Who will be paying for the impacts of on both distribution and transmission systems of widespread DER penetration, whether it is in the form of DER Aggregations under Order No. 2222, state-jurisdictional net energy metering (NEM), or stand-alone DERs (often PURPA facilities)? And, who will decide who bears such costs – FERC or state commissions?
The FTC Petition – A Thinly-Veiled Attempt to Protect Full Net Energy Metering for DERs
On May 18, 2022, 235 self-described “consumer, anti-monopoly advocates, public interest and environmental organizations, and rooftop solar companies” (Petitioners), petitioned the FTC to exercise its authority under Section 6(b) of the FTC Act to study electric utility industry practices that they claim impede renewable energy competition and harm consumers (the FTC Petition) (link and press release).
Why did they make this filing? It appears that they did so to stave off actions by certain states to reduce compensation for energy produced by DERs under net energy metering (NEM) laws and policies.
The participants in the rooftop solar industry are on the verge of possible defeat, or a partial defeat, in their most important state, California. Even though NEM reform battles may eventually occur in most every state with NEM (it ended in a loss in Hawaii years ago), California matters most. And California’s regulators preliminarily have determined that the subsidies to NEM participants are too high. So, Petitioners hope that the can persuade three FTC Commissioners to assist them in quashing all efforts to reform “full NEM,” whether in California or elsewhere.
The concept of full NEM is simple. A retail customer produces energy from a DER (typically, but not always with on-site, rooftop solar panels) and the energy not consumed on site in real time is credited to the customer at the full retail rate. Thus, this means that the customer producing energy from rooftop solar that is not in excess of its total needs during the billing period gets paid a rate equal to the utility’s cost of energy plus the utility’s costs of transmission, distribution, back-up power, and much more. This compensation is many times higher than the amount paid for energy and capacity sold by solar and wind power developers selling to the market or bilaterally. (Note that no actual wind or solar power companies or their trade associations signed onto the Petition.) This over payment to NEM participants results in the costs of the utilities’ transmission and distribution system (as well as many other costs) being shifted from the NEM participants to other customers, generally from wealthier people with larger houses on which to put solar panels to power customers without. Currently, California has a closed (but ongoing) NEM 1.0 program (full NEM) and an open NEM 2.0 program (best characterized as “almost full” NEM).
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The Best Description of Order No. 2222? “Landmark” “Transformative” Ground-Breaking” “Barrier-Busting” “Competition-Boosting” “Game-Changing” “Bold” or “None of the Above Due to Traditional Net Metering”?
The glowing reviews and legal/trade press headlines would have one believe that DER Aggregation under Order No. 2222 will soon transform the electric industry, as DERs too small to participate directly in RTO/ISO markets will flock to third-party DER Aggregators who will sell wholesale services to organized markets. Will DER owners leap at the chance to participate in wholesale markets? The near-term answer lies in footnote 95 of Order No. 2222, leaving net metering (NEM) untouched and the (Solar Power World) map below. The map shows us four RTO/ISO states (NY, MI, IN, IL) where DERs cannot participate in “traditional” NEM, i.e., where the meter runs backward or excess power over the billing period is compensated at the retail rate). Depending on NEM compensation in such states, perhaps DER Aggregation is a meaningful option. There is a direct connection between DER participation in an aggregation and the economics of traditional (full retail compensation) NEM, the subject of NERA’s Petition for Declaratory Order. That connection has been ignored by most articles extolling Order No. 2222. (Disclaimer: Steptoe represented the New England Ratepayers Association in filing its PDO in Docket EL20-42.) The true potential of Order No. 2222 is unlikely to be met unless FERC changes the colors on the map below by asserting its full jurisdiction over wholesale power sales, whether those sales are made under PURPA’s exemption for sales from small QFs or FPA Section 205.
Continue Reading The Best Description of Order No. 2222? “Landmark” “Transformative” Ground-Breaking” “Barrier-Busting” “Competition-Boosting” “Game-Changing” “Bold” or “None of the Above Due to Traditional Net Metering”?
Virtual Net Metering –Vulnerabilities of Free Delivery Service to Legal Challenges
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.
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FERC’s MidAmerican/SunEdison Orders on Net Energy Metering: Have They Been Properly Applied by the States?
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.…
Continue Reading FERC’s MidAmerican/SunEdison Orders on Net Energy Metering: Have They Been Properly Applied by the States?