New Net Metering Rules Could Alter Vermont's Solar Power Landscape

Apr 7, 2016

The program that gave liftoff to Vermont’s renewable energy industry is getting a makeover, and new rules from the Public Service Board could alter the solar power landscape across Vermont.

It’s a high stakes transition for a program that requires utilities to purchase electricity from people that install rooftop solar arrays and other small- and medium-scale energy projects. And some small utilities say the proposed changes could jack up rates on households who don’t participate in the program.

Lawmakers approved the net-metering law back in 1998 as a way to jumpstart the construction of small-scale renewable energy projects. By forcing utilities to pay a set price for the power, the legislation allowed for the construction of environmentally friendly power sources that the market wouldn’t have otherwise borne.

“There’s a lot of benefits around net metering,” says Andrea Cohen, head of government affairs at the Vermont Electric Cooperative.

Cohen says VEC continues to support net metering. But her co-op is highlighting a tension that has existed since the program’s launch: When do premium prices for renewables begin to cause undue financial impacts on other ratepayers?

"There are a lot of benefits around net metering, so we don’t want to diminish the benefits. We’re just trying to get to a place where we can cover the fixed cost of the grid." — Andrea Cohen, head of government affairs at the Vermont Electric Cooperative

Net-metering customers often aren’t buying any power at all from their local utility, since their solar array or other energy solution is generating more electricity than they can use. Cohen says utilities need ways to collect from net-metering participants the money needed to maintain their local transmission grid.

“Because if not, who’s going to pay? It’s their neighbors and others in the community,” Cohen says. “There are a lot of benefits around net metering, so we don’t want to diminish the benefits. We’re just trying to get to a place where we can cover the fixed cost of the grid.”

The Vermont Electric Cooperative and some of the state’s other smaller utilities are urging the Public Service Board to allow them to levy something called “grid-service fees” on people in the net-metering program.

Patti Richards, general manager at Washington Electric Cooperative, says that when homeowners aren’t paying for power, they also aren’t paying for the fixed infrastructure costs baked into those rates.

“And by having the ability to do a grid-service fee, or some sort fee for infrastructure, it allows us to mitigate that and temper any sort of cost shifting between different consumer groups,” Richards says.

James Moore is co-founder of SunCommon, one of the state’s largest solar companies. Moore says would-be solar customers need as much certainty as possible when it comes to deciding whether or not solar makes financial sense for them. Allowing utilities to impose an unknown fee at some unknown point in the future, according to Moore, undermines the entire model.

“These utility executives would never sign a power-purchase agreement with a big power plant and allow the power plants to change the deal fundamentally moving forward with fees and taxes and stuff,” Moore says.

Andrew Savage is chief strategy officer at AllEarth Renewables, a company whose business model also relies on net metering incentives. VELCO, the company that oversees the state’s transmission grid, says small-scale, local energy projects have helped the state avoid $250 million in grid maintenance costs.

Savage says it is net metering participants that are responsible for those savings, and that they shouldn’t be punished for advancing the state’s energy goals with grid-service fees.

“It certainly has an un-stabilizing impact on any of our customers that might want to go solar, and their ability to understand what the implications are from a financial perspective,” Savage says.

Not all utilities think grid-service fees are a good idea.

A spokesperson for Green Mountain Power, by far the state’s largest utility, says if the price for net-metered energy reflects the value it brings to the system, then there’s no need for grid fees.

And Moore says there’s plenty of evidence to suggest that grid fees would have a chilling effect on the renewable energy industry. Washington Electric Cooperative won an allowance at the end of the 2013 that allowed it temporarily to impose grid-service fees on customers who wanted to participate in the net-metering program.

Over the next two years, according to Moore, the number of net-metering certificates granted in the WEC territory declined by more than 50 percent. Over the same period, Green Mountain Power, which does not charge grid-service fees, saw a 50-percent increase in the number of net-metering certificates granted in its territory.

"The comments really brought to our attention the fact that the fee, as it was drafted in that version, was unbounded, it was open-ended." — Public Service Board member Margaret Cheney

Whether or not the Public Service Board will permit utilities to impose grid-service fees on net-metering customers remains an open question. The board included a grid-service fee provision in an earlier draft of proposed changes to the rules governing the program. It’s been stripped from the latest version, based in part on comments the board received from developers like SunCommon and AllEarth.

“The comments really brought to our attention the fact that the fee, as it was drafted in that version, was unbounded, it was open-ended. So there was a perception that there really was an unpredictable element in what has been a very defined program,” says Public Service Board member Margaret Cheney.

Cheney says that while the grid-service provision has been stripped for now, that doesn’t necessarily mean it won’t reappear in a different form in the final rule.

“We recognized that it would be probably better to redraft that part of the rule with perhaps parameters, perhaps a cap, but some kind of collar so that it wasn’t so open ended,” Cheney says. “We still don’t know what it should look like, and …  if there should be one. But we know there has to be more analysis about that.”

Among the people pushing the board to bring back the proposal is Sen. John Rodgers, a Democrat who represents Essex and Orleans counties. Rodgers tried to pass legislation last week that would have allowed utilities to assess grid-service fees – he offered the amendment after he saw the latest version of the proposed rules had dropped the grid fee provision.

Rodgers says he doesn’t buy the industry argument that grid-service fees will kill renewables. And he says his concern is for the lower-income ratepayers in his district, which is mostly covered by VEC.

“Most of the people who are net metering have some disposable income,” Rodgers says. “I live in a very poor area, so the cost shift is being largely put onto people who are low income and can least afford it.”

The proposed new rules from the Public Service Board would also change the amount of money that net-metering customers get for the power their projects are pumping into the grid. The rules would also create different rate classes, a strategy Cheney says will encourage the kinds of renewable-energy projects that Vermonters prefer.

The Public Service Board is taking comments on its latest version of the proposed changes to net metering over the next 30 days, and will hold two public hearings in early May.

This story was originally published with the headline Net Metering Rule Changes Reignite Debate Over Renewable Energy Cost Shift.