The Louisiana Public Service Commission (PSC) this past Wednesday adopted common-sense reforms to the state’s policy on net metering. This policy refers to situations where rooftop solar consumers are paid for excess electricity they sell back into the grid.
Under the reforms, current net metered rooftop solar owners – and those that install their systems by the end of the year — would continue to receive the retail rate for excess electricity sold into the grid for 15 years. New rooftop systems coming online in 2020 would receive the avoided cost or wholesale rate for excess power sold to their electric service provider. This change is a big shift in policy that is a good step for Louisiana customers as a whole.
Back in 2015, Energy Fairness discussed a study published by the state’s PSC that found a cost-shift of more than $2 million from rooftop solar owners to non-solar customers. This cost-shift was in addition to the $42 million annual cost of the state’s tax credit for solar installations.
Louisiana is not alone in its efforts to reform outdated net metering policies. Policymakers from Arizona to Michigan to Kentucky have all implemented much-needed changes to the inequities embedded in these policies.
Arizona was the first to act in correcting the cost-shift from rooftop solar to regular utility customers. In 2016, the Arizona Corporation Commission (ACC) voted 4-1 to end net metering for all new rooftop installations in favor of a rate that was closer to paying the avoided cost/wholesale rate for all future rooftop installations. Taking a reasonable approach, the ACC grandfathered in net metering rates for existing rooftop owners for 20 years.
Though there was an initial drop-off in new rooftop installations after net metering was eliminated, applications by rooftop systems to interconnect with the grid are now back at 2016 levels. In other words, sensible reforms don’t kill the public appetite for solar.
While the ACC was reconsidering net metering policies in the Desert Southwest, almost 2,000 miles away in Michigan the state legislature eliminated net metering and authorized the state’s public service commission to establish a new rate for rooftop systems. Earlier this year, the Michigan PSC reduced the net metered rate to more of a wholesale rate and grandfathered in existing rooftop systems for 10 years at the net metered rate.
Following Arizona’s and Michigan’s lead, Kentucky Governor Matt Bevin signed into law SB 100, which allows utilities to file for adjustments to their current net metering rate for new rooftop systems coming online in 2020. The new law grandfathers in the net metered (retail) rate for existing rooftop systems and those coming online before 2020 for 25 years unless they sell their property.
These changes in Arizona, Kentucky and Michigan reflect a net metering approach we’ve supported for more than eight years. Namely, to effectively manage the growth of residential solar, state policies must A) treat all customers fairly by avoiding cost shifting; B) accurately reflect both the benefits and costs to the grid of solar; and C) not distort the energy marketplace by paying excessive rates for rooftop generation.
Louisiana, Michigan and Arizona should be commended for their actions in implementing these goals. Let’s hope other states follow their lead.