By John McFerrin
The West Virginia Public Service Commission is considering a proposal by First Energy (parent company of Mon Power) to reduce the amount that it pays individual producers of solar power for the electricity their private solar panels add to the electricity grid.
Almost all home solar systems are connected to the electricity grid. During the day, and particularly on sunny days, those homes produce all the electricity they use. On most days, the homes produce more electricity than they need. This electricity goes into the electrical grid, available for use by other customers.
At night and on cloudy days, these homeowners use more electricity than their systems produce. During those times, they import electricity from the grid. If, at the end of the month, the homeowner has used more than he or she has exported to the grid, the homeowner is billed for the excess. The system is known as net metering.
Under the current system, the electricity the homeowner takes from the grid is the same price as the electricity which he or she supplies to the grid. The electric company credits the homeowner for the electricity supplied to the grid from the homeowner’s system at the retail rate for electricity. It then charges the homeowner for electricity that the homeowner takes from the system produces at the same retail rate. In most situations, the amounts taken from the grid and supplied to the grid are about the same, so the homeowner’s bill for electricity (not considering the service charge that First Energy imposes) is close to zero.
First Energy wants to change that. It wants to start crediting homeowners for the electricity they send to the grid at the wholesale price. It would still charge those same homeowners the retail price for electricity it delivers to them. The result would be that the electricity leaving a home would be considered worth about half as much as the electricity entering the same home.
This is not net metering’s first rodeo at the Public Service Commission. It was on the agenda in 2006; multiple people and companies participated, including First Energy. The Public Service Commission directed the parties to negotiate an agreement. By the end of 2007, the parties had negotiated and come up with the agreement that formed the basis of the Public Service Commission order that First Energy now wants to change. Apparently, it has had second thoughts about what it agreed to.
First Energy gives this justification for the change:
The change proposed to the credit is appropriate so that other customers are not subsidizing net metering customers and so that net metering customers actually pay for the distribution, transmission, and capacity facilities that they use and costs that are incurred for them.
In other words, even though the solar-powered homeowner is not using the power plant to produce his or her electricity, that homeowner should pay a share of the cost of the wires, etc. required to deliver that electricity of him.
This justification is insufficient in several ways. First, it is imprecise. Because of its imprecision, it almost certainly overstates the cost of using the distribution system. A typical homeowner who uses solar power would, if not using solar power, have an electric bill of about $100 per month, $1200 per year. Under First Energy’s proposal, that same homeowner, using solar power, would still have a bill of about $600 per year. It is not plausible to say that each solar-powered homeowner imposes a cost of $600 on the electrical grid each year.
Even if the typical solar-powered home imposes a cost upon the grid, it is wholly or partially offset by what First Energy charges users of solar power. Right now, First Energy charges all homeowners who have solar power $5.00 per month, even in months when they contribute more electricity to the grid than they draw from it.
Second, it ignores the financial benefit that solar-powered customers confer upon the power companies. One of the curses of the power generation business everywhere is that the companies have to plan for, and build capacity for, peak demand. They cannot just build enough capacity to supply the average amount of electricity that people need. They must build capacity both in the power plants and in the distribution system to meet the demand when demand is greatest. Even if much of that capacity is unused most of the time, the utility companies must bear the expense of building and maintaining it.
In other states (but not West Virginia) some companies pay customers to install energy saving equipment. It is in the utilities’ interest to do so because it is cheaper than the cost of building new capacity.
In West Virginia, the owners of solar equipment are offering the power companies an even better deal. They are not asking that the companies pay for their systems. At their own expense, they have voluntarily given the power companies a way to manage their peak demand problem. In return, it is only fair that they receive the retail price for their power.
Solar power is particularly useful in helping meet the peak demand. Peak demand typically comes during the summer, when the sun is blazing and everybody is running air conditioners full blast. That is when homeowners who have solar power are contributing the most electricity to the power grid.
Homeowners who install solar power are helping the United States move toward a national goal of reducing greenhouse gasses as a way to slow down climate change. The United States has set a national goal of reducing greenhouse gasses by 50% from 2005 levels by 2030. Solar power helps us get there. It is an activity that should be encouraged, not discouraged by underpaying for the electricity produced.
Finally, the Public Service should avoid killing an entire industry. Right now, solar power installation is a growing industry in West Virginia, employing, by one estimate, 536 workers and growing. If homeowners cannot be fairly compensated for the excess electricity they produce, they will be dramatically less likely to install solar power.
Right now, solar power installation is a growing industry. It may be able to survive a blow such as the one First Energy proposes. It may not. If it does not, the Public Service Commission will have succeeded in killing one of West Virginia’s few growing, thriving industries. It is hard to see how killing an industry which is—by reducing climate change and saving West Virginians money on their electric bills—serving the public interest is consistent with the Public Service Commission’s mandate to protect the public interest.
The Public Service Commission is still accepting comments on the proposed rule. It will probably make a decision in February 2024.
Missing Frank, again
When the current net metering rule was adopted in 2007, much of the advocacy was done by Frank Young. He was one of the negotiators who reached the agreement that became the current rule. It is much too dramatic to say that this change wouldn’t be happening if Frank were still alive. It’s not too dramatic to say that we sure could use his help this time around. It’s just another reminder of how much we miss Frank.