Maryland PSC Works on Contentious Net Metering Rules
On August 26, 2010, the Maryland PSC announced a rulemaking session for October 26, 2010, regarding amendments to the state’s net metering regulations. Initially, Staff provided the group with a “strawman” draft regulation. Since Staff anticipated that the most contentious issue was likely to be the question of how to value generation credits, the strawman…
On August 26, 2010, the Maryland PSC announced a rulemaking session for October 26, 2010, regarding amendments to the state’s net metering regulations. Initially, Staff provided the group with a “strawman” draft regulation. Since Staff anticipated that the most contentious issue was likely to be the question of how to value generation credits, the strawman proposal included several optional sections addressing this issue. On August 2, the Staff filed a Net Energy Metering Working Group Report that included two sets of draft regulations as work product from the technical working group with one set of draft regulations representing the proposal of the utility members of the working group and the other representing the proposal of the collective solar industry. After substantial discussions among the parties, there had been no consensus reached on a preferred option. Staff also asked the Maryland Energy Administration (MEA) to perform an analysis of the financial effects of the generation credit timing and valuation proposals as they would apply to different renewable energy technologies. The MEA analysis considers the financial effects of the proposed regulations on eligible customer-generators, but does not address effects on the utilities or other ratepayers. This analysis was included in the report.
Specifically, the MEA financial analysis looked at the impact of moving from a kWh carry forward for up to 12 months to a monthly conversion of net excess generation into a dollar credit (as the law requires). Further, it analyzed the impact of calculating this conversion at Standard Offer Service (SOS, i.e. avoided cost of generation), Solar Locational Marginal Price (LMP) for solar generation, Monthly LMP for non-solar generation, and real-time Hourly LMP. The analysis was telling. In all cases, the net metering customer’s bill increased from what it would be under current regulations, with the largest increases seen under the utility proposal. For customers that aimed to offset most or all of their electricity with a renewable system, the difference could mean up to a 650% increase in their annual bill. The report explained, “as the Coverage Ratio of an installation increases, a larger percentage of the installation’s annual generation will be renewable installation converted at a lower-than-retail rate. The effect is highly nonlinear.”
On August 9, the Office of Staff Counsel submitted comments on the Working Group Report, which identifies the differences between the two proposals. Unfortunately for net metering customers, this report concluded that the utility group’s proposal would be the simplest to administer and adopt. The report also concluded, “The proposed regulations, while compliant with the net-metering law, will add significant complexity and cost to the implementation of the law. Currently, net-metering does not require billing changes, significant manual recalculation or system programming. The approach used for net-metering, one might argue, was intended to provide a benefit and incentive to customers for the deployment of renewable energy, without causing the utility to incur significant costs. The new changes to the law have altered that basic approach, by requiring billing and metering changes, as well as creating the potential need for significant manual adjustments to bills. One could note the intent in the law is to “reduce costs of interconnection and administration”. Staff recommends a continued effort to modify the net-metering law to return to the original approach and recommends that the Commission direct the Net-Metering Working Group to further develop legislative language that would achieve that goal.”
See Maryland PSC Docket RM 41 for more information.
Background: During the 2010 legislative session, the Maryland General Assembly enacted Senate Bill 355 and House Bill 801 which proposed modifications to Maryland’s net metering statute. Unfortunately, this law was not worded to achieve its legislative intent to improve the state’s net metering policy. The amendments added a new definition of generation credit, referring to the amount of excess electricity generated by an eligible customer-generator in a billing period. Substantively, the amendments deleted the provision limiting the accrual and retention of generation credits to a twelve month period, specified that the generation credit must appear on bills in a dollar amount, and permitted eligible customer-generators to request a cash payment for any generation credits remaining at the end of twelve months. The new laws directed the Commission to convene a technical working group to address the metering and associated pricing mechanisms appropriate to net energy metering for various customer classes in the various utility service territories.