Inside Clean Energy: Solar Industry Wins Big in Kentucky Ruling

Source: By Dan Gearino, Inside Clean Energy • Posted: Sunday, May 23, 2021

State regulators find that the value of rooftop solar is much more than a utility had argued.

Solar systems at a farm in Versailles, Kentucky. Photo courtesy of Solar Energy Solutions

The people in Kentucky’s small rooftop solar industry are used to fighting for their livelihoods against utilities, but they aren’t used to winning.

So a ruling last week from the Kentucky Public Service Commission was a surprise and a relief.

The commission rejected a proposal from the utility Kentucky Power that would have gutted net metering, the policy that says rooftop solar owners can sell their excess electricity back to the grid.

Kentucky Power customers with rooftop solar have long been able to get the full retail rate for excess electricity. The utility had proposed to cut that rate to 4 cents per kilowatt-hour. The commission ruled that the rate will be 10 cents per kilowatt-hour, much more than the utility wanted and only a little bit less than the current level.

“My initial reaction to this decision was one of relief,” said Matt Partymiller, general manager at Solar Energy Solutions, a solar installer in Lexington and president of the Kentucky Solar Energy Industries Association, a trade group. But, he added, “that feeling of relief was quickly followed by the realization that this part of a long continued effort that we’re going to have to be fighting against.”

Kentucky’s utilities and many of its elected officials have worked to stop rooftop solar from gaining a foothold, arguing that solar customers do not pay an appropriate share of the costs of maintaining the grid, even though the state has very little rooftop solar. Kentucky ranked 40th in the country in electricity generation from small solar systems in 2020, right behind Arkansas and ahead of Kansas, according to the Energy Information Administration.

A 2019 law, signed by then-Gov. Matt Bevin, a Republican, said that new solar customers would no longer get the full retail price for excess electricity. Utilities would need to submit proposals for the new rates to the commission.

Kentucky Power, a subsidiary of Ohio-based American Electric Power, was the first major utility to propose new rates, making this case the commission’s first opportunity to show how it would interpret the law.

In its ruling, the commission disagreed with Kentucky Power’s arguments and found that the utility was undercounting the financial benefits of rooftop solar for the grid.

Also, the commission called attention to how small the problem was that Kentucky Power was trying to solve, noting that there were only 46 households benefiting from net metering in the utility’s territory in 2020.

The utility said those households were getting an unfair subsidy from net metering that added up to about $40,000 per year. The commission responded by saying that this “purported subsidy” amounts to only 24 cents per year for each of the utility’s non-solar customers and is a small fraction of other subsidies embedded in Kentucky Power’s rates.

“It was Kentucky Power’s intent to provide a fair and balanced approach for all customers, not just the net metering customers,” said Cindy Wiseman, a Kentucky Power spokeswoman, in an email in response to a question about the commission’s ruling. “Our regulatory team is still reviewing the order and discussing it to gain a better understanding of the path forward.”

The three-member commission has one member who was appointed by Gov. Andy Beshear, a Democrat, and two who were appointed by Bevin.

Partymiller, whose company has about 35 employees and may be the largest solar installer in the state, was careful not to overstate the significance of the decision, because it just covers one utility, and the commission still needs to rule on other utilities’ plans.

He said the rooftop solar industry has some big challenges in Kentucky even with this ruling. One of the biggest is a law that sets a cap on how much customer-owned electricity generation can come online before there is a drastic cut in net metering rates. This law, which predates the 2019 net metering legislation, will kick in when rooftop solar and other customer-owned resources hit 1 percent of peak electricity demand in each utility’s territory.

Kentucky Power probably is years away from hitting the 1 percent cap, but the mere existence of the cap is a problem because it puts a ceiling on growth for solar companies, Partymiller said.

He said he would like to see the Legislature and governor increase the cap or repeal it, but he also knows that there is a long fight ahead to make that happen.

I have read many decisions by state regulatory commissions about net metering, and the Kentucky ruling stands out for the methodical way it dismantles some common arguments made against rooftop solar about how non-solar customers are heavily subsidizing customers with solar. I would not be surprised to see the Kentucky commission’s findings cited in other states to argue for the benefits of rooftop solar, something I was not expecting, but there it is.