Distributed Generation Decisions at State Level Hint at Ongoing Controversies

The proliferation of rooftop solar and other forms of distributed power generation is forcing state legislatures and public utility commissions to grapple with questions around net-energy metering and the value of distributed generation. Weighing the benefits of clean, distributed power against the incumbent electric utility companies’ need for financial returns on infrastructure investments is leading may jurisdictions to tack on a charge to distributed power producers to pay for the infrastructure and grid upgrades. While the rulings appear to be positive for distributed generation, the real question of their impacts won’t be answered until regulators decide on the specific numbers.

As reported in an Electrical Wholesaling feature in the April 2014 issue, the rise of distributed generation promises to completely reshape how electric power is provided throughout the United States as falling prices and technological advances in generation and storage equipment cross the threshold to become cost-competitive with centralized grid power. Some recent rulings in Oklahoma, Vermont, Minnesota and South Carolina suggest that distributed power will hold an increasingly prominent place in the electricity mix.

Oklahoma Governor Mary Fallin signed a bill last week allowing utilities to create a new rate class for customers who seek to sell power onto the grid, charging them a higher rate to support utility infrastructure, which raised the ire of solar supporters. But the following day the governor issued an executive order supporting expansion of solar and other distributed generation technologies as part of the Oklahoma First Energy Plan program and directing regulators to proceed with those goals in mind.

The order says the bill “does not mandate tariffs or other increases for distributed generation customers.” Fallin’s order emphasized that “prior to implementation of any fixed charges, this Bill allows the Commission to consider the use of all available alternatives, including other rate reforms such as increased use of time-of-use rates, minimum bills and demand charges.”

Vermont passed a law that raises the cap on net metering to 15% of each utility’s peak demand. The law includes an “off-ramp” protection allowing utilities to develop alternative net-metering programs if solar penetration passes a certain threshold.

South Carolina legislators negotiated a compromise law to promote solar growth while supporting utilities’ efforts to recoup costs while integrating the distributed generation onto their grids. The bill includes provisions for third-party ownership of solar systems and an increase in the net metering cap to be determined by the public utility commission.

Minnesota passed a bill establishing the first statewide “value of solar” tariff (VOST), an alternative to net-metering programs that was pioneered in Austin, Texas. Under a VOST program, instead of rolling back the meter as is typical in net metering, solar system owners would pay the going rate for the power they use and the standard infrastructure charge, then be credited back at a set rate for each kWh sold back onto the grid. The VOST is recalculated annually and its impact on solar system owners depends entirely on where that credit is set.