EnergyWire: ELPC’s Brad Klein Says Net-Metering Does Not Raise Rates Paid by Non-Solar Customers

EnergyWireNet-Metering Proposal Raises Subsidy Questions in Ind.
February 10, 2017
By Jeffrey Tomich

Indiana joined the cavalcade of states debating the factious topic of net metering as the utility industry squared off with solar advocates and other supporters over how to fairly compensate consumers who generate their own electricity.

A hearing before the Senate Utilities Committee included familiar arguments about jobs, the environment and whether the state’s current policy, initially adopted in 2005, is forcing non-solar customers to subsidize their neighbors with solar panels.

From Nevada to Arizona and beyond, legislatures and utility commissions have debated proposals to eliminate or weaken net-metering policies — changes pushed by utilities who say increasing solar penetration hurts their ability to recover costs of maintaining the grid.

Currently, Indiana net metering customers are credited for the excess power they put on the grid at the retail electricity rate. On average, the retail rate in Indiana is about 11 cents per kilowatt-hour.

State Sen. Brandt Hershman (R) filed S.B. 309 last month. It addresses more than rooftop solar. But the debate over net metering consumed most of yesterday’s five-hour hearing. In the end, the committee adjourned without taking a vote.

As filed, S.B. 309 would end net metering in Indiana in 2027 and replace it with a “buy-all, sell-all” model under which customer-generators would sell their electric output to utilities at the wholesale rate and purchase energy for their home or business at the retail rate.

The bill prompted an immediate backlash, and Hershman offered an amendment yesterday that replaced the “buy-all, sell-all” proposal with a system to credit customer-generators at a rate equal to the utility’s average wholesale energy price, plus a 25 percent premium. Based on testimony from the Indiana Energy Association (IEA), the lobbying group for investor-owned utilities, that wholesale rate is presently about 3 cents per kWh.

The amendment would end net metering in 2022 — five years sooner than the initial bill. Customers who participate in net-metering tariffs when the programs end would be grandfathered for a decade.

“We want to encourage a technology to a degree,” Hershman said. “But at such point as that technology’s cost is dropping dramatically and that policy stays static, what you’re doing is creating an increasing subsidy.

“It’s a heck of a deal if you can get it,” he added. “But the question is, is that good public policy?”

Subsidy Questions

At the heart of the debate was to what extent, if any, net metering creates subsidies among Indiana utility customers.

Bill supporters including the IEA, the Indiana Chamber of Commerce and Americans for Prosperity told the committee there is no doubt that solar-owning customers in Indiana are being subsidized by customers without rooftop solar systems.

“While we’re growing an industry, while we’re developing an industry, that kind of solar support with a subsidy is not a bad idea,” said Mark Maassel, IEA’s executive director. “But at some point, we do need to transition away from asking someone to pay for someone else’s facilities.”

Even Hershman’s amendment that would compensate customer generators at 25 percent above the wholesale energy price wouldn’t change that, he said.

“It does continue a subsidy,” Maassel said. “It’s less than there is today, but it does continue a subsidy.”

Bill supporters, however, had no answer when they were asked to quantify the amount of any subsidy or provide data to back up their claims.

“If the utility believes there is a subsidy, then the burden of proof is theirs,” said Kerwin Olson, executive director of the Citizens Action Coalition, an environmental and consumer advocacy group. “They have no burden of proof in this building. We should not blindly accept their false narrative.”

Brad Klein, senior attorney for the Chicago-based Environmental Law and Policy Center, a Midwest advocacy group, cited studies from other states and the Lawrence Berkeley National Laboratory that showed net metering has little if any impact on the rates paid by non-solar customers.

If anything, he said, the benefits of distributed generation are too often overlooked.

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