By William Opalka

New York utilities and three solar companies on Tuesday proposed a business model that they said would replace net metering and address cost-shifting concerns, a pact that could serve as a model nationally (15-E-0751).

The proposal was made in a proceeding of New York’s Reforming the Energy Vision initiative.

The Solar Progress Partnership includes Central Hudson Gas & Electric, Consolidated Edison, New York State Electric and Gas, National Grid, Orange and Rockland Utilities, Rochester Gas and Electric and the solar companies SolarCity, SunEdison and SunPower.

“At its core, the partnership’s proposal provides simplicity for customers, recognizes the locational value of clean [distributed energy resources] and attempts to resolve potential bill impacts, particularly to customers who are not participating in [net metering],” the filing states.

Under net metering, utilities pay for surplus power from rooftop solar systems. Utilities say this means ratepayers without solar systems are paying more than their share of grid costs. (In the Orange and Rockland service territory, customers are reimbursed at the NYISO day-ahead hourly price, which is the wholesale rate. Some other utilities pay at the retail rate.)

The proposal would preserve credits for residential rooftop solar systems. But it proposes a transition from the current net metering model that would begin in 2020 for larger projects. The filing recommends collecting a payment from solar developers for community and remote solar projects connected to the grid.

The proposal marks a potential cease-fire in the battles solar developers have fought with utilities in states across the country. In December, SolarCity announced it was ending operations in Nevada after regulators cut payments to rooftop panel owners.

News of the agreement appeared to cheer investors. SolarCity shares ended last week at $33.34, up 9% from the open Tuesday, while SunPower shares were up less than 1% at $21.66. SunEdison shares were trading at $0.34 Thursday — when the company announced it was seeking Chapter 11 bankruptcy protection — up 6% from Tuesday.

“We’re working together to keep our state’s solar market vibrant while enabling us to maintain the robust power grid that solar energy requires, and in a way that is fair to all customers,” Con Edison CEO John McAvoy said in a joint statement.

SolarCity CEO Lyndon Rive also was conciliatory. “The deep institutional knowledge of these six utilities and the creative approach they are taking to the evolution of electricity is inspiring. Leaders like these will lay the foundation for the grid of the future.”

The partnership said the proposal came out of discussions facilitated by the Advanced Energy Economy Institute.

LMP+D+E

The proposal said it would use elements of a New York Public Service Commission staff white paper to transition to a compensation structure “that more closely aligns with the value the resources bring to the power system, including the wholesale power system (‘LMP’), the electric distribution system (‘D’) and to society at large (‘E’), which is generally the environmental benefit.”

Each community distributed generation (CDG) project would be assigned to a tranche that would establish a compensation rate and developer payments. “Each successive tranche would incorporate higher developer payments, gradually moving the total resource compensation rate to LMP+D+E,” the partnership said.

According to PSC data, the state has more than 3,100 MW net energy metering resources installed or in utilities’ interconnection queues. “These queues have more than doubled in the first three months of 2016,” the proposal said. “Much of this recent development activity has been configured as CDG projects.”

Barriers to Entry?

The plan would require developers to provide letters of credit, a condition that Karl Rábago, head of the Pace Energy and Climate Center, said bars small developers.

“In the early days of the Texas market deregulation, that’s really what shook out the smaller developers,” Rábago, a former Texas Public Utility Commissioner told Capital New York. “I don’t have a line of credit if I’m a small player.”