Net Metering Dodges a Bullet, But More Challenges Loom

FERC unanimously rejected a petition seeking to end state and local jurisdiction over net metering programs, but solar advocates warn that future regulatory changes could increase rates for owners.
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Many commercial real estate owners with rooftop solar or other solar arrays on their properties can breathe a sigh of relief that net metering rules will not change in the near future after the Federal Energy Regulatory Commission rejected a petition to end state and local jurisdiction over rates. The New England Ratepayers Association wanted FERC to take control of decisions on how businesses and homeowners are compensated when they produce excess solar.


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Nathan Phelps, regulatory director for Vote Solar, an advocacy group, said the NERA petition would have had profound impacts on current solar users because it would not have grandfathered in legacy customers.

“Without any type of legacy treatment, existing projects would have to change over how they’re compensated,” Phelps said. “That means millions of residential customers and about 200,000 commercial customers that have solar and are currently using net metering would basically have the rug pulled out beneath them. The implications are pretty extreme for customers that have already made the investment in solar and would have a chilling effect on any future solar.”

According to Vote Solar, net metering programs currently encompass about 2.3 million participants in 49 states. These programs include investor-owned utilities, electric cooperatives and municipal utilities.

Keeping solar affordable

Net metering credits homeowners and businesses that generate solar power for the electricity they add to the grid. Public Citizen, the consumer advocacy and watchdog group, calls net metering a “crucial component of rooftop solar financing” because it makes solar energy systems affordable to both residents and business owners. The petition filed by NERA in April would have required those generating solar power to be paid no more than the wholesale rate of electricity, which, according to the American Solar Energy Society, is typically three to four times less than the retail rates many earn under state net metering rules.

Opposition to the NERA proposal, which was unanimously rejected by the five-member FERC board in mid-July, drew overwhelming and bipartisan opposition from solar energy advocates, state regulators, and elected officials from both sides of the aisle. In comments filed with FERC, The Solar Energy Industries Association called the petition “an unlawful federal power grab.”

“Given the different retail conditions that exist in each region, there may not be a better example of an energy policy that should be overseen at the state and local level,” wrote Abigail Ross Hopper, SEIA president & CEO.

In addition to higher rates, business owners and residents with net metering systems could have been exposed to new tax liabilities that would have forced them to pay taxes on the energy they generate for the grid, according to Vote Solar. If there was a change in net metering policy, state legislatures and utility commissions would have lost flexibility over distributed energy resource (DER) programs, possibly disrupting grid modernization and other programs administered by the states. Other critics, such as like Ari Peskoe, director of the Electricity Law Initiative at Harvard University, noted that approving the petition could create chaos and leave the states open to regulatory challenges from utilities and lawsuits.

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Among the groups supporting the NERA petition were libertarian group Heartland Institute, the Competitive Enterprise Industry, Americans for Tax Reform and Citizens Against Government Waste. Critics have also pointed out the seemingly shadowy nature of NERA itself. The only publicly identified person associated with the group is its president, Marc Brown, whom Slocum described as a lobbyist.

While FERC did rule against the NERA petition this time, Slocum and Phelps worry the issue could be raised again because FERC rejected the proposal on procedural grounds, saying it wasn’t addressing specifics of net metering laws. Phelps said the wording of their ruling seemed to almost invite a challenge down the road to net metering in a specific state. “Yes, it keeps the door wide open. The threat is there,” Slocum added.

 

Varying Compensation Structures

Whether or not NERA or another group petitions FERC in the future, some states are already implementing or planning net-metering changes. Hawaii has suspended net metering and Louisiana has reduced the compensation to the retail rate for new installations.

Meanwhile, other states are considering different compensation structures. New York, for example, has been looking at the value of the DER (VDER) structure for several years and already moved larger projects and commercial solar installations away from net metering. In July, the New York Public Service Commission agreed to extend net metering for current rooftop solar projects through 2022 because of COVID-19’s impact on the solar industry.

In 2022, building owners can continue with net metering but would have to pay an additional charge, which Phelps described as relatively small. Another option would be receiving a value stack tariff rate, which varies the rate depending on the time of day and where the electricity was produced. However, the value stack tariff rate will always be less than the retail rate.

SEIA’s is concerned about the customer benefit charge that will be applied to future rooftop solar projects and decrease the savings for switching to solar, said David Gahl, the organization’s senior director of state affairs, in prepared remarks. 

Slocum stressed the importance of offering equity and fairness for all consumers through net metering programs. And while changes may be on the way, they should be made by the states rather than at the federal level as NERA was seeking, he contends.