Vitriol is to exploit the public’s inclination to favor solar to make utilities pay an exorbitant political price to have policy decided on the merits.
David Raskin is a partner in the Washington, DC office of Steptoe & Johnson LLP. He has been representing clients in the electric power industry for over 35 years.
Charles Cicchetti and John Wellinghoff have authored a recent article in this publication titled "Solar Battle Lines," (Public Utilities Fortnightly, December 2015) which condemns utility proposals to include demand charges in their retail rate designs to redress problems created by net energy metering. "Solar Battle Lines" avoids the real issues and contributes to a serious misunderstanding of electricity pricing. Populist rhetoric in favor of rooftop solar energy and against utility monopolies is almost certain to have broad emotional appeal, but net energy metering is the prototypical wolf in sheep's clothing. Messrs. Cicchetti and Wellinghoff are doing the public no favors by evading a rational discussion of this ratemaking practice.
The Economics of Net Metering
The economics of net energy metering are straightforward. If a utility uses a volumetric per kilowatt-hour (kWh) retail rate, and rooftop solar owners are allowed a full offset to their retail charges for every kWh of energy produced behind the retail meter, every kWh of rooftop solar energy produced is being valued at the full retail rate. This is true for both the kWhs consumed by the retail customer behind the meter and, in most net metered states, all of the excess kWhs delivered to the host utility.