The New England Ratepayers Association (NERA) has filed a petition with the Federal Energy Regulatory Commission (FERC) to prevent states from passing on the costs of rooftop solar panel installations to ratepayers in general.
NERA’s petition asks the FERC to “declare that there is exclusive federal jurisdiction over wholesale energy sales from generation sources located on the customer side of the retail meter.” If FERC grants the April 14 petition it could have a major effect on “net metering” laws throughout the country, possibly leading to their demise, as NERA wants the agency to “find unlawful, and therefore reject, state net metering laws which assert jurisdiction over such wholesale sales.”
Socializing Solar Energy Costs
Net metering laws, adopted in 41 states, require utilities to purchase excess electricity from households with their own electricity generation source, the “customer side of the retail meter,” at the retail prices ratepayers pay for electricity. Usually these generation sources are rooftop solar panels.
Utilities typically buy electricity wholesale or generate it on their own, so the power they purchase from “distributed-generation” sources such as rooftop solar panels, as opposed to centralized large power plants providing power for many customers, costs them more, costs they pass on to other ratepayers in the form of higher prices.
In addition, managing power from rooftop solar sources and other distributed sources connected to the grid requires special equipment to regulate electricity flowing two ways. Under net metering laws, those costs are paid by ratepayers in general instead of the customers or companies that have installed or operate the distributed generation sources. Such cost-shifting is regressive because rooftop-solar owners have generally higher incomes than others, so lower-income ratepayers end up subsidizing higher-income customers.
“Furthermore, by increasing the amount of intermittent, non-dispatchable power that utilities are required to purchase, higher risk premiums are incorporated into electricity rates—further increasing the cost of electricity to all non-net-metered consumers,” NERA’s petition says. “This cost shift is on the order of hundreds of millions of dollars across the country every year.”
Studies Confirm Cost Shifting
Multiple studies have demonstrated net metering laws shift costs from relatively wealthy households to poorer households.
A December 2013 paper from the Harvard Business Law Review Online notes “net metering causes a re-allocation of transmission, distribution, and reliability costs to those customers who do not own distributed generation.” A study by the California Public Utilities Commission found customers in the Golden State who have installed net-metering systems going back to 1999 have an average median household income of $91,210, significantly higher than either the state’s median income of $54,283 or the median income of $67,823 in investor-owned utilities service territories.
Legislators should be concerned about the effect of energy policies on low income households, says Marc Brown, president of NERA.
“Any legislator or regulator who purports to care about low-income consumers should be supportive of our petition,” Brown told Daily Energy Insider. “We feel that if FERC rules in our favor, investment capital will flow to far less expensive and more efficient forms of renewable energy generation.
“It will also reduce or eliminate the regressive cost-shifting inherent in full-price net metering compensation schemes—saving ratepayers in New England and nationwide hundreds of millions of dollars,” Brown said. “[Ending net-metering would save] ratepayers hundreds of millions of dollars in New England and billions of dollars nationwide.”
There is no deadline for FERC to act on the petition. The agency set a May 14 deadline for comments.
Tim Benson (tbenson@heartland.org) is a policy analyst at The Heartland Institute.
