Some states permit end-users to “obtain” energy generated at a remote location, without requiring such end-users to pay the utility to which they and the generator are interconnected for the delivery and ancillary services required to move the energy to the end-user’s load. Such “virtual net metering” is a key element of some community (or shared) solar programs. Examples of end-users that pay no delivery charges for energy delivered from “off-site” or “remote” generation are reflected in an Oregon commission’s recent May 23, 2018 order and in Minnesota, where the local utility continues to credit customers of community solar gardens at the full retail rate. In contrast, (most) other end-users must pay delivery charges when consuming energy delivered over the utility’s wires, whether the energy they consume is largely produced a block away or hundreds of miles away. (On-site net-metering programs also may result in free delivery service for end-users, but that issue is not the focus of this post.) The focus of this post is whether a state or state utility commission may lawfully mandate that energy produced at one location can be deemed to have been consumed by an end-user at another location without that end-user having to pay for delivery service if the utility’s wires are used for such delivery. As discussed below, there are a variety of legal grounds on which virtual net-metering laws, regulations, or tariffs could be challenged by utilities, customers to whom delivery costs may be shifted, and competing generators as relates to the free (or reduced cost) delivery service aspect of virtual net metering. Continue Reading Virtual Net Metering –Vulnerabilities of Free Delivery Service to Legal Challenges
Some state net energy metering (NEM) programs cause cost shifts to a degree that perhaps was never intended by FERC. Sun Edison LLC, and MidAmerican Energy Co., remain the seminal cases on how FERC determines whether a wholesale sale of energy has occurred under a state’s NEM program. As explained below, many state commissions may be implementing MidAmerican and SunEdison in a manner contrary to what FERC intended when it decided those cases.
FERC has jurisdiction over all wholesale sales (i.e., sales for resale), although, due to PURPA and its implementing regulations, rates for certain wholesale sales by qualifying facilities (QFs) are set pursuant to state oversight. Arguably, then, any time a NEM customer sells power back to a utility, who would then re-sell it to another customer, such sale would be a FERC-jurisdictional sale or a sale under PURPA, depending on the eligibility rules for NEM customers’ resources. However, in SunEdison and MidAmerican, the Commission held that there may be, over the course of a billing period, either a net sale from the NEM customer to the utility, or a net purchase by the NEM customer from the utility. In both cases, FERC ruled that where there is a net sale to a utility at the end of the billing period, the sale is considered to be wholesale. In short, in these cases, FERC delegated its jurisdiction to determine when a wholesale sale occurred to the states, but indicated that it would defer to the states’ billing period. Because eligibility for NEM programs are typically limited to renewable resources well under 1 MW that are automatically QFs, the state may only mandate a utility to pay an avoided cost rate for such sale, consistent with PURPA.