The OUR’s role in net billing
Reference is made to a column written by Aubyn Hill in the Financial Gleaner of September 12, 2014 in which he questioned the role of the Office of Utilities Regulation (OUR) in the net billing process.
Titled ‘The Senseless Complexity of the Net Billing Bureaucracy’, it asserted that when the JPS does its technical assessment of the application for net billing, ‘their recommendation then goes to the Office of Utilities Regulation which holds it a couple of days, adds little or no value, and sends it on to the minister, who adds no value but may delay it for a while before adding the ministerial rubberised chop.’
We are using this opportunity to clarify not only the OUR’s role, but to outline the procedure for applying for a net billing licence as set out in the ‘Jamaica Public Service Company Limited Standard Offer Contract for the Purchase of As-Available Intermittent Energy from Renewable Energy Facilities up to 100kW Revised Determination Notice’ dated May 1, 2012.
Net billing allows customers of JPS, who own renewable energy generators, such as wind turbines and photovoltaic or solar systems, to generate electricity for personal use. It also allows them to sell excess energy to JPS at the short run variable “avoided cost” prices set by the OUR.
The short-run variable avoided cost in this construct reflects the fuel cost per unit of net generation on a monthly basis. This price is effectively the system total monthly fuel costs divided by the Net Generation.
Avoided cost is therefore the cost the utility would have incurred had it supplied the energy itself or obtained it from another source.
In order to encourage the development of renewable energy technology, the Government of Jamaica has determined that providers of renewable electricity to the grid should be paid a premium of up to 15% on the avoided cost of energy.
NET BILLING POLICY
The Net Billing policy which is outlined in the SOC Determination Notice stipulates that provision be made for small commercial and residential electricity generation installations with capacity up to 100kW from renewable energy sources.
The policy provides that, given the nature of these renewable installations, supplemental power will be needed from the national grid from time to time, and on occasion they will have excess energy available for sale to the national grid.
These installations are allowed to exchange power with the national grid under a net billing arrangement which involves the installation of up to two meters at the premises where the renewable energy facility is located.
Each meter measures energy flow in opposite directions. One meter accounts for flows from JPS to the customer premises and the other from the generation facility at the customer premises to JPS. In the case of the installation of a single meter, that meter has the capability to measure energy flows in both directions.
Under the net billing arrangement, JPS is responsible for the installation and maintenance of the meters and meter costs are recovered through the rates charged to the customer for electricity from JPS.
And a SOC to be executed by JPS and the customer will specify the OUR approved-rate at which the customer will sell energy to, and purchase energy from the national grid. These rates will be published in the local newspapers.
The process of finalising the SOC for promulgation and implementation commenced in May 2009 when the OUR initiated the consultation process with JPS.
The OUR deemed it necessary to first have an extensive consultation with JPS to ensure that the initial draft of the SOC adequately reflected components of the regulatory framework and legislation governing the sector and took into account relevant commercial and technical matters.
A revised SOC document outlining comments and concerns raised by stakeholders in the consultation process can be found on OUR’s website – our.org.jm.
To date, 265 applications have been received, out of which 224 which licences were issued. One hundred of the applicants have received SOCs, 68 of which are now connected to the grid.
The OUR’s role in respect of net billing is pursuant to its statutory function to regulate the generation, transmission, distribution and supply of electricity and takes into account the requirements of the licence, the government’s energy policy, industrial policy and other relevant policies and issues that impact the electricity sector.
This is set out in the ‘Regulatory Policy for the Addition of New Generating Capacity to the Public Electricity Supply System’.
The Regulatory Policy also sets out, among other factors, the “simpler procurement methodology” as approved by the OUR for capacity additions of up to 100kW supplied from energy plants which use renewable resources as its primary energy source.
Renewable energy sources refer to resources such as sunshine, wind, rivers and biological cycles which are naturally regenerated and are not depleted when exploited. The said approved procurement methodology allows these small additions of capacity to be supplied to the national grid by way of a SOC issued by the JPS.
The terms and conditions of the SOC address, inter alia, the price, the rights and responsibilities of parties to the contract, safety, technical requirements of the facility, and the assignment of interconnection costs.
Payments for electricity supplied under the SOC is in accordance with the OUR approved Net Billing pricing methodology.
Further, Section 4(1)(b) of the OUR Act requires that the OUR processes all applications for licences to provide a regulated service and that the licences be granted by the responsible minister upon the recommendation of the OUR.
The OUR therefore processes all applications for a licence to sell electricity to the national grid under the SOC arrangement, and submits its recommendation for grant of licence to the minister with portfolio responsibility for energy.
Once JPS confirms that the customer is in good standing with the company, and the capacity applied for matches with the capacity of the equipment, then the OUR prepares its recommendation for the minister.
This process by the OUR normally takes two days.
The Electric Lighting Act empowers the minister to issue licences to persons wishing to supply electricity for any public or private purpose.
Persons wishing to sell electricity to JPS must therefore first obtain a licence from the Minister before their facility can be connected to the national grid.
Mr Hill has argued that the minister should not be required to sign off on small power generating units, certainly not for 10kW solar and wind systems.
However, we urge Mr Hill to appreciate the fact that for such considerations as planning, stability and sustainability, there has to be tight monitoring and control over the amount of electricity on the grid.
Inasmuch as the OUR has to regulate that capacity, the Ministry of Science Technology Energy & Mining has to monitor the licences granted and the total capacity from renewable sources to the national grid.
Although the Net Billing Pilot Programme was scheduled to end in May 2014, it has been extended because the initial threshold of approximately 12 .8 MW equivalent penetration was not exhausted under the pilot.
The OUR’s position is that JPS should continue to process applications in accordance with the provisions of the SOC Determination and the Standard Offer Contract.
It is unfortunate that some persons are experiencing delays. The OUR has endeavoured to resolve the reported issues pertaining to the delays experienced after the grant of the licence.
However, we can confidently say that there is no delay in processing applications from the OUR’s end. It is also important to emphasise that this is a pilot project, and a review is now in progress with the objective being to address shortcomings and make the programme more responsive to all stakeholders.
We will welcome Mr Hill’s input in that exercise.
We are heartened by the number of applications received for net billing since the pilot programme started in May 2012 and are optimistic that the project will work to the benefit of our utility consumers.
n Elizabeth Bennett Marsh is public education specialist at the Office of Utilities Regulation.