by Jeff St. John
April 27, 2018

We’ve seen some important regulatory action this week from states leading the push for grid edge regulatory reform. Hawaii set a 2020 deadline for creating the country’s first performance-based ratemaking regime. New York passed rulings easing integration for distributed solar and energy storage. And we reported on the latest updates on Massachusetts’ new "Clean Peak Standard" and 100-megawatt energy storage target. 

This week also brought some important news from states less well known for grid edge innovation. Take this week’s approval of utility AEP Ohio’s Electric Security Plan by state regulators, which includes $20.5 million to support microgrid and electric-vehicle charging development as part of a “Smart City Columbus” initiative. 

The security plan (PDF) establishes pricing and supply of generation service through 2024, and also covers distribution system investments, grid modernization, energy efficiency measures and economic development initiatives. And as with most large utility rate cases, the plan has gone through many iterations, including a massive multi-party settlement that saw many of the utility’s requests scaled back considerably. 

AEP Ohio’s original May 2016 request included spending for some more future-facing technologies, such as a $21.2 million rider to bring microgrids, EV chargers, smart streetlight controls, and other “smart city” technologies to the state capitol of Columbus.

A November 2016 amendment boosted that investment to $52 million for up to 10 microgrids across the city, to back up critical facilities like hospitals, fire stations, water treatment plants, grocery stores and gas stations. This distribution technology rider proposal also sought $30 million for LED lighting replacement programs, $69 million for a “next-generation utility communication system,” and $30 million for distribution substation security technology. 

A settlement agreement from August 2017, involving 15 parties ranging from environmental and consumer groups to big power customers and competing utilities, scaled back that spending considerably. AEP “relinquished the changes to the fixed customer charge and volumetric portion of AEP Ohio’s distribution rates,” and withdrew its sub-metering and LED requests. 

Distribution investments were set at $215 million in 2018, rising gradually each year to reach $290 million in 2021 — unless a 2020 distribution rate case changes that equation. The Environmental Defense Fund, a party to the settlement, noted that the plan will also require AEP to build or enter into power-purchase agreements for 900 megawatts of solar and wind projects under its renewable generation rider. 

Microgrids and EV chargers were combined into a $20.5 million smart city rider. Of that, $10.5 million was directed to “pursue microgrid projects with nonprofit or public-serving customers,” considerably less than the $52 million originally requested. We’ve seen a similar approach from Illinois regulators, who last month approved a scaled-back $25 million microgrid project for utility Commonwealth Edison that included third-party access and future rules to open the market to a “microgrid services tariff” of a still-undefined nature. 

AEP Ohio’s microgrid program will also be open to third parties: “Aside from facilities on AEP Ohio’s distribution grid and related maintenance, a contract to build and maintain the microgrid equipment will be competitively bid,” the ruling noted. The $10.5 million will cover microgrid equipment operations and maintenance, software and control systems, and a rebate program to “partially cover the costs for public-serving, nonprofit customer-owned renewable generation resources that integrally support a microgrid.” 

AEP Ohio’s remaining $10 million in smart city funding will support a rebate program for EV charging stations, available to qualifying public, government, workplace and multi-unit residences, and with a portion reserved for low-income areas. That’s expected to nearly double the number of EV charging stations in the state, adding about 375 EV charging stations to the state, including at least 75 DC fast-charging stations. 

All of this work is tied into a broader set of projects in Columbus, which is also the headquarters of AEP. In 2016 the city won a $40 million Department of Transportation grant to develop a “model for connected cities of the future,” along with a $10 million grant from Microsoft co-founder Paul Allen’s Vulcan Inc. to “focus on decarbonization of the energy and transportation sectors.” 

Looking beyond Smart Columbus, this week’s agreement tables many of AEP Ohio’s original plans for reconfiguring its residential and C&I rate structures, as well as its annual distribution of grid investments, to await regulatory guidance from Ohio’s own version of a statewide energy policy overhaul. 

Dubbed “PowerForward,” the docket was created last year to consider grid modernization, reliability and resilience, and “incorporate new, innovative technologies” that benefit Ohio ratepayers. The Public Utilities Commission of Ohio has set a goal of implementing the regulatory reforms that emerge from it by the end of the decade, and many of the longer-term spending plans approved this week are tied up in a “placeholder PowerForward Rider,” with values to be determined through a process that’s only started to get underway.

AEP Ohio’s broader smart metering, distribution automation and volt/VAR optimization (VVO) investments got the green light last year, when PUCO approved its GridSmart Phase 2 program. This approval gave AEP most of what it asked for in its $290 million 2013 plan, including smart meters for nearly 900,000 customers, 250 new distribution automation circuit reconfiguration devices, and 160 new distribution grid VVO devices. 

AEP Ohio is just one of seven utilities owned by AEP, with 5.4 million customers in 11 states. CEO Nicholas Akins said this week that the company’s grid investments would total $17.7 billion through 2020, including $12.8 billion in transmission and distribution systems and $1.7 billion in renewable energy.

While fellow Ohio-based utility FirstEnergy is facing bankruptcy for its uncompetitive coal and nuclear power plants — and seeking federal emergency bailouts to provide out-of-market payments to keep them from closing — AEP has been shifting from generation to distribution, Akins said at the company’s annual shareholder meeting. The company sold four competitive power plants last year, transferred ownership of two others, and plans to retire a co-owned plant in June, he said. 

Southern Company’s smart neighborhoods

Southern Company, the multi-state utility serving 9.2 million electric and gas customers in four states, has been investing heavily in distributed energy. Its most notable investment has been in support of its unregulated energy services business — the $431 million purchase of backup power and microgrid systems provider PowerSecure. 

It’s also pursuing distributed energy projects on the regulated side of the business, at least in pilot form. Southern Company’s “smart neighborhood” initiatives at subsidiaries Georgia Power and Alabama Power are combining solar, batteries, backup generators, and state-of-the-art home energy management technology to create some of the region’s first residential microgrids. 

Alabama Power got its project rolling in April 2017, partnering with Signature Homes to build a 62-home “community-scale power system” in the Reynolds Landing neighborhood of suburban Birmingham. Featuring a 330-kilowatt ground-mount solar array, about 600 kilowatt-hours of battery storage and 400 kilowatt-hours of natural-gas-fired backup generators, the system can generate enough electricity — 600,000 kilowatt-hours per year — to cover the neighborhood’s needs

Each home comes with mobile-connected Carrier heat pumps, Rheem hybrid electric water heaters, smart thermostats, and Samsung smart appliances, along with a Vivint smart home system with voice-activated security, smart locks, lights, cameras and garage door controls. The first buyers started moving in in November, and Alabama Power is holding tours of its showcase “smart neighborhood idea house” this weekend and next. 

In January, Georgia Power picked PulteGroup to develop its smart neighborhood — 46 townhomes in Atlanta’s Upper West Side to be equipped with rooftop solar, behind-the-meter batteries, and the same high-efficiency smart home technology featured in Alabama Power’s project. 

Southern Co.’s partners on the projects, the Department of Energy’s Oak Ridge National Laboratory and the Electric Power Research Institute, have a lot of experience with home energy management, and will help manage the data collection and analysis to show whether the projects meet their goals.