On February 1, 2019, the Massachusetts Department of Public Utilities issued two long-awaited orders in docket D.P.U. 17-146. The orders address a number of issues related to pairing energy storage systems (“ESS”) with net metering facilities and the rights to the capacity associated with net metering and smart facilities. There are too many issues in these orders to address each fully here, but below are some high-level highlights.

In the first order, DPU 17-146-a, the Department allowed net metering facilities to be paired with ESS but limited the permissible configurations. It allowed configurations where: (1) the ESS is charged only from the net metering facility and cannot export to the electrical grid; (2) the ESS is charged only from the net metering facility but is programmed to allow exports to the electrical grid; and (3) the ESS is charged from both the net metering facility and the electrical grid, but cannot export to the electrical grid.

The Department did not allow configurations where the ESS is unrestricted as to charging source and can export to the electrical grid. The Department concluded that the three configurations it deemed permissible sufficiently safeguard against potential manipulation of the net metering program. But for ESS that are unrestricted both as to charging and discharging the Department found that, “at this time, . . . the risk of irregularities or non-compliance with essential rules and regulations is too high . . . .” The Department did not provide more detail about its concerns – which had been contested by commenters – but suggested that it may change its position as it develops experience.

In the second order, DPU 17-146-b, the Department set rules for the capacity rights associated with net metering and SMART facilities. Finalizing an approach to capacity rights for distributed generation resources had become a bit of a bugaboo, largely as a result of the complex interactions any decisions could have with both state programs, such as net metering and SMART, and with ISO-New England markets and rules. Now we have answers, and they generally track the so-called “Compromise Proposal” that was reached in July by many of the most actively involved parties.

• For Class I net metering facilities, which are 60 kW or less, capacity rights stay with the facility owner.
• For ESS paired with net metering or SMART facilities, the capacity associated with the ESS (distinct from the capacity of the associated net metering or SMART facility) will also stay with the facility owner.
• For Class II and Class III net metering facilities, and for SMART facilities using the alternative-on-bill crediting mechanism, capacity rights will automatically transfer to the electric distribution company (“EDC”), which will then be required to participate in the forward capacity market either by obtaining a capacity supply obligation, or registering to passively earn performance incentive payments. Proceeds will be credited to ratepayers – 80% if the EDC obtains a capacity supply obligation, and 100% if the EDC opts for passive participation.
• For an existing Class II or Class III net metering facility, the capacity rights remain with the facility owner if a distribution company has not previously asserted title to the capacity rights and a host customer has either qualified the facility in a Forward Capacity Auction or submitted a qualification package in the most recent a Forward Capacity Auction prior to the date of the Order,
• Facilities that are behind the meter or that are paired with ESS will have an option to buyout the capacity rights from the EDC according to a set formula. Although commenters had suggested broader buyout options, the Department believed that limiting the buyout mechanism to these circumstances was the appropriate balance for returning value to ratepayers at this time.
• The Department deferred a decision on the capacity rights of Qualifying Facilities, an issue of relevance to SMART participants, suggesting that the matter will be decided in connection with an ongoing review of its QF regulations in D.P.U. 17-54.

The Department did not resolve the question of whether behind-the-meter customers can choose to be “load reducers” rather than registered in the ISO-NE market, although it laid out several conclusions about how that process would work if adopted. The Attorney General and others argued that this option could provide greater net benefits. The Department will take initial comments until February 15 and reply comments until February 22. In the interim, the Department will not allow the EDCs to participate in the forward capacity market with behind-the-meter facilities.

Revised tariffs to implement these decisions will be filed in a new docket, providing a further opportunity for stakeholder review.