PRESENTATION BY SCOTT SKLAR ON RENEWABLE ENERGY REGULATION FOCUSING ON DISTRIBUTED GENERATION

1. PRESENTATION BY SCOTT SKLARON RENEWABLE ENERGY REGULATION FOCUSING ON DISTRIBUTED GENERATION “Federal Electricity Regulation and Alternative Energy” December 14, 2005 – Sponsored by: American Bar Association, Section of Environment, Energy, and Resources, Renewable Energy Resources Committee and The Center for Economic and Environmental Partnership, Inc.

2. The Stella Group, Ltd.. is a strategic marketing and policy firm for clean distributed energy users and companies which include advanced batteries and controls, energy efficiency, fuel cells, heat engines, minigeneration (natural gas), microhydropower, modular biomass, photovoltaics, small wind, and solar thermal (including daylighting, water heating, industrial preheat, building air-conditioning, and electric power generation). The Stella Group, Ltd. blends distributed energy technologies, aggregates financing (including leasing), with a focus on system standardization. Scott Sklar, the Group's founder and president, has a Q&A Column that appears on the largest clean energy web portal: www.renewableenergyaccess.com.and his coauthored book, A Consumer Guide to Solar Energy, was re-released for its third printing. Scott Sklar lives in a solar home (solar water heating system and 1.5 kW of photovoltaics) in Arlington, Virginia and the separate office building of The Stella Group, Ltd. has 1 kW of solar photovoltaic roofing shingles, advanced battery bank and high-efficiency (heat pump, double pane windows and R38 insulation), a 0.5 kW wind turbine, and a 5 kW PEM fuel cell for backup and peak power augmentation (the first commercial leased fuel cell in the United States). His Washington, DC office building has a 1.5 kW photovoltaics system which is one block from The White House. Scott Sklar, President, The Stella Group, Ltd., 1616 H Street, N.W., 10th floor, Washington, D.C. 20006 Phone: 202-347-2214 Fax: 347-2215, E-mail: solarsklar@aol.com, Message beeper: 202-347-2214 via answering service, Web sites: www.thestellagroupltd.com and www.stellacapitalllc.com

3. STATUS IN STATES NOW, WITHOUT FEDERAL STANDARDS • Most state DG interconnection components to conform to UL 1741 and then for the system certification to be in compliance with IEEE 1547 • Now 39 States have interconnection/net metering laws based on these two standards and they are all different - from actual component requirements, to whether it's State-wide or utility service territories • States which have interconnection rules have different size limitations from 2 - 10 - 100 kWs – 2 MWs!

4. RECENTLY- PASSED FEDERAL ENERGY BILL In the 1724 page Energy Policy Act of 2005, Title XII which deals with Electricity (Section 1251, 1254), interconnection expert Chris Cook states, "Rather than mandating federal net-metering standards and inter-connection standards, the two sections direct states to undertake consideration and make a determination with respect to each standard. It is impossible to say with certainty if states will have broad or narrow discretion in meeting the requirements of these sections. The essence of Section 1254 is to promote the standardization of interconnection procedures around the IEEE 1547 standard. Whether fortuitous or by design, Congress' articulation on interconnection happens to fit nicely with issued FERC NOPRs."

5. FERC IS MOVING CORRECTLY, BUT SLOWLY • FERC’s interconnection rules for small generators (Order 2006), issued in May 2005." The Commission issued Standard Rule For Small Generator Interconnection facilitates needed infrastructure development standard procedures for the interconnection of requiring generators no larger than 20 megawatts – a move that removes barriers to the development of needed infrastructure by reducing interconnection uncertainty, time and costs. According to FERC, rule will help preserve grid reliability, increase energy supply, and lower wholesale electric costs for customers by increasing the number and types of new generators available in the electric market, including development of non-polluting alternative energy resources. • The rule directs public utilities to amend their Order No. 888 open access transmission tariffs to offer non-discriminatory, standardized interconnection service for small generators. The amendments should include a Small Generator Interconnection Procedures (SGIP) document and a Small Generator Interconnection Agreement (SGIA).

6. The SGIP contains the technical procedures that the small generator and utility must follow in the course of connecting the generator with the utility's lines. The SGIA contains the contractual provisions for the interconnection and spells out who pays for improvements to the utility's electric system, if needed to complete the interconnection. • The rule applies only to interconnections with facilities already subject to the jurisdiction of the Commission • The Federal Energy Regulatory Commission (FERC) has accepted PJM Interconnection's proposal that makes it easier for small generators to connect to the electric system and participate in PJM's wholesale electricity market, the world's largest. • The proposal is a new standard that sets the technical requirements to connect generators of two megawatts (MW) or less to utility lines. It applies to small generators selling their electricity in PJM's wholesale electricity market. These generators include wind, solar and cogeneration units. One megawatt is enough electricity to power about 800 homes. PJM's region includes 143,000 MW of generating capacity. Access to the market improves the generators' ability to sell the electricity they produce and to find the best price.

7. MARKET IS MOVING FASTER THAN REGULATION • The clean distributed generation industries have market growth raning from 25 - 37 percent in 2005, which is consistant growth for seven years in a row - for combined heat and power, fuel cells, microhydropower, modular biomass, photovoltaics, small wind. • States covering MOST of the US ratepayers have tax incentives and waivers, clean energy system benefit trust funds, clean air (SIP) funds), renewable energy portfolio standards, green power and technology procurement programs for state and local governments, etc. • Twenty-nine states have interconnection standards that should increase to nearly forty by 2007. • Federal tax credits (both investment tax credits (ITC) and production tax credits (PTC) have now been passed for implementation in 2006 and 2007 with exceedingly likely extensions, probably to 2011.