Financial Institutions - Policies and Regulations

The energy market in the U.S. is in a state of transition. For the most part gas markets have restructured, breaking the gas suppliers into unregulated companies and leaving the distribution ("pipe") companies regulated. A similar restructuring is happening in the electric industry today, with each state in various stages and each adopting various regulations and policies towards electric deregulation. Many States have adopted some policy or regulation that breaks the electrical industry into two parts, essentially the same as in the gas industry, a supplier side (electric generation companies) and a distributor side (transmission and distribution companies, also known as "wire" companies).

Many of the policies and regulations are being driven by the overall movement of the nation towards connecting distributed generation (DG) systems to the grid. Distributed generation helps bring the source of electricity closer to the point of use thereby reducing grid congestion, especially in local areas where demand is high and the transmission and/or distribution systems are at or near capacity. Distributed generation can also reduce some of the line losses associated with transmitting electricity from remote central generating stations to urban areas.

The issues also apply to CHP are similar to those that apply to DG. However, CHP has some additional aspects that need to be taken into consideration. Since CHP not only generates electricity, providing the same benefits to the grid as distributed generation, it further reduces electrical demand by displacing electrical load through the use of thermal technologies to provide cooling and heating that otherwise would have been provided by electric cooling and heating equipment. In this respect, CHP should be given credit for not only the energy it saves by eliminating line losses, but it should also be given credit for the electricity it displaces through recovery of the heat produced by the generation equipment. However current regulations and policies do not allow emissions credits to be taken for either the electricity and/or line losses directly replaced by onsite self generation, nor for electricity displaced by the thermal cooling and/or heating equipment.

Many smaller electric generators, who generate electricity only for their own use, are positioning themselves to connect to the grid and that leads to many issues, including technical , pricing, policy, and regulatory. The major issues include the following:

• Access and interconnection policies and requirements
• Utility rate structures
• Exit fees
• Tax treatment of distributed generation equipment
• Siting requirements
• Energy efficiency incentives

While there are similarities in restructuring between some States, the differences are more numerous, ranging anywhere from the status of restructuring in the State to the technical details of interconnecting to the grid. For a specific discussion on the status of the relevant policies and regulations in your Region or State simply select the appropriate Region on the provided map.