NASHVILLE, Tenn.—Most electric cooperatives may not be seeing explosive growth of distributed energy resources (DER) on their systems—yet. But it's not too soon to start considering whether DER can help co-ops meet their needs and, if so, ways in which compensation and cost recovery mechanisms for those resources may be assessed, according to a panel discussion at NRECA's 2018 Annual Meeting.

"Most co-ops looking into this do not have a DER problem," said Mark Faulkenberry, senior manager of member relations for Western Farmers Electric Cooperative in Anadarko, Oklahoma. "They're just trying to find the most fair and equitable rate methodology to take them into the future."

The challenge is finding the right balance, primarily through rate design, where the co-op's commodity—electricity—is an affordable option for members considering technologies like electric vehicles, Faulkenberry explained.

"They're trying to meet their member's needs for the future," he said. "I think it's very visionary."

Guadalupe Valley Electric Cooperative, which serves 80,000 meters east of San Antonio, began selling and installing distributed solar PV to members to counter sales from a third-party vendor. Darren Schauer, general manager and CEO of the Gonzalez, Texas-based co-op, said more than 1,200 members have utilized the program so far, resulting in 7 megawatts of roof- and pole-mounted distributed solar. A community solar project adds another 2 MW to the system.

The co-op, which is not affiliated with a G&T, has yet to change its rate structure to account for its DER program, and it currently purchases power back from distributed solar owners at the average wholesale power rate.

"Now, will we have a rate that is strictly for solar customers? Probably not," Schauer said. But they will likely develop a higher fixed charge, and he sees future potential for taking demand rates to the residential level.

"Ratemaking is an art, not a science," Schauer said. "No matter how you design rates there will always be differences in how each member within that rate class is affected. The same pretty much holds true for DER programs."

And although electric cooperatives have been fairly aggressive in increasing fixed charges as one way to find the right balance, Jacob Thomas, senior project manager at consulting firm GDS Associates, noted the industry at large is not far behind.

"We certainly see that co-ops tend to have higher fixed charges because of lower density, but municipals are starting to raise them because they are dealing with the same things we are," Thomas said. "Investor-owned utilities are trying to, but they're getting a lot of regulatory pushback."

The breakout session coincided with the launch of an NRECA report on the topic, "Distributed Energy Resources Compensation and Cost Recovery Guide," which is available on NRECA's Retail Rate Guide, released last March, serves as companion piece and also is available for download.