My Turn: More net metering would be a good thing

For the Monitor
Published: 7/4/2020 6:00:34 AM

In his June 22 Monitor op-ed (“Too much net metering not a good thing”), Rep. Michael Vose mixed some facts with some fiction.

He noted correctly that over the past decade the wholesale price of electric energy in New England has declined markedly (from 6 cents per kilowatt-hour in 2010 to under 3 cents per kilowatt-hour today), while the region’s “full retail rates” are still among the highest in the country (19 cents per kilowatt-hour for a typical Eversource residential customer).

He also correctly noted the reason for the drop in wholesale rates: free market competition. Congress, state legislators, and state regulators have broken up regulated utilities’ century-old monopoly on electric power production. Generation of electric energy has been opened up to lower-cost competitors, resulting in lower energy prices for consumers.

That left large investor-owned utilities like Eversource with only two remaining profit centers: transmission lines and distribution networks, or “T&D.” These delivery systems are natural monopolies. Their rates are set by federal agencies with jurisdiction over interstate transmission lines and state regulators like the NHPUC, which sets rates for the “poles and wires” outside your home. T&D costs have continued to rise even as wholesale energy costs have declined.

From the point of view of large utilities like Eversource, the problem with “too much net metering” is that it threatens revenues from their only remaining profit centers – especially transmission. Net metering “Distributed Energy Resources” (DERs) send locally produced renewable energy just up the street – from a roof, field, covered landfill, or river – to the net-metering “customer-generator’s” near neighbors. Delivery uses only a few hundred yards of utility distribution wires, for which the utility is paid: both the selling customer-generator and its neighbor continue to pay distribution charges as part of the 19 cents per kilowatt-hour full retail rate.

But here’s the thing that worries utilities like Eversource: smaller DERs export net-metered energy to the grid for consumption by their neighbors without using utility transmission facilities. As this becomes clear to ratepayers and legislators, they will demand that utilities not impose artificial transmission charges for the delivery of renewable power that in point of physical fact never uses their more expensive transmission lines.

The central fiction in the Vose op-ed perfectly illustrates this point. Referring to HB 1218 and its proposed increase from 1 MW to 5 MW in the net metering cap for municipalities and businesses, Vose argued: “Such large systems would produce generation well in excess of what any residential customer and most, if not all, New Hampshire businesses could possibly consume. The bulk of this generation would be sold back to the utility at the standard offer rate of 8 cents per kilowatt-hour when its wholesale value is just 3 cents. The difference represents an over-market cost for raw electricity of 5 cents.”

Rick Labrecque, manager of Distributed Energy Resource Planning for Eversource, explained what really happens at a Jan. 2 meeting at the company’s offices. He acknowledged that Eversource accounts for most net-metered energy transactions as “load reduction” (which incurs no transmission charges), but that it arbitrarily designates an unspecified number of larger customer-generators (those who earn $10,000 a year or more) as “wholesale generators” rather than “load reducers.”

Using what he acknowledged was “sort of a subjective approach,” Eversource apparently charges full T&D rates both to this arbitrary subset of larger customer-generators and to their neighbors who receive the locally generated excess power.

Eversource thus charges twice for T&D – from the net-metering customer-generator to the ISO-NE wholesale delivery point, and back again to the customer-generator’s neighbors. This, despite the fact that the excess energy has actually traveled only a few hundred yards up local distribution wires. The perverse and unnecessary result is that Eversource “buys” net-metered excess energy at the default energy service rate of 8 cents per kilowatt-hour and “sells” it into the ISO-NE energy market at the wholesale rate of 3 cents per kilowatt-hour – thus generating a “paper loss” of 5 cents on each kilowatt-hour of these net-metered exports to the grid.

But beyond the transmission fiction, Vose begs the answer to the real question: Should net-metered energy be valued at the wholesale rate of 3 cents per kilowatt-hour or the retail rate of 8 cents per kilowatt-hour (as the NHPUC has determined)? The value of excess energy delivered to a customer-generator’s neighbor is exactly the same as the value of default service energy the utility would otherwise deliver to that same ratepayer – after “processing,” i.e., after being generated from fossil fuel transported from distant states, bundled into default service by the middle-man supplier, and sent many miles over the utility’s T&D networks.

And what would that neighboring ratepayer pay the utility for default service? Why, 8 cents per kilowatt-hour – exactly what it pays for the power produced by its net-metering neighbor, and exactly what the customer-generator is paid for the net energy it produces from sun, wind, or water.

Eversource would prefer that net-metering customer-generators be paid at the wholesale rate of 3 cents per kilowatt-hour because that would justify charging ratepayers for transmission services that are not actually used in the delivery of net-metered energy on local distribution circuits. But if these energy exports to the grid are properly accounted for as “load reduction” rather than “wholesale sales,” there would be no “5 cent over-market cost for raw electricity” to redistribute among Eversource ratepayers.

HB 1218 would have required load reduction accounting for net-metered energy exports to the grid. It will not become law this year because Republican representatives killed all remaining House bills in a party-line vote on June 11.

But SB 159, sponsored by Sen. Jeb Bradley, contains identical “load reduction accounting” provisions. It was vetoed by the governor, but the state Senate overrode that veto in early March. The House will have its own opportunity to override in the fall. It’s past time to relieve New Hampshire ratepayers of charges for transmission services that are simply not used when net-metered renewable energy is exported to the grid.

(Rep. Howard Moffett, D-Canterbury, is vice chair of the House Science, Technology and Energy Committee.)

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