Net Metering Debate Moves East

Net metering debate moves East

June 06, 2016

The debate over standard net metering benefits in the US has migrated east. During the first five months of 2016, revised net metering policies were implemented in Massachusetts, rejected in Maine and Pennsylvania, and teed up for further action in New Hampshire, Rhode Island and New York.

Polarizing policy decisions in 2015 on net energy metering programs in three leading solar states out west led to an overhaul of such programs in Hawaii and Nevada, while California reaffirmed its existing net metering framework until the issue is revisited in 2019. By contrast, state policymakers in the northeastern states appear willing to implement incremental changes to compensation, including allowing below retail, but above wholesale, rates and adding fixed monthly or other new charges on net metered customers in an effort to equalize the impact of net metering costs across ratepayers. 

The northeastern states are also looking to loosen program restrictions and encourage deployment of net metered systems, for example, by raising state- or utility-level capacity caps and increasing system sizes eligible for net metering. 

New Hampshire and Rhode Island

New Hampshire and Rhode Island are cases of new policies poised for further action. 

The New Hampshire Public Utilities Commission opened Docket No. DE 15-271 in July 2015 to examine the utilities’ customer-generator interconnection and net metering queue management procedures. The New Hampshire commission approved new procedures in March 2016. The new procedures include certain revised application requirements and project milestones that must be met to ensure that a proposed project is closer to being built before it is allocated capacity under the statewide cap. The procedures apply to both new and existing projects; the latter were given until June 1, 2016 to demonstrate compliance with the new requirements.

In parallel on the legislative front, the governor signed a bill (HB 1116) in May 2016 that doubles the previous statewide cap on total capacity of systems eligible for net metering from 50 megawatts to 100 megawatts.  

At least one utility, Eversource, which serves about 20% of the New Hampshire population, is already nearing the new cap for larger projects (between 100 kilowatts and one megawatt). Eighty percent of the 50 megawatts of additional capacity was allocated to projects at or below 100 kilowatts, while the remainder was allocated to larger projects.  

HB 1116 also requires the New Hampshire commission to develop alternative net metering tariffs, leaving New Hampshire a state to watch for further policy developments in 2016. Related legislation, SB 378, also enacted in May, directs the New Hampshire commission to review group net metering arrangements that, along with virtual net metering and community solar, are variations on standard net metering and allow multiple customers to benefit from the excess output of a system.

Rhode Island is also discussing its net metering policy. The Public Utilities Commission opened a new docket, Docket No. 4600, in February as a forum for reviewing the changing distribution system. 

On the legislative front, HB 7006 passed in the Rhode Island House in February and has moved to the Senate. The bill would double the maximum eligible system size, from five to 10 megawatts, to participate in net metering and restrict interconnection charges imposed on customers. 

Massachusetts and Maine

Massachusetts and Maine are a tale of two governors: one supporting incremental net metering reform and the other rejecting more extensive changes.

In April, the Republican governor of Massachusetts signed a bill (HB 4173) that increases the net metering cap from 4% to 7% for projects with private entity offtakers, and from 5% to 8% for systems with public (e.g., government) offtakers. The caps generally do not apply to residential systems, which accounted for almost half of solar systems installed in Massachusetts last year.

On the compensation front, the new law preserves close to retail rates for residential, small commercial and public projects. Generally, private systems installed after Massachusetts reaches its target of 1,600 megawatts of installed net metered solar capacity will be credited at decreased rates closer to the wholesale rate, by allowing customers to be credited for only 60% of excess generation. Customers who qualify for net metering prior to this cap being reached are grandfathered and will be able to maintain the higher rate for 25 years. Utilities will be allowed to submit requests to impose a minimum monthly bill on customers to help pay for the grid. However, the Massachusetts commission may only approve such minimum charges once the 1,600 megawatt cap is reached.  

The new caps are expected to be reached in 2017. Meanwhile, lifting the public and private net metering caps will allow project development to move forward in the near future, alleviating the backlog of hundreds of projects that have stalled since local utilities hit their respective caps last year. 

By contrast, Maine punted. The legislature and the governor have been unable to reach a consensus on proposed revisions to net metering.  

The state legislature voted in April to replace existing retail net metering and allow new residential and small commercial customers (with systems up to 250 kilowatts) to enter into long-term contracts with local utilities, including Central Maine Power and Emera Maine, to sell aggregate generation. Payments under such long-term contracts would be credited against a customer’s monthly utility bill. Utilities would aggregate, then sell or use the output in a manner that maximizes ratepayer value. Rates under these contracts would be set by the Maine Public Utilities Commission, with compensation declining as the aggregate number of residential and small commercial systems installed reaches certain statewide targets. 

The legislature proposed to grandfather existing net metering customers. They would remain eligible for the current tariff rates for 12 years.

The Republican governor vetoed the bill over concerns it would be a burden to ratepayers because it did not include all renewable technologies, return renewable energy credits to ratepayers or cap the price paid under the proposed long-term contracts. 

The state House fell just short of the super-majority two-thirds vote necessary to override this veto at the end of April. In the absence of legislative action, the issue of net metering moves to the Maine commission. Net metered systems exceeded 1% of Central Maine Power’s peak load by the end of 2015, and Emera Maine is expected to reach its 1% cap later this year.

Pennsylvania

Pennsylvania is a case of straying outside the statute.

The state is focused on incremental changes. The Pennsylvania Public Utility Commission largely reaffirmed existing policy in February. Although a state regulatory review body recently struck down the commission action, the controversy appears to center primarily on the perceived lack of statutory basis for one particular provision in new rules the commission proposed.

The Pennsylvania commission voted 3-2 in February in Docket No. L-2014-2404361 to retain net metering at the full retail rate (approximately 8¢ per kWh). The decision reaffirmed statutory caps on nameplate capacity at 50 kilowatts for residential systems, three megawatts for non-residential systems, and five megawatts for industrial systems.

The most controversial addition by the Pennsylvania commission was a new requirement that any system participating in net metering cannot be sized to generate more than 200% of the customer’s historic annual electric consumption. The commission had initially proposed a much lower percentage of 110% in February 2014 when it first initiated the rulemaking proceeding. However, it ended up increasing this to 200%, citing a desire to balance allowing future load growth and limiting excessive oversizing of systems, while aiming to ensure that default service is provided at the least cost to customers over time.

In late May, the five-member Pennsylvania Independent Regulatory Review Commission (IRRC) unanimously voted to disapprove of the Pennsylvania commission rules. The primary basis for the decision was a lack of clear statutory authority for the Pennsylvania commission to impose a 200% size limitation. The IRRC also determined the commission failed to show a compelling need for the changes and to consult with the legislature in drafting the rules.

The Pennsylvania commission now has three options: to withdraw the proposed regulation, to resubmit the regulation with revisions within 40 days after the disapproval order issued by the IRRC in early June or to submit the regulation without revisions for approval to the state legislature.

An interesting twist could be the changing makeup of the Pennsylvania commission. One of the three majority voters, Pamela Witmer, left the commission after her term expired in April. Governor Tom Wolf (D) has nominated his senior energy adviser, David Sweet, to fill the vacancy, but the nomination must first be confirmed by a majority of the Pennsylvania Senate. This leaves the Pennsylvania commission with only four members, two of whom favor the commission’s recommendations and two of whom are against.

New York

New York is moving toward a compromise worked out between the utilities and solar companies.

Net metering is being addressed as part of the broader state-wide REV — “Reforming the Energy Vision” — initiative. The Department of Public Service issued a white paper in January 2016 for comment. The New York Public Service Commission is expected to make a decision on policies proposed in the white paper later this summer.

In the meantime, the department has temporarily suspended the state’s net metering caps and instructed utilities to continue accepting interconnection applications from prospective net metering customers. Comments were due in April on an interim successor to the net metering program in Case 15-E-0751. 

A group of utilities and solar companies submitted a proposed compromise in April. The group includes all the major New York utilities (Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New York, Inc., New York State Electric & Gas Corporation, Niagara Mohawk Power Corporation d/b/a National Grid, Orange and Rockland Utilities, Inc. and Rochester Gas and Electric) and three large solar developers (SolarCity, SunEdison and SunPower). 

The compromise would transition net metering rates to a formulaic LMP + D + E approach. “LMP” is calculated using the New York Independent System Operator’s established location-based marginal price, which includes the wholesale price of energy, transmission congestion charges and transmission line losses. “D” is the full range of additional values provided by the distribution-level resource, calculated using each utility’s benefit cost analysis handbook, a handbook developed by each utility to guide distributed energy resource providers in structuring their projects. “E” is the cumulative value of external benefits from the project, both quantitative and qualitative, such as renewable energy certificates and emissions reductions. Existing customers would be grandfathered at their current rates of compensation.

A decision on the compromise is expected later this year.