energy. To minimize the

impact of unsubscribed blocks, IPL has met with potential anchor tenants who may be willing to take

on additional blocks to backfill unsubscribed blocks until IPL can subscribe new customers. Anchor

tenants would agree to a minimum subscription with a floating subscription level that would cover

unsubscribed blocks up to a predetermined amount.

Ownership The LGP AC participants’ views differed on ownership of the solar facility, ranging from IPL

ownership to third-party or shared ownership. Ownership by the utility is consistent with Indiana’s

regulatory framework and optimizes grid operation.

System Size Some LGP AC participants view the proposed size of 1 MW as too small and suggested an initial

potential community solar pilot program of at least 5 – 10 MW. Those participants believe a larger

pilot size would allow for more customer participation and lower costs per customer. IPL’s

perspective is that a potential pilot should be around 1 MW. A manageably sized pilot can help IPL

understand customer preference, community solar operations, and determine best practices. A

potential community solar pilot program needs to balance size with the ability to fully subscribe the

blocks. The larger the system, the larger the risk in having unsubscribed portions. If the potential

pilot is determined to be successful, future phases could be larger.


Proposal

Due to misalignment on the design factors noted above, IPL has determined not to pursue a

community solar pilot program at this time. Through this work with the LGP AC, IPL has determined

1) key items necessary for IPL to pursue a community solar pilot project at this time and 2) key items

that require further research subsequent to IPL’s IRP results. IPL will continue to evaluate pilot

program options. This evaluation will include discussions with potential anchor tenants and

exploration of strategies and methods to obtain a fully subscribed program.

Key items necessary for IPL to pursue a community solar pilot project

The research and analysis completed by the LGP AC regarding a potential community solar pilot

program has identified certain design factors (summarized below) that would be necessary for IPL

to pursue a program in a way that reasonably balances the interests of all customers and IPL.

Fully subscribed For IPL to pursue the construction and implementation of a community solar pilot program, all

subscription blocks must be fully subscribed. This indicates that customers are truly interested in

supporting the program and minimizes immediate risk of unsubscribed blocks. Full subscription of

the potential community solar pilot program means securing sign-up commitment from subscribing

customers prior to breaking ground on the solar facility construction. The costs to participate will

not be collected from subscribing customers until the solar array is complete and online.

Rate based / Backstop IPL believes that a potential community solar pilot program should be rate based. In IPL’s first rate

case after the implementation of a potential community solar program, IPL would include the project

and associated expenses into its new rates. IPL would also include the annual subscription revenues

collected for the program as an offset to the revenue requirement. When fully subscribed, the

recovery of the cost of subscribed blocks would come from subscribed customers. However, the costs

for unsubscribed blocks would be recovered from all IPL customers. By including a potential

community solar pilot program in IPL’s rate base, the transition of cost recovery between subscribers

would be administratively less burdensome. IPL supports a potential community solar pilot program

design where unsubscribed blocks are included in the total IPL customer generation mix. The

approach to this design element allows the potential community solar pilot program to become more

scalable for potential future addition to the pilot program and allows unsubscribed energy to be

recovered.

Minimum Term For IPL to propose a community solar pilot program, the minimum term commitment by customers

would be one year. A contract term of less than one year, or no contract term, would increase

administrative expenses related to potential community solar pilot program subscriber management

and increase the risk for unsubscribed blocks. A one-year contract term allows customers to

unsubscribe if necessary while keeping administrative burden at a minimum.


Key items that require further research for IPL to pursue a potential

community solar pilot project

Solar Tax Credit IPL included the Solar Investment Tax Credit (ITC) in the economic analysis presented to the LGP AC.

At IPL’s preferred pilot size (1 MW), IPL/AES is likely able to take advantage of the ITC. However, if

a larger pilot project (over 1 MW) were to be considered, IPL’s/AES’s ability to utilize the tax credits

is less certain. A larger pilot project may necessitate a Tax Equity partner, which creates additional

complexities.

Administrative and Other Costs The administrative costs have not yet been adequately reflected in the solar economic model

discussed above. Thus far the modeling has included a high-level assumption for administrative

costs. IPL’s current billing system is not designed to easily handle deviations from normal business

practices. The current system would require upgrades to successfully administer a community solar

pilot offering. In addition, we have not yet fully developed a marketing plan for a community solar

pilot project and have not yet estimated the marketing costs. Finally, the current economic model

assumes no cost for land (existing IPL land or donated site). IPL needs to continue to research and

better understand the details of a potential locations.

IPL’s Integrated Resource Plan (IRP) IPL is performing resource planning modeling and analysis as part of the 2019 IRP process. Many of

the LGP AC Participants are also involved in that process. The IRP results will inform IPL and LGP AC

Participants on the potential path forward for any resource needs or changes. If this process, through

its rigorous modeling and stakeholder involvement, identifies construction of solar as necessary for

the generation mix, there may be an opportunity for IPL to re-visit and further develop a potential

community solar pilot program as part of the overall additional solar resource addition.


Appendix A – Smart Electric Power Alliance “SEPA” Market

Research

Market Research Results

The survey and focus groups: homeowners, renters, and small businesses were quite favorable.

Survey details:

• The survey was sent to 82,867 residential and small business customers in April 2017.

• The response rate of 4.9% exceeded IPL’s expectation.

• The survey was completed by 3,999 residential and 47 small business customers.

• Approximately 70% of residential customers and 89% of small business customers were

interested in community solar.

• See the figures below for limited survey results.

Figure 2: Residential Response to “Would you be willing to pay a premium to voluntarily participate in an IPL community

solar program?”

Figure 3: Small Business Response to “Would you be willing to pay a premium to voluntarily participate in an IPL

community solar program?”

Figure 4: Residential Response to “Assuming your bill mirrors the average IPL residential customer bill of $100 a month,

what is the highest additional amount you would be willing to pay to power your home with solar energy?”

Focus Group takeaways:

• Interest in solar is primarily driven by saving money, followed at a distance by

environmental concerns.

• Two to three year program terms were deal breakers for many of the participants.

• Renewable Energy Credits (RECs) were not a meaningful value to most.


• For the most part, customers were not concerned where the solar facility would be located.

• Customers were fairly split between interest in paying more and locking in a rate vs. paying

a bit less.

Large Customer Interview takeaways:

Interviews were conducted with companies from these five sectors: Pharmaceuticals, Health Care,

Manufacturing, Higher Education and Food Processing. A summary of findings is listed below:

• Most customers have explored investing in on-site solar energy in the past, but did not

proceed due to cost.

• All customers expressed interest in the community solar concept as long as it is a cost-

neutral option.

• Paying a premium can be a non-starter, unless the organization has a history or value of

investing in sustainability.

• Beyond cost, achieving sustainability goals and public relations value are the main drivers

in solar adoption.

• Customers described participation in voluntary sustainability reporting.

• Carbon Disclosure Project

• American College & University Presidents’ Climate Commitment

• Desired contract length varied dramatically between 1 year and 20 year commitments.


Appendix B – Illustrative Participating Customer Monthly

Bill

Below is an example bill for a current Residential (RS) customer with a 1,000 kWh usage per month

and subscribes to one 250 W block.

Total Month Usage 1,000 kWh

Community Solar production for 1 250w block 32.85 kWh

RS Customer Monthly Cost Per kWh

Customer Charge 17.00$

1st 500 53.27$ 0.106540$

Over 500 45.38$ 0.090752$

GP -$ -$

FAC 0.29$ 0.000285$

DSM 4.21$ 0.004207$

ECCR (2.70)$ (0.002699)$

CAP 0.78$ 0.000780$

OSS (0.61)$ (0.000607)$

RTO (0.03)$ (0.000028)$

117.58$

Community Solar Cost Per Block 2.92$

Community Solar Credit (1.30)$ 0.039585$

Net Community Solar Premium 1.62$

Total Monthly Bill 119.20$

Example Customer Monthly Bill (Rates as of May 2019)

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