By: DSIRE Insight Team
State policymakers and regulators are continuing to consider major reforms to net metering policies, with states taking different approaches to successor tariff designs and implementation timelines. The NC Clean Energy Technology Center has tracked these changes for several years through its 50 States of Solar quarterly report series. To date, more than half of U.S. states have considered significant net metering reforms through legislation or regulatory proceedings. However, the majority of states continue to offer “traditional” or “retail rate” net metering that nets production and consumption over the monthly billing period.
Alternatives to Traditional Net Metering
Currently, eight states - Arizona, Hawaii, Indiana, Louisiana, Michigan, Mississippi, and Utah - have distributed generation (DG) compensation rules other than retail rate net metering. The predominant successor tariff structure is net billing, wherein production and consumption are netted at a sub-monthly interval (most net billing tariffs use instantaneous netting). Each of the above states offers a net billing tariff, although the credit rate for excess generation varies.
Net Metering and Distributed Generation Compensation Policies (May 2021)
New York also has a net billing tariff in place for larger commercial customer-generators, as well as remote net-metered and community solar projects. This tariff compensates customers at a rate based on the value of distributed energy resources for hourly grid exports. Residential and small commercial customers are still eligible for retail rate net metering in New York, though.
Minor Modifications to Traditional Net Metering
Other states have considered significant net metering reforms, but opted to make only minor policy changes and maintain monthly netting, for at least the time being. California was one of the first states to consider a net metering successor tariff, and opted to retain monthly netting, but require participation in time-of-use rates and the application of certain non-bypassable charges.
Most recently, regulators in Kentucky and South Carolina issued orders maintaining monthly netting while modifying some other aspects of net metering. The Kentucky Public Service Commission issued a decision on Kentucky Power’s net metering successor proposal, making only a minor change to the tariff by reducing the credit rate for monthly net excess generation from the retail rate to $0.09746 per kWh. In South Carolina, regulators approved mandatory time-of-use rates for residential solar customers. The tariff will use monthly netting by time-of-use period and include a minimum bill. Duke Energy’s tariff will also include a non-bypassable charge based on system capacity, as well as a grid access fee based on system capacity for systems over 15 kW. The Connecticut Public Utilities Regulatory Authority also issued a decision in 2021, approving a traditional net metering option, as well as a buy-all, sell-all tariff option.
Net Metering Successor Tariffs and Modified Net Metering Programs
Regulators in Arkansas and New York issued decisions on net metering successor tariffs last year. The Arkansas Public Service Commission elected to maintain retail rate net metering, but approved a grid access fee, which is currently set at zero, for certain larger systems. The New York Public Service Commission, meanwhile, approved a mass market successor tariff design, which also maintains retail rate net metering while adopting a monthly customer benefit contribution based on DG system size.
New Hampshire and Vermont modified their net metering tariffs a few years ago, with the New Hampshire Public Utilities Commission adjusting credits for monthly net excess generation and Vermont regulators adopting credit adjusters based on system size, siting, and renewable energy certificate ownership.
Net Metering Reversals
Notably, some states that have adopted net metering successor tariffs have later reversed these decisions and returned to a monthly, retail rate netting structure. In Nevada, regulators adopted a net billing tariff with avoided cost compensation for excess generation in 2015. However, in 2017, the state legislature restored traditional net metering. Similarly, Maine regulators approved a buy-all, sell-all tariff to replace net metering, with compensation rates phasing down to an avoided cost rate. The state legislature later restored traditional net metering in 2019. Most recently, the Kansas Corporation Commission modified Evergy’s DG customer tariff so that it now includes the same rates as the standard customer tariff and no longer includes a demand charge component. This follows an opinion from the Kansas Supreme Court, finding that the tariff was discriminatory and in violation of state law.
Opening the Door to Reforms Down the Road
A growing number of states are opting to keep traditional net metering in place for at least a certain period of time, providing a degree of certainty to the market, but opening the door to policy reforms several years down the road. Oftentimes, these states will set a specific date or level of installed DG capacity that triggers a review of net metering and the development of a new tariff design.
In Arkansas, utilities and other stakeholders may file net metering alternatives beginning in 2023, and in Iowa, regulators are to develop a value of solar methodology for future tariffs in 2027. Virginia and Washington lawmakers both enacted legislation increasing the states’ aggregate caps on net metering, while establishing successor tariff timelines. In Virginia, the State Corporation Commission is to open a successor tariff proceeding when the aggregate capacity of customer-generators reaches 3% for a utility. In Washington, utilities may file net metering successor tariffs to take effect when the 4% aggregate capacity limit is reached or July 1, 2029, whichever comes first.
Reforms Currently Under Consideration
Several states are in the midst of evaluating major net metering reforms. California regulators are in the process of developing a Net Metering 3.0 tariff, while the Illinois Commerce Commission is determining the DG rebate amount that will be a component of the state’s net metering successor tariff.
In Hawaii, the Public Utilities Commission is considering DG rate design proposals, including HECO’s proposal to implement a time-varying export credit rider. The Michigan Public Service Commission is also considering further changes to its inflow/outflow tariff through a working group focused on rate design for distributed energy resources. Mississippi regulators are also evaluating net metering changes in a new proceeding opened this year.