Vermont Electric Coop suggests lowering subsidy for alternative energy projects

James Eniti uses net metering with Washington Electric Cooperative in East Montpelier. Photo by Roger Crowley/for VTDigger

James Eniti uses net metering with Washington Electric Cooperative in East Montpelier. Photo by Roger Crowley/for VTDigger

The state’s second largest utility has stepped out front in the debate over how to proceed with a state incentive program for small, renewable energy producers.

Vermont Electric Cooperative submitted a proposal to the Public Service Board on Tuesday that carries lesser incentives than the program currently offers.

The Vermont Public Service Department and renewable energy advocates are opposed to the VEC proposal.

At issue is a law that compels utilities to credit customers for the solar and other renewable power they produce at a rate of 20 cents per kilowatt-hour (kWh). This practice is known as net metering, and projects that are less than 500 kilowatts (kW) in capacity are eligible for these incentives. Businesses and homeowners can use the credits to zero out their energy bills.

Some small utilities want to change the funding arrangement because they say it kicks the cost of maintaining the grid to other customers, while developers and advocates argue the policy places an accurate value on solar production and should remain intact to continue growing jobs and Vermont’s renewable energy portfolio.

A utility, however, no longer has to accept applications for net-metering systems when the installed wattage of a utility’s total net metering surpasses 4 percent of its peak demand from the previous year or from 1996, whichever is greater.

Vermont Electric Coop is one of four Vermont utilities to reach that threshold and has ceased accepting net-metering applications. Hardwick and Morrisville electric departments also stopped accepting applications. In August, Washington Electric Cooperative — which was the only utility to continue accepting net-metering applications after hitting the 4 percent cap — announced that as of Oct. 1 it would accept only solar installations of 5 kilowatts (kW) or less.

Dave Hallquist, cheif executive officer of Vermont Electric Co-op. VTD/Taylor Dobbs

Dave Hallquist, cheif executive officer of Vermont Electric Co-op. Photo by Taylor Dobbs/VTDigger

What Vermont Electric submitted to the Public Service Board this week was a proposal to continue accepting net-metering applications under new terms. Rather than crediting net-metering systems at 20 cents per kWh, Vermont Electric proposes a credit of 12.5 cents per kWh for a 10-year contract and 15.8 cents per kWh for a 20-year contract. The higher compensation rate of the 20-year contract takes into account energy price inflation.

Vermont Electric CEO David Hallquist said that at the 20-cent compensation rate, his utility’s non-net-metering customers are subsidizing net-metering customers at a value of $580,000 a year for the fixed costs of maintaining the power grid. While Vermont Electric’s proposal would not change the credit for current net-metering systems, Hallquist says the higher rate of compensation cannot continue.

Hallquist points to the dropping costs of solar and argues such a high incentive is no longer necessary. He said the proposed rates take into account the benefits these generators bring to the grid because this distributed power production lowers the costs of infrastructure by bringing generation closer to its source.

“We’re essentially paying what we believe is the fair-market rate for power,” he said. “That is power we don’t have to purchase off the market. We’d rather buy the power from our members.”

Elizabeth Gamache, Vermont Electric’s manager of corporate services, added, “Not only is it fair to net metering customers, but it’s fair to non-net metering customers.”

Soon after Vermont Electric announced its proposal, renewable energy advocates came out in strong opposition. Ben Walsh of the Vermont Public Interest Research Group was one of those advocates.

“Vermont Electric Coop’s attempt today to pull the rug out from under small-scale solar stands in direct opposition to Vermont’s goal of getting to 90-percent renewable energy,” he said in a Tuesday statement, citing the state’s nonbinding Comprehensive Energy Plan. “The Vermont Legislature designed a net metering program that has worked exactly as intended; solar installations are accelerating, and solar is now available and affordable for more Vermonters than ever. VEC’s proposal would reverse both of those trends for its members and is a step in the wrong direction.”

Darren Springer, deputy commissioner of the Vermont Public Service Department, also has reservations about the proposal. He says the department’s research doesn’t jibe with that of Vermont Electric Coop. The department completed a report earlier this year that found net metering does not “impose a significant net cost to ratepayers who are not net metering participants.”

Springer said no large-scale 2.2-megawatt solar projects in the state have been built with a compensation rate of 12.5 cents. If projects with better economies of scale can’t be built for such levels of compensation, he questions how small-scale projects can.

“We just don’t see how the analysis squares with both our own ratepayer analysis and the actual cost to develop solar,” he said.

Springer and the department plan to present a policy proposal to the Legislature at the beginning of the session to set longer-term standards for the net-metering program.

“We expect to have this resolved through the Legislature, and having utilities go to the board and filing tariffs and having each utility with a vastly different program is not preferable to having the Legislature set policy statewide,” he said.

Rep. Tony Klein, D-East Montpelier, chairs the House Natural Resources and Energy Committee. He said the issue is a high priority for the Legislature, and he expects to have a bill on the House floor within two weeks of the session’s opening.

“The program is finally working,” he said. “People are getting what they want. It’s the policy of the state of Vermont, and we want to move forward.

“We have a system of franchised monopolies,” Klein continued. “In return for giving utilities areas to serve without competition, they have to carry out the policy of the state of Vermont. And if they can’t, then maybe they have to evolve, or they have to sell, or they have to go bankrupt. Things don’t stay static. The role of utilities’ just being a poles and wire company is changing.”

Andrew Stein

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