Karl Rábago & Sam Swanson: PSB’s last chance to get net metering rules right

Editor’s note: This commentary is by Karl R. Rábago, who is the executive director of the Pace Energy and Climate Center at the Elisabeth Haub School of Law in White Plains, New York, and Sam Swanson, a senior policy adviser to the Pace Energy and Climate Center who lives in South Burlington. Each has more than 25 years’ experience in the electric utility industry and are recognized experts in electricity policy.

On June 30, the Vermont Public Service Board issued an order establishing a revised net metering program pursuant to Act 99. The program establishes the rules for compensation, siting and charges on distributed clean energy facilities from wind, solar and other renewable energy sources. After nearly two years of development, the latest version of the new rules is deeply flawed and out of step with best practices in other states. The board has one more chance to modify its rules and to preserve the future of Vermont’s clean energy growth. It should take that opportunity.

Fair compensation for value produced is the touchstone of net metering policy. When customers become electricity generators they put private capital to work for the benefit of everyone who uses electricity in the state. The electricity these customers make, use and in some cases export to the grid all adds value for everyone. It is clean, locally produced, and most importantly, goes to work right in the distribution grid, avoiding the need for costly transmission.

The new net metering program rules look like an effort to kill the distributed energy market in Vermont with a death by a thousand small cuts — creating an unnecessarily complex and negative gauntlet of rules and conditions. The rules undercut the value of net metering investments, and will likely stall the growing clean energy market in Vermont. Experts on the ground in Vermont have described the potential consequences of the new rules as “grave,” and frustrating to Vermont’s efforts to expand reliance on clean, local energy.

Most notably, the new net metering rules proposed by the board adopt several approaches that are out of step with best practices in other states where net metering policy is supporting growth in renewable energy generation.

The board’s new rules put utilities in the driver’s seat on a host of potential new charges to be imposed on new and existing customer generators.

The rules adopt an arcane and stingy structure for setting the compensation credit value for generation that is excess to a customer’s on-site needs.

 

The rules adopt an arbitrary cap on market growth, which would stifle the growing clean energy business and distort markets through artificial scarcity.

The rules adopt an arcane and stingy structure for setting the compensation credit value for generation that is excess to a customer’s on-site needs. This provision is troubling in that it can frustrate energy efficiency, reduce the size of generation systems, and deny all Vermont customers of the benefits of locally produced clean energy.

Finally, the board rules will effectively foreclose development of new affordable community shared solar projects, which are vital to enabling solar energy access to low and moderate income customers, renters or others who can’t install their own solar systems. These impacts result not only from rate credit reductions, but also from unnecessarily narrow project ownership requirements in the board’s rules.

The Vermont Public Service Board now has the chance to fix these and other errors in the net metering rules, through its process of rehearing on the rule. Even though the rule has been in the works for the past two years, some of the most troubling provisions actually only appeared in late stage versions of the rules. Vermont’s clean energy future is at stake.

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  • The official comment period for this draft of net metering rules has closed, but the PSB website still allows people to submit comments. I encourage people to submit comments even if they are “late.” You can submit comments to the PSB through their online form at
    http://psb.vermont.gov/docketsandprojects/public-comment?docket=website
    then choose “Rule 5100 – Net Metering” in the “Docket Number / Project Name” drop list. Alternatively, you can email comments (using “Rule 5100 comment” in the subject line) to [email protected]. Please keep all comments civil!

    The authors of this op-ed are correct that the new rules, as drafted, will be a drag on the growth of clean energy in Vermont going forward. They fail to mention another serious problem with the rules: they retroactively reduce the value of net metering for existing solar customers who put down a lot of money with the reasonable expectation that the state would not pull out the rug from under them. This is just plain bad public policy, and utterly unnecessary.

    These new charges on existing customers are called by the PSB “non-bypassable” charges. The rules in Vermont since net metering began have not included any non-bypassable charges (with a few exceptions for a couple of the smaller utilities). Any new rules should grandfather existing solar customers to continue avoiding any non-bypassable charges that may be imposed on future customers, who at least will have fair warning when they decide whether or not to make the investment.

    Disclosure: I have solar myself, and I also work for a solar installer.

    • Lenny Gerardi

      Right on, Jonathan!
      The implications of the proposed rule are huge and incredibly unfair to “existing solar customers”, folks like me who did lots of sharp-pencil homework about length of payback and risk before plunking big bucks on the table to help our State and our policy-makers achieve Vermont’s ambitious sustainable energy targets.
      The non-bypassable charges, fees that cannot be offset by a solar customer’s generation in excess of his usage, impose a major new net-metering fee or penalty that threatens to warp the economics of the decisions many of us made to invest in residential net-metered solar.
      If this rule goes through with these new net-metering penalties without grandfathering existing solar generators, it won’t represent just “bad public policy”, it will be a glaring exercise of BAD FAITH on the part of the State, that will be incredibly dangerous and damaging to Vermont’s reputation and to the credibility and effectiveness of our leaders and policy-makers as they try to convince us to support them in future critical social, economic and environmental initiatives. I for one will feel altogether betrayed and cheated by the PSD, the PSB, the Administration and our legislators. I hope there is still time to turn this ship of state around.
      I am taking Jonathan’s advice to submit comments despite the closure of the PSB’s embarrassingly short comment period.

  • Lenny Gerardi

    Right on, Jonathan!
    The implications of the proposed rule are huge and incredibly unfair to “existing solar customers”, folks like me who did lots of sharp-pencil homework about length of payback and risk before plunking big bucks on the table to help our State and our policy-makers achieve Vermont’s ambitious sustainable energy targets.
    The non-bypassable charges, fees that cannot be offset by a solar customer’s generation in excess of his usage, impose a major new net-metering fee or penalty that threatens to warp the economics of the decisions many of us made to invest in residential net-metered solar.
    If this rule goes through with these new net-metering penalties without grandfathering existing solar generators, it won’t represent just “bad public policy”, it will be a glaring exercise of BAD FAITH on the part of the State, that will be incredibly dangerous and damaging to Vermont’s reputation and to the credibility and effectiveness of our leaders and policy-makers as they try to convince us to support them in future critical social, economic and environmental initiatives. I for one will feel altogether betrayed and cheated by the PSD, the PSB, the Administration and our legislators. I hope there is still time to turn this ship of state around.
    I am taking Jonathan’s advice to submit comments despite the closure of the PSB’s embarrassingly short comment period.

  • Gerry Silverstein

    For those open to considering all aspects of renewable energy policy (including the Public Service Board), an article in today’s New York Times by Eduardo Porter is valuable reading

    http://www.nytimes.com/2016/07/20/business/energy-environment/how-renewable-energy-is-blowing-climate-change-efforts-off-course.html?_r=0

    • The Porter article hardly considers all aspects of the issue. It ignores distributed and demand side resources. It extrapolates from anecdotes to paint an unrealistic view of energy markets and technical integration of intermittent generation. It even suggests that nuclear power could be made cost-effective if we put all our energy support eggs in the nuclear basket.

      • Gerry Silverstein

        I do not think the Porter article suggests that to make nuclear power cost-effective, “we” would have to put all our eggs in the nuclear basket. I believe the author is arguing that due to (1) (legislative-directed) percentage goals for RE-generated electricity and the subsidies that have been provided to promote those goals, and (2) the cheap cost (currently) of natural gas, nuclear (a 24/7 provider of extremely low carbon electricity), has become financially non-competitive. I believe the author is arguing that nuclear should be part of the mix in combating global warming. He is not saying it is the only entity….. but one that should be included considering all that it can do to minimize pumping more carbon dioxide into the atmosphere….while at the same time providing a continuous (24/7) source of electricity.

        • Gerry, You are correct. You linked to an excellent article in the NY TImes describes the difficulty and technical complexity involved in the transition away from fossil fuels for electricity generation.

        • Kevin Jones

          The times article is deeply flawed in that it focuses on the symptoms not the problems. The problems are not caused by the integration of renewables but instead the patchwork of subsidies that states have had to use since there is no federal policy. Much of the concerns identified in the times story would be remedied by replacing subsidies and mandates with a meaningful carbon tax as well as well designed time of use pricing at the retail level. We can integrate a lot more solar and wind particularly if we had a congress that would implement a meaningful climate policy.

  • Kevin Jones

    Karl and Sam are right on in their criticism of the PSB’s rules. Both this draft of the rule for 2017 and the Board order extending GMP’s 2016 cap are horrendous policy for community solar — which is the best way for many smaller customers to go solar. The Board’s proposed 6 cent penalty for Vermont residents and businesses who want to keep thier RECs and legally go solar is unjustified. The 4% annual cap contradicts what they had conveyed to other parties and the legislature previously and has not been justified. Thier new 500 kW cap on how much each customer can acquire through net metering is discriminatory and the Board had provided not justification to do so. Thier proposal to increase mandatory fixed charges that net metering customers (both new and historic) must pay is shortsighted. It is time for the legislature to take back the policy making in this area that they mistakenly placed under the PSB’s control. This proposed rule is deeply flawed.

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