FERC Wins Mandated Utilities Bid

electric utility.
Published On
Jul 24, 2020

The New England Ratepayers Association has lost its bid to have the Federal Energy Regulatory Commission (FERC) mandate utilities to pay wholesale prices to homeowners who practice net metering using solar panels and other distributed generation equipment, so states won’t be able to permit utilities to pay more expensive retail prices that the association contends are ultimately subsidized by other ratepayers.

In its petition to the FERC, the association cited data from the U.S. Energy Information Administration and compared residential retail rates with wholesale energy prices. The average residential retail rate in United States is slightly above 13 cents per kilowatt-hour (kWh), and in some places such as New York, New England and California, residential retail rates are now approaching or exceed 20 cents/kWh. In contrast, wholesale energy prices in most of the country have recently averaged between approximately 2 and 6 cents/kWh.

“As a result, customers who deliver energy to the interconnected utility as part of a full net metering program are generally paid a price for that energy that is several times greater than the wholesale price for energy,” wrote the association’s attorneys, David B. Raskin and Richard L. Roberts of Steptoe & Johnson LLP in Washington, D.C.

The association contended net metering sales are actually wholesale sales because the energy is being sold to the utility for resale to the utility’s retail load, or for resale by an independent system operator or regional transmission organization. As such, the FERC is required to exercise its rate jurisdiction over them, and the wholesale energy sales should be priced at the utility’s avoided cost of energy if the sale is being made pursuant to either the Public Utility Regulatory Policies Act or the Federal Power Act.

The association also contended that net metering shifts the fixed and other costs avoided by customers with behind-the-meter generation to other customers of the interconnected utility, who are thereby forced to subsidize net metering sales.

“Because full net metering is primarily available to higher income customers, lower income customers end up subsidizing higher income customers, which is essentially “Robin Hood in reverse,” the association’s attorneys wrote.

Moreover, net metering favors “relatively inefficient and non-dispatchable generation” located behind-the-retail-meter at the expense of investment in more efficient grid-connected renewables and the dispatchable generation needed for reliability, the attorneys contended.

“By overcompensating one of the least efficient forms of renewable generation, full net metering increases the cost to achieve any given level of renewable energy use and thus makes it less likely that society will be able to achieve whatever level of renewable energy goals is chosen,” they wrote.

Last week the FERC unanimously dismissed the association’s petition, “given the Commission’s discretion whether or not to issue declaratory orders and the failure of petitioners to identify a specific controversy or harm that warrants the Commission acting.”

Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, applauded the FERC decision.
“Solar has created hundreds of thousands of jobs in states across the country and contributed more than $100 billion to the U.S. economy,” Hopper said in a press release. “Our industry holds great promise to help create jobs and revive local economies.”

“We are grateful to the state utility commissions and many other partners who strongly opposed this petition,” she said. “We will continue working in the states to strengthen net metering policies to generate more jobs and investment and we will advocate for fair treatment of solar at FERC where it has jurisdiction.”


About the Author

Katie Kuehner-Hebert

Katie Kuehner-Hebert has more than three decades of experience writing about the construction industry, and her articles have been featured in the Associated General Contractor’s Constructor magazine, the American Fence Association’s Fencepost, the...

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