Utilities Throwing Shade on Net-Metering Policies Across the West

By Andrea Lang, Energy Fellow

Recent decisions by Public Utility Commissions (PUCs) in Nevada and California illustrate the debate going on around the country about net-metering policies. A net-metering policy requires utilities to “net” out the amount of electricity that solar owners use versus what they provide back into the grid, essentially allowing their meters to run backwards when they are providing energy from solar panels and offsetting their retail electricity costs. More than 40 states have a net-metering policy in place, and while they have never been popular with utilities, the debate seems to be heating up lately. This is likely because as the cost of installing solar panels has dropped over the last several years, more and more homeowners have been installing rooftop solar and taking advantage of net-metering rules.

The biggest argument against net-metering is that it shifts costs from people that can afford solar panels onto those that cannot. That is, although solar owners are providing electricity that the utility doesn’t have to buy elsewhere, they aren’t paying for the transmission and distribution costs, either. Utilities argue that those costs unfairly shift onto non-solar owners, increasing their electricity rates.

It is this argument that led Nevada’s PUC to essentially abolish its net-metering program last December. NVEnergy, Nevada’s largest utility and biggest advocate against net metering, describes the new rule as establishing “new net energy metering rules and rates.” The Nevada PUC, too, describes its decision as establishing “net metering rates.” However, the whole idea behind net-metering is that it does not involve rates at all, but merely allows a customer’s meter to run backwards and offset some of the energy they use. Under the decision, Nevada doesn't allow true net metering because while it allows solar customers to use the power they generate, and thus offset their retail consumption directly with their own generation, it doesn't allow customers to net out their solar generation and retail purchases on a monthly basis. Instead, solar owners get to potentially consume some or all of the power they generate, and then earn the new tariff rates for the solar power they produce but don't consume onsite.

The PUC will replace Nevada’s net metering program with something that is more akin to a feed-in tariff program. The new program requires utilities to purchase solar power from their customers, charges solar customers a service charge, and gradually reduces solar customers’ bill credits from higher retail rates (which they effectively earn under the existing net-metering program by virtue of the meter running backwards) to significantly lower wholesale rates. 

Although the PUC had initially proposed to apply this rule not only to future solar owners but also to existing ones, it has since backed down from that position. It appears to be strongly considering a compromise position to “grandfather” existing solar owners under the net-metering program, but apply the new tariff program to new owners. If this grandfathering provision is not added, thousands of customers who expected to recoup the costs of their investment in solar panels through the net-metering program will be hit hard by the significantly less beneficial feed-in tariff program.

The decision is especially confounding in light of the findings of a report the Nevada PUC commissioned last year. The report concluded that although non-solar customers may have experienced some cost shifting in the past, it was unlikely to be an issue in the coming years due to the need for utilities to invest in green energy to comply with state’s renewable portfolio standard.

On the other hand, last week California’s PUC resisted the same arguments, deciding to keep its net-metering program in spite of utilities’ growing dissatisfaction with it. The 3-2 decision was a narrow but significant victory for solar advocates, and should allow California’s booming solar industry to keep growing.

As the cost of solar continues to drop and more homeowners opt to install solar panels on their homes, it seems likely that states will increasingly revisit their net-metering policies. I only hope PUCs are able to see through utilities’ self-interested arguments and realize that the benefits of incentivizing increased green distributed generation far exceed the costs.