Kentucky PSC hears testimony about new state net-metering law
The Kentucky Public Service Commission (PSC) has been working through how best to implement a law passed earlier this year by the Kentucky General Assembly that would impact the ways that utilities credit customers who produce solar and other renewable energy.
Under the new law, the state PSC will set the net-metering rates for individual utilities, which affect the dollar credits net-metered customers receive. The law says that utilities are allowed to “implement rates” on their net metering customers that would help the utility to recover “all costs necessary to serve” them.
Each utility — including Duke Energy Kentucky, Kentucky Power Co., Kentucky Utilities Co., Louisville Gas & Electric Co. — will present to the Kentucky PSC and the commission will then determine their net-metering compensation rate.
“Each utility’s new net-metering rate will be established based on its particular circumstances,” the PSC explained, “considering both the evidence in each case and the record of the current proceeding.”
The Kentucky PSC heard comments from citizens, solar advocates, utilities, and other stakeholders about the new law and how they felt it would best be implemented. The PSC is taking into account all comments and will release a report with its final order and a summary of the comments received.
“We believe that this procedure will allow everyone who wishes to do so to address the PSC,” PSC Chairman Michael Schmitt said. “We want everyone to be heard without having to wait excessively long for that opportunity.”
A public comment hearing held by the PSC on Nov. 13 lasted for more than five hours.
One of the arguments made by utilities and lawmakers is that everyone who uses the electric grid should help pay to maintain it. But through the credits that they receive, net-metered customers are avoiding paying the fixed costs for ensuring the reliability of the grid. Those costs are shifted to customers without rooftop solar through higher utility bills.
Alex Vaughan, director of regulated pricing and renewables at American Electric Power, is responsible for cost service and rate design matters at Kentucky Power Company Co. At the hearing, he said utilities have had to determine who pays for the extra costs associated with net metering customers.
“Over a third of our customers are connected to transmission voltage so they do not use or pay for the distribution system,” he said. “So when you start looking at cost of service impacts from a net metering customer on the other distribution customers, it’s larger than one might think.”
Vaughan said the typical bill for a residential customer of Kentucky Power is $124 for using around 1,000 kilowatt-hours per month.
“We can argue about how much of the generation costs should be credited back to customers or shouldn’t be credited back, but we can just look at this conservatively and say the D&T [distribution & transmission] piece of the bill, the wires, we can all agree the sun is going to go down every day, solar net metering customers are going to use the company’s grid at some point throughout the day when they are no longer producing enough energy to fulfill their requirements,” he said. “That being said, roughly half the bill, currently 45 percent, is related to distribution and transmission costs in our residential class.”
Vaughan added that a solar customer who is on a one-for-one net basis who is connected to the AEP grid has no bill from the utility, and yet “is not paying $56 of wires costs that they are using every single day, so annually that’s a $672 subsidy per customer that is getting baked in to the remaining customers’ rates, the wires customers’ rates.”
Advocates, ratepayers, utilities, and the PSC all said they are concerned about low-income customers. The argument from many was that if a customer cannot afford solar panels on their home, they should not be footing the bill for those who can afford solar.
There were a number of citizens who argued for solar and other renewables, including those hoping for the subsidies in an attempt to allow all demographics of customers to be able to afford renewable generation.
Solar advocates made the argument that solar panels could help lower the costs for everyone, if programs were implemented correctly. A number of advocates, government entities, and nonprofits told stories about installing solar on their own buildings, or helping families install solar panels on their homes, and how this has helped them save on their electricity.
Meanwhile, AEP does not measure costs by the intangible values of the grid, but rather the hard costs associated with keeping it running.
Vaughan explained that there are many studies out there about the value of what is lost when the grid goes down, as well as intangible benefits of the grid — including health benefits and economic development. But Kentucky Power’s rates are not affected, positively or negatively, by these things.
“We don’t do value-based rate-making, we do cost-based rate-making,” he said. “We don’t argue for the value of the grid.”
He added that AEP and Kentucky Power would prefer that, if the PSC planned to value the intangible assets, they don’t add that cost into the utility rates, “to keep everything in the apples-to-apples, cost-to-cost rate.”
The commissioners stressed that their decision would not be made solely on cost, but on what is best for everyone.
“It’s not the lowest cost – it’s safe and reliable, fair, just, and reasonable,” said Robert Cicero, vice chairman of the Kentucky Public Service Commission. “Protecting all of the parties involved is what we’re trying to do right now.”
The law goes into effect on Jan. 1, 2020.
