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Update to Burbank Water and Power’s Customer Solar Program and Introduction of a Solar Net Billing Program
Attachment 1 - Solar Net Billing Rate Design
Date: January 14, 2025
Contents
Introduction ..................................................................................................................... 2 Compensation Rate for Exported Solar Energy .............................................................. 2 Table 1: Components of BWP’s Avoided Cost of Energy .............................................. 3 Solar Net Billing Program Details .......................................................................................... 3 Maximum Eligible Solar System Size ............................................................................... 3 Maximum Size Based on Annual Electric Usage .......................................................... 4 Annual Compensation .......................................................................................................... 4 Performance Meter ................................................................................................................ 4 Renewable Energy Credits .................................................................................................. 5 Grandfathering ........................................................................................................................ 5 Implementation Plan........................................................................................................ 5 Billing Implementation .......................................................................................................... 5 Staff Training ........................................................................................................................... 6 Rules and Regulations Update ........................................................................................... 6 Program Launch ..................................................................................................................... 6 Solar Customer Impact – Additional Details .................................................................... 6 Table 3: Monthly Bill Impacts for NEM 1.0 Versus Proposed Net Billing Rate .............. 7 Figure 1: Average Summer Delivered, Produced, and Received Energy ....................... 9 Table 4: Monthly Bill Impacts with Oversizing Allowance ................................................ 10 Table 5: Payback Periods for Solar Investment by Rate Option and Oversizing Allowance ................................................................................................................................ 10 Payback Period Assumptions ........................................................................................ 11 Fiscal Impact ................................................................................................................. 11
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Introduction
In order to establish a new solar net billing program that fairly and equitably compensates solar customers, encourages better management of solar energy during peak periods, and keeps solar economically viable for Burbank Water and Power (BWP) customers, BWP staff recommends the transition from the current NEM 1.0 solar program to the Solar Net Billing program. This document dives into the details of the proposed BWP Solar Net Billing program and its rate design.
Compensation Rate for Exported Solar Energy
Solar net billing customers would be charged the retail time-of-use (TOU) rate (defined in Article X, Section 1C of the Burbank Fee Schedule) for energy they use from the grid.
They would be compensated for energy their solar system exports back into the grid based on BWP's avoided cost of energy (ACOE).
The ACOE would be a time- based rate that aligned with the TOU rate periods, and the methodology is comprised of the following two components:
1. Avoided generation energy costs
Each kWh of energy fed into the grid from a customer-generator is one less kWh of energy that BWP must produce or purchase from the market. This time- based avoided cost of generation energy is best represented by analyzing historical energy prices in the appropriate energy market for BWP. Hourly market data is readily available for the California Independent System Operator (CAISO) region in Southern California known as “SP-15,” but BWP is in the Los Angeles Balancing Authority, and its hub is Palo Verde, which does not have historical hourly data. To calculate the ACOE, staff use an hourly price curve from the last two to three years from SP-15 and scale it to estimate a Palo Verde price curve using daily price data, which was available from both hubs. The hourly data is aggregated by season and TOU period.
2. Avoided Renewable Portfolio Standard (RPS) costs (or “green attribute”) o State-mandated Renewable Portfolio Standard (RPS) requirements dictate the percent of BWP’s power supply that must be from renewable sources. Each kWh that customer -generators feed back into the grid reduces BWP’s RPS obligation and the value of this avoided renewable energy is the second component of the ACOE. BWP staff proposes to use the average market value from the last three years of Portfolio Content Category 3 ( PCC3) Renewable Energy Credits (RECs) as the value of this “green attribute” of renewable power.
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Table 1: Components of BWP’s Avoided Cost of Energy
Rate Time Period
Avoided Energy
Generation Costs
($/kWh)
Avoided RPS Costs
($/kWh)
Total Avoided Cost
of Energy ($/kWh)
Summer On-Peak
(4 PM – 7 PM) 0.1086 + 0.01 = 0.1186
Summer Mid-Peak
(8 AM – 4 PM &
7 PM – 11 PM)
0.0725 + 0.01 = 0.0825
Summer Off-Peak
(11 PM – 8 AM) 0.0602 + 0.01 = 0.0702
Winter Mid-Peak
(8 AM – 11 PM) 0.0596 + 0.01 = 0.0696
Winter Off-Peak
(11 PM – 8 AM) 0.0596 + 0.01 = 0.0696
Alternative Compensation Rates
Another potential component that was initially discussed by staff but not included in the proposal is the avoided cost of transmission. Energy exported to the grid from customer-generators does not require transmission. However, BWP is unique compared to some other utilities in that BWP’s transmission costs are fixed, so reducing the amount of energy traveling to Burbank via transmission lines does not lower BWP’s transmission costs at the margin.
Solar Net Billing Program Details
Maximum Eligible Solar System Size
Under the current rules and regulations, only systems under one megawatt (MW) in size are eligible for net-energy-metering. For the new program, staff proposes increasing the eligible limit from one MW to five MW. Some large commercial customers have demand that exceeds one MW, and could benefit from installing larger systems to offset onsite energy use.
Alongside increasing the eligible system size, BWP will implement a maximum export limit of one MW of instantaneous power. This will limit grid complications due to solar overgeneration, while providing Burbank commercial customers with greater incentive to install larger solar systems.
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Maximum Size Based on Annual Electric Usage
While Solar Net Billing will increase solar payback periods due to the new ACOE compensation structure, one of the key objectives was to maintain the economic viability of rooftop solar in Burbank. It is thus important to design the program parameters in a way that balances fair compensation with economic viability. One lever to reduce payback periods is to relax the maximum sizing requirement for new systems subject to Solar Net Billing.
BWP’s current program limits system sizes to generation that will equal 100% of the annual energy use of the solar customer. For residential customers, BWP is proposing to increase the allowable system size to equal 150% of the annual energy use of the sol ar customer. This system size increase will benefit the customer by helping to reduce the payback period on their solar system. It will also help encourage the installation of customer battery storage and help future- proof solar systems against future electrification. The allowable size will be calculated using either the last 12 months of customer metering data or an estimation of annual energy use using three watts per square foot when 12 months of metering data is not available.
For commercial customers, the size limit will now be determined by the service size, not the annual energy use. The main concern of oversizing solar systems is overloading the service and transformer, so limiting the solar system size to the service size will avoid this overloading.
Size review will be eliminated for all new systems 10kW California Energy Commission Alternating Current Capacity (CEC -AC) and under in size. BWP Transmission and Distribution engineering staff have determined that grid impacts are minimal for systems under this size. Staff estimates that this will eliminate size review for ~90% of all new solar systems.
Annual Compensation
The current NEM program allows customers to opt for an annual payment for any excess solar credits they carry at the end of the year, or to roll-over credits indefinitely. Under the new program, customers will no longer receive credits, but it is possible they could carry a cash balance. Staff proposes allowing customers to receive a check for excess cash balance annually, by request.
Performance Meter
Currently, BWP requires the installation of a performance meter that measures the customer’s solar generation only. This meter is not required for billing, under the current NEM program, nor the new program. It exists for reporting energy use to the CEC in order ATTACHMENT 1
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to receive RECs, and so that the customer has information on their solar system’s performance. BWP engineering also uses performance meter data for distribution system analysis. BWP will continue to require the performance meter. The only exception will be for systems where all loads are connected directly to the AC inverter, which renders a performance meter redundant.
Renewable Energy Credits
BWP will reserve the right to claim customer renewable energy credits. The value of the credits is currently lower than the estimated administrative cost required to claim the credits. However, credit prices are expected to increase in the future, BWP will reserve the right to claim credits in the interconnection agreement.
Grandfathering
All existing customers and any customers that have a finalized building and safety permit for a solar generation system before the implementation date, will be grandfathered into the existing NEM 1.0 rate structure. That grandfathering for all NEM 1.0 cust omers will sunset after 20 years, or if the solar system changes owners, or the customer does an upgrade to their solar system. An upgrade is defined as increasing the size of the system.
Doing an in-kind replacement of solar system parts will not end grandfathering.
Implementation Plan
Project Schedule Date
Board Recommendation 11/7/24
City Council Approval 12/17/24
Complete rate configuration 5/1/25
Deploy new program/rate
(actual date contingent on technology
upgrades and labor resources)
7/1/25 –
1/1/2026
Billing Implementation
In order to launch the new program, the billing system needs to be prepared for the new rate. There are multiple technology upgrades that must be completed before the new rate is implemented. Staff estimates that the technology upgrades will be completed in Q1 of 2025.
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Staff Training
BWP Sustainability and Marketing staff will prepare quick reference guides for customer service staff to answer customer questions before formal communications go out to the public.. Before the official program launch, customer service staff training will take place at least one month in advance.
Rules and Regulations Update
The new program will require rules and regulations updates, including the revised interconnection agreement. These updates will take place as part of the regular rules and regulations update in 2025.
Drafts of the new interconnection agreement, and the rules and regulations revisions are attached. Currently, the solar sections of the rules and regulations only refer to the interconnection agreements, and all rules governing solar are in those agreement s. The intent of the revision is to simplify the interconnection agreement and move general system requirements not specific to the agreement between BWP and the customer to the rules and regulations. By simplifying the interconnection agreement, BWP will make the agreement easier for customers to understand. By moving more of the rules out of the interconnection agreement, we increase our flexibility to adjust the rules as needed, and will not leave customers with agreements referencing outdated rules and regulations.
Program Launch
The new program will launch at a to-be-determined date in 2025, estimated to be around June 1, 2025. Applications received after this date will automatically be part of the new program and rate.
Solar Customer Impact – Additional Details
Table 3 shows the impact of the proposed net billing rate on future solar customers in each customer class. The source of the data comes from current solar customers on NEM
1.0. While these customers will be able to remain on their current rate (see Grandfathering section below)— the table is useful for illustrating the impact of the rate change. Each row shows the average customer usage and bills for each customer class. It should be noted that, while solar systems are allowed to be sized to 100% of annual use, the average residential system is sized closer to 60% of annual use.
The first column on the left shows the customer type. The second column shows the average monthly usage for a customer of each type. This value represents the total energy consumption at the premise—either directly from the rooftop solar system or the grid.
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The third column in Table 3 shows an estimated average bill for customers without solar.
The fourth column, “NEM Bill,” shows an estimate of the average monthly bill with solar under the current NEM rate. To compare a monthly bill after the proposed Net Billing Rate becomes effective, the “Net Billing Bill” column (third from the right), shows the estimated impact of the proposed net billing rate on monthly bills for a solar PV system of equivalent size.
For residential NEM customers on a tiered rate, the monthly NEM-related savings is $139—with monthly electricity bills totaling $ 85 compared to an estimated $224 without solar PV (62 percent savings). If these customers were converted to a net billing rate with their same solar PV system, their average monthly electricity bills would total $120. They would still save $104 (45 percent) with the rate, but the savings difference compared to NEM would be $35. This pattern of savings continues for the other customer classes.
Table 3: Monthly Bill Impacts for NEM 1.0 Versus Proposed Net Billing Rate
Customer
Type
Non-Solar
Bill
NEM 1.0 (Current) Net Billing (Proposed)
Monthly
Usage
(kWh)1 NEM Bill
Difference
from Non-
Solar
Percent
Saved
Net Billing
Bill
Difference
from Non-
Solar
Percent
Saved
Residential
Tiered 894 $224 $85 $139 62% $120 $104 47%
Small
Commercial 1,608 $400 $138 $262 65% $227 $173 43%
Medium
Commercial 17,021 $4,138 $3,170 $968 23% $3,361 $777 19%
The decrease in bill savings for customers is due to two main factors. First, the ACOE is less than the retail rate of energy. Second, the netting between delivered and received energy occurs instantaneously instead of at a monthly rate. The energy from the rooftop solar system fed into the grid is measured and summed continuously and compensated at the ACOE. Under existing NEM, the received energy is netted on a monthly basis and thus compensated at the full retail rate. For customers on a TOU rate (i.e. all customer types in Table 2 except “Residential Tiered”), netting occurs separately for three TOU buckets: on- peak (summer only), mid- peak (summer and non- summer), and off -peak (summer and non-summer). TOU customers who may build up “mid-peak” energy credits during periods when the sun is out are able to use these credits during the evening mid- peak period (7pm-11pm) when the rooftop solar system is no longer generating electricity.
1 This figure represents total combined consumption at the premise from both the rooftop solar or the grid. The calculation is solar production (P) minus received energy (R) plus delivered energy (D). (C = P – R + 894D) ATTACHMENT 1
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Similarly, under NEM with TOU, rooftop solar systems can generate off -peak credits during weekend days and use these credits during off-peak periods during the week.
Figure 1 illustrates the cost and value for customers on proposed Solar Net Billing . It shows average usage characteristics for NEM solar customers on a tiered rate. The figure is broken down into the Solar Net Billing TOU periods (moving from left to right): off-peak from 12AM to 9AM, mid-peak from 9AM to 4PM, on-peak from 4PM to 7PM, and off-peak from 11PM to 12AM. The red bars represent the energy delivered to the customer from the grid. The light blue portions of the bar show the hourly energy produced by the solar system and consumed onsite. The dark blue portions of the bar show the energy produced by the solar system and fed back into the grid. Thus, the red and light blue portions added together represent the total household consumption of energy —either from the grid or the solar system. The sum of the light blue and dark blue bars represent the total energy generated by the solar system —whether it is consumed onsite or fed to the grid. The reason that certain hours can have all three color represented is due to the instantaneous netting of delivered and received. Within a one- hour time period, the customer could both use energy from the grid and also export it to the grid, depending on how much th ey use versus how much the solar system produces. There could also be instances where during some hours solar covers the entire household need, thus there would be no red.
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Figure 1: Average Summer Delivered, Produced, and Received Energy
Figure 1 also shows the value of each bar color for each TOU period. The cost of delivered energy (red) is based on the residential TOU tariff. The value the energy from rooftop solar (light blue) is also based on the TOU tariff, as customers would otherwise be using energy from the grid. The amount earned from energy exports (dark blue) is based on the ACOE. As discussed above, under TOU NEM, the solar energy generated during the mid- peak period from 9AM to 4PM would be able to offset energy (at the full r etail rate) from the grid either during that same mid-peak period or during the mid-peak period from 7PM to 11PM. Under Solar Net Billing, the energy is compensated at the ACOE.
To model the impact of net billing on solar viability, BWP staff developed a model to estimate the monthly savings and payback period for solar customers under different sets of program parameters (results in Table 4). This model assumes an installed cost per watt of $3.15/watt, consistent with installation cost data in southern California. Other assumptions were a federal tax credit of 30 percent, no O&M system costs or degradation rate, and a 3 percent real discount rate (with the assumption that ACOE com pensation and retail rates increase at the same rate into the future).
Table 4 shows the bill impacts under ideal conditions for solar, with systems sized to 100% of annual use, and then a system oversized to 150% of historical usage under solar net billing . With 150% oversizing, customers will see similar monthly and annual bills
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when compared to NEM 1.0. While the overall bill is similar, the larger system requires a higher up-front investment from the customers. This increases the payback period relative to NEM 1.0 for most customers, as seen in Table 5.
Table 4: Monthly Bill Impacts with Oversizing Allowance Customer
Type
Annual Bills
Non-
Solar
NEM 1.0
(100%)
Percent
Reduction
Net Billing
(100%)
Percent
Reduction
Net
Billing
(150%)
Percent
Reduction
Residential
Tiered $224 $21 91% $85 62% $30 87%
Small
Commercial $400 $64 84% $173 57% $60 85%
Medium
Commercial $4,138 $1,759 57% $2,249 19% $1,305 68%
Table 5 shows the estimated payback periods for typical solar PV systems for the four most common customer types with NEM rates. These payback periods assume ideal system sizing, first with systems sized to 100% of annual usage for NEM 1.0 and solar net billing, and then the final column using solar net billing with systems sized to 150% of annual use. The leftmost column shows the customer type. The next three columns provide the estimated payback periods under NEM 1.0, the proposed net billing rate with no allowed oversizing, and net billing with 150 percent oversizing. Under the current NEM
1.0 rate, staff estimates that residential customers who invested upfront in a solar PV system and then realized an annual stream of savings could pay back the cost of the system after 6 years. Under net billing with no oversizing, the payback period would increase to 9 years. With a 150 percent oversizing allowance, the payoff period would increase to 10 years.
Table 5: Payback Periods for Solar Investment by Rate Option and Oversizing Allowance
Customer Type
Monthly
Usage
(kWh)
NEM 1.0
(100%,
grandfathered)
Net Billing - No
Oversizing
(100%)
Net Billing -
150%
Residential Tiered 894 6 years 9 years 10 years
Small Commercial 1,608 9 years 15 years 15 years
Medium
Commercial 17,021 4 years 5 years 5 years
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Payback Period Assumptions
For calculating the payback periods using the aggregated average usage patterns, the assumptions were as follows:
• For solar PV systems, the installed cost per watt was $3.15 • The federal tax credit was 30% of the total installation cost. • The annual discount rate was 3% per year. The future stream of cost savings was assumed to be real and not nominal, as the amount would increase at the rate of inflation—similar to rates. The additional 3% discount rate was assumed to represent that avoided cost of capital.
Fiscal Impact
BWP sets rates to recover the amount of revenue necessary to serve its customers —or the “revenue requirement.” Solar Net Billing will not decrease the revenue requirement, but it will collect more revenue from solar customers that is currently being collected from non-solar customers. Figure 2 illustrates the cost shift that removes the cross - subsidization for residential customers on a tiered rate. The blue bar on the left shows the average annual bill before solar. The bill under an NEM 1.0 rate is shown in the middle in blue and the solar net billing bi ll is on the right. The orange portion of the middle bar represents the cost to serve solar customers that will be shifted back to solar customers and no longer subsidized by non-solar customers.
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Figure 2: Eliminating Cost Shift from NEM 1.0 to Proposed Net Billing Rate
$2,685
$1,023
$1,435
$412
$-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
Before Solar Current NEM 1.0 Net Billing
Residential Tiered Annual Energy Cost Comparison
Customer Bill Cost Shift to Non-Solar Customers