Avoided Cost Comparison Levelized Cost of Energy ($/MWh)

for the interconnection of distributed resources.
However, in a 2000 study by the National Renewable
Energy Laboratory of 65 distributed power
case studies, only seven reported no major utility
related barriers to interconnection. A majority
of respondents noted that “utilities’ policies or
practices constituted unnecessary barriers to interconnection.”
109 With distributed power systems
accounting for upward of 15 percent of electricity
generation capacity in some regions of the country,
there was growing concern around the reliability
implications of further interconnections.
These provisions of EPAct 2005 were designed to
promote more widespread adoption of net metering
and interconnection rates.
In November 2005, FERC required all public utilities
involved in interstate commerce to implement
standard interconnection procedures for
small generators (those under 20 MW). 110 Under
the order, small generators are required to adhere
to FERC’s Small Generator Interconnection Procedures
for technical issues; and the Small Generator
Interconnection Agreement for contractual
issues. It also required that all utilities under its
jurisdiction implement open access transmission
tariffs (OATTs). According to FERC, the regulation
was designed to equalize interconnection
treatment for generators both independent of and
affiliated with transmission providers. The order
was designed to “reduce interconnection time
and costs […], preserve reliability, increase energy
supply where needed, lower wholesale prices
for customers by increasing the number and types
of new generation that will compete in the wholesale
electricity market, facilitate development of
non-polluting alternative energy sources and help
109 R. Brent Alderfer, Thomas J. Starrs and M. Monika Eldridge, “Making Connections: Case Studies of Interconnection Barriers and their
Impact on Distributed Power Projects,” National Renewable Energy Laboratory NREL/SR-200-28053, May 2000 (Revised July 2000).
110 See: “Order No. 2006. Standardization of Small Generator Interconnection Agreements and Procedures,” Federal Energy Regulatory
Commission, Issued May 12, 2005.
111 Ibid.
112 See: MidAmerican, 94 FERC ¶61, 340 (2001). From “FERC Upholds Net Metering Laws,” Wind Energy Weekly, 20:940, April 6, 2001.
113 See: MidAmerican, 94 FERC ¶ 61,340 (2001), and SunEdison LLC, 129 FERC ¶ 61, 146 (2009).
114 See: Section 1252 of EPAct 2005; and New PURPA Section 210(m) “Regulations Applicable to Small Power Production and Cogeneration
Facilities,” Federal Energy Regulatory Commission, January 2006.
aSSESSIng THE ROlE OF dISTRIBuTEd POwER SySTEmS In THE u.S. POwER SECTOR
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remedy undue discrimination.” 111 However, the
interconnection standards apply only to utilities
subject to FERC’s jurisdiction; as most small generators
are at the distribution level, the policy has
little applicability to the majority of distributed
power systems.
FERC Jurisdiction
Over the last decade, FERC has made several rulings
having an impact on DPS, especially smallscale
facilities and installations.
In March 2001, FERC stated that “we find…that
no sale occurs when an individual homeowner
or farmer (or similar entity such as a business)
installs generation and accounts for its dealings
with the utility through the practice of netting.” 112
In effect, this ruling seemed to define that the
process of net metering does not constitute a sale
of electricity from a customer-sited facility, but
rather a crediting arrangement. However, FERC
has left open the possibility that where a sale occurs,
it could constitute a wholesale transaction
and thus fall within its jurisdiction. 113
EPAct 2005 ended the mandatory purchase requirements
stipulated in PURPA for those QFs
with access to wholesale markets, i.e. the exemption
applied to utilities operating only in “sufficiently
competitive markets for the QF to sell its
power.” 114 Following passage of the EPAct 2005,
FERC issued a generic rulemaking removing the
purchase obligation for utilities connecting to
four independent system operators—Midwest
Independent System Operator, PJM Interconnection,
ISO-New England and the New York Inde-