July | August 2017







States Explore Net Metering Reforms for Solar Customers

By Liz Edmondson, CSG director of energy and environment policy
On Dec. 23, 2015, the Nevada Public Utilities Commission, or PUC, set new rules for net metering, placing Nevada at ground zero of the nationwide debate regarding the appropriate pricing scheme for rooftop solar. While Nevada had previously allowed rooftop solar customers who sold power back to the electric grid to be compensated at the retail rate of electricity, the recent PUC decision implemented a new two-part tariff that pays net metering customers a lower rate for power they produce and also requires a higher fixed charge. This significant change to the state’s net metering policy applies not only to new customers, but to existing solar customers, as well.
Net metering is the process by which electric customers generating their own electricity are compensated for any excess power they provide to the grid. If customers generate more power than they need, the electricity meter measures that and provides the customers credits that can be used when the customers’ systems are not producing. As the name implies, the customers are billed only for their net energy use and compensated for any net excess energy generation. Many net metering policies also include caps on the amount of rooftop solar generation that can be connected to the grid.
One hotly contested issue states are addressing in net metering is at what rate should the customer be compensated and should existing customers be subjected to any subsequent rate changes? When net metering policies were originally developed, rooftop solar was still in its infancy and was far more expensive than it is today. Net metering originally required utilities to buy customer-produced excess generation at the retail rate, meaning the customer-generated excess energy was compensated at the same rate as customers pay the utility to purchase power.
However, the number of rooftop solar installations is on the rise and in many states net metering caps are being reached. That’s leading some in the industry and in statehouses to question whether rooftop solar customers are paying their fair share for the cost of being connected to the grid and whether non-solar producing customers are subsidizing net metered customers. Rooftop solar advocates, however, point to some recent studies suggesting that rooftop solar customers add value to the grid.
With these questions and developments in mind, a number of states have studied, revisited or revised their net metering policies to attempt to address these issues.
At a recent CSG event, state officials from Nevada came together to discuss the state’s recent experience in reforming its net metering policies. Nevada’s net metering program began in 1997 and gained 6,000 participants in its first seven years. As more customers became a part of the net metering program, the Legislature continued to increase the net metering cap.
“The Legislature tried to continue to make our state the best in the world when it comes to rooftop solar,” said Nevada state Sen. Kelvin Atkinson. However, questions remained regarding the fairness of net metering rates between solar and non-solar customers, specifically whether solar customers were paying their fair share for the cost of maintaining the electric grid.
Thus, in 2015 the Legislature passed SB 374, which according to Commissioner Paul Thomsen—then chairman of the Nevada Public Utilities Commission—directed the PUC to set new net metering rates and study the economic impact of net metering on ratepayers.
“The big issue is the policy of the Legislature trying to transfer economic regulation to the PUC,” said Thomsen. Once the Legislature kicked the issue to the PUC, it became a matter of setting a just and reasonable rate of return, he said. The PUC found that rooftop solar providers were receiving a $16 million per year subsidy, which amounted to a $300 million cost shift between solar and non-solar customers over a 20 year period.
In addition, Thomsen noted that in the six months between the passage of SB 374 and the PUC decision in December 2015, 24,000 customers signed up for net metering. “This exacerbated the problem,” said Thomsen, “because you had all these people wanting a certain outcome from the PUC.” Ultimately, the PUC decided that the new rates would apply to all net metering customers, regardless of when the customer connected their panels to the grid.
The PUC decision caused a wave of reactions from solar advocates, who are currently working to reverse the PUC’s decision. In addition, Nevada has several large scale energy users that are contemplating going completely off the grid, according to Atkinson.
“What people don’t understand is what that will do to remaining customers,” Atkinson said. However, Thomsen noted the state is charging customers an exit fee to pick up the burden of leaving the electric grid.
“The challenge we face is how committed we are to becoming more energy independent and what is the price we are willing to pay if we don’t,” said Nevada state Sen. Patricia Spearman, who also serves on Gov. Brian Sandoval’s New Energy Industry Task Force. “We need a strategy to respond to current needs, while having the ability to respond to changing technologies.”
As states across the country reevaluate their net metering policies, Nevada will serve as an important case state as the Legislature, governor’s office and PUC continue to work on these issues.