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Mich. regulator staff's proposed rules could cut net metering compensation

A plan proposed by regulatory staff to revise Michigan's net metering policies could lower compensation to customers with rooftop solar and other forms of distributed generation.

The Michigan Public Service Commission is required under energy reform legislation passed in 2016 to study and design an "appropriate" tariff that represents the costs of service for customers who participate in distributed generation or net metering programs. During an Oct. 18 workgroup meeting, the PSC staff shared a draft paper proposing a "concept tariff" that would credit distributed generation customers at lower values for the excess power they sell back to the grid than the retail rate many now receive. The policy would apply to distributed generation from renewable sources including power produced from solar, wind, geothermal, biomass, tidal movements and waste-to-energy facilities.

Under Michigan's current net metering policy, customers with distributed generation systems up to 20 kW receive credit at the full retail rate for all excess power. Customers with systems above 20 kW, and up to 150 kW, which typically include the commercial and industrial class, pay the full retail rate for power from their electric provider and receive the generation portion of the rate, or a wholesale rate, for excess generation they deliver to the grid. In Michigan, residential retail rates for investor-owned utilities averaged about 15.5 cents/KWh to 19 cents/KWh as of Oct. 1, depending on the utility, according to data from the commission.

In the paper, the PSC staff proposed an "outflow credit," for excess distributed generation including solar. Though the paper does not include actual tariff values, an initial "back-of-the-napkin" estimate shows the outflow credit at 8 cents/kWh based on a utility's avoided costs, Julie Baldwin, manager of the PSC's renewable energy section, indicated during the workgroup meeting. The commissin will post its calculation of the outflow credit on its website by Nov. 1, Baldwin said. But the precise tariffs must be determined by the three-member commission through utility rate cases filed after June 1, 2018, according to Baldwin's presentation. The PSC is taking comments on its draft paper through Nov. 3.

The commission in July issued an order that customers who apply for the distributed generation program during the interim period, before new rules take effect, can continue to net meter for 10 years.

In an interview, Sunrun Inc. Director of Public Policy Amy Heart said the tariff, depending on its design, could "eliminate the current net metering program and in the process devalue rooftop solar."

Alison Williams, manager of clean energy at the Edison Electric Institute, said during the meeting that customers who put up rooftop systems or other forms of distributed generation are always users of the grid. "Under most rate design structures, net-metered private solar customers do not pay enough in fixed costs," Williams said in a presentation, referring to costs to maintain the grid and ensure backup power is available when solar production fluctuates.

"We are hopeful that through additional conversations over the next few months that we can get more data on [the benefits] solar brings but also talk about alternative rate design solutions that address the legislative directive and make sure the solar industry can grow in Michigan," Heart said. The commission aims to complete a cost of service analysis on distributed generation later this year to determine whether net-metered projects cover their fixed costs, Baldwin said.

The workgroup floated the idea of using hourly production and consumption data to figure out when a customer ought to be credited, but Heart said the method could be confusing for customers to understand. She is open to other forms of rate design such as time-of-use rates or a "minimum bill" mechanism.

The state's two largest utilities said they are still evaluating the draft paper. CMS Energy Corp. subsidiary Consumers Energy Co. said in an email, "We appreciate the MPSC staff's thoughtful approach to seeking information and input into meeting the requirements of Michigan's 2016 energy law. We have, and will continue to, support solar energy as a portion of our diversified portfolio to provide reliable and affordable energy to our customers."

DTE Energy Co. spokeswoman Cindy Hecht wrote in an email, "DTE Energy believes that customers who wish to install solar panels and generate power should have the freedom to do so. At the same time, we feel that private generation should be priced fairly to ensure that energy company customers are not subsidizing private systems."