Solar advocates are discouraged following new limits approved by the state this month on how much electric utilities have to pay solar customers for excess power generation — though the fight, at least in the short term in Pennsylvania, is largely political.
The contentious 3-2 ruling by the state Public Utility Commission caps a two-year debate over how to update Pennsylvania’s provisions around so-called net metering, established as part of the 2004 law requiring utilities to buy increasing amounts of power from alternative and renewable energy sources.
Net metering allows “customer generators” — most often electricity-producing solar panels — to produce electricity in excess of what is consumed and requires utilities to credit customers at the retail rate on their next monthly bill. At the end of the year, utilities reimburse any extra generation accumulated throughout the year at the wholesale rate.
But as solar energy has grown in recent years, net metering has emerged as a central issue: Solar proponents say the utility payments are crucial to attracting more customers to what can be a large upfront investment, while utilities argue their compensation to solar customers unfairly burdens non-solar customers and could eventually raise the cost of electricity for everyone.
In forming the 2004 Alternative Energy Portfolio Standards, legislators set a capacity limit for residential rooftop at 50 kilowatts, while capping commercial systems at 3 megawatts and industrial systems at 5 megawatts. But the PUC has gone farther, imposing an additional limit on the size of solar installations based on how much power customers generate above their consumption.
At its Feb. 11 meeting this month, the commission approved capping the size of customer generators at 200 percent of a customer’s annual electricity consumption. Introducing the idea in February 2014, regulators initially suggested capping systems at 110 percent of consumption but last April raised it to 200 percent.
Commissioner Robert Powelson, who joined Commissioners Pamela Witmer and John F. Coleman Jr. in voting to approve the rules, called the net metering limits an important consumer protection that balance renewable energy growth with keeping power prices affordable.
The PUC joins utility regulators in other states who have issued a range of decisions on net metering. Most recently, Nevada regulators abolished net-metering compensation altogether and established a separate rate class for residential and small commercial customers.
The Pennsylvania commission notes the rules are less restrictive than those in other states. The final rule document pointed out Maryland has the same 200 percent limit, Delaware has a 110 percent limit and New Jersey requires that the generating capacity cannot exceed a customer’s annual energy usage.
“I do not believe that these regulations impose any unreasonable burdens on the responsible development of renewable generation sources,” Mr. Powelson wrote in a statement.
The decision, however, came over the dissent of chairman Gladys Brown and vice chairman Andrew Place, a former EQT executive confirmed to the commission in September. Ms. Brown said while the motive to prevent the intentional overbuilding of the system is rational, the agency cannot ignore the limit already spelled out by the 2004 law.
“The commission commits a legal error by imposing a different size limitation,” wrote Chairman Gladys Brown, adding that the agency has no authority to “tailor” laws to meet policy goals by rewriting specific statutory terms.
In a separate statement, Mr. Place said the commission, by focusing on limiting the size of the systems, was missing the real issue: ensuring the retail rates paid to customers are the most accurate. This would require redefining the retail value to account for the range of effects that solar energy has on the grid — avoided costs of new transmission and distribution, and environmental benefits, as well as added costs for utilities as rooftop solar becomes prevalent in neighborhoods.
“Consumers are best served by getting the ‘retail value’ price right, rather than by seeking to impose net metering capacity restrictions which are not in [the 2004 law],” Mr. Place wrote. He did not telegraph whether he personally favored making those rates ultimately higher or lower.
‘Solar is getting cheaper’
Utilities argue that solar customers aren’t paying their fair share of distribution costs. By law, utilities are not in the business of selling electricity but instead recover costs from customers to maintain the local distribution system of wires and poles. When credited the retail rate — which includes the cost of generation, transmission and distribution — solar customers are effectively being paid for managing the grid system.
Solar advocates have called the limits an unnecessary restraint and a solution to a problem that does not exist. Rob Altenburg, director of PennFuture Energy Center, said the law already distinguishes between a “merchant” and “customer” generators, so homeowners can’t essentially build a power plant in their backyards to profit off the utility.
He agrees the retail rates should be reviewed. “Sooner or later this question will need to be answered because solar is getting cheaper and you’re going to see more and more of it,” Mr. Altenburg said.
Sharon Pillar, president of the Solar Unified Network of Western Pennsylvania, said few, if any, solar customers would be directly affected now. “But there are some who would like to expand, and this is discouraging,” she said.
The PUC’s rules contained an exemption for agricultural customers who use methane digesters that convert cow manure into energy because, according to the final rule, “it is this waste stream, and not the motive to sell electric generation, that determines the size of such systems.”
Nearly 9,000 facilities in the state are net metered, according to the PUC. Those facilities have a combined capacity of more than 200 megawatts, and over 94 percent are solar.
Daniel Moore: email@example.com, 412-263-2743 and Twitter @PGdanielmoore.