The Growing Implications of Net Metering to Rate Payers, Utilities and Policy Makers

Net metering (the process where a home or business generating its own electricity can run its meter backward and sell any excess electricity it generates to the grid for a bill credit) continues to gain momentum in the United States. While the total number of customers using net meters remains relatively small, their numbers are growing. The Solar Energy Industries Association (www.seia.org) reports that since the practice was first introduced in the 1980′s, 43 states and the District of Columbia have implemented net metering policies.

Advocates of net metering say that these programs provide them with a choice in how they obtain their electricity, that using net meters leads to fewer greenhouse gas emissions from coal or natural gas (most “net metered” power comes from wind, solar and some biomass) and that customers ultimately see their cost for electricity reduced (once the equipment and installation costs are fully amortized).

The growing number of net meters is creating greater uncertainty for rate payers, utilities and policy makers. Rick Tempchin, executive director of retail energy services for the Edison Electric Institute (www.eei.org) identified several issues in his recent two part series on the subject in Intelligent Utility magazine. Among the issues he cites is one that often gets overlooked: the economic impact to rate payers who remain on the grid. Whether these customers remain on the grid by choice or because they cannot afford to install or connect to a rooftop or community generation source, they are responsible for paying the fixed costs associated with the utility’s grid infrastructure. As more and more customers disconnect from the grid, the cost of building and maintaining that infrastructure must be spread over fewer customers, leading to higher rates. Rate payer advocacy groups have begun articulating economic justice concerns about the present methods by which these costs are allocated among consumers.

Another fairness issue being raised centers on the price at which the utility is required to purchase power from individual producers. Rather than wholesale rates, utilities generally are required to pay a higher, “retail” rate to net metering customers. Utilities claim that forcing the industry to purchase electricity from any generating source at a price that is higher than the utility’s wholesale cost is tantamount to an unreasonable tax. Instead, they argue, electricity-generating customers should be paid no more than wholesale rates for the excess power they generate. An additional change being pressed by the industry is that a utility should not be required to buy ANY power from a consumer generating source when the load on the utility’s system makes the excess, consumer-generated power unnecessary

These competing arguments, and many more, are likely to be heard with much more frequency as costs for net meters and distributed generation technologies decline. How policy makers, system developers, utility industry executives, consumer interests and environmental advocates navigate these waters remains to be seen. One thing is certain: the actions taken by stakeholders in the coming months will have profound implications for all of us.

For information on how STAR Group can help your organization understand and prepare for the implications associated with uncertainty and change, please fill in the form on the right-hand side of this page. To see case studies of our work in identifying implications, click here.