As a member of the Corporations Committee, one of the issues I have been working on is a revision to the electric utility statutes dealing with net metering.
Under the current net metering statute, rooftop solar panels supply energy first, to the home, and then at times when the solar panel produces more power than the home is using, the power is sent back onto the grid to be used by other customers. The meter “spins” backwards, subtracting the power sent onto the grid from the total power used by the consumer. That is how net metering gets its name—it means that at the end of the month the consumer is charged only for net electricity used. If the rooftop solar panel generates more energy than the utility customer uses during the month, those kilowatt-hours are “credited” to the customer’s account. These kilowatt-hour credits are accumulated, and the customer is paid for them at the end of the year at the utility company’s avoided cost. The avoided cost is typically between 30 to 50 percent of the total residential kilowatt-hour charge.
Such net metering arrangements were put in place a few years ago as a means of promoting renewable resources such as rooftop solar and small wind generation. However, in their current form these arrangements create some severe inequities.
Net metering imposes a regressive cost-shift from solar adopters onto non-solar adopters. To the extent that a solar household’s production is less than or equal to their consumption, they are, in effect, reimbursed at the full retail kilowatt-hour rate. They, therefore, make no contribution toward the operating, maintenance and capital costs of the electric infrastructure. That household is still making full use of the total distribution, transmission and generation facilities of the utility system, but they are not paying for their share of the system. Over time, those costs will be shifted to the non-solar customers. Wealthy households therefore benefit disproportionately from this hidden subsidy because they tend to be the ones who are able to pay the high upfront cost of installing solar panels. Costs are shifted from those most able to pay to those who are least able to pay.
There are currently two proposed amendments to remedy this regressive cost-shift.
One proposal would require the solar household to pay the full retail rate for all energy consumed by the household and receive a credit for all the output of the solar installation at the electric utility’s avoided cost. Thus, the consumer with a solar installation would contribute their fair share of the operating costs of the utility rather than shifting those costs to the non-solar customers.
Another remedy would be to repeal the net metering section of the electric utility statute and let the Public Service Commission and the public utilities handle this ratemaking issue.
It would not be fair to change the net metering rules for those residences or businesses that have already invested in a rooftop solar or small wind generator. Regardless of which amendment is adopted a provision must be included that would protect those customers and allow them to continue under the current rules for 10 or 15 years.
There is a precedent under federal law for the payment of avoided cost for the power from renewable resources. The Public Utility Regulatory Policy Act (PURPA) requires public utilities to take power from what are called Qualifying Facilities (QF’s). QF’s are commercial scale renewable energy generating facilities. While public utilities are required to take the output of such facilities, they are only required to pay their avoided cost. This is the same price that would be paid under my proposed amendment.
Critics of this proposal have said that it is premature because the current cost shifting is very minimal. My answer is that the cost shifting per installation is just as great now as it ever will be. It is minimal in total because of the very low penetration of net metering installations. Now is the time to remedy the situation before it becomes a big problem. We must send the correct price signal now to potential net metering customers.