Net Metering in Colorado – an update

Vince Calvano
CRES Boulder County Chapter

Current net metering policy has been and continues to be very good for the Colorado solar industry, but there has been a lot of talk lately about changing the price utilities, such as Xcel Energy, will pay to net metered customers that generate excess electricity in Colorado. This change has been strongly advocated by the local investor owned utility, Xcel Energy, also known as a Public Service Company of Colorado (PSCo). The utility believes Colorado’s current policy is unfair to non-solar customers, and the Colorado Public Utilities Commission (PUC), the body that regulates utility matters like this one, has just finished a year-long series of panel discussions, legal briefings, and comments by the many interested parties in the net metering debate. The Colorado PUC regulates the two investor owned electric utilities in CO, Xcel and Black Hills Energy, but does not have jurisdiction over municipal electric utilities and rural electric cooperatives in Colorado, and thus Munis and Coops can make their own rules when it comes to net metering policy for their customers.

Currently, the state policy for investor owned utilities is to compensate solar customers at the same retail rate (about $0.1067/kWh) that the utility charges residential customers for their electricity usage. This payment only applies to solar customers that, on average, generate more electricity via their solar panels than they use in a given month. Per Colorado law, residents are allowed to size their systems up to 120% of their average annual electric usage per year.

Net metering is important to customers who invest in solar because it plays an integral part in their ability to earn a return on their investment. Solar customers are able to offset most of their electricity costs, and while most of the electricity their panels generate goes toward offsetting their nighttime electricity usage, they get paid at the utility’s retail rate for each kilowatt-hour of electricity they send back to the grid. Colorado is one of many states that use the retail rate for net-metered solar customers.

There are differing views on the costs versus benefits of these distributed solar resources on the grid depending on whether you are looking at the issue as a solar customer, non-solar customer, the utility, or society as a whole. The utilities and some others take the side that net metering at the full retail rate carries an unfair incentive to solar customers resulting in an unfair cost shift to other customers. The solar industry and other solar supporters argue that the full benefits of distributed generation at current penetrations are not properly accounted for and outweigh the costs to non-solar customers.

The debate in Colorado was sparked by PSCo’s claim that net metering at full retail rate constitutes a subsidy, and that their solar customers are not paying their fair share to use the utility’s electric grid, and correspondingly, the non-solar customers are paying more than their fair share. However, various other pro-solar parties argued against the existence and/or size of this incentive claimed by PSCo.

In 2014 the Commission started a new proceeding with the purpose of considering net metering and the expansion of rooftop solar in Colorado. There was an initial informal meeting on April 9th, which included presentations from various State entities, utilities, and even CRES Boulder County’s Leslie Glustrom. The purpose of the presentations, and the subsequent comments, was to guide the Commission on what it should do in the proceeding.

The Commission decided to order a series of three panels and a round of legal briefs. The panels were to cover Costs, Benefits, and other State’s examples of dealing with net metering and rooftop solar. Before the 3rd panel was concluded, a fourth panel was set to address issues related to on-site storage; distribution system design; panel orientation and sizing of photovoltaic systems; “grid parity” and the need for incentives to install retail distributed generation in the future; and a “minimum bill” concept.

There was a fair amount of agreement on the costs associated with rooftop solar and net metering. But, there was a fair amount of disagreement on the benefits, and PUC Chairman Epel pointed out that the disagreements on benefits cover five areas: the avoided emissions costs, the avoided capacity and variable and fixed O&M costs, the avoided distribution and transmission upgrades, and the society adder. Basically, the solar industry calculated 18c/kWh of benefits, and PSCo calculated around 5.4c/kWh.

So what’s next? After all of the panels, briefs and comments, there was some narrowing of issues and disagreement, but in the end, the utility and the solar groups still want different things from the Commission. The PSCo wants the Commission to find that net metering at retail rate constitutes a subsidy, and to have a new proceeding where they will advocate to lower the rate and track it in the Renewable Energy Standard Adjustment, which all customers pay for. The solar industry wants an independent assessment on the proper methodology for determining the benefits of solar, and then to use that method to determine the value of solar for PSCo.

Only time will tell what the Commission will do next.

To read a detailed version of this blog post, please click on the following link.