Retail Net Metering: It's Time to Get It Right for All Customers

• Date: 01 August 2018

8-2018 NEWS & ANALYSIS 48 ELR 10729

COMMENT

Retail Net Metering: It’s Time to

Get It Right for All Customers

by Adam Bensho and Alison Williams

Adam Bensho is the Executive Director of Regulatory Aairs at Edison Electric Institute, an association representing U.S. investor-

owned electric companies. Alison Williams is the Director of State Energy and Regulatory Policy at Edison Electric Institute.

A

profound transformation is underway across

the United States, as the way in which energy is

produced and used is shifting due to changes in

technolog y, policy, and customer demands. At the center

of this great change is t he energy grid itself. Electric

companies are investing more than $100 billion each

year to build the smarter energy infrastructure needed

to integrate distributed energy resources of all types (e.g.,

private or rooftop solar, microgrids, storage) in homes and

businesses. Accommodating these devices means that the

energy grid must fundamenta lly shift from the traditional

system of one-way power delivery into a dynamic system

with two-way power ow between the electric company

and its customers.

With the myriad of changes underway in the energy

sector, it is more important than ever for the regulatory

paradigm—specically rate design—to keep pace, as Pro-

fessors Revesz and Unel rightly point out in their article

Managing the Future of the Electricity Grid: Distributed

Generation and Net Metering. Historical ly, residential reta il

electricity rates have been designed to recover most of an

electric company’s total costs of service— primarily driven

by infrastructure needs—on the basis of energy consump-

tion, with most of the xed costs and capacity-related

costs rolled into that volumetric charge.1 is approach no

longer works when a customer’s use of the energy grid is

dened by more than just the amount of electricity he or

she purchases. By extension, retail net metering is simi larly

awed from a cost-causation standpoint.

In Sections 1 and 2 of our Comment, we highlight va ri-

ous areas of agreement with the authors, while Section 3

focuses on where our views diverge with respect to pro-

posed rate designs and, specica lly, the authors’ suggested

inclusion of speculative and unquantiable externalities in

any compensation analysis. Final ly, Section 4 oers impor-

tant data points to support our position that distributed

1. Rate designs that fully recover xed costs are needed to ensure that infrastruc-

ture costs are shared equitably across all customers that use and rely on the

grid. See Lisa Wood, Getting Solar Pricing Right, Brookings Institute (Sept.

18, 2014), https://www.brookings.edu/articles/getting-solar-pricing-right/.

generation is not the sole—or even the primary—compo-

nent determining the economic feasibility of clean energy.

I. Retail Net Metering Is a Blunt Policy

Tool That Warrants Review by

Regulators to Better Ensure Equity

and to Support Further Technological

Advances

e original intent of net metering, a policy which dates

as far back as the early 1980s, was to incent installation of

small wind turbines a nd solar panels at a time when these

technologies were prohibitively expensive. ese customer

programs were small, almost a lways had participation

caps, and were designed around the limitations of ana log

meters. Net metering was—and remains—a basic billing

mechanism whereby customers’ electricity meters spin for-

ward when they need power from the electric company and

backward when their system generates power. is simplis-

tic system provided enough of a subsidy on the customer

side to help jump-start the distributed energy sector.

Fast-forward to today, nearly 40 years after customers

rst installed d istributed energy systems, and the picture

is very dierent. e adoption of digital smart meters —

nearly 76 million have been installed in close to ha lf of

all U.S. hou seholds— enables more precise, economic ,

and equitable rate designs that could not even be consid-

ered a decade ago.2 Moreover, many dist ributed genera-

tion technologies are now widely deployed—the result of

a signicant fall in price that has made these technologies

aordable to a larger portion of the population. Accord-

ing to the Solar Energy Industries A ssociation, more than

one million dierent solar installations nationwide had

been connected to the energy grid as of May 2016.3 is

2. A C, E C S M D: F-

   S G (2016).

3. Andrew Savage, 1 Million Solar Strong, and Growing, S E I.

A’ (May 3, 2016), https://www.seia.org/blog/1-million-solar-strong-

and-growing.

Copyright © 2018 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.