Vermont’s 4% net metering cap generates legal debate

The question of whether some rural utilities should finance small renewable energy projects has taken a nosedive into the realm of legal ambiguity.

The issue stems from a law that requires utilities to credit customers 20 cents for every kilowatt-hour (kWh) they produce through small renewable energy systems, or net metering systems. According to the law, however, a utility does not have to accept applications for these systems when the capacity of a utility’s total net metering surpasses 4 percent of its peak demand from the previous year, or from 1996, whichever is greater.

The question now being raised is whether a utility can continue to reimburse customers at a higher rate, after hitting the 4 percent threshold.

“The utility who is going above the 4 percent cap voluntarily is taking some risk,” Geoff Commons, director of Public Advocacy for the Department of Public Service, told utility executives recently. “The statute does provide a very specific and clear mechanism for raising the 4 percent cap, and it is silent on the question of whether a utility can go over it. I think it’s a risk for a utility. Legally, I think it is ambiguous.”

Three utilities — Vermont Electric Cooperative, Washington Electric Cooperative and Hardwick Electric Department — recently hit this cap, and officials from the utilities have voiced concern that the state’s net metering policy is shifting utilities’ costs onto other customers, who don’t have solar systems. The three utilities operate primarily in the north-central and northern part of the state.

Net metering customers can use credits to pay off fixed-cost charges to reduce their monthly utility bill to nothing. But regardless of how much power a customer uses, a utility must have infrastructure, such as poles and lines, in place to supply customer needs. Officials at the three utilities have voiced support for limiting the application of net metering credits so that customers cannot zero out the fixed-cost portion of their bill.

Vermont Electric and Hardwick Electric have stopped accepting net metering applications for the moment, but Washington Electric is still taking in new net metering systems.

Patty Richards, general manager of Washington Electric, said the quasi-judicial board tasked with regulating utilities has not waved a red flag.

“We notified the Public Service Board, and the board hasn’t taken any steps that would indicate we’ve got a problem brewing,” she said.

Washington Electric’s situation is different than Vermont and Hardwick Electric’s. Washington Electric’s highest residential rate of power is more than 20 cents, and the utility is allowed to credit net metering clients at 21 cents per kWh, which is the utility’s highest residential rate of power.

This practice differs from that of Vermont and Hardwick Electric, which credit net metering systems at 20 cents per kWh while charging those customers less than 20 cents for the power they use from the grid. In the case of Vermont Electric, the utility credits net metering systems 20 cents per kWh and charges customers 17 cents per kWh for power from the grid.

Chris Recchia, commissioner of the Public Service Department, told utility executives last week that his department would support them if they continued to net meter.

“For those of you who are approaching this in a reasonable way and are trying to figure out how to not cause starting and stopping … the department will support you,” he said, admitting that he does not control the board, which has final say over this issue.

The Public Service Board has the power to raise the cap, but Recchia said the chance of the board doing that before the end of next year’s legislative session is slim to none.

David Hallquist, CEO for Vermont Electric, said that his lawyers determined the utility should not accept new net metering applications.

“If you read the legislation, it basically says that the Public Service Board can authorize a utility to go above the 4 percent cap,” he said. “We believe that because it explicitly says that, a utility doesn’t have the right on their own to decide this.”

Hallquist said that Vermont Electric would apply to create an interim program that would last until the Public Service Board or the Legislature changes the net metering law. This program would create a separate class of customers who wish to net meter. The reimbursement rate, however, would be less than 20 cents and likely less than 17 cents.

“It’ll probably be less than the residential rate of power because we’ve got to be able to capture the infrastructure costs,” he said. “It will be what the value is during the peak time minus what the infrastructure costs for us to stay connected.”

In the case of Hardwick Electric, the town-owned utility is simply not accepting applications for net metering systems. On Tuesday, it held a public meeting to discuss the issue, and Mike Sullivan, the utility’s general manager, said there would be another public hearing next month.

Leading members of the business community — like Pete Johnson, owner of Pete’s Greens; Tom Stearns, owner of High Mowing Organic Seeds; and Matthew Derr, president of Sterling College — sent a letter to the town selectboard in June, advocating for continued net metering.

They pointed to the town plan, which says: “Hardwick supports its residents in using wind, hydro, methane and solar to generate alternative and renewable electricity locally … The selectboard should direct Hardwick Electric Department to encourage net metering and other like-minded measures.”

Sullivan, who became general manager at the beginning of this month, said the company isn’t making moves right now.

“We received an order from the Public Service Board, which says we don’t have to go above the 4 percent cap,” he said. “We’ve chosen at this point that we’ve hit the goal, and until it’s in our interest to move forward, we’re going to hang tight.”

Source: VT Digger


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