BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION Petition of PUGET SOUND ENERGY, INC. For an Order (1) Authorizing Deferral of Expenditures Incurred Under Schedule 150, Net Metering Services for Renewable Energy Systems, and (2) Authorizing Recovery in Electric Rates of Such Deferred Expenditures in Accordance with Schedule 120, Electricity Conservation Tariff Rider. Docket UE-990016 ORDER On January 7, 1999, Puget Sound Energy, Inc., ("PSE" or "the Company") filed a petition for an order regarding the accounting and ratemaking treatment of the Company’s Net Metering Services for Renewable Energy Systems Tariff (“Net Metering Program”). According to the Petition, the Net Metering Program is in the public interest and utility costs to implement and manage the program should not exceed public benefits. The Petition also states that such program costs should be recovered from all PSE customers rather than solely from the customer-generators and that Schedule 120 is an appropriate mechanism to recover such costs. BACKGROUND 1. Washington State Substitute House Bill 2773 requires utilities to offer to make net metering available to eligible customer-generators, stating that it is in the public interest to do so. 2. Net metering means measuring the difference between the electricity supplied by an electric utility and the electricity generated by a customer-generator that is fed back to the electric utility over the applicable billing period. 3. Concurrently with the Company’s Petition, the Company filed its proposed Schedule 150, Net Metering Services for Renewable Energy Systems, which governs the Net Metering Program. The intent of the proposed Net Metering Program is to encourage the development of small-scale renewable resources. 4. On May 16, 1997, in Docket No. UE-970686, the Commission approved the Company’s Schedule 120, Electricity Conservation Service. This rider provides for concurrent recovery in rates of deferred electricity conservation expenditures. Docket UE-990016 Page 1 PROPOSED NET METERING PROGRAM 5. The Company’s proposed Net Metering Program will allow customers who own hydroelectric, solar, or wind powered generators with a total capacity of no more than 25 kW per customer, to operate these systems in parallel with the Company’s electricity facilities and measure the flow of energy in two directions. Energy production in excess of consumption on a monthly basis will be credited to the customer-generator, with this kWh credit appearing on the bill for the following billing period. On an annual basis, any remaining unused kWh credit accumulated during the previous year shall be granted to the Company, without any compensation to the customer-generator. 6. The proposed Net Metering Program will require the Company to incur certain expenses, including: (a) program management costs; (b) incremental customer metering costs necessary to implement the Net Metering Program; (c) unbilled distribution system costs associated with distribution services used by the customer-generator but not paid for the by the customer-generator. Unbilled distribution system costs are defined as costs associated with the use of the distribution system by the customer to “store” generation output. The cost for using this system is the amount of kWh credits stored and recovered times the functionalized distribution system cost for the customer-generator’s rate classification as identified in PSE’s cost unbundling report in Docket No. UE-980181; (d) costs associated with tracking, record keeping, billing, and accounting for the Net Metering Program. 7. The Company proposes to defer the program costs associated with the proposed Net Metering Program by recording them in FERC Account No. 182.3, Other Regulatory Assets. Monthly entries will be made to reflect the Company’s actual costs of running the Net Metering Program. On an annual basis, the generation value of any remaining unused kWh credits granted to the Company shall be used to offset program costs so deferred. 8. The Company proposes to subsequently recover those deferred costs through Schedule 120, which amortizes to FERC Account No. 908, Customer Assistance Expenses. This tariff schedule currently imposes a surcharge applied to each kWh of electricity sales under each of the Company’s electricity sales tariffs. The Company anticipates including Net Metering Program costs as part of its general O&M expenses in its next general rate case, anticipated after December 31, 2001. 9. Currently the rates set forth in the Schedule 120 rider are calculated to recover the conservation expenditures which are projected to be incurred for each program year, subject to true-up during a subsequent twelve-month period based on actual conservation expenditures during the program years and the actual recoveries during the relevant recovery period. 10. The Company is scheduled to submit a filing on or before March 1, 1999, stating the prediction of amounts to be spent in calendar year 1999. The Company proposes including estimated expense amounts for the Net Metering Program in that filing. FINDINGS THE COMMISSION FINDS: 1. Puget Sound Energy, Inc. is engaged in the business of furnishing electric and gas service within the state of Washington as a public service company, and is subject to the jurisdiction of this Commission. 2. On January 7, 1999, Puget Sound Energy, Inc. filed a petition for an Accounting Order regarding the accounting and ratemaking treatment of the Company’s Net Metering Program. 3. The proposed Net Metering Program will encourage the development of small-scale renewable resources, which is in the public interest. 4. As the Net Metering Program is in the public interest, utility costs to implement and manage the program should not exceed public benefits. 5. As the Net Metering Program is in the public interest, the Company should be allowed to recover the costs of implementing the program from all electric customers, rather than solely from customer-generators. 6. Following the existing Rate Plan Period, the Company is expected to include Net Metering Program costs in general O&M expenses to be filed in its next general rate case, anticipated after December 31, 2001. 7. The Company’s proposed accounting treatment is reasonable and the Company should be allowed to: (a) Record monthly, as a Deferred Regulatory Asset, in FERC Account No. 182.3, the Company’s cost of providing the Net Metering Program through December 31, 2001, and (b) Recover the deferred Net Metering Program expenditures, as any other electric conservation program expenditure, in electric rates under the provisions of Schedule 120, which amortizes to FERC Account No. 908, Customer Assistance Expenses. (c) On an annual basis, the generation value of any remaining unused kWh credits granted to the Company shall be used to offset the program costs so deferred. ORDER WHEREFORE, THE COMMISSION HEREBY ORDERS: 1. The proposed accounting treatment in the Company’s Petition dated January 7, 1999, is hereby approved with respect to the Company’s Net Metering Program. 2. The Company is hereby authorized to: (a) Record monthly, as a Deferred Regulatory Asset, in FERC Account No. 182.3, coincident with the revised Schedule 120 effective date, the Company’s cost of providing the Net Metering Program through December 31, 2001, and (b) Recover the deferred Net Metering Program expenditures, as any other electric conservation program expenditure, concurrently in electric rates under the provisions of Schedule 120, subject to annual review and true-up with actual costs. 3. This order shall in no way affect the authority of this Commission over rates, service, accounts, valuations, estimates or determination of costs, or any matters whatsoever that may come before it, nor shall anything herein be construed as an acquiescence in any estimate or determination of costs, or any valuation of property claimed or asserted. DATED at Olympia, Washington, and effective this th day of February, 1999. WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION ANNE LEVINSON, Chair RICHARD HEMSTAD, Commissioner WILLIAM R. GILLIS, Commissioner