Welcome and Introductions

CoServ Presentation&

Member Input

July 26, 2007—CoServ’s Board of Directors issued a final decision and order regarding the federal statutory requirement that CoServ consider implementing five new ratemaking standards added to the Public Utility Regulatory Policies Act of 1978 (“PURPA”):

•Whether to implement a net metering service

•Fuel source diversity plans

•Fossil fuel generation efficiency plans

•Smart metering program

•An interconnection service for its Member-owners

Distributed Generation

What is Net Metering?

Net metering is most commonly accomplished by a single meter that runs forward when power is flowing from the utility to the customer and then runs backwards when power is flowing from the customer to the utility.

•Net metering would encourage the development of distributed generation by providing a means for customers with on-site generation to be compensated for their investment.

•Significant growth in the use of distributed generation by end-use customers could reduce the future and perhaps the existing generation requirements from CoServ’s wholesale power provider resulting in the conservation of energy supplied by the Cooperative.

•Providing net metering service would benefit those cooperative Members with on-site generation by providing a means of compensation that exceeds the actual value of the Member’s generation.

Conclusions

Net metering provides a small subsidy to the net metering customer and increases the rates of other customer classes. It appears to be contrary to the third purpose of the federal PURPA standards regarding equitable rates for consumers.

The PURPA net metering standard should be adopted with modifications that: (1) make the standard consistent with the DG Manual; (2) limit net metering to electric consumers with onsite qualifying facilities generating 50 kW or less; and (3) ensure the retail electric rates for electric consumers are cost based and designed to minimize subsidization by other electric consumers in the Cooperative’s electric rate classes.

CoServ’s net metering standard says, “retail rates for electric consumers receiving net metering service shall be cost based and designed to minimize subsidization by other CoServ Electric rate classes.”

Issues with DG and Net Metering

DG and Net Metering can cause:

under-recovery of distribution COS fixed costs

non-DG Members to subsidize the DG Members

DG (behind the meter) causes a significant reduction in kWh sales

Our current retail rates recover approximately 2/3 of the distribution COS fixed cost in the variable component of the rate, i.e.: in the energy charge

A significant reduction in kWh usage means under-recovery of distribution COS fixed costs, ultimately requiring a rate increase

If the retail rate does not recover from each DG Member the costs caused by that Member, those costs are recovered from other Members causing the non-DG Members to subsidize the DG Members

Issues with DG and Net Metering

Net metering allows the Member to use CoServ as a “bank” for kilowatt hours.

• This is the equivalent of borrowing money (kilowatt hours) and paying it back with no interest.

“Borrowing” kilowatt hours causes expense with no ability for CoServ to recover that cost.

Issues with DG and Net Metering

Net Metering compounds under-recovery of distribution COS fixed costs and creates additional subsidy by non-DG Members for the benefit of DG Members

Net Metering will result in under-recovery of wholesale power costs from the DG Member

• Since the meter is permitted to run forward and backward, energy is “borrowed” from CoServ during high cost periods and “returned” during low cost periods.

• 100% of wholesale power cost is recovered by CoServ through the PCRF

• Wholesale power cost under-recovered from DG Members flows through to all other Members via the PCRF

Wind and Solar DG is intermittent

Permitting excess DG production to be credited on the next billing or paying for excess production increases the subsidy

Issues with DG and Net Metering

CoServ’s Current DG Policy

October 1, 2010 - CoServ began charging an additional $10 for any Member with a net metered DG system

• $10 customer charge per month plus a $10 DG charge

Net metering with no purchase of excess DG production, i.e.: CoServ does not pay for or provide a credit for excess kWh flowing onto the distribution system

• Member cannot “bank” excess production as a credit on the next billing month

The Member’s DG output is netted against that which is provided from CoServ and they pay the retail rate for anything over what they produce. In the event a Member produces more than they use, they don’t receive any additional payment for the excess.

Is Distributed Generation Tariff –“Penalty or Disincentive”?

We’ve been listening!

Members with DG perceive that the additional $10 charge is a “penalty” or providing a “disincentive” for others looking to install this technology

Some Members say that CoServ should provide a subsidy to DG Members to encourage development of renewable technology

Members feel that they should be compensated for excess kWh provided to CoServ

Proposed DG Policy - proactive approach

Eliminate perception that CoServ is “anti-DG” while providing for the full recovery of fixed costs

Minimize rate subsidization

Fair and equitable to everyone (Non-DG & DG Members)

Recover 100% of fixed cost in Customer Charge with lower kWh charge

Provide two options for handling DG output:

• Net Metering with no payment or credit for excess kWh

• No Net Metering with an avoided wholesale energy cost payment for excess kWh, single meter that measures kWh delivered by CoServ and received by CoServ (from the DG), allows DG production to reduce kWh purchased from CoServ but will not “run backwards”

Proposed DG Policy - proactive approach

Based on latest cost of service study, CoServ’s Residential customer charge should be ~$30 per month

Currently we charge $10 customer charge and collect the additional fixed cost in the per/kWh charge (variable component)

Proposed DG Policy - proactive approach

Residential Billing Units Wires Total Wires Total Wires Total Wires Total

Billing Units

Consumers (12 month Sum) 1,055,316 0 10.00 10.00 0 10,553,160 10,553,160 0 30.00 30.00 0 31,659,480 31,659,480kWh (November - April) 0.017877First 700 kWh per Month315,500,063 0.104455 0.024947 0.129402 32,955,559 7,870,780 40,826,339 0.104455 0.001760 0.10622 32,955,559 555,298 33,510,857Next 300 kWh per Month91,982,429 0.104455 0.014947 0.119402 9,608,025 1,374,861 10,982,886 0.104455 0.001760 0.10622 9,608,025 161,894 9,769,919Over 1,000 kWh per Month247,309,669 0.104455 0.009947 0.114402 25,832,731 2,459,989 28,292,721 0.104455 0.001760 0.10622 25,832,731 435,279 26,268,010kWh (May - October) 955,112,022 0.104455 0.024947 0.129402 99,766,226 23,827,180 123,593,406 0.104455 0.013898 0.11835 99,766,226 13,274,020 113,040,246

Subtotal (Jan - Dec) 1,609,904,183 0.022071 168,162,541 35,532,810 203,695,352 0.104455 0.008961 0.11342 168,162,541 14,426,490 182,589,032PCRF (49,662) 0 (49,662) (49,662) (49,662)Total 0.104424 0.028627 0.133051 168,112,879 46,085,970 214,198,850 0.104424 0.028627 0.133051 168,112,879 46,085,970 214,198,850

Purchased Power Purchased Power

Purchased Power Purchased Power

2011 Residential

Standard Residential Rate Standard Res. Rate RevenueResidential Rate w/ Full COS in

Customer Charge Proposed Residential Rate Revenue

Current DG rate Proposed DG rate

Customer Charge $10.00 Customer Charge $30.00DG Charge $10.00Energy Charge (May-Oct) $0.129402 Energy Charge (May-Oct) $0.118350 (All kWh)

(April-Nov) $0.129402 (1st 700 kWh) (April-Nov) $0.106220 (All kWh)$0.119402 (Next 300 kWh)$0.114402 (Any additional kWh)

PCRF ($0.040000) (Can fluctuate month-to-month) PCRF ($0.040000) (Can fluctuate month-to-month)

No payment for excess generation No payment for excess generation

Option 1- Net Metering with no payment for excess kWh

Example of rate options for Residential DG

Option 2- No Net Metering with payment for excess kWh

Current DG rate Proposed DG rate

Customer Charge $10.00 Customer Charge $30.00DG Charge $10.00Energy Charge (May-Oct) $0.129402 Energy Charge (May-Oct) $0.118350 (All kWh)

(April-Nov) $0.129402 (1st 700 kWh) (April-Nov) $0.106220 (All kWh)$0.119402 (Next 300 kWh)$0.114402 (Any additional kWh)

PCRF ($0.040000) (Can fluctuate month-to-month) PCRF ($0.040000) (Can fluctuate month-to-month)

Payment for excess generation at CoServ’s Payment for excess generation at CoServ’s average annual avoided wholesale energy average annual avoided wholesale energy

cost (approx. $0.05 /kWh)cost (approx. $0.05 /kWh)

Example of rate options for Residential DG

Sample DG Flow Diagram

Transformer

ServicePanel

DW HVAC RefrigPool

PumpFreezer TV

DG

Inverter

Estimated Excess Power Production (PV Watts)

Note: Excess Power Production occurs when power production exceeds energy consumption and power flows backwards onto distribution system.

Annual Excess Wind Power Production, 2400 watt

Annual Excess Solar Power Production, 2400 watt

Annual Excess Solar Power Production, 3200 watt

Annual Excess Solar Power Production, 4000 watt

73 65 353 796

Annual Res kWhAnnual Wind kWh output,

2400 wattAnnual Solar kWh output,

2400 wattAnnual Solar kWh, 3200

wattAnnual Solar kWh, 4000

watt

18,010 2,690 3,368 4,491 5,614

CoServ Avg Residential kWh/meter

2400 watt Excess Wind Power Production

2400 watt Excess Solar Power Production

3200 watt Excess Solar Power Production

4000 watt Excess Solar Power Production

Rate impact for Member (Std. Rate, Current DG rate & Proposed DG rate)

Residential Customer w/ DG

3 kW of Solar (estimated

output)

Residential Customer w/out

DG

Current Residential

Rate

DG Customer Charge

Residential Customer w/ DG (Proposed Rate)

Residential Customer w/out DG

Meter Usage Meter Usage Units

Jan-12 1081 294 1375 KWH 105.75$ 10.00$ 115.75$ 104.91$ 128.53$ Feb-12 902 287 1189 KWH 91.35$ 10.00$ 101.35$ 92.45$ 114.05$ Mar-12 661 366 1027 KWH 71.05$ 10.00$ 81.05$ 75.73$ 101.47$ Apr-12 721 380 1101 KWH 76.42$ 10.00$ 86.42$ 79.92$ 107.23$ May-12 894 375 1269 KWH 92.63$ 10.00$ 102.63$ 102.75$ 127.28$ Jun-12 1397 361 1758 KWH 135.41$ 10.00$ 145.41$ 143.61$ 167.83$ Jul-12 1939 379 2318 KWH 183.34$ 10.00$ 193.34$ 187.73$ 217.23$

Aug-11 2406 371 2777 KWH 251.57$ 10.00$ 261.57$ 225.73$ 288.81$ Sep-11 2161 344 2505 KWH 226.93$ 10.00$ 236.93$ 205.76$ 261.46$ Oct-11 1247 360 1607 KWH 131.38$ 10.00$ 141.38$ 131.44$ 166.42$ Nov-11 753 283 1036 KWH 82.04$ 10.00$ 92.04$ 91.24$ 106.32$ Dec-11 877 273 1150 KWH 90.20$ 10.00$ 100.20$ 101.31$ 112.25$

Total 15037 4073 19110 1,658.07$ 1,542.58$ 1,898.90$

Current DG RateAvg. cost per/kWh 0.1103$

Savings vs/ Current DG

rate

Savings vs/ Residential Customer w/out DG

Proposed Rate w/ $30 Customer

Charge & 115.50$ 356.32$ Avg. cost per/kWh 0.1026$

Residential Customer w/out

DGAvg. cost per/kWh 0.0994$

Q & A

Next Steps:

If proposed approach is approved by Board of Directors:

• Develop edits to Tariff and DG Manual and present to Board for approval 4th Quarter 2012

• Test rate changes• Provide written notice to affected DG Members

Notice could provide opportunity for feedback and comments prior to implementation

• Implement 1st Quarter 2013 • Monitor Member impact and feedback

Distributed Generation, Rebates & Rate Strategy

December 2011

Thank you for attending the Thank you for attending the CoServ Electric Distributed CoServ Electric Distributed

Generation (DG) Focus GroupGeneration (DG) Focus GroupAugust 30, 2012August 30, 2012