States, Utilities Face Challenges with Net Metering

Although the number of customers utilizing net metering technology represents a tiny fraction of the overall population, the rapid pace and expansion of rooftop solar across the country has galvanized a debate across many states to re-examine popular incentive programs for distributed energy systems.
David Owens, executive vice president of business operations with the Edison Electric Institute, believes that’s a good thing. Customer interest in power options has changed due to technology, he said, so the regulatory model governing those options also should change.
“Across the country, there is growing interest in using distributed generation systems, including rooftop solar systems,” he said. “It is time to update existing net metering policies and apply a regulatory structure that provides for rates that are transparent, does not shift costs from (distributed generation) customers to (non-distributed generation) customers, and ensures that our grid is enhanced to provide new services and technologies for use by our customers.”
Owens will discuss the utility perspective in the net metering debate during a Feb. 4 Council of State Governments’ webinar, “Challenges and Future Opportunities for States in Net Metering.” David Wright, past president of the National Association of Regulatory Utility Commissioners, will explain the complex situation and variables facing state commissions—including how net metering factors into the ratemaking process—and what the future may hold.
Residential photovoltaic installations grew 62 percent between 2011 and 2012, according to a December 2013 report by the financial information group, Fitch Ratings. The ongoing debate in states is fast becoming a transformative issue that could lead to systemic changes for the electric power distribution market.
Distributed energy technology, where power is generated with onsite modular devices, has become an increasingly favorable option for customers, especially those installing rooftop solar systems that utilize state net metering programs. Net metering essentially is a billing mechanism that credits home or system owners for any power they sell back to the electric grid.
If a home system generates more power than it needs, it can sell the excess back to the grid—sometimes at retail, rather than the less expensive wholesale prices. Forty-three states and four territories have set some type of net metering policy. Those policies and regulations vary, but 2013 was an especially active year for high-profile rate cases at state commissions across the country.
Many utilities argue that existing rate structures and payments to customers were designed for an era where few people were utilizing rooftop solar technology and consequently is now resulting in cost shifting to other non-net metering customers in order to recoup the true cost of power distribution. Solar installation companies and related advocacy groups have pushed back on those assertions and believe changes in incentive programs and fee structures will diminish growth in residential alternative energy development.
Many outside observers expect at least some type of legislative or regulatory action in states like Colorado, Florida, Illinois, Iowa, New York, Massachusetts and Vermont in 2014.
“There are many challenges ahead of us this year, but we are looking at those challenges as new business opportunities that will allow us to better serve our customers,” Owens said.
State regulators will play a critical role in charting a path that balances the rate recovery and cost-shifting concerns raised by utilities, and solar installation and consumer groups that argue customers should have more control over their electricity bills and ultimately over where that power comes from.

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