Net Metering State Updates

One energy-related issue area that has seen particularly significant play in the states over the past few years is net metering reform. For the uninitiated, net metering is a billing system whereby electric customers with rooftop solar or other small-scale, on-site distributed generation (DG) systems can obtain credit for any surplus power they may generate. The federal Energy Policy Act of 2005 mandates all public utilities offer net metering services to their customers upon request. Today, 44 states maintain net metering programs.

The ALEC position on net metering is fairly straightforward. Electric customers who value and can afford DG technologies should be free to install these systems on their homes or businesses. At the same time, however, these customers should pay for all costs associated with their decision to install and utilize these technologies without shifting this financial burden onto non-DG customers. Using data provided by the U.S. Energy Information Administration (EIA), the Edison Foundation’s Institute for Energy Innovation estimates DG customers shift roughly $60 in non-energy grid services to non-DG customers each month. To be sure, ALEC does not support the elimination of net metering programs but rather encourages states to consider relatively modest reforms that will afford electric customers with greater transparency and fairness.

Over the past few months, three states have made high-profile changes – some good, some bad – to their existing net metering programs: Hawaii, Nevada and California. Here is a quick look at some of these changes:


Given its geography, Hawaii is unique when it comes to generating electricity. According to the U.S. Energy Information Administration (EIA), roughly 73 percent of the state’s electricity is generated from imported petroleum. As a result, Hawaiians pay roughly 30 cents per kilowatt hour (kWh) of electricity, easily the most expensive of any state in the union and almost triple the national average.

These expensive electricity prices coupled with an extremely generous net metering program that reimbursed customers at the full retail rate for surplus electricity made the installation of DG systems an especially attractive option for many Hawaiians. Roughly 12 percent of Hawaiian Electric Company (HECO) customers currently have rooftop solar systems, easily the highest market penetration for rooftop solar in any state.

In October 2015, the Hawaii Public Utilities Commission (HPUC) made headlines when it effectively closed the state’s net metering program to new participants, although existing DG-customers were grandfathered in. At first blush, this decision may appear counterintuitive, considering Hawaii has a renewable portfolio standard (RPS) that seeks to generate 100 percent of electricity from renewable sources by 2045, but HECO maintains the oversaturated market for rooftop solar presents a number of significant technical challenges to the electric grid that must be addressed.

Going forward, new DG-customers can connect to the grid via a “self-supply” or a “grid-supply” tariff. Under the self-supply option, rooftop solar customers would be able to have their systems fast tracked for approval but would not be reimbursed for any surplus electricity generated. Customers electing this option would most likely need to have a battery or other storage technology. In contrast, the “grid-supply” option would reimburse customers for surplus electricity based on the avoided cost of fossil fuel generation as opposed to the full retail rate.


In anticipation of the state reaching its 235 megawatt (MW) net metering cap sometime during the summer of 2015, the Nevada legislature directed the Public Utilities Commission of Nevada (PUCN) to develop a new tariff for DG-customers within the state. PUCN did just this and, in December 2015, unanimously voted to approve of a new rate structure that would effectively reimburse DG-customers at the wholesale rate (rather than the retail rate) for surplus electricity and also impose a monthly grid hookup charge. Controversially, this change in reimbursement was made retroactively, and the roughly 18,000 beneficiaries of the existing net metering program were not grandfathered in.

As a result, solar installation companies such as SolarCity, SunRun, and Vivent announced partial or full curtailments of operations within the state, further buttressing the notion the industry would struggle to exist but for government subsidies. A class action lawsuit has been filed against NV Energy accusing the Nevada-based public utility of providing false information to PUCN regarding the recommended rate changes. A second lawsuit – currently seeking class action status – has also been filed against SolarCity for allegedly failing to disclose to customers information about the effects of PUCN’s then-pending decision. Finally, an initiative petition is currently circulating within the state to deregulate the state’s energy market. Amid all this activity, PUCN is currently determining whether or not to slightly reverse course by grandfathering in existing net metering customers.


In late January 2016, by a 3-2 vote, the California Public Utilities Commission (CPUC) largely upheld the state’s existing net metering arrangement that reimburses DG-customers at the full retail rate for surplus electricity. California-based utilities had previously requested the state’s net metering program be changed to reimburse customers for surplus electricity at the avoided cost. The new arrangement does allow a utility to impose a one-time hookup fee on solar customers ranging between $75 and $150 and a modest surcharge for using electricity from the grid, totaling roughly $6 per month. In rendering the decision it did, CPUC – perhaps unsparingly – missed an obvious opportunity to eliminate the cost-shifting nature of the state’s net metering program.

In Depth: Energy

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