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Net Metering Policy Overview and State Legislative Updates

Net Metering: Policy Overview and State Legislative Updates

Jocelyn Durkay 9/26/2014

Net metering policies have facilitated the expansion of renewable energy through on-site generation, also known as distributed generation. Common distributed generation sources, which can be located at a house, school or business rather than utility-owned property, are solar panels, micro-turbines or other renewable energy sources. Increasing numbers of utility customers are using net metering to generate electricity from sources on their property. For example, U.S. solar capacity has increased 418 percent since 2010 and more than half of this increase comes in the form of solar panels on homes and businesses. Net metering policies allow distributed generation customers to sell excess electricity to a utility at a retail rate and receive credit on their utility bill. This credit offsets the customer’s electricity consumption during other times of the day or year, thereby reducing the amount of electricity that a customer purchases from a utility.

State Net Metering Policies

Forty-three states, Washington, D.C., and four territories have authorized net metering, and utilities in three additional states—Idaho, South Carolina and Texas—have implemented net metering programs. In June 2014, South Carolina became the 44th state to enact net metering legislation, however, net metering remains a voluntary policy and only applies to larger utilities. Net metering policies can assist states in meeting their renewable energy requirements or targets, as a number of states have specific requirements for distributed generation. While a majority of states and territories have authorized net metering, they have taken differing approaches to policies with regard to terminology, capacity limits, eligible technology, net metering credit retention and renewable energy credit (REC) ownership.

state net metering map

Terminology

States have implemented net metering policies using a range of terminology and definitions. For example, California enacted legislation authorizing “net energy metering,” defined as “measuring the difference between the electricity supplied through the electrical grid and the electricity generated by an eligible customer-generator and fed back to the electrical grid over a 12-month period.” Maine authorized “net energy billing” as “a billing and metering practice under which a customer and shared ownership customers are billed on the basis of net energy over the billing period taking into account accumulated unused kilowatt-hour credits from the previous billing period.”

Capacity Limits

Capacity limits regulate the system size of net metered installations in a variety of aspects and vary widely across states. Capacity limits can be determined by a kilowatt-based limit or a percentage limit. For example, Wisconsin has authorized net metering for systems up to 20 kilowatts (kW) while Arizona has no capacity limit but caps systems at 125 percent of a customer’s total connected load. In addition to Arizona, New Jersey and Ohio have authorized net metering with no capacity limit. Vermont, Virginia and Wisconsin have authorized net metering for systems up to 20 kW in capacity while Massachusetts allows for certain systems up to 10 megawatts (MW) and New Mexico authorizes net metering for certain systems up to 80 MW. Nearly half of states with net metering policies authorize net metering for systems up to one MW in capacity.

Capacity amounts can also vary with regard to utility type, customer type, technology and system type. For example, a majority of states have adopted requirements that are only applicable to certain types of utilities, such as investor-owned utilities. States also have adopted capacity limits based on customer demographics: West Virginia established different limits for commercial, industrial and residential customers, which are additionally based on the size of the utility serving the various customer demographics. Several states have established capacity limits based on technologies, such as in New York where solar, wind, micro-hydroelectric, fuel cell, biogas and micro-combined heat and power (CHP) systems all have different capacity limits (which then vary based on customer demographics).

States can also adopt different capacity limits for individual systems, aggregated net metering systems, community net metering systems or virtual net metering systems, which are discussed under “Net Metering System Types” later in this document. Arkansas, for example, has established system capacity limits for individual customers but has no aggregated net metering capacity limit. Kansas has established a kilowatt-based capacity limit for individual customers but limits aggregated net metering capacity to 1 percent of a utility’s retail peak demand.

Eligible Technology

States include a variety of technologies in net metering policies. While all states with net metering include solar energy in their policies, they may also include: wind and micro-turbines, combined heat and power (CHP) or cogeneration, biomass, biogas, landfill gas, municipal solid waste, anaerobic digesters, geothermal electric, fuel cells, small hydroelectric, tidal energy, wave energy, ocean thermal and fuel cells using renewable fuels.

Compensation

State policies also have addressed how long customers can maintain or “roll over” bill credits for net metered electricity. Virtually all states credit excess generation to the next monthly billing period or allow distributed generation customers to select this option. North Dakota, an exception to this practice, reconciles excess generation monthly at avoided-cost rate. An important distinction in states’ policies is whether credits for excess generation can expire or can be carried over indefinitely and states have taken a range of approaches to address this. For example, Alaska credits excess generation to a customer’s next bill and credits may be carried over indefinitely. In Hawaii excess generation is credited to a customer’s next bill at retail rate but excess credits are granted to the utility at the end of an annual billing cycle. California credits excess generation to a customer’s next bill at retail rate; after a 12-month period customers can choose whether to roll credits over indefinitely or receive a payment for credits at the wholesale rate, and if no option is selected then credits are granted to the utility with no customer compensation. States can vary compensation policies based on factors such as system size or technology. For example, Minnesota determines net excess generation policies based on the capacity of the distributed generation system while New York differentiates net excess generation policies based on technology.

REC Ownership

Net metering policies may specify ownership of renewable energy credits (RECs). Renewable energy producers earn RECs for electrical generation and states can determine if the distributed generation customer, or the utility or cooperative that purchases excess electricity, owns the REC. REC ownership can be important to meeting state renewable portfolio standards (RPS), whether the requirements are for distributed generation or utilities and cooperatives. In Colorado, where the state RPS requires a percentage of retail sales to come from distributed generation, RECs are owned by distributed generation customers. Utilities in Kansas, where there is no distributed generation requirement in the state RPS, own distributed generation RECs. A majority of states with net metering have determined that distributed generation customers own RECs.

Net Metering System Types

In recent years, a number of states have differentiated how net metering policies apply to different customer types. Conventional net metering, sometimes referred to as individual net metering, connects a generating source to single meter, such as a house or building. The recent expansion of net metering policies allows generating sources to be connected to multiple meters or multiple properties. These policies— aggregated net metering, virtual net metering and community net meteringhave authorized net metering for new customer types, including non-profits, renters, multi-unit residences, multi-property owners, renters, municipalities and others who cannot install distributed generation. Under conventional net metering, these customer types could not have benefitted from net metering.

net metering map

See Map "State Net Metering Policies" for conventional net metering authorization.

Aggregated Net Metering

Aggregated net metering allows for a property owner with multiple meters on one property or adjacent properties to implement net metering, such as with a group of university buildings or adjacent farm properties. At least 16 states have authorized aggregated net metering, including Arkansas, California, Colorado, Connecticut, Delaware, Maine, Maryland, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, Utah, Washington and West Virginia. Certain states have placed specific requirements on aggregated net metering systems based on customer type (such as Maryland and New York); technology type (such as Nevada and New York) or the distance between meters (such as New Jersey and West Virginia). States have also required customers to request for meters to be aggregated, required customers to cover the expense of meter aggregation or established separate capacity limits for aggregated systems.

Virtual Net Metering

Virtual net metering expands aggregated net metering, allowing a property owner with multiple meters to distribute net metering credits to different individual accounts, such as to tenants in a multi-family property or condominium owners. Owners of non-adjacent properties can also use credits from production on one property for consumption at another. At least five states have authorized virtual net metering, including California, Connecticut, New Hampshire, Pennsylvania and West Virginia.

State legislative activity is included below:

  • California: Legislation authorized virtual net metering for local governments in 2008. The state also authorized virtual net metering for certain multi-tenant customers. The Public Utility Commission extended virtual net metering to all multi-tenant properties in 2011.
  • Connecticut: Legislation authorized virtual net metering for municipal customers, for up to three megawatts in capacity in 2011. Legislation in 2013 expanded virtual net metering to agricultural customers.
  • New Hampshire: 2013 legislation authorized virtual net metering where a customer can become a group host for non-customer generators. Costs associated with utility information system upgrades must be met by the group host.
  • Pennsylvania: Legislation in 2007 authorized virtual meter aggregation on properties located within two miles of the customer-generator’s property and within a single electric distribution company’s service territory.
  • West Virginia: The Public Service Commission authorized both physical and virtual meter aggregation, as long as meters are within two miles of the generating source. Costs associated with meter aggregation must be met by the customer, not the utility.

Community Net Metering

A third concept, community net metering (also known as neighborhood net metering, community-based renewable energy or community solar) allows for multiple users to purchase shares in a single net metered system, either located on-site or off-site. For example, this could take the form of residents in a community or condominium buying shares in a medium-sized solar array. At least 10 states and Washington, D.C., have authorized community net metering or pilot projects: California, Colorado, Delaware, Illinois, Massachusetts, Maine, Minnesota, Rhode Island, Vermont and Washington.

State legislative activity is included below:

  • California: 2013 legislation for a Green Tariff Shared Renewables program authorized community choice aggregation for multi-tenant properties and local governments. The program will end in 2019.
  • Colorado: Legislation authorized meter aggregation and community solar gardens in 2010 for customers of investor-owned utilities. Community solar gardens cannot exceed two megawatts in capacity and must have at least 10 subscribers.
  • Delaware: Legislation authorized meter aggregation for community-owned energy generating facilities in 2010. The Delaware Public Service Commission has also released an order regarding community-owned generating facilities.
  • Illinois: Legislation in 2007 permitted utilities to offer meter aggregation for community-owned wind, biomass, solar, methane digesters or other technologies where multiple individual customers are served by the same renewable generating facility. Net metering and dual metering are not authorized for systems larger than two megawatts in capacity.
  • Massachusetts: The Green Communities Act authorized neighborhood net metering facilities in 2008 for all customers. Neighborhood net metered facilities must have 10 or more people who are located in the same neighborhood and served by the same utility. Legislation also allows for commercial customers.
  • Maine: Legislation established a Community-based Renewable Energy Pilot Program in 2009 that is available to all customers. Projects may not exceed 10 megawatts of installed capacity, and all projects combined cannot exceed 50 megawatts installed capacity.
  • Minnesota: Legislation authorized community solar gardens in 2013 for facilities no greater than one megawatt of capacity. Facilities must have at least five subscribers. The program is required for Xcel Energy only, although other utilities may elect to develop their own programs.
  • Rhode Island: Legislation authorized small and large distributed generation projects in 2011 that are up to three megawatts in capacity.
  • Vermont: Legislation authorized solar renewable plants in 2012 that are up to one megawatt in capacity and available to all customers. Additionally, group net metering was authorized in the 2006 Energy Security and Reliability Act and the Public Service Board has established a filing process.
  • Washington: Legislation authorized community solar projects in 2005 that are up to 75 kilowatts in capacity. Individuals, local government and business can participate in community solar projects and facilities can be locally or utility owned.
  • Washington, D.C.: The D.C. Council passed the Community Renewables Act of 2013, authorizing community net metering and community renewable energy facilities up to five megawatts in capacity that have no fewer than two subscribers per facility. The policy applies to all customer demographics.

Additionally, legislation on these topics has been debated in a number of states, such as Hawaii, Maryland (2014, 2013, 2012), Nebraska and Virginia.

State Action

In recent years, state legislatures have taken an active role in navigating net metering. While policies have been responsible for expanding access to the benefits of renewable energy, they have generated questions of equity, specifically with regard to solar energy. Some argue that net metering policies increase existing demands on transmission and infrastructure without compensating utilities for the cost of maintaining these systems. All electricity users pay for the grid that supports electric infrastructure through charges on their utility bill, however, since net metered customers may end up purchasing very little electricity, they inadvertently avoid these charges. Additionally, some feel distributed generation users should not be credited at the retail rate for excess electricity generation, but rather at the avoided cost or wholesale rate. Net metering supporters contend that these policies provide utilities with energy at peak times when energy is most valuable, reduces transmission costs, and contributes to reliability and clean air goals.

Numerous state legislatures and public utility commissions are debating the best way to balance customer demand for distributed generation with the impacts new technologies have on the electric power grid, including exploring ways to assess the actual costs and benefits to the utility. Net metering and distributed generation debates are just beginning in many states and more action is likely to follow.

2013 Notable Policy and Regulatory Developments

Several states recently reviewed their existing net metering policies, either expanding or revising programs, or developing alternatives to net metering. A number of state utility commissions have explored their net metering policies and capacity limits, including those listed below.

  • In November 2013, the Arizona Corporation Commission approved the Arizona Public Service Company (APS) to establish a charge for new rooftop solar panel installations connected to the electric grid through net metering. The charge amounts to $0.70/kW—a monthly charge of $4.90 for most customers—effective January 2014. The policy will be in effect until the next APS rate case, which will be in 2015.
  •  California enacted Assembly Bill 327 in 2013, which extended the state’s net metering policy by requiring utilities with more than 100,000 service connections to offer net metering until programs reach net metering program limits or until July 1, 2017. The legislation assigned program limits for the state’s three major utilities based on generating capacity. Once programs reach their determined limits or beginning July 1, 2017, utilities must offer distributed generation customers a standard contract or tariff that is to be determined by the California Public Utility Commission. The state also enacted Senate Bill 43 in 2013, which authorized community net metering (see “Community Net Metering” above).
  • Minnesota House File 729 (2013) required the Minnesota Department of Commerce to develop a “value of solar” methodology for the Minnesota Public Utilities Commission (PUC). The tariff will serve as a voluntary alternative to net metering. The Department of Commerce was required to submit a final methodology in January 2014 to the PUC and the PUC approved the tariff in April 2014. The legislation also authorized community solar gardens (see “Community Net Metering” above).
  • Nevada Assembly Bill 482 (2013) required a study of the impacts of net metering on ratepayers. A 2014 Public Utility Commission report found impacts on all ratepayers would be minimal, whether the impact was positive or negative.

2014 Policy Developments

State legislatures have continued to explore and revise net metering policies in 2014, with a number of states already enacting legislation on this topic (see chart below). Additionally, state utility commissions in a number of states have continued this debate as well. For example, in January, 2014 the Iowa Utilities Board opened a notice of inquiry to gather information on policy and technical issues associated with distributed generation. The initial comment period conclude in late February 2014. The Louisiana Public Service Commission continues to explore the costs and benefits of net metering and solar energy in 2014.

Table: 2014 Enacted Legislation as of July 30, 2014

State

Bill

Summary

California Senate Bill 862 Authorized a facility of the Department of Corrections and Rehabilitation to participate in net metering programs with up to eight MW in capacity so long as it does not export more than 1.35 megawatts of electricity generated by wind technologies to the electrical grid at any time.

Colorado

House Bill 1101

Among other provisions, specified that the percentage of electricity generated by a community solar garden that is attributed to residential or governmental subscribers is exempt from property tax; a business owner of a community solar garden will be levied a property tax on the electricity generating capacity used by businesses.

Connecticut

 

House Bill 5115

Disqualified net metering customers from receiving solar rebates.

According to a news source, the enacted legislation was intended to close a loop hole with production subsidies and not intended to disqualify net metering customers from receiving solar rebates. The Connecticut Clean Energy and Finance Authority has adjusted their policies to address this.  

Senate Bill 357

Among other provisions, provided a partial exclusion for Class I distributed generation sources participating in virtual net metering in property tax valuation beginning October 2014.

Hawaii

House Bill 1943

Amended the Public Utilities Commission principles regarding the modernization of the electric grid. Requires the commission to consider the value of enabling a diverse portfolio of renewable energy resources; expanding customer options to manage energy use; maximizing interconnection of distributed generation on a cost-effective basis at reasonable rates; determining fair compensation for electric grid services by distributed generation customers; and maintaining grid reliability and safety through modernization of the electric grid.

Indiana House Bill 1423

Allows the owner of a private generation project to sell excess electric output generated by the project to an electric utility. Authorized the electric utility to recover the purchase price through a fuel adjustment charge. Required an electric utility to provide, upon request, back up, maintenance and supplementary power to a private generation project.

Kansas

House Bill 2101

Among other provisions, established a yearly expiration date for net metering credits for systems installed before July 1, 2014. Established three tiers of net metering capacity limits for net metering systems installed after July 1, 2014, including for residential customers; for commercial, industrial, religious institutions, agricultural, industrial, local and state and federal customer generators; and for schools. Allowed utilities to develop new rate classes or tariffs for distributed generation customers with systems installed after July 1, 2014. Made additional revisions to net metering policies beginning in 2030.

Maine

Senate Paper 644

Established the Maine Solar Energy Act. Among other provisions, required the Public Utilities Commission to determine the value of distributed solar energy generation and submit a report of their findings to the legislature in January 2015. Determined baseline requirements that must be included in the commission’s analysis and allowed for additional considerations. Established state solar energy generation goals.

New Hampshire House Bill 1600 Amended the definition of "eligible customer-generator" to include purchasers of electricty from net metering renewable energy sources. Authorized distributed generation systems that are less than 15 kW to be exempt from an annual site visit and allows the owner of the customer-sited source to electronically report production monthly to an independent monitor.

Oklahoma

Senate Bill 1456

Authorized utilities to develop a new rate class for distributed generation customers to cover infrastructure costs. The measure will take effect in November 2014 and does not apply to customers with distributed generation installed by November. The new rate class and any associated tariffs must be created by the end of 2015 and approved by the Oklahoma Corporation Commission.

Governor Fallin also issued an executive order stating that the legislation is not a mandate for utilities to implement a tariff system for distributed generation.

Oregon

House Bill 4042

Included renewable marine energy in the list of applicable technologies for net metering.

Rhode Island House Bill 7727; Senate Bill 2690 Established a tariff-based renewable energy distributed generation financing program, the Renewable Energy Growth Program. The program will finance the development, construction, and operation of renewable energy distributed generation projects over five years through a performance based incentive system with specified megawatt targets. Included specifications for solar energy and non-solar renewable energy projects, as well as coordination with energy efficiency programs.
Rhode Island House Bill 8010; Senate Bill 2915 Revised definitions of a municipality and a public entity in net metering statutes. Included the state of Rhode Island, municipalities, wastewater treatment facilities, public transit agencies or any water distributing plant or system within the definition of a public utility.

South Carolina

Senate Bill 1189

Authorized net metering and net metering capacity limits based on customer type. Established a voluntary distributed energy resource program, as well as a renewable energy leasing program. Tasked the South Carolina Public Service Commission with developing net metering rates.

Utah

Senate Bill 208

Amended current net metering policy, requiring the Public Service Commission and electric cooperatives to seek public comments on and to determine the costs and benefits of net metering programs. These entities may then impose a charge, credit or ratemaking structure (including new or existing tariffs) for distributed generation, based on these findings.

Vermont

House Bill 702

Among other provisions, revised the formula for net metering credits, including specific provisions for solar energy systems. Increased net metering caps to 15 percent of a distribution company’s peak demand during 1996. Expanded net metering policies for solar energy systems. Authorized a net metering pilot program for electric cooperatives and revised reporting and rulemaking processes.

House Bill 884

Exempted solar renewable energy plants with less than a 50 kilowatt capacity that are either net metered or not connected to the power grid from municipal property taxes.

Sources

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