The New England Ratepayers Association (NERA) on April 14 filed a legal challenge with the Federal Energy Regulatory Commission (FERC) on full net metering transactions.
Specifically, NERA requested that FERC declare there is exclusive federal jurisdiction over wholesale energy sales from generation sources located on the customer side of the retail meter, and order that the rates for such sales be priced in accordance with public law, according to the filing.
“We are not asking FERC to insert its jurisdiction on energy consumed on the customer side of the meter, only that which is exported to the grid and is then resold by a utility, which constitutes a wholesale sale under the Federal Power Act and should be regulated as such,” NERA President Marc Brown told Daily Energy Insider on Thursday.
In New England, Brown said that full net metering (FNM) policies have led to hundreds of millions of dollars in regressive cost-shifts from low- and middle-income families to higher-income families who take advantage of FNM policies, which grossly overpays them for the energy they export.
“Ending these policies will save ratepayers hundreds of millions of dollars in New England and billions of dollars nationwide,” Brown said.
According to NERA’s petition, “the inequities and inefficiencies” of existing FNM rates across the country are increasingly being recognized as both unjustifiable and unsustainable in a world where rooftop solar power has become a growing part of the nation’s energy sector.
“The long-term success of distributed solar as an energy resource must depend on it becoming truly cost-competitive with other resources, and rate reforms to more realistically compensate distributed solar are an important part of making this transition,” according to the petition. “It is clear that the energy price paid for the energy produced by rooftop solar is a matter of serious concern for the wholesale energy markets.”
FERC acknowledged that concern this week when one day after NERA’s filing the commission issued an April 15 notice setting a May 14 deadline for comments. “There is no deadline for commission action on the petition,” FERC spokesman Craig Cano wrote Daily Energy Insider in an email, adding that FERC does not discuss issues raised in pending matters.
In its petition, NERA points out that rooftop solar, through the application of FNM, is being compensated for the intermittent, mostly off-peak, energy it exports to the grid, at the full retail price of electricity rather than the wholesale energy price that all other resources are paid.
In addition, rooftop solar, under FNM – because of being paid the retail price for a wholesale product, and despite its intermittent nature – is being paid for capacity and demand products it does not provide, according to the petition.
“What is especially troublesome is that energy sold from rooftop solar installation includes the full retail price, while wholesale wind and solar units, which provide the same environmental benefits, are only compensated at wholesale rates despite the fact that wholesale wind and solar are both more efficient, both economically and in terms of carbon reduction,” NERA writes in the petition. “That disparity in compensation motivates investors to allocate more capital toward less efficient production and away from the more efficient.”
The result is more expensive rates for other consumers, and it’s also inconsistent with the future of solar energy, says NERA.
“While it is not suggested that the commission look to displace or preempt the states in regard to tariff structure, it would be a very positive step toward protecting the competitive nature of the wholesale market to take action within the scope of its jurisdiction over wholesale prices that would provide the country with fully competitive, non-discriminatory, energy and capacity markets,” according to the petition.
Basically, says NERA, net-metered customers still use the transmission and distribution system to ensure that they have reliable power when they aren’t producing it, but because of net metering they do not have to pay their fair share for the infrastructure that allows them to sell their product. The power for which they are compensated at well-above market (wholesale) rates does not have the attributes of retail power, which is firm, reliable and provides ancillary benefits.
Conversely, net-metered power is non-firm, unreliable and provides no ancillary benefits. And if an electricity circuit has too much solar on it, then the utility must invest additional capital to upgrade the system, pushing more costs onto customers, according to NERA.
“Furthermore, by increasing the amount of intermittent, non-dispatchable power that utilities are required to purchase, higher risk premiums are incorporated into electricity rates – further increasing the cost of electricity to all non-net-metered consumers. This cost shift is on the order of hundreds of millions of dollars across the country every year,” the association says in its filing.
The petition seeks a declaration that any state which sets net metering tariffs above a utility’s avoided cost is preempted by the Federal Power Act and is in violation of the Public Utilities Regulatory Power Act (PURPA), which stipulates that qualifying facilities, like rooftop solar, are to be compensated at the utility’s avoided cost.
“NERA has consistently argued that full net metering policies are socially regressive and overcompensate distributed generators at the expense of all other electricity consumers,” Brown said in a statement on Tuesday. “Owners of rooftop solar panels have incomes 150 percent higher than average, leading to a ‘Reverse Robin Hood’ effect, which has a disproportionately deleterious impact on the low-income and elderly communities and other citizens on fixed incomes.”
Brown added that “full-price net metering perverts electricity markets by grossly incentivizing the most-expensive and least efficient carbon-free generating resource – rooftop solar.”
“Any legislator or regulator who purports to care about low-income consumers should be supportive of our petition,” he said. “We feel that if FERC rules in our favor, investment capital will flow to far less expensive and more efficient forms of renewable energy generation. It will also reduce or eliminate the regressive cost-shifting inherent in full-price net metering compensation schemes – saving ratepayers in New England and nationwide hundreds of millions of dollars.”
Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program, tweeted earlier today that NERA “seeks to end net metering as we know it.”
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