Feb 02, 2016 - 4:45pm

Congress Should Let States Figure Out Net Metering Rules


Senior Editor, Digital Content

bloomberg_electricity_meter_1600px.jpg

Electricity meter

Much has been written here and elsewhere about EPA going way beyond its authority to tell states how to generate electricity. The agency’s Clean Power Plan—using the hollow word “flexibility”—limits the states’ options to reduce carbon emissions by stacking the deck against coal and natural gas and in favor of wind and solar.

Sens. Angus King (I-Maine) and Harry Reid (D-Nev.) want to play the same game by restricting states’ ability to change electric metering policies for rooftop solar power generation.

Distributed solar power could be the wave of the future, just as the Internet distributed computing power. As Noah Buhayar at BloombergBusinessweek writes, just like the price of computing has collapsed, innovations have cratered the price of solar power:

Adjusting for inflation, it cost $96 per watt for a solar module in the mid-1970s. Process improvements and a huge boost in production have brought that figure down 99 percent, to 68¢ per watt today, according to data from Bloomberg New Energy Finance.

A new industry of solar panel designers and installers has sprung up like daisies in the spring to meet this demand.

Some people install panels to shave a few dollars off their electricity bills; for some, rooftop solar is a status symbol that matches the hybrid car sitting in their garage, and for others it’s a step toward going “off the grid.”

Whatever the reasons, lower prices, taxpayer subsidies, and a state electricity policy called “net metering”--which allows consumers with solar panels to sell excess electricity back to utilities—has spurred demand for rooftop solar panels.

Forty-four states have some form of net metering, according to BloombergBusinessweek, but as executive director of the Harvard Electricity Policy Group and a former Ohio public utility commissioner Ashley Brown explains, the policy creates cross-subsidy problems:

Because utilities must pay a retail price for a wholesale product, net metering enables those with rooftop solar systems to avoid contributing to the costs of maintaining the electric grid and keeping it operating reliably.

Brown continues:

What results is an inequitable shift in grid costs to non-solar customers, who are, on an aggregated basis, less affluent than those they are being asked to subsidize. Recently, the Nevada Public Utilities Commission found that, "the annual subsidy associated with the existing shift in fixed costs from net metering customers to other customers is approximately $623 for each residential net metering customer in southern Nevada and $471 for each residential net metering customer in northern Nevada."

Under net metering, when the sun isn’t shining, rooftop solar owners enjoy the use of transmission lines, transformers, and other components of the modern power grid without paying their fair share for these facilities.

A non-solar neighbor should not have to pay the full freight for his neighbor’s electricity grid access solely because the neighbor has the wherewithal to install solar panels on their roof. 

Federalism is a good solution. States are in the best position to find the right balance between electricity producers and consumers. However, an amendment by Sens. King and Reid in Sen. Lisa Murkowski’s (R-Alaska) energy bill would remove state flexibility by locking in place inequitable net metering policies, as Justin Sykes at Americans for Tax Reform writes:

The King-Reid amendment would establish stringent federal standards dictating how each state may operate their net metering programs. Net metering policies vary by state, but in general electric utilities are required to purchase excess electricity generated by customers with rooftop solar installations at the full retail rate as opposed to wholesale. As result, solar customers avoid paying for many of the fixed costs of the grid, and thus these fixed costs are shifted onto non-solar customers. 

The new federal standards imposed by the King-Reid amendment, such as requiring extensive evidentiary hearings, would thus act as a new legislative barrier to states seeking to address the cost-shifting dilemma.

This amendment would effectively take such decision making ability away from the states and give it to the federal government. Furthermore, the King-Reid amendment would only work to further the practice of forcing non-solar customers to subsidize net-metered customers.

States, rural electric cooperatives, and certain localities are undoubtedly in a much better position than the federal government to make decisions about state energy policy. The states are already reeling from a slew of regulations put forth by President Obama, such as the Clean Power Plan, that empower federal regulators at the expense of state sovereignty.

The National Association of Regulatory Utility Commissioners also opposes the King-Reid amendment stating:

The amendment is well intentioned, and NARUC's members are strong believers that regulatory determinations on rates should be based on an impartial judgment on the most complete evidentiary record possible, but which are nimble enough to meet a sector that is changing rapidly.

The practical implications of the amendment to State utility commissions would weigh down commissions and prevent them from this nimbleness.

Fair metering policies aren’t anti-solar. No one wants to stop anyone from installing solar panels on their rooftops. Solar power has a role in electricity generation just as much as does coal, natural gas, wind, nuclear, and hydropower. However, it needs to compete fairly in the marketplace. Free-riding on the power infrastructure is not acceptable.

Just as EPA shouldn’t mandate to states how electricity should be produced, Congress shouldn’t take away state regulatory authority by tipping the scales in favor of one form of energy over another.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.