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“[W]e find the proposal deficient and not in the public interest in several key aspects, including but not limited to BGE’s site selection process, cost recovery and associated ratepayer impacts, and non-inclusive generation design” the PSC said.
A BGE spokesperson told TransmissionHub on July 19: “We are reviewing the PSC’s order. We continue to believe that public purpose microgrids are an important enhancement to the resiliency of the power grid for customers and that electric distribution utilities are ideally suited to pilot and implement microgrids.”
As TransmissionHub reported, Exelon‘s BGE last December sought PSC approval for a pilot project to build, operate and recover costs associated with two “public-purpose” microgrids located within the company’s electric distribution service territory, and a request for a waiver of the requirement to obtain a certificate of public convenience and necessity for the pilot project.
According to BGE’s December 2015 filing, under a February 2014 executive directive, a Resiliency Through Microgrids Task Force was formed to examine certain barriers to deploying microgrids in Maryland. BGE said that it was an active participant in the task force roundtable meetings, offering comments on technical issues, as well as insight on legal and regulatory considerations impacting the deployment of public purpose microgrids in Maryland. The task force issued a report in June 2014, BGE said.
BGE said that it considered how sites might be identified and evaluated for potential microgrid applications, adding that the overall process considered the current state for reliability and resiliency impacts and any other planned system work that might address those issues.
The process then looked for clusters of critical services and establishments, including urgent care facilities, schools, gas stations, grocery stores, restaurants, banks, pharmacies and home improvement stores. Another criterion, BGE added, was how many residents surround the proposed microgrid location and how many would be supported by available services. Potential sites were also reviewed for the ability to interconnect and reconfigure the distribution system to support the desired public benefit operation.
One of the proposed microgrids would be located at Edmondson Village – the 4600 block of Edmondson Ave., Baltimore City, Md. – and the other one would be located in the Kings Contrivance area of Howard County, Md. – centered on the 8600 block of Guilford Road in Columbia, Md.
As noted in the PSC’s July 19 order, BGE estimated the costs associated with the project to be around $3.5m per MW of load supported. Thus, for the 2 MW Kings Contrivance microgrid location, the estimated cost is about $7m, and about $9.2m for the 3 MW Edmondson Village location, the PSC said, adding that to recover those costs, BGE included with the proposal a new rider to BGE’s Electric Service Tariff—Rider 12, Microgrid Service Pilot—which would impose a monthly surcharge on all BGE ratepayers.
In the first year, the estimated charge for an average residential customer using 930 kWh each month would be about 4 cents per month, or 48 cents annually, the PSC said, adding that the charge would increase during the second year to 13 cents per month, or $1.56 annually. If BGE does not establish any additional microgrids after the pilot project, that cost would continue at $1.56 per year until the microgrid generation assets are depreciated, the PSC said.
The PSC said that it is not convinced that the traditional ratemaking process could not have incorporated a microgrid pilot program.
“We find that the proposed rider would be inappropriate for this pilot study, especially when it is yet to be established that the two proposed microgrids will function as promised and deliver the anticipated benefits,” the PSC said. “We are further concerned that even upon conclusion of the pilot, ratepayers will continue to pay this cost through the bill surcharge for the life of the microgrid assets, which would last well beyond the pilot. Also, if the pilot project is successful and BGE deploys additional microgrids in the future, the collective bill surcharge amounts would rise significantly.”
The proposal also suffers from a lack of investment in the project by the intended commercial beneficiaries within the microgrid or the company’s shareholders, the PSC said, noting that BGE’s pilot program focuses on sustaining merchant services used by residential customers, such as groceries, fuel, pharmacies and banks.
Although those merchant tenants are the direct beneficiaries of a hardened infrastructure designed to insulate them from extended outages of the larger grid, BGE has not asked any of them to actively participate or share in any responsibility for the microgrid deployment, the PSC said, adding that BGE does not indicate a willingness to shift even a portion of that responsibility and risk to its shareholders.
The PSC also noted that it was concerning that BGE made no attempt to seek alternative funding through state and federal agencies or the local subdivisions.
Discussing the site selection process, the PSC noted that BGE selected the microgrid site locations without engaging or soliciting input from any local or county officials or customers. BGE only stated that it examined the reliability and resiliency of its distribution systems and identified prospective areas that could benefit from microgrid support, the PSC said.
The absence of customer and county input during the selection process calls into question whether BGE carefully considered the particular needs of that location, whether a public purpose microgrid presented the best solution for that location, and whether the anticipated benefits to that community would reasonably outweigh the total cost of the project, the PSC said.
Although BGE advised the PSC at a June hearing that it has since engaged officials in Baltimore City and Howard County, it has not expressly agreed to reevaluate or change either location if county and city officials ultimately object to the proposed location or insist on a different one, the PSC said.
Among other things, the PSC noted that the proposal relies nearly exclusively on natural gas as the sole fuel source for microgrid generation. The proposal does not contemplate any renewable energy options, combined heat and power (CHP) or energy storage to diversify BGE’s generation portfolio, the PSC said.
Sole reliance on one fuel source further casts doubt on the resilience of the microgrid itself, the PSC said, noting that BGE has not accounted for the possibility that the microgrid could experience an outage or become unable to provide service to the critical assets.