Kansas Supreme Court rules against fixed fee for solar customers in net metering case

The Kansas Supreme Court recently ruled that utilities are not allowed to charge a higher rate for net metering customers than non-net metering customers.

The Kansas Corporation Commission (KCC) had previously ruled that Kansas utilities were allowed to charge energy producers who generate solar or wind power a fixed fee that was different than their regular utility customers.

The court cited a Kansas law from 1980 that says customers may not be charged a different rate if they use renewable energy.

Kansas is not known for its prevalence of solar, with only 0.14 percent of the state’s electricity provided by solar, according to the Solar Energy Industries Association (SEIA).

According to Damon Smith, senior communications specialist with Evergy, the utility currently has 6,381 net metering customers on its system, with 1,550 in Kansas, or 0.4 percent of the company’s 1.6 million total customers.

The utilities in the case argued that things have changed since 1980 and that a more recent law should be taken into consideration. That law says: “For any customer-generator which began operating its renewable energy resource under an interconnect agreement with the utility on or after July 1, 2014, have the option to propose, within an appropriate rate proceeding, the application of time-of-use rates, minimum bills or other rate structures that would apply to all such customer-generators prospectively.”

In its decision, the Kansas Supreme Court said that the two statutes do not conflict, and it’s possible to propose a rate structure for customers who connected after 2014, without discriminating in price among all of the utility’s customers.

“Here, the proposed rate does not reflect an added service justifying a higher cost. The utilities want to impose a mandatory three-part rate design for DG [distributed generation] customers as opposed to the two-part rate design applied to non-DG customers. Both rate designs include a basic service fee and a kilowatt-hour energy charge,” the Supreme Court wrote. “The three-part rate design, however, adds an additional ‘demand charge’ for DG customers. This demand charge includes a flat fee of $3 in the winter and $9 in the summer. There is no question that the RS-DG rate at issue here is not built on a time-of-use rate or a minimum bill. It is simply price discrimination.”

The Supreme Court continued by writing there were several ways that utilities could eliminate the problem “without creating a regime of price discrimination.” They cited some options, including restructuring rates so that fixed costs are covered in the flat fee, imposing a (non-discriminatory) time-of-use rate, or a sliding scale rate as customers purchase different amounts of energy.

“Of course it is beyond the scope of this opinion to predict whether these alternative price schemes would clear either the political or legal hurdles they might face,” they continued. “These examples simply illustrate that price discrimination is not the only way to achieve an equitable market for the sale of electricity within statutory parameters.”

The Supreme Court said its decision does not impose any restrictions on how utilities or commissions make decisions about how to structure the generation and sale of electricity other than the restriction based on the 1980 law.

Environmental organizations that brought the lawsuit praised the decision.

“With today’s Supreme Court ruling, we make headway toward fairness and justice for solar and renewable energy users in Kansas,” said Zack Pistora, Kansas lobbyist at the Sierra Club.

Meanwhile, Evergy is following the guidance of the ruling, and is looking at where this will lead in the future. Smith said the company has asked the KCC for guidance on next steps “to establish a different rate for our customers who are currently on the RSDG Rate Plan.”

“This may require a formal commission proceeding to ensure a fair price is established for all customers,” he explained. “In the short term, customers will remain on the current RSDG Rate, though the commission will determine if the difference in rates would lead to us crediting customers’ accounts. This process could take several months before a rate change is approved.”