House Bill 227 House Committee Substitute 4, the latest iteration of the “net metering” bill advocated by electric utilities, ends “net” metering for new and existing customers, and unfairly opens the door to diminishing the value of solar power that utilities in turn sell to others at retail or higher rates.
Currently, a net metering customer “nets” what they generate and what they use, over a billing period, at the same value. The net metering customer gets a “credit,” not cash, for any excess over what is used. There is no incentive to “overbuild” a solar array since it would create credits that would never be used.
HCS 4 ends monthly “netting” of use and generation, and imposes “instantaneous” netting, so that the Public Service Commission could set the value for all electricity fed into the grid during a day, not just the excess generated over use by the customer in a month. This could reduce the credit given to all solar, even though the utility saves money during peak periods by selling that solar to other customers at higher rates than the credit given to the customer-generator.
Even worse, HCS 4 does not clearly grandfather existing customers, who installed their solar arrays assuming that they would receive a retail one-to-one credit for all electricity fed into the grid. It would be a simple fix for the bill to state that it applies only to new customers taking net metering service after a certain date, but the current bill does not clearly protect existing customers and their sunk investment.
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The bill sends the issue of cost recovery to the PSC, but does not provide proper guidance to the commission. A utility is never guaranteed 100 percent recovery, only the opportunity through approved rates to recover the costs of service to a customer class through a mixture of fixed and variable charges. Any charge on net metering customers is limited to that needed to assure equitable contribution by net metering customers to the cost of service relative to non-participating customers.
The issue is this: Net metering customers may use less electricity from the grid, so that those fixed costs that are imbedded in the volumetric rates charged by a utility may not be fully collected from net metering customers (just like energy-efficient customers). But solar customers provide measurable value to the utility and other customers, and when determining the cost of service to those customers, the value should be considered. The PSC is the appropriate body to determine what is “fair, just, and reasonable,” but the utilities shouldn’t be able to game the process by ignoring the value of solar power.
Tom FitzGerald is director of the Kentucky Resources Council.