Additional Testimony In Support of L.D. 91
An Act to Eliminate Gross Metering
From Steven L. Weems, Executive Director
Solar Energy Association of Maine
To the Joint Standing Committee on Energy, Utilities, and Technology
February 1, 2019
Senator Lawrence, Representative Berry, and members of the Joint Standing Committee on Energy, Utilities, and Technology: please accept this additional testimony in favor of L.D. 91, submitted after reviewing the full scope of the commentary and discussion on January 29.
The Solar Energy Association of Maine (www.solarenergymaine.org) is a Maine nonprofit corporation that supports the development of solar electricity of all project sizes and ownership models, for the benefit of all Maine people. SEAM is a broad coalition of solar advocates who are dedicated to providing helpful and reliable information.
We have added some information to the diagram (attached below) we distributed on January 29, comparing Net Metering and Gross Metering. Hopefully, this helps clarify things further. Follow the flow of electrons. A residential rooftop solar array is wired into the house electrical service. When the solar array generates electricity, it goes to this service to power anything requiring electricity in the house (lights, microwaves, computers, heat pumps) at that moment in time. Only the excess solar electricity flows out onto the grid, to other nearby utility customers. At any time the household needs additional electricity, the utility supplies it, by feeding power back through the house electric service.
CMP can and does measure both (1) the kilowatt‐hours (kWh) of excess solar electricity flowing out to the grid, and (2) the electricity it provides the house flowing in from the grid. This back and forth is measured by the CMP meter between the house electric service and the grid (in purple). Under original Net Metering, the additional CMP meter between the array and the house electric service (in red) does not exist. The utility (CMP) does not know how much total solar electricity is generated or how much of this power is used instantaneously on the premises. It only knows (1) how much excess solar electricity flows onto the grid and (2) how much power the household uses that is supplied from the grid.
This is the essence of original Net Metering. The solar customer gets a kWh credit (not a financial credit) for the excess solar power that flows out to the grid, and is billed the full retail rate (delivery and energy charges) only for the kWh of electricity CMP delivers in excess of the solar electricity the customer supplies to the grid. Hence the terminology “net metering.” The customer pays only for the “net” amount of electricity he or she requires, above and beyond the solar electricity he or she supplies to the grid. This system works and is understandable.
As you know, the Public Utilities Commission (PUC) has implemented the Gross Metering rule. In accordance with this rule the utility now is required to install an additional meter between the solar array and the house electrical service (shown in red on the diagram below), enabling CMP to measure the total electricity generated at the array, with includes both the amount used instantaneously on the premises and the amount flowing out to the CMP grid. By PUC rule, the additional cost of installation of this meter is borne by all other ratepayers, not the customer. This is the cost CMP initially estimated at about $500 but is running in the $1,500‐2,000 range per installation, as reported by ReVision Energy and Insource Renewables, two of the leading installers in Maine.
To fully understand Gross Metering, it is important to distinguish between two new charges CMP now levies on solar customers subject to this rule. Under original Net Metering, the customer is not levied either the energy or delivery charge for the electricity provided by CMP that is equal to or less than the kWhs of solar electricity the customer contributes to the grid. Under Gross Metering, the customer now has to pay for delivery of all the power supplied by CMP.
This is the first negative part of the Gross Metering rule. The customer does not get any kWh credits against future delivery charges for the amount of excess solar energy he or she sends to the grid. (Note the additional meter required under gross metering is not required to levy this new charge. CMP already knows the total amount of electricity it is delivering to the customer by reading its existing meter between the grid and the house electrical service.)
The second part of the Gross Metering rule is even worse. The new CMP meter required between the array and the house electric service now gives CMP information about all the solar electricity generated. Under Gross Metering, CMP now charges for delivery of all the solar electricity generated at the array, including the portion consumed instantaneously on premises which never touches the grid. This is the penalty fee to which people are referring which solar owners have to pay for investing in solar equipment, generating clean energy, and consuming it instantaneously on their own premises. A general rule of thumb (and experience averaged over many installations) indicates this might be about half of the total solar electricity generated at the array.
In the example we provided in our January 29 testimony, the Gross Metering rule results in an additional fee of about $500/year for a typical residential rooftop solar customer. The math is simple. Assume the customer has matched up annual solar generation with annual electricity use. A typical residential customer would use about 600 kWh of electricity per month, and generate 7,200 kWh of solar electricity per year, to satisfy this total electricity usage. The CMP volumetric delivery charge is $0.07/kWh, for an additional customer payment (CMP revenue) of $500 per year (7,200 kWh x $0.07/kWh). This includes a delivery charge for the solar energy consumed instantaneously on the premises which never touches the grid. Experience averaged over many residential solar installations indicates this may be about half of the total solar electricity generated.
This is referred to as “going behind the meter” and getting into the private business of what the customer is doing in his or her home. The “meter” being referred to in this expression is the original CMP meter measuring what is going back and forth to the grid. The new meter required by Gross Metering allows the utility to see what the customer is doing is his or her own household. Please draw your own conclusion about the fundamental fairness of this. The result is a convoluted, difficult, and expensive concept to implement. As noted, the considerable economic burden of this falls on all other ratepayers.
Investor‐owned utilities throughout the country have mounted a sustained attack over many years against net metering because it threatens their basic business model of (1) monopolistic power; (2) publicly‐guaranteed rates of return for private shareholders; (3) large, centralized generating facilities (usually owned by the utilities or their affiliates); and (4) huge investments in towers, poles and wires. The bigger these investments the greater to return for shareholders, especially if the capital investments required are financed substantially with debt, which enables them to get a return on someone else’s money.
In Maine, as elsewhere, critics of net metering have zeroed in on the modest financial incentive small solar owners get from net metering. Under net metering solar owners send the electricity they generate that they cannot use instantaneously to other grid customers for kWh credits for this amount of electricity. They then do not have to pay for this amount of electricity when they require it later. CMP and its allies say this is unfair to other ratepayers because they still have to maintain the grid, and the utility loses some revenues under Net Metering. This so‐called “subsidy” was pegged at about $3 million per year by Mitch Tannenbaum of the PUC. Since utilities have a monopoly and a guaranteed rate of return, net metering critics say this short‐term loss of utility revenue has to be made up by other ratepayers.
At first blush, this sounds like a legitimate issue but it is bogus at many levels and does not stand up to further scrutiny. Here are a few of the reasons this is a false issue that should not determine anything.
1. Net metering is a very small incentive, similar to other more substantial assessments on all ratepayers for the common good. The ratepayer assessments for the Regional Greenhouse Gas Initiative (RGGI) and the Efficiency Maine Trust rebate programs are good examples of paying small amounts via electricity tariffs to help fund important policy initiatives. Net Metering is consistent with this approach, since all ratepayers benefit from a shift to distributed, clean energy.
2. Net energy billing (NEB) is a weak incentive. It should not be curtailed. If anything, it should be deepened and increased, or replaced by something more effective. The proof is in Maine’s last‐in‐the‐region standing regarding any measure of solar electricity development: total capacity, capacity per capita, job generation, accessibility of solar electricity for low and moderate‐income people. Mr. Tannenbaum said the PUC took into account the declining cost of solar equipment. The federal tax credit of 30% is scheduled to decrease and then expire. This will increase the effective capital cost of solar installations substantially! The PUC has not taken this into account.
3. Most importantly, criticism of net metering discounts the substantial benefits to all ratepayers of distributed solar electricity. As noted in other testimony, Maine’s PUC commissioned a serious study of these benefits a few years ago. The study authors concluded the benefits to other ratepayers are greater than the costs, in both the short and long‐term. While the methodology and specific conclusions can be debated, benefits unquestionably exist that must be taken into account, and many NEB critics refuse to do so by focusing exclusively on short‐term costs. And notably, these are not even real costs. Solar customers are not creating a nickel of actual real, incremental cost for the grid. The “costs” CMP and others cite are in reality additional revenues CMP wishes it could get. This is why CMP is so enamored of the idea of gross metering – it can get paid for a certain amount of power it never handles!
4. On Tuesday, the PUC went on record saying net metering benefits are so long‐term they should not be taken into account. This was shortly after the EUT Committee heard testimony about ISO New England’s conclusion that solar electricity saved the region over $20 million in peaking power plant generation charges during one heat wave last summer! This is an example of a real short‐term benefit. Maine’s share of this would be about $2 million, not including consideration of the additional savings in capacity payments that will not have to be made for standby facilities if peak load requirements are reduced. It is not a stretch to say there is clear evidence that short‐term benefits of distributed solar electricity installations exceed the lost revenues to the utility from net metering.
5. The $3 million net metering cost figure cited by the PUC is a minuscule percentage of the total amount spent annually in Maine for electricity. This is about $1.5 billion for about 11,200,000 MWhs (megawatt‐hours) of electricity at an average customer cost of $0.13/kWh. $3 million is 0.002 of $1. 5 billion. Even if only the transmission and distribution portion of the total energy cost is considered, at say $0.07/kWh, the $3 million is still only 0.004 of total electricity costs in Maine. This shows that even if all the benefits, both short and long‐term, of distributed solar generation are disregarded, the impact on any rate‐payer is inconsequential. Even in this one‐dimensional, distorted, hypothetical
scenario, the impact of net metering on a typical non‐solar ratepayer would be pennies per month.
6. All electricity customers, including solar customers, pay a fixed monthly delivery fee to be connected to the grid. The idea that solar electricity owners are somehow getting a “free ride” at other ratepayers’ expense is inaccurate. This brings up the related point about how difficult it is to achieve some kind of ultimate “fairness” across all electricity customers and ratepayer classes. Seasonal camp owners, for example, with nominal annual electricity use, pay very little in delivery fees per year, but maintaining the delivery system for their properties is expensive. This is just a fact of life in a system that serves all people. You cannot break the total costs down too finely and still have a universal system! In a caring society, everyone takes care of their neighbors and helps pay for policy objectives that are deemed to be in the common good.
7. The argument put forth by the PUC that the costs of net metering (to other ratepayers) are incurred in the short‐term, and the benefits are all in the distant future when the distributed energy system reaches scale are particularly specious. How are we going to get to scale unless we take steps now to incentivize people to make the investments that will get us there? The best approach involves setting long‐term goals and then investing for the common good, by setting up a policy and regulatory system now to help us get there in the future. This is the basic justification for net energy billing or net metering.
The Solar Energy of Maine respectfully reiterates its support of L.D. 91. While net metering has been tinkered with in other states and eventually will be superseded by other more precise value‐driven mechanisms, Maine is alone in implementing gross metering. It really is inane, creating chaos in the distributed energy market. Restoring original net metering for a while is a sensible thing to do, recognizing its value as a useful, albeit limited incentive, that doesn’t hurt anybody. It would be a small step forward.
This said, all this discussion of the short‐term merits of net metering and gross metering is playing “small ball.” SEAM respectfully suggests L.D. 91 should be approved and enacted as soon as possible, clearing the way for consideration of more comprehensive, longer‐term, higher‐impact renewable energy legislation. The overriding importance of addressing climate disruption indicates this is no time to get bogged down in stale debates about small, short‐term issues manufactured by investor‐owned utilities. Some really innovative and high‐impact clean, renewable energy proposals are in the queue and the more attention that can be given them the better. This is a time when creative thinking and bold action is required, to bring forth constructive solar legislation that will increase Maine’s total capacity of this clean, secure energy source dramatically. Anything else is analogous to “fiddling while Rome – or more accurately the whole planet – burns.”
Thank you for your patience in reading this testimony, and your consideration of our views. Please refer further to the attached revised diagram, which has been updated in an attempt to make it clearer. Our suggestion is to “follow the electrons.” Like all electrons, distributed solar energy electrons travel fast, but they don’t travel far. This is a good thing.
Attachment: Amended Net and Gross Metering Diagram 1‐31‐19