Technology and Innovation

Distributed Generation

The growth of distributed generation (DG) is raising new discussion about the value of the grid and who pays to use it. Although the current number of net energy metering (NEM) customers on the AEP system is relatively modest, it is increasing.

Very few customers are truly “off the grid.” Both DG customers and non-DG consumers are connected to the grid and use the services it provides. DG consumers rely on the grid to deliver energy at times when their system is not generating enough electricity to meet their needs. Additionally, even when they are generating more power than they need, DG customers need the grid to off-load that energy, even if the utility doesn’t need it.

Public policies and rate structures established to encourage early development of DG have led to unintended consequences that must be addressed. NEM tariffs were established to incent DG resources to develop and mature. NEM tariffs typically credit DG customers at the full retail rate, which includes both the costs of the energy itself, as well as and the fixed costs associated with the services they receive from being interconnected to the grid (such as the distribution poles, wires and meter necessary to provide service to them). As a result, NEM customers avoid paying their fair share of these fixed costs for services that they use from the grid. Consequently, these costs are shifted to other customers, which is neither fair nor reasonable. This cost shifting can disproportionately affect low-income and other vulnerable customers and can impose financial costs on AEP and other utilities by preventing cost recovery in a timely manner Therefore, a fair and equitable tariff arrangement needs to be considered for DG customers who should pay their fair-share for use of the grid.

AEP is actively engaged with our stakeholders to reach a fair and equitable arrangement for all customers.

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