Temporary fix proposed for net metering program

Last year, the state's net-metering program was a victim of its own success as several utilities reached statutory limits that capped participation in the program. Lawmakers are now entertaining a proposal that would set the stage for the program's overhaul.

The Department of Public Service and Legislative Council have drafted legislation for a temporary three-year "fix" ahead of a program makeover directed by the Public Service Board in 2017.

Rep. Tony Klein, D-East Montpelier, who chairs the House Natural Resources and Energy Committee, said he will apply a simple litmus test for a short-term solution to the program:

"You may not like everything that's in there, (but) can you live with it?" he said.

Under the law, utilities are required to take on net-metering customers until the total capacity of those systems equals 4 percent of the utility's peak demand during 1996 or the previous calendar year. The proposal would raise the cap from 4 percent to 15 percent.

But utilities and customers want assurance that the program does not subsidize backyard renewable energy projects at the expense of ratepayers who do not participate in the program.

Solving the issue will involve an education campaign and an overhaul of current utility rate structures, said Klein, whose committee has so far failed to ease the concerns of a "perceived" cost shift.

"For the next three years, let's continue with the certainty," Klein said. "At the same time in the bill we're saying, 'OK, the new world starts after 2016.' We've got now to 2016 for the Public Service Board to design a program into the future that will address the 'cost shift.' But it's more, it will address the sustainability of not just the program but the current utility structure. What we have to figure out is not being penny-wise and pound-foolish."


Testimony this week centered on the question of whether net-metering shifts the cost of maintaining utility infrastructure to non-net-metering ratepayers.

Terry Cushing, a resident of Hardwick, gave committee testimony against a program that he says subsidizes the wealthy on the backs of the working class.

"Why do I have to give my money as a subsidy or anything else to rich folks - and tell me if I'm wrong, the majority of these people are rich. It's a huge transfer of wealth from the poor to the rich," Cushing told the committee. "If you put net-metering out, and you paid these folks putting up these solar panels exactly what you pay the commercial power industry for the power, you won't hear another word from me."

Deputy Commissioner Darren Springer said there is no evidence that net metering shifts the cost of maintaining the grid's poles and wires other customers. In fact, he said distributed energy provided by net-metering participants reduces the cost of maintaining the grid.

"Nobody has come in for a rate increase on net metering. A lot of rate increases are driven by transmission costs. Net metering reduces transmission costs," he told the committee.

But Dave Hallquist, CEO of the Vermont Electric Cooperative, referenced a familiar analogy to highlight the cost of net metering: If a consumer rolls back his electricity bill to zero, he is not paying the embedded service charge.

His 5-year-old data show VEC would need to receive more than $30 per month to cover the cost of net metering. But Klein and Hallquist agreed that the service charge would not solve the underlying problem with utility rate structures.

"That really does not solve the problem, but solves the perception problem," Klein said. "We got into this mess because a perception was put out there."

The simplest solution to the perception problem would be to prohibit customers from zeroing out their bills, Klein said. This provision is not in the department's bill.

Bill Driscoll, vice president of Associated Industries of Vermont, a business trade association opposed to state's current net-metering program, says, the program is unstable and shifts transmission costs to non-net-metering customers. He wants the cost-shift issue to be addressed by a long-term solution.

"We can still have an expansion in the meantime, so long as some of the cost-shift fairness concerns - and we can differ over how much is reality and how much is perception - if we take some steps to address those issues up front, knowing that there may be additional changes or tweaks during a more in-depth process three years from now. That's something that I think, in concept, we could support," he said.

He said he would also support a change in the credit that customers receive for the net-metered electricity they generate. He suggests that utilities pay the wholesale commodity price of the energy instead of the retail electricity rate. Wholesale power is priced at about 7.5 cents per kWh in Vermont.


Springer said raising the cap to 15 percent would be the start of a good short-term plan.

A utility could change the cap if they have a power supply portfolio of 90 percent renewable and 10 percent net-metered systems, he said. The utilities would then be able to design a different net-metering program.

The new proposal expands fast-track registration processes to larger systems of 15 kW. (If lawmakers enact set back requirements for solar projects, that provision would apply.)

At the end of 2016, the federal tax credits on solar installations will likely expire, Springer said. This is a 30 percent federal tax credit for homeowners who install solar projects.

The proposal uses blended rates rather than the higher residential - or block - rates to credit net-metering customers. Most cooperative unities have blocked rates that increase based on usage to discourage wasteful consumption. Currently, utilities pay net-metered customers the highest block rate for their electricity.

With blended rates, utilities could save money by crediting their net-metered customers slightly less for larger installments.

"This is an attempt to getting at the real value of the net-metered system across the board. That's what the proposal is, that this better reflects the real value," Klein said. "I would suggest that we make the decision on what the real value is and not necessarily what's best for one customer or best for the utility."


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