The debate over the future of net metering and the proper valuation of distributed energy resources has reached Congress. In the wake of a debacle over retroactive changes to net metering rules in his home state of Nevada, Senator Harry Reid (with Senator Angus King of Maine) recently proposed legislation on the subject. The proposal, known as Amendment 3120 would add language to Section 111(d) of the Public Utility Regulatory Policies Act of 1978 ( PURPA) aimed at protecting net metering customers from retroactive changes to net metering rules and requiring any such changes to consider the benefits of distributed energy resources. Before making changes affecting existing net metering customers, regulators or utilities would be required to demonstrate: “in an evidentiary hearing in a general rate case, that the current and future net benefits of the net metered system to the distribution, transmission, and generation systems of the electric utility are less than the full retail rate.” The legislation would also require changes impacting future net metering customers to include consideration of “the societal value of distributed energy resources.”
Coincidentally, New York’s utility regulators at the Public Service Commission have been hard at work addressing the highly-charged issues of grandfathering rights for net metering customers and the value of distributed generation. In 2014 and 2015, the Public Service Commission issued a series of orders that carefully considered (with some bumps along the way) what projects would be grandfathered. The Commission repeatedly assured the marketplace that existing projects would be protected from net metering changes, stating that:
In order to continue the momentum the solar industry has gained in New York, certainty on the availability of revenues is necessary. Developers who have premised their revenue expectations on the availability of net metering should not be deprived of the revenue stream methodology they anticipated. As a result, once a solar project is connected or accepted for NEM, that methodology will not be replaced with a successor tariff methodology unless otherwise requested by the developer or customer. Instead, to provide regulatory certainty, any successor tariff will adhere only prospectively to projects developed in reliance upon them instead of reliance upon net metering.
Case 14-E-0151 and 14-E-0422, Petition of Hudson Valley Clean Energy, Inc. and Petition of Solar Energy Industries Association, et. al., Order Raising Net Metering Minimum Caps, Requiring Tariff Revisions, Making Other Findings and Establishing Further Proceedings (issued December 15, 2014), at 15 (emphasis added). Subsequently, the Commission determined that these projects would be grandfathered for at least 25 years, a duration intended to coincide with the term of a typical power purchase agreement.
A central goal in New York’s Reforming the Energy Vision proceeding, ongoing since 2014, has been reaching consensus on proper valuation of distributed energy resources. As these issues continue to play out on the Federal level, we would expect New York, with its self-imposed mandate of 50% renewable energy by 2030, to continue to develop policies that encourage distributed generation.
Thomas Puchner is a partner in the Energy practice group at Phillips Lytle LLP. Attorneys in Phillips Lytle’s Energy Practice Group have extensive expertise in all aspects of renewable energy projects, including siting and permitting, power purchase agreements, solar leases, financing (including New York’s Green Bank), and Public Service Commission/Utility regulatory matters. In addition, an interdisciplinary team of Phillips Lytle Energy and Environmental law attorneys excels in all aspects of siting renewable energy facilities on brownfields and landfills.