Kentucky Net Metering Horserace Helps Consumers

Most states have considered net metering and established some policies that compensate private solar owners for electrons generated from owned or leased panels on rooftops or ground-mounted systems. PACE took a close look at the state of the states’ approaches last year in our report, “Net Metering: Costs, Customers and a Smarter Way Forward.”

Our central point in that report still rings true today – there is no policy justification for paying private solar generators more than the fair market value for electrons they send into the grid. Just as for any service or business dependent on commodity inputs, wholesale prices have to drive utility decision-making and fulfilling the obligation to serve customers as cost-effectively as possible.

This year, as in many previous legislative cycles, states continue to wrestle with net metering questions. Kentucky legislators have taken a very deliberate and thoughtful approach, beginning last fall when Chairman Jim Gooch led the Natural Resources and Energy Committee through a series of informational hearings on net metering, offering many voices the chance to contribute data and ideas. In early January, H.B. 227 emerged, and evolved over several more hearings and stakeholder conversations. It passed the Kentucky House in early March.

H.B. 227 was written as a response to a long-standing net metering policy that valued private solar electrons at 300 percent above the wholesale cost of power. While the actual amount of private solar installations was, and remains, fairly small in the state, the overly generous rate was already costing other consumers more than their fair share.

Why? Because when private solar customers receive an exaggerated retail rate for their electrons, they pay less than their fair share in most monthly bills for upkeep of the poles, wires and people that serve everyone (and which, ironically, make their own sales back to utilities possible).

Over time, a healthy debate among lawmakers and stakeholders in Kentucky helped H.B. 227 develop and pick up a broad supporting coalition, including the Kentucky Association of Economic Development and the International Brotherhood of Electrical Workers.

The bill contemplates that an informed and open process at the Public Service Commission will result in a new, fair and sustainable net metering rate. It grandfathers existing private solar customers for a lengthy term of 25 years. Most importantly for consumers, it ensures that a sustainable private solar business can continue to flourish in the state.

As the Kentucky legislative session comes down to the wire, PACE hopes the odds favor consumers and that we’ll see H.B. 277 post another victory for the smarter way forward on net metering.