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SC legislation would reward fossil fuel retirements, lift cap on net metering

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


SC legislation would reward fossil fuel retirements, lift cap on net metering

South Carolina lawmakers filed legislation that again attempts to ease restrictions on net metering as part of a package of bills that would create incentives for clean energy investments and competition. New legislation also sets up financial performance metrics to reward fossil fuel retirements.

Senate Bill 332, introduced Jan. 8 by Sen. Tom Davis and Sen. Sandy Senn, would lift South Carolina's 2% cap on net metering for rooftop solar customers and establish a successor tariff applied to customer-generators.

Under a comprehensive law and settlement agreement signed in 2014, electric utilities must make net energy metering available to customer-generators until the total nameplate capacity of the distributed energy systems equals 2% of the utility's previous five-year average of peak retail demand. Under the agreement, set to expire Jan. 1, 2021, a kilowatt-hour produced by a customer-generator is credited at the full retail rate of a kilowatt-hour produced by the utility.

With South Carolina Electric & Gas Co., or SCE&G, and Duke Energy Corp.'s utilities on track to meet the net metering requirements early, lawmakers tried unsuccessfully in 2018 to eliminate the current 2% cap by allowing new interconnections to be compensated until a new order is issued by the Public Service Commission of South Carolina.

"Last year, solar came so close," South Carolina Rep. Peter McCoy, a sponsor of solar legislation, said Jan. 10 at a joint news conference, as reported by The (Columbia, S.C.) State newspaper. "The votes were there. We had the effort. We had the energy, and we had the people on board for alternative energy solutions. ... It's time to finish the drill."

Under S.B. 332, once the total nameplate generating capacity of net energy metering equals at least 2% of the previous five-year average of the electrical utility's retail peak demand, all new customer generators will take service under the utility's successor net energy metering tariff. If a utility reaches the 2% cap prior to a commission order approving a successor net metering tariff, the utility must continue accepting applications for net energy metering service under current regulations.

The successor net metering tariff "shall include an accompanying net metering contract to extend the terms of service for a period of at least [25] years," the bill states.

S.B. 332 also establishes a voluntary renewable energy program that allows participating customers to enter into power purchase agreements with electric utilities. It establishes criteria for the utilities to procure the energy, capacity and environmental benefits tied to the agreement from small power producers.

Customers would be allowed to select the renewable energy facility that provides the generation, as well as negotiate the price of the power purchase agreement and contract length.

In addition, the bill provides a path for independent power producers to gain access to the grid and compete for utility contracts.

"At first glance, there are components of the proposals we certainly agree with," Duke Energy spokesman Ryan Mosier said in a Jan. 10 email. "For example, we support removing the net metering cap and letting customers use all the solar they produce for their own consumption."

Duke Energy, however, has voiced its opposition to continuing the net metering rate established in the 2014 law.

"It appears some of the current proposals continue that subsidization of solar, which impacts non-solar customers and is unnecessary," Mosier said.

"We look forward to working collaboratively in 2019 with legislators and any stakeholders who want to build on policy efforts in South Carolina to grow renewable energy that are sustainable, fair and affordable for our customers," the spokesman added.

Retirement rewards

Senate Bill 137, introduced by Davis, requires the PSC to establish incentives and penalties "that directly tie an electric utility's revenues to that utility's achievement on performance metrics."

Specifically, the bill would create incentives for energy cost reductions, grid modernization investments and renewable energy usage. The legislation also establishes a stranded cost recovery process in order to "encourage the accelerated retirement of an electric utility fossil fuel electric generation plant" through allowing utilities to recover the stranded costs tied to the early retirement of a coal or gas plant.

Notably absent from early legislation filed in South Carolina are bills that address the July 2017 abandonment of the V.C. Summer nuclear expansion. Lawmakers in the South Carolina General Assembly in late June 2018 overwhelmingly approved a nearly 15% rate reduction for SCE&G to gut all but about 3.2% of the rates the utility charges for the scrapped reactors.

Richmond, Va.-headquartered Dominion Energy Inc.'s acquisition of SCE&G parent SCANA Corp. was approved on promises of rate relief and lower nuclear cost recovery.