LEGAL ISSUES IN
DISTRIBUTED ENERGY &
NET METERING
Presented by:
Dan Clearfield, Esq.
Energy Law & Policy Institute
University of Pittsburgh School of Law
August 2, 2013
What’s Coming

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Distributed Energy – Basic ABC’s
Net Metering Basics
Net Metering Legal Issues
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Who can install net metering?
Eligibility/generation types
Can a net metering customer shop?
How is net output price calculated?
What are the longer-term prospects for net
metering?
2
What is Distributed Energy?


Distributed energy resources are parallel and
stand-alone electric generation units located
within the electric distribution system at or
near the end user
Examples of Distributed Energy Systems:

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Combined heat and power
Photovoltaic
Wind
Geothermal
Hydroelectric
3
Source: The California Energy Commission
Projected Growth in Distributed Energy

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Distributed generation is approximately 5% of
total U.S. power generation.
In a recent survey by Black and Veatch, more
than 40% of the responding utilities indicated
that they expected to see distributed
generation to be about 10% (or more) of total
U.S. power generation by year 2020.
5
Benefits of Distributed Energy


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Cost savings for owner/customer
(Potential) increased reliability of grid
overall
Increased energy efficiency (line
losses)
Environmental benefits
6
Distributed Energy Concerns


Makes generation and transmission planning
difficult
Shifts costs of central station generation and
transmission system

Remaining customers responsible for costs of
system
7
Distributed Energy – What’s the Best
Configuration?

Utility Side/Wholesale
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Sell @ Wholesale
Interconnect to transmission and/or distribution
Clearly have right to sell ancillary services
More complicated
Requires developer to be LSE in PJM (or other
ISO)
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Distributed Energy – What’s the Best
Configuration?

Customer Side/Retail
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
Net Metering
Usually provides pricing subsidy
Limits use of output
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What is Net Metering?
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Net energy metering is an important incentive
program that can maximize the amount of
distributed energy on the grid.
Net metering allows customers with distributed
generation systems to be compensated when
their systems generate more electricity than the
customer is using onsite.
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What is Net Metering

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Net Metering “Customer Generator” receives
full retail rate credit for outflow (each kWh
generated)
Amount purchased by customer generator @
same rate
Customer generation receives payment at
some level for net annual outflow
11
Source: U.S. Energy Information Administration,
based on Database of State Incentives for Renewables and Efficiency
Source: U.S. Energy Information Administration, Electric Power Annual
Source: U.S. Energy Information Administration, Electric Power Annual
Net Metering Legal Issues: Who Can Install
Net-Metering ?

General Rule: Retail Customers Only

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Generally, retail customer must be an owner or
operator
States may allow third party financing/
ownership

Pennsylvania will allow third-party owner/operator
in limited circumstances

Third-party owned and operated systems are limited to
110% of the utility customer’s annual electricity
consumption.
15
Net Metering Legal Issues: Eligibility of Net
Metering Requirements
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States may limit net-metering to certain
technologies to reflect policy choices
Systems typically sized to on-site load (or a
little more)
Generally, limited to small-scale systems
States may limit aggregate capacity, based on
utility peak load
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- Eligibility Technologies
Solar
Wind
CHP
Fuel Cell
Biomass
MD
√
√
√
√
√
NJ
√
√
√
√
NY
√
√
√
√
√
OH
√
√
√
√
√
PA
√
√
√
√
√
√
TX
√
√
*
*
√
*
WV
√
√
√
√
√
√
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Geothermal
Coal
√
√
√
Summary of Net- Metering
State
System Size
Cap
Suppliers
Required
to Offer ?
Applicable
Scenario
Monthly
Carryover
Rate
1 MW; 10 MW for 3
biodigesters
No
Dual-Bank, if supplier
offers net-metering;
likely Partial Netting
otherwise
Monetized credit
on full retail rate
CT
2 MW
Yes
Utility-Side Netting
1:1 kWh credit
D.C.
1 MW
No
Dual-Bank Netting
Retail for 100
kW or less;
generation rate
for 100 kW to 1
MW
DE
2 MW
Yes
Utility-Side Netting
1:1 kWh credit
IL
40 kW
Yes
Dual-Bank or Utility
Side Netting
1:1 kWh credit
CA
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Summary of Net- Metering (Cont.)
State
System Size
Cap
Suppliers
Required
to Offer ?
Applicable
Scenario
Monthly
Carryover
Rate
ME
660 kW
No
Utility-Side Netting
1:1 kWh credit
MD
2 MW
Not
addressed
Utility-Side Netting
(current)
1:1 kWh credit
MA
10 MW for gov’t
2 MW for others
Not
addressed
Hybrid
Monetized credit
based on
calculation
( ~ retail rate)
MI
150 kW
Yes
Utility-Sde up to 20
kW
1:1 kWh credit
NH
100 kW
No
Unclear, probably
Partial Netting
1:1 kWh credit
NJ
Customer’s average
annual load
Yes
Utility-Side Netting
1:1 kWh credit
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Summary of Net- Metering (Cont.)
State
System Size
Cap
Suppliers
Required
to Offer ?
Applicable
Scenario
Monthly
Carryover
Rate
NY
2 MW
Not
addressed
Utility-Side Netting
1:1 kWh credit
OH
No specific limit
No
Hybrid or Partial
Unbundled
generation rate
PA
5 MW for
commercial systems
No
Unclear, probably
Partial Netting
1:1 kWh credit
RI
3.5 MW
Not
addressed
Unclear, possibly
Hybrid
Monetized
credit, based on
calculation
( ~ retail rate)
TX
No state-wide rules for net-metering
Source: Justin Barnes & Laurel Varnado, “The Intersection of Net-Metering & Retail
Choice: An Overview of Policy, Practice and Issues,” Interstate Renewable Energy Council
(2010), at p. 7-8, Table 1 (footnotes omitted)
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Net Metering Legal Issues: Net Metering
Customer – Shopping or Non-Shopping?
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Rules vary from state whether competitive
suppliers are required to offer net metering
and, if so, does competitive supplier need to
provide subsidy?
PA: EGS not required to offer net metering; if
EGS does, the rate it charges/pays for
generation is up to parties.
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Are Net-Metering Customers Shopping?

PPL Electric Utilities had the following numbers for net-metering
customers as of April 30, 2012:
Rate Class
Residential
Number of Customers Using Net
Metering in Conjunction with:
Default Service
Service from EGS
from PPL
1,430
789
Totals
2,219
Small C & I
(64.44%)
284
(35.56%)
170
454
Large C & I
(62.56%)
1
(37.44%)
27
28
Totals
(3.57%)
1,715
(96.43)
986
2,701
(63.50%)
(36.50%)
22
Net Metering Legal Issues: Calculations of
Net Output Price

PA (and other states) current rule: customer
generator receives yearly net output at “priceto-compare” (“PTC”)

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PTC is default service price PLUS transmission
What happens when there is no more default
service?
23
Net Metering/Distributed Generation
Legal/Policy Issues

What Are the Longer-Term Prospects
for Net Metering
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Net Metering Arguably Produces Benefits
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Lower, more predictable energy bills
Reduces strain on electric grid
Encourages alternative energy production
Net metering customers may be more aware
of consumption
25
Net Metering Creates Issues


Tilting market in favor certain resources
Remaining ratepayers paying subsidies to
encourage net metering

E.g., California’s three major electric utilities
estimate that burden that will be shifted is about
$7.6 million – an extra $185 per year if evenly
spread
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“Death Spiral”
With advent of abundant domestic natural gas supply
some question need to continue to provide regulatory
incentives
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Will Net Metering Incentives/Subsidies
Continue:

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Net metering key part of encouraging “all of the
above” strategy
Like Twitter and crowd sourcing, net metering is
(increasingly) popular

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Unlikely that grid will move back towards more
centralization
Home owners/small business/developers can make
money

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More of them than utilities
But, future of rich subsidies in doubt

Especially as generation pricing becomes more
market reflective and competitively sourced
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Questions?
Dan Clearfield, Esq.
(717) 237-7173 | dclearfield@eckertseamans.com