Secretive group’s petition to FERC could ‘end net metering as we know it,’ lawyers say

Source: By Catherine Morehouse, Utility Dive • Posted: Wednesday, April 22, 2020

A recent filing submitted to the Federal Energy Regulatory Commission could “end net metering as we know it,” according to legal experts.

The petition from the New England Ratepayers Association (NERA) asks FERC to “declare that there is exclusive federal jurisdiction over wholesale energy sales from generation sources located on the customer side of the retail meter.” In other words, NERA makes the case that any behind-the-meter, or customer-sited, energy generation is a wholesale sale, subject to FERC jurisdiction.

The group’s points echo some of the issues raised by utilities and their trade groups, which have long argued that forcing utilities to pay rooftop solar owners for the excess power they produce is unfair to ratepayers who don’t site solar. But the fact that the issue is being raised by a non-profit regional ratepayers group is raising eyebrows for some.

Public Citizen has filed to intervene in the motion, hoping to force NERA to disclose its funders.

“NERA is likely backed by very powerful, well-funded interests, and they are extremely smart and aggressive about their strategies,” Tyson Slocum, director of Public Citizen’s Energy Program, told Utility Dive.

Should FERC regulate your rooftops?

Net metering compensates solar producers for the amount of generation they produce but don’t consume. Utilities pay for that excess generation at a retail rate, which NERA notes often exceeds the wholesale rate.

The group argues that in instances where “a portion of the energy produced behind the retail meter either exceeds the customer’s demand or is designed to bypass the customer’s load and is physically directed entirely to the local utility,” that exchange should be considered a wholesale sale, regulated by FERC.

In effect, the policy would not have immediate consequences, but would change the federal commission’s precedent set in previous cases, where the commission ruled net metering compensation was not the same as a wholesale sale. NERA disagrees with this premise, arguing that it was “improper for the Commission to do so,” in an FAQ emailed to Utility Dive by NERA president Marc Brown.

If successful, the petition would ensure that “any excess energy delivered to the utility at any time is a wholesale sale, subject to FERC jurisdiction,” Jeff Dennis, managing director and general counsel at Advanced Energy Economy told Utility Dive. “Therefore, it’s either a sale under [the Public Utilities Regulatory Policies Act (PURPA)]  subject to avoided cost pricing, or the customer essentially has to have a rate on file with FERC.”

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The technical feasibility of such a shift is not clear, Ari Peskoe, director of the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program. told Utility Dive. Most rooftop solar would likely fall under the jurisdiction of PURPA as a qualifying facility, and therefore be priced based on the avoided cost of generating that power, argued the petition.

But under that scenario, you would need to distinguish between the energy that someone consumes from their utility and the energy that someone exports from their house to the utility, which would potentially require a second meter on the solar system itself.

“The practical implication would have to be that you’d have to add this giant cost on all these presumably existing and new rooftop solar facilities that they would need the second meter,” said Peskoe. “I don’t know how that would work.”

A potential fight for states

Laws and regulations on net metering vary state by state, but in total 41 states have some sort of net metering policy in place.

Several states are in the process of examining successor tariffs to net metering, including New York and Utah. But some state policies have fallen short — many point to Nevada and Maine as examples of states where repeals of net metering led to economic disaster for solar.

“For rooftop customers, net metering has been a successful policy that has helped drive the growth of solar around the country, while lowering electric bills for homeowners and small business owners,” Katherine Gensler, vice president of regulatory affairs for the Solar Energy Industries Association told Utility Dive in an email. SEIA is still reviewing the NERA petition, but said “Nevada is a perfect example of what happens to local clean energy economies when states gut net metering.”

States would likely not be happy with such a disruption of current policy, said Dennis, because it would complicate some of those current proceedings on net metering.

“A state couldn’t simply decide, ‘Well, maybe we want to rethink the rate structure here,'” he said. “A jurisdictional determination like this would really take a lot of what states believe is in their control,” including the rates, terms and conditions that surround self-generation.

But NERA says it doesn’t see itself as interfering with state rights.

“Every state will still have the ability to support solar or any other form of generation. There are numerous tools that state legislatures and regulatory bodies have at their disposal to support favored generation,” such as tax credits, zero emissions credits, and other incentives, the group said in its FAQ.

Although NERA says it represents ratepayers in New England, it asserts that the most effective way for it to attack this policy is at the federal, not state, level.

“[N]et metering is having an unfair and harmful impact on ratepayers, especially low-and middle-income families. Given this problem, NERA has chosen to challenge net metering at the body which has the proper jurisdiction over wholesale electricity transactions,” the group said in its FAQ.

But some are suspicious of the group’s backing. The two lawyers tasked with the case have traditionally worked for large industry trade groups, and the cost to hire them plus the $30,060 filing fee at FERC raises the possibility for some that the group may have more resources than just a grassroots consumer group.

“The attorneys that are on this petition are typically working with big utilities and other energy companies,” said Peskoe. “They don’t typically work with small nonprofits and put together these extensive petitions.”

Who’s funding NERA?

Though NERA has existed since 2013, it has largely stuck to New England rate decisions. This is only the second time it has filed with FERC

NERA first filed with FERC in 2018, asking the commission to rule against a New Hampshire law that provided subsidies to biomass generators. The filing caught the attention of consumer advocacy group Public Citizen and two New Hampshire legislators, who in July 2019 filed to intervene in the case, asking FERC to demand NERA disclose the identities of its members.

In September, FERC ruled the state law invalid and “completely ignored” the request to force the group’s disclosure, though that request was filed after the deadline, said Slocum.

This time, FERC is less likely to pass over the group’s intervention, he said.

NERA includes 12 company members and received $245,000 in total revenue in 2018, Public Citizen pointed out in its testimony. Contributions make up the entirety of the group’s revenue, according to its 990 tax forms, averaging approximately $20,000 per member.

“A $20,000 financial contribution to become a ‘member’ of the New England Ratepayers Association orients its membership more in line [with] a corporate trade association,” Public Citizen wrote in its comments.

NERA describes itself as “an independent non-profit” that was “established to give a larger voice for the families and businesses that are served by regulated utilities.” NERA’s Brown did not respond to multiple Utility Dive questions about its funding and membership.

“NERA isn’t some rag tag bunch of dreamers. They are a well financed corporate front group pursuing a smart, aggressive playbook,” said Slocum.

“Why now?”

After last week’s FERC meeting, Chair Neil Chatterjee told reporters he had not yet had time to review the net metering filing.

“My focus this week has been on agenda items and, of course, staying on top of our response to COVID 19,” he said at the time.

FERC on April 15 set a May 14 deadline for groups to intervene and file comments, which Peskoe said is too quick of a turnaround for such a big proposal. “There’s no urgency,” he said.

In general, the intention behind filing this petition now is unclear.

FERC disclaimed jurisdiction for net metering a decade ago, and there have been no major developments in the underpinnings of the policy for some time now, said Dennis. NERA says “recent cases” at the D.C. Circuit Court of Appeals “reject the legal theory used to disclaim jurisdiction and identify the applicable jurisdictional transactions as, in fact, wholesale sales,” making the case relevant now, but rulings referred to in its filing were made in 2012 and 2013.

“There are a lot of significant ‘Why now?’ questions that I can’t really answer at the moment. Maybe it’ll become apparent later,” said Dennis.

Slocum said there is undoubtedly a timing element. “Everything about the timing of this filing, and it’s potential sweeping effect on solar policy, is intentional,” he said.

The Electric Power Supply Association and the PJM Interconnection’s independent market monitor, along with Public Citizen, have applied to intervene so far.

EPSA does not have a position on the matter yet and the Edison Electric Institute, which represents investor-owned utilities in the U.S., is still reviewing the filing.