Future of net metering policies includes innovative utility tariff proposals
Widespread adoption of distributed energy resources (DERs), clean energy targets, and changing customer demands have pushed state regulators to reevaluate net energy metering (NEM) policies to better align with sound regulatory principles and state policy objectives, according to panelists during a Feb. 4 session at the National Association of Regulatory Utility Commissioners’ Winter Policy Summit.
In fact, some form of action on distributed solar policy and rate design changes took place in 46 states and the District of Columbia during 2020, according to Autumn Proudlove, senior policy program director at the North Carolina Clean Energy Technology Center (NCCETC), which is administered by the College of Engineering at North Carolina State University.
Proudlove, lead author of the latest edition of NCCETC’s quarterly report, 50 States of Solar, which lists the top 10 distributed solar policy trends and rate design changes of 2020, cited the report as the basis for her presentation, noting that a total of 257 state- and utility-level changes were proposed, pending or enacted by the end of 2020, with South Carolina among several states taking the greatest number of actions, according to the report.
Specifically, NEM reforms led distributed solar policy activity in 2020, said Proudlove, who added that NCCETC expects to see this trend continue this year. “Almost every state is looking at these issues in some way,” Proudlove said during the virtual NARUC panel discussion on NEM, and investor-owned electric companies are helping to lead policy changes.
For example, recent state NEM policy developments include action by Duke Energy, which recently reached an agreement with rooftop solar installers and other solar advocate groups on net metering reform in South Carolina. The current list of signatories to the successor tariff proposal is growing and currently includes: Duke Energy Carolinas and Duke Energy Progress; Vote Solar; the North Carolina Sustainable Energy Association; Sunrun Inc.; Solar Energy Industries Association; and the Southern Environmental Law Center on behalf of the South Carolina Coastal Conservation League, Upstate Forever, and the Southern Alliance for Clean Energy.
The investor-owned utility joined these stakeholders to file an NEM successor tariff proposal with the South Carolina Public Service Commission that includes a monthly minimum bill, which according to the NCCETC report is of growing interest to utilities as a distributed generation (DG) rate design element, particularly as an alternative to demand charges, fixed fees, and capacity-based charges.
Lon Huber, vice president of rate design and strategic solutions at Duke Energy, who is tasked with developing innovative electric rate designs for all of the company’s jurisdictions, said one of the key pillars of the proposed settlement starts with proper cost recovery of investments that really don’t vary by energy usage.
“We know there are certain fixed costs in the system so what this does is sets a minimum collection of customer distribution costs to reflect those investments,” said Huber. He noted that the minimum bill item adds non-bypassable riders — which recover the costs of public programs, i.e. storm recovery and cybersecurity, for instance, that Huber said are more societal and have no relationship to value-metric usage — as well as a $30 minimum bill to recover Duke’s estimated customer and distribution costs.
Another NCCETC report trend, Proudlove said, regards states and utilities increasingly considering time-of-use crediting for NEM customers, another goal that Duke Energy’s filed NEM successor tariff proposal includes in South Carolina.
Time-of-use netting, which permits excess credited at avoided cost monthly, more closely reflects the temporal value of solar generation than the current policy, Huber said.
“We decided to go with it because it is more granular than monthly, but a little more above hourly, or blocks of hours, if you will,” he explained. “I think it’s a really good moderated position and then any excess within those blocks are credited out at what we pay large-scale solar providers and developers.”
Another innovative approach in Duke’s tariff includes dynamic and temporal price signals to better reflect the cost to serve. Huber said this is important as South Carolina begins to shift to a winter peak, which is a bit harder to predict than summer peaks so Duke Energy wants to make sure that it offers dynamic pricing and can tell customers to take steps to reduce their load during these peaks. “That is baked into the rate design,” Huber said.
There are so many perspectives to look at with the costs and the benefits, said Huber. “We’re trying to use a few different lenses here to make sure that we’re accomplishing the goals of the legislation,” he added.
Huber also noted that according to a self-devised scorecard on meeting the goals of Act 62, Duke Energy has received an A+, “but we’ll see what the commission thinks,” he said.
Other trends also have emerged from NEM rate design taking place across the nation, according to NARUC panelist Matthew McDonnell, managing director at Berkeley, Calif.-based Strategen Consulting, who agreed with Duke Energy’s Huber that “as DER further proliferates, states will need to embrace a comprehensive and holistic approach to DER that will need to be reflected in tariff designs.”
And that’s “a process,” McDonnell said, “not a singular event.”
