Missouri Takes a Look at Real Net Metering

Missouri Takes a Look at Real Net Metering
by Henry Robertson, Chapter Energy Chair

The Missouri Public Service Commission (PSC) has opened proceedings to comply with The Federal Energy Policy Act of 2005 (EPAct). Participation requires legal intervention. Great Rivers Environmental Law Center has intervened on behalf of Ozark Chapter and a coalition of other groups advocating clean energy: Concerned Citizens of Platte County, Heartland Renewable Energy Society, Mid-Missouri Peaceworks, Burroughs Audubon, and Ozark Energy Services.

Intervene in adoption of Federal Energy Standards (EPAct)
The Ozark Chapter decided at its July 2006 Executive Committee meeting to intervene in a process of the Missouri Public Service Commission (PSC) that will consider adoption of five non-mandatory federal energy standards for utilities—the first two of which deal directly with wind and/or renewable energy sources. The utilities will be sure to weigh in on these decisions and we feel the public should also have a voice.
uNet metering: enables customers to use their own energy generation (such as wind mills) to offset their consumption over a billing period by allowing their electric meters to turn backwards when they generate electricity in excess of their demand. This offset means that customers receive retail prices for the excess electricity they generate.

Fuel sources standard: requires each utility to develop a plan to diversify its sources, including consideration of renewables.
Generation efficiency: requires utilities to devise 10–year plans to improve the efficiency of their fossil fuel generation.
Time-based metering: requires utilities to offer time-of-use metering, critical peak pricing etc.
Interconnection: requires utilities to supply interconnection to distributed generators.

Suppose you put solar panels on your home or business to generate your own electricity. Most of the time you will not generate enough, but sometimes you’ll have power to spare. If you “interconnect” your system to the utility grid, you can get power when you need it and feed clean energy back into the grid when you don’t. With “net metering,” a single meter spins backwards or forwards, and you pay the utility for the net amount of electricity you use, over and above what you generate.

“We need to … change the incentives so that not selling electricity becomes profitable.”

The federal Energy Policy Act of 2005 (EPAct) requires every state to consider adopting Congressional standards for interconnection and net metering if they do not already have comparable standards. Missouri has what it calls a net metering law, but it’s phony net metering. It uses two meters to set different prices for power going in and power coming out. Customer-generators have to pay retail rates to the utility but get credited for the power they generate at the utility’s avoided cost—a fraction of the retail rate. In addition, the law burdens the customer-generator with expenses for testing, insurance, additional metering, and “all reasonable standards and requirements” the utility sees fit to impose.

We expect the utilities to resist, and hope the PSC is ready for true net metering in Missouri. The utilities argue that crediting customer-generators at retail prices forces regular customers to subsidize them, and that the customer-generators are not paying their share of the utilities’ costs. But people who generate their own clean electricity are doing a service to society at great expense to themselves. Solar panels still don’t come cheap. (Wind towers aren’t feasible on small urban and suburban lots, says the American Wind Energy Association.) Net metering will never pay these energy pioneers back, but it’s an incentive. Besides, it’s only fair when they’re feeding electricity into the grid for others to use. And that could be cheaper for the utilities than buying peaking power on the spot market.

Smart metering
Another EPAct standard is smart metering and time-based rates. Smart meters can tell what time of day a customer uses electricity. They can collect data, which can be sent back to the utility by an automatic meter reader. This sounds intrusive but it’s not necessarily sinister; the gas company put an automatic reader on my meter, and my next bill showed a $50 credit for gas I hadn’t used after all. Smart metering, if done right, could assist customers in conserving energy and saving money.

Utilities can use communication technology to notify customers of price fluctuations. Devices attached to major appliances in a home or (most likely) business can receive signals to reduce their demand for electricity at peak times.

These technologies are essential for time-based metering to work. Electricity demand varies seasonally and by time of day. The highest peaks in consumption are on hot summer days when the air conditioners are churning.

Time-of-use pricing (TOU) charges different prices at peak and off-peak times. Customers can save money by using less electricity at peak times. A variant of TOU is critical peak pricing, which charges much higher prices at a few extreme peak hours. In both cases the prices are set well in advance. Demand is not necessarily reduced but the peaks are smoothed out. The utility may be able to avoid building a new power plant just to meet peak demand.

Real time pricing (RTP) is a different approach. The customer learns the prices only a day or even an hour in advance. This method is used only by a small percentage of commercial and industrial customers with heavy demand and the ability to closely monitor their consumption, but the efficiency gains are greater than with TOU. By becoming aware of their electricity consumption and its price, these consumers may be motivated to do more than just spread their demand out over a longer time—they may even start to conserve energy.

The rules of the game must change
So what’s in it for the utilities? The high technology of smart metering costs more, and they’re losing peak sales. They save money on high-priced natural gas, the primary fuel for peaking power, but that price is no problem for them; under last year’s Senate Bill 179 they can automatically pass fuel price increases on to us, the ratepayers, without having to go through the PSC (this is called a fuel adjustment clause). They can save money by not building new power plants, but we customers ultimately pay for those too; once they go into service their capital costs go into the rate base. Efficiency programs have to be marketed if customers are going to adopt them; the utilities would be advertising in order to sell less of their product—electricity.

Missouri’s utilities don’t like energy efficiency any more than they like net metering. We need to go well beyond EPAct and change the incentives so that not selling electricity becomes profitable.