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Major Utility Wants Lower Net-Metering Rates

North Carolina's Duke Energy will seek a lower reimbursement rate for customers who supply the grid with solar-generated power

Posted on Jan 28 2014 by Scott Gibson

Duke Energy in North Carolina wants to pay homeowners less than the retail price for the photovoltaic(PV) Generation of electricity directly from sunlight. A photovoltaic cell has no moving parts; electrons are energized by sunlight and result in current flow. power they sell to the grid.

According to published reports, including an Associated Press story published by Businessweek, the utility will seek permission from state regulators to lower net-metering rates from the current 11 cents per kilowatt hour to a number that reflects the cost of generation--between 5 cents and 7 cents per kWh.

The North Carolina Utilities Commission established rules about 10 years ago in which homeowners with PVPhotovoltaics. Generation of electricity directly from sunlight. A photovoltaic (PV) cell has no moving parts; electrons are energized by sunlight and result in current flow. systems were to be paid the full retail price for any excess power they produced. But a company official says federal law requires Duke to pay only the generating cost.

"Right now, we need to collect 11 cents for every kilowatt hour from all across our system to fairly cover the costs of providing that service," said renewable generation development vice president Rob Caldwell. "When we give a customer 11 cents for something that's worth less than that--5 to 7 cents in our example--that means other customers are going to have to make that up because our costs are fixed."

North Carolina has doubled its output from rooftop solar arrays in the past two years, the AP quoted Caldwell as saying, while demand for electricity in the U.S. has shrunk slightly.

David Pomerantz, a spokesman for Greenpeace, called Duke's intent a "power grab to make sure it maintains a monopoly on being able to sell electricity in North Carolina," the AP reported.

Utilities raise the same issues elsewhere

The North Carolina flap isn't unique. Similar arguments are being raised by utilities in other states, including California, Arizona, and Hawaii. Power companies contend that high reimbursement rates paid to homeowners with solar installations unfairly penalize nonsolar families, who end up paying an unequal share of maintaining the utility's grid.

Duke CEO Jim Rogers in March called the proliferation of solar panels a "potential threat to us over the longer term and an opportunity in the short term," according to an article posted at renewableenergyworld.com.

"If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using us for backup," he said.


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1.
Wed, 02/05/2014 - 12:26

Net metering
by stephen sheehy

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I hate to say this, but Duke Power has a point that does need to be addressed. My electric bill in Maine comes from Central Maine Power Co. CMP doesn't generate electricity. It delivers power generated by other companies. They bill for the cost of the power and also for the cost of delivering it to my house. I pay about .08 per kwh for the electricity and about .08 for delivery. If I make my own power, how do I justify, on economic grounds at least, why CMP should pay me .16? If it sells the power I generate to someone else for .08, it is losing money. As a regulated utility, it is entitled to make a profit.
Paying me .16 is good public policy, if we are trying to encourage me to produce solar power, but we do need to address the point made by the utilities.


2.
Wed, 02/05/2014 - 19:06

net metering
by David Fay

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Re: steven sheehy

What makes you think it costs CMP a certain amount per kWh to deliver your electricity? That's the way they charge, but that's just a billing convenience. Delivery costs them more or less a fixed amount. If anything, it goes down with more kWh's, not up (e.g., businesses in the city use more kWh's but have very short lines to maintain).

I agree that power generated by solar panels shouldn't cost the electric company full retail price, but it shouldn't cost them wholesale price either.

David


3.
Wed, 02/05/2014 - 21:37

Net metering
by Dennis Heidner

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Remember Duke is an investor owned utility (IOU) for IOU's revenue stream is important. Most IOU's do not really want to encourage energy efficient houses or programs; in general they do so because they are being pushed into it by the public or regulators. IOU's would be perfectly happy with more consumption of electrical power and a demand response (DR) program that allowed them to curtail use of electricity when they have to buy on the spot markets at higher costs.

In the Puget Sound area, several years ago my IOU cost of distribution (and some transmission) was about $30/MWhr... or roughly $0.03/kWh. Retail rate was about $0.08/kWh. Their wholesale cost was probably around (a guess) $0.04/kWh.

They are solar - and energy efficiency friendly - because the alternative is raising a large chunk of capital and building out more lines and generation. At some point in time they will have to do so also... and they then may change how they view energy demand. Duke has applications in process to build an additional nuclear power plant in their service area, and they are also building large centralized solar farms.

As for the use of the distribution lines - several years ago FERC pushed ISO's to start adopting a model for location marginal pricing (LMP) which means the further the utility is away from the point of generation - the higher their cost of the delivered energy. If the same concept were to move down to the local distribution network - that might make charging a fee for redistributing the surplus power from roof tops reasonable. With smart meters and the grid (GIS location) information - they could do so... calculating how far any excess travels before it is effectively consumed by a neighbor. But they are not likely to do so - because they are driven by profits. They do not have an reason (from their viewpoint) to pay residential solar producers based on LMP between producer and user.

Duke and others like to argue that roof top residential customers are taking money from neighbors are conveniently forgetting to tell the rest of the story...


4.
Thu, 02/06/2014 - 13:52

delivery distance is near zero
by Mark Bartosik

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As Dennis points out "location marginal pricing" is a potential way to assess the delivery charge.
In my case, I paid for the wire that goes from our house to the utility pole, and so did our neighbors. So if our immediate neighbor ends up consuming all our excess generation, then the distance traveled on the utility's network is one crimp contact, consider it too small to measure - less than an inch! Unless more neighbors install solar it is unlikely that the excess electricity from my system will make it beyond the end of the street. So until we are generating significant percentages of electricity from solar the distribution costs are minimal, and so it is justified to pay full retail cost (power gen and distribution).
I only in fact get power gen costs refunded, but that's only if I generate more than I consume (which is rare). Utility LIPA - Long Island Power Authority.

It appears to me to be a way to stifle solar by a utility that sees a threat to profits.


5.
Fri, 02/07/2014 - 16:45

Edited Fri, 02/07/2014 - 16:52.

portfolio standards are in the mix too
by Leigha Dickens

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North Carolina is a funny state when it comes to energy policy. We have a Renewable Energy Portfolio Standard which requires utilities like Duke (who, after the merger with Progress, is now essentially the only utility in NC...hmm....) to produce a percentage of their power from various renewable sources, including PV. My company, Deltec Homes, has a buy-all-sell-all system on our manufacturing plant where we sell all of our solar generation to Duke at wholesale price plus an adder for the value of the "Renewable Energy Credits" that Duke needs to say it is meeting the portfolio standard. The total ends up a little more than retail price, which was part of the intent of the REPS in order to incentivize solar development in the state. My house, meanwhile, has a net-metered system, in which I must grant Duke sole ownership of the RECs from my system without being paid for them. So, if paying only wholesale cost for excess generation in my net-metered system is justified, what of the value of the REC that my investment in a PV system is allowing Duke to claim? I'm sure they'd rather abolish the portfolio standards altogether, but, since that measure didn't make it through the state legislature, it feels like Duke is trying to have it both ways here.

Nationwide this isn't just a push away from PV, residential energy efficiency programs are under fire too because they, too, decrease utility revenues. I was just recently pointed to a report that basically describes Duke's argument here and proposes resiting incentives for solar and energy efficiency alike, even REPS programs. It makes me gnash my teeth, but there is a valid point here. This issue of essential infrastructure with high associated costs in an economy of declining sales does bear considering. North Carolina has also proposed an extra tax for fuel efficient vehicles because less fuel consumption means less gas tax paid to the state, while transportation infrastructure costs remain the same--a similar issue in a different energy sector.

But, to reduce how much one can lower her energy costs by choosing other technologies, or even to toss a special fee at those who consume less, is not the way to solve that issue, doing that misses the point about why we must have these behavior and technology changes. If we can't have a carbon tax or cap and trade, if we can't have tighter REPS or tighter fuel economy standards, then we need every tool we still have to continue to encourage individuals to make behavior and technology choices that reduce energy consumption from sources that also create large-scale environmental problems. If utilities want to start talking about "fairly covering a cost to provide the service," then let's start talking about fairly covering the costs of climate change.


6.
Fri, 02/07/2014 - 17:16

Response to Leigha Dickens
by Martin Holladay, GBA Advisor

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Leigha,
I really appreciate your thoughtful comments. Thanks.


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