States seek to address balance in distributed generation

Date
12/03/2015

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Erin Carson, EnerKnol

On October 20, 2015, the Arizona Corporation Commission (ACC) voted to investigate the value and cost of distributed generation (DG) in one generic docket, in order to address issues over reimbursements for DG through net energy metering (NEM). NEM is a billing mechanism for electric utility customers with grid-connected DG, allowing customer generators to exchange excess generation for kWh and/or financial credits. While solar advocates are focused on preserving NEM, which has facilitated significant expansion of solar energy through on-site generation, utilities are seeking methods to reduce rates or add charges to generators, in order to avoid shifting grid maintenance costs to non-DG customers. The ACC’s decision was provoked by a recent request from Arizona Public Service (APS), the state’s investor-owned utility (IOU), for a separate proceeding to evaluate solar cost of service (COS) after its request to reset solar fees for customer generators was declined.

NEM has expanded to 44 states and 4 U.S. territories and has been a core enabler of most state distributed solar generation along with federal, state, and utility incentives. It has also played a crucial role in helping states meet their renewable energy targets and environmental objectives. NEM also forms a suitable compliance strategy for states preparing meet emissions reduction requirements under the Clean Power Plan (CPP), which sets the first emission guidelines for fossil fuel-fired power plants.

NEM policies have facilitated the expansion of renewable energy primarily through customer-sited generation. Increasing numbers of utility customers are using NEM to sell excess electricity to a utility at a retail rate and receive credit on their bill to offset a part of their electricity consumption, thereby reducing the amount of electricity purchased from a utility. Several states and utilities are reviewing their NEM policies to expand the program by increasing aggregate caps, modifying capacity limits, or allowing meter aggregation or virtual net metering, while some are seeking alternatives to ensure that customer-generators have a reasonable share in infrastructure costs.

Arizona Corporation Commission Opens New Docket to Determine Value and Cost of Solar

The ACC decided to end investigation on the APS proposal to reset fees for solar owners and opened a generic docket to address both the value and cost of solar (VOS and COS) to determine whether to retain retail NEM or replace the policy and impose additional fees on solar owners. The APS and Tucson Electric Power (TEP) have raised concerns regarding reimbursement for customer generators who send excess energy to the grid, arguing that NEM reduces their revenues and burdens non-solar customers with unfair costs incurredforgrid maintenance.NEMallowscustomergeneratorstoreceive credit for the excess power they export to the grid from their rooftop panels at the full retail rate of electricity. This policy has been vital to the growth of the residential and commercial photovoltaic market in booming solar states, such as California and Arizona.

As increasing levels of distributed solar generation burdens grid equipment and aging infrastructure, several states and utilities are reviewing their NEM policies with proposals to expand or revise programs, or devise alternatives. 

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