Photo following the IURC hearing on 12/09/14 in the NIPSCO FIT 2.0 case. Right to left: Alison Becker with NIPSCO; Laura Ann Arnold with IndianaDG and Timothy Caister with NIPSCO.

NIPSCO Becomes First Indiana Electric Utility to Extend Voluntary Feed-in Tariff (VFIT)

Today (3/4/15), the Indiana Utility Regulatory Commission (IURC) approved an order in Cause No. 44393 during their weekly conference.

Only two Indiana investor owned electric utilities have offered voluntary feed-in tariffs (VFITs). Indianapolis Power and Light (IPL) offered Rate REP which has now expired. Northern Indiana Public Service Company (NIPSCO) became the second Indiana utility to offer a FVIT. Today NIPSCO becomes the first Indiana utility to extend their VFIT program.

 IndianaDG offers a BIG THANK YOU to NIPSCO for all the hard work and time consuming confidential negotiations resulting in the IURC order today approving Phase II of their VFIT.

The order approves the Settlement Agreement reached by the parties. A copy of the order which includes the Settlement Agreement can be found at: http://www.in.gov/iurc/files/44393order_030415.pdf

Background

•  NIPSCO filed a petition with the Indiana Utility Regulatory Commission (IURC) on 9/11/13 for a proposed extension of their voluntary feed-in tariff (VFIT). This petition in Cause No. 44393 (Phase 2 or FIT 2.0) was different than most cases filed since NIPSCO did not file a case-in-chief with the Commission outlining their proposal.
• NIPSCO filed a petition in Cause No. 43922 with the IURC for Phase I of the VFIT on 7/16/10 and the IURC approved an order on 7/13/11. A Settlement Agreement in this first case was filed on 4/18/11.
• Before even filing the second petition with the IURC, NIPSCO conducted a series of confidential meetings with the parties to their VFIT in Cause No. 43922 (Phase 1 or FIT 1.0). These meetings began in May of 2013.
• Following petitions to intervene by Citizens’s Action Coalition (CAC), the Hoosier Chapter of the Sierra Club, BioTownAg and Indiana Distributed Energy Alliance (IndianaDG), a series of confidential settlement negotiations took place.
• On 10/09/14, a Settlement Agreement was filed among Northern Indiana Public Service Company (NIPSCO), Indiana Office of Utility Consumer Counselor (OUCC), the Hoosier Chapter of the Sierra Club, Citizen’s Action Coalition (CAC), Indiana Distributed Energy Alliance (Indiana DG) and Bio Town Ag regarding the continuation of and modifications to company’s ability to acquire or purchase customer-generated electricity from renewable energy projects (Renewable Feed-in Tariff).
• The IURC order approves the Settlement Agreement which provides an additional 16 MW of capacity available for smaller renewable projects.  The Phase I pilot was capped at 30 MW.  The request specifically seeks to continue the Renewable Feed-In Tariff with an additional amount of this capacity available to smaller, qualifying solar, wind and biomass facilities.  Solar and wind projects will be limited to 200 kW and biomass projects will be limited to 1 MW.
• The order allows NIPSCO to retain a fixed purchased rate approach to providing payment for energy (and capacity, if eligible) from qualifying facilities. The purchased rates under the settlement are generally lower than Phase I of the program, with the exception of certain wind project sizes.
• The order provides a new lottery process for allocation of available capacity if requests exceed the amount available; alternatively, for a second allocation of biomass capacity, a reverse auction is proposed.
• NIPSCO will announce the opening of the lottery within 30 days from today’s IURC order. NIPSCO will then accept applications for 60 days from the date applications begin to be accepted.
• The order approves further modifications and enhancements to improve the structure of the Renewable Feed-In Tariff based upon NIPSCO’s experience with the Phase I pilot.
• In addition, to allow customers to pursue other forms of financing, including lease options, NIPSCO has removed the requirement that the customer must own the system. This also applies to customers utilizing NIPSCO’s net metering program. This means that NIPSCO will allow third party leasing financing mechanisms for net metering.

Phase I Pilot (2011 – present) Background

• NIPSCO’s previously approved renewable feed-in tariff (“FIT”) was designed to be a three-year, voluntary customer pilot whereby NIPSCO purchased electric energy and capacity from its electric customers for qualifying renewable energy production .
• The pilot was capped at 30 MW for all approved renewable technology types, with no individual fuel source allowed to exceed 50% of the capacity and additional carve outs for small solar and wind installations. Individual projects were limited to 5 MW.
• At the end of the third year of the pilot, there were 25 large projects online or in the queue and under construction, and the FIT pilot reached maximum tariff participation levels for all but wind generation. Of the 30 MW, 14.35 MW has been subscribed for biomass projects, with an additional 14.5 MW for the large solar projects.  Of the 1 MW reserved for small projects (less than 10 kW), small solar projects constitute .7 MW (or 700 kW), with small wind making up .104 MW (or 10.4 kW).
• In 2013, NIPSCO’s FIT program generated nearly 48,000 MWh, with most of that generation coming from biomass (31,600 MWh) and large solar (15,800 MWh).
• The pilot provided a great deal of information to NIPSCO, including ways to improve its standards for interconnection and the integration of the operating and safety procedures into its normal operations. In addition, NIPSCO has learned from the commercial experience of the FIT, including how to best integrate large projects into its planning process.
• Capacity in Phase I was allocated on a first-come, first-served basis.
• Most of the capacity for Phase I has been subscribed, but projects in the queue will continue to be connected under the rules in place for the pilot program.

NIPSCO FIT Phase II or FIT 2.0

• Phase II is focused on smaller projects. The total MW available was decreased to 16 MW, with the largest projects being limited to 200 kW for solar and wind and 1 MW for biomass.
• With the exception of certain wind project sizes, the purchase rates relative to Phase I have decreased. In order to better understand how the market is changing, Phase II includes a purchase rate decrease for wind and solar projects of 8% after the second year of Phase II.  In addition, the larger solar projects (projects >10kW and ≤ 200 kW) will be made available in two allocations, with half of the capacity available at the beginning of Phase II and the other half available at the beginning of year three.  This will assure that at least some of the capacity will be available at the reduced purchase rate to allow NIPSCO to understand the impact.  Another change from the Phase I pilot is that there will be no annual price escalation for solar or wind.
• For biomass projects, which will be also be offered in two allocations in the same manner as large solar, rather than having a purchase rate decrease after the second year, Phase II will offer a reverse auction whereby interested parties will submit a bid not to exceed the purchase rate available in the first two years. The lowest bid will win the capacity.  This will allow NIPSCO to better understand market conditions as well as getting the lowest price for its ratepayers.
• Phase II includes a lottery process, which will be announced no more than 30 days after Phase II is approved and will be open for 60 days, to assign available capacity. Interested parties will submit a project request form and, if there is greater demand than there is available capacity, a lottery will be held to determine the order in which the projects receive capacity. In the event that there is less interest than there is available capacity, all projects will be granted capacity.  If, at any point after the lottery, there is unsubscribed capacity and no one on the waiting list, that capacity will be available on a first-come, first-served basis.
• NIPSCO will continue to provide an annual report to the Commission and other interested parties with information related to participant participation and project characteristics.
• Customers with larger projects are encouraged to pursue them through NIPSCO’s net metering program, the avoided cost tariff or through the Midcontinent Independent System Operator (“MISO”). Each of the three options has specific qualifications.