WHAT IS A UTILITY? SCOTTMADDEN, INC. | 8 For years, electric utilities have had a special role in providing electricity to consumers, an exclusive franchise territory, and an obligation to serve all customers at reasonable rates. With the advance of distributed approaches to energy production and delivery and a DIY ethos, some utility functions are being assumed by customers and “non-utilities.” However, this splintering of responsibilities has implications both for consumers and utilities. Some New Energy Delivery Models That Encroach On Functions of Traditional Utility Service Functions and Its Special Role: Microgrid E.g., Princeton University’s hybrid (islanded or connected) • Generates power when prices are high, permitting lower consumption from traditional utility in high-demand periods • Bids into PJM ancillary markets • Islands from grid during emergencies Third-Party Solar Ownership E.g., SolarCity Model • Third-party developer owns, operates, and maintains the photovoltaic (PV) system • Host customer agrees to site the system on its roof or property and leases the system or purchases the electric output from the developer for a predetermined period • Developer or another party acquires valuable financial benefits such as tax credits and income generated from the lease or sale of electricity to the host customer Community Solar • A community solar project often includes multiple end users or subscribers purchasing a portion of the capacity or output from a solar PV facility and receiving the benefit on their electric bill • “Up-front payment” programs require customers to purchase or lease panels; “on-going payment” programs require customers to provide monthly payments to access solar capacity or output • Depending on program design, customer receives retail or partial retail bill credit for actual or guaranteed system output • Customers often pay a premium for solar output but receive hedge against future rate increases as costs are often locked in for the duration of the contract