Consideration of Public Utilities Regulatory Policies Act (PURPA) Standards 11-15

1. Consideration of Public Utilities Regulatory Policies Act (PURPA) Standards 11-15 -A Public Hearing- October 22, 2007

2. “Consideration” Overview PURPA Overview- • Why are we considering PURPA now? • What is required of the Commission? • Are we compliant with PURPA Standards now? • Discussion of Standards to be considered • Additional public input • Conclude “Consideration”

3. PURPA Overview • 1978 Public Utilities Regulatory Policies Act (PURPA) • Amended by the Energy Policy Act of 2005 • Requires utility regulatory authorities to consider adoption of five new standards: • Net Metering - Standard 11 • Fuel Diversity - Standard 12 • Fossil Fuel Generation Efficiency - Standard 13 • Smart Metering - Standard 14 • Interconnection - Standard 15

4. What is Required? • There is a question about the applicability of the new requirements for Leesburg at this time, but it is prudent to consider them now • If PURPA were applicable to Leesburg, we were to begin consideration of Smart Metering and Interconnection Standards by August 8, 2006 and make determinations by August 8, 2007 • Begin consideration of remaining three Standards by August 8, 2007; and complete determinations by August 8, 2008 • Hold a public hearing • Issue a written decision

5. City’s PURPA Compliance • March 2007 - Staff became aware of the PURPA issue and began to study applicability to Leesburg and develop recommendations • October 22, 2007 - Public hearing for formal consideration and determination of all five Standards • Staff is developing alternate strategies that will satisfy the intent of the PURPA Standards

6. Appropriate Actions After appropriate “consideration” of the PURPA Standards, the Commission may: • Implement the PURPA Standard • Decline to implement the Standard (must state in writing the reason for the decision) • Implement a modified Standard • Implement a more or less stringent Standard Declining to implement a PURPA standard does not prevent adopting any related standard at a later date that better reflects the needs of Leesburg customers.

7. Net Metering - Standard 11 What Standard 11 prescribes: • Make available upon request • Available to any electric customer • Connect customer-owned generation to utility distribution system • Customer generated energy “netted” against utility delivered energy

8. Net Metering Staff Comment: Net metering does not differentiate the time value of generation, it forces the utility to “purchase” at retail rates and does not consider the value of “delivering” the energy to the consumer. “All Requirements Project” (ARP) provides that “all” electric capacity and energy be purchased and received from FMPA. Options to consider: • Monitor ongoing proceedings at the FPSC and FMPA pertaining to Net Metering. Staff recommends the Commission decline to adopt PURPA Standard 11

9. Fuel Diversity - Standard 12 What Standard 12 prescribes: • Plan to minimize dependence on one fuel source • Diversify electric generation sources, including the use of renewable technologies

10. Fuel Diversity Staff Comment: Leesburg receives energy from 3 nuclear plants and relies on FMPA to provide generation unit and fuel diversity through unit dispatch and market purchases. Options to consider: • Continue to evaluate opportunities with FMPA for further fuel diversification including Clean Coal, Nuclear, and Solar and other renewable sources Staff recommends the Commission decline to adopt PURPA Standard 12

11. Fossil Fuel Generation Efficiency - Standard 13 What Standard 13 prescribes: • Implement 10-Year plan to increase the efficiency of a generation fleet

12. Fossil Fuel Generation Efficiency Staff Comment: Leesburg does not own fossil fuel generation assets and relies on FMPA to provide fossil fuel generation efficiency. Options to consider: • Continue to evaluate opportunities with FMPA for further fossil fuel generation efficiency. Staff recommends that the Commission decline to adopt PURPA Standard 13

13. Smart Metering – Standard 14 What Standard 14 prescribes: • Offer time-based rates to each customer, such as: - Time-of-use (T-O-U) pricing - Critical peak pricing - Real time pricing - Credits to large customers for peak load reduction • Rate variance, over time, must reflect utility’s cost variance

14. Smart Metering Staff Comment: Technology advances in Smart Metering during the last 2 years have created a great opportunity to offer time based rate schedules and reduce utility truck rolls for meter connects, disconnects, and reading verifications. While our power supply costs may change from month to month, we do not have a time based cost variance. Options to consider: • Evaluate applicability of time based rates and explore opportunities to reduce operating expenses using smart metering technologies. Staff recommends that the Commission decline to adopt PURPA Standard 14

15. Interconnection – Standard - 15 What Standard 15 prescribes: • Upon request by customer, interconnect customer-owned generation to City of Leesburg electric distribution system • Interconnection services shall be offered based upon IEEE Standard 1547 • Interconnection agreements shall promote best practices and be just and reasonable

16. Interconnection Staff Comment: The City of Leesburg has an Interconnection and Parallel Operation Agreement with Cutrale which offers interconnection service in a manner comparable to that prescribed by the FPSC for investor-owned utilities and is based on the IEEE Standard 1547. Options to consider: - Monitor ongoing proceedings at the FPSC pertaining to Interconnection. Staff recommends that the Commission decline to adopt PURPA Standard 15

17. Recommended Next Steps for this Proceeding • Solicit additional comments from the public

18. Recommended Next Steps for this Proceeding • Solicit additional comments from the public • Determine that it is not in the best interest of the electric customers of the City of Leesburg to adopt any of the PURPA Standards 11 through15, at this time, for the reasons cited herein.