By Michael Kuser

New Hampshire regulators on Friday took the first step toward an overhaul of their net metering rules, reducing compensation for rooftop solar owners while ordering a study of the value of distributed generation that will inform long-term changes.

The Public Utilities Commission ordered utilities to implement a new alternative net metering tariff that retains monthly netting for small distributed generation system owners while moving to instantaneous netting for non-bypassable charges. The rules, “to be in effect for a period of several years,” will begin Sept. 1 (Order 26,029).

The commission chose a quasi-adjudicative process to reconcile two settlement proposals on how to develop and implement a new alternative net metering tariff, as directed by the state legislature last year in House Bill 1116.

Two Proposals

One settlement proposal came from a coalition of utilities and consumer parties (UCC), including Eversource Energy, Liberty Utilities, Unitil Energy Systems, the state Office of Consumer Advocate, the New England Ratepayers Association, Consumer Energy Alliance and Standard Power of America.

The other proposal was filed the same day by a coalition of distributed generation industry advocates and environmental organizations known as the Energy Future Coalition (EFC), which included the Acadia Center, The Alliance for Solar Choice, the Conservation Law Foundation and eight other organizations and companies (docket DE 16-576).

In its unanimous 74-page order, the commission ruled that:

• Small customer-generators with renewable energy systems of 100 kW or less will continue to net meter their DG resources monthly. Those customer-generators will receive monthly net export credits equal to the monetary value of kilowatt-hour charges for energy service and transmission service at 100% and distribution service at 25% — a 75% reduction — while paying the full amount of non-bypassable charges, such as the system benefits charge, stranded cost recovery charge, other similar surcharges and the state electricity consumption tax. Previously, they received kilowatt-hour credits.
• Large customer-generators will continue to be net-metered as they are currently but will also receive monetary credits rather than kilowatt-hour credits on a monthly basis. To qualify for alternative net metering, large customers must consume at least 20% of their actual or estimated annual distributed generation system electric production behind the meter.
• DG systems installed or queued during the period the new net metering tariff is in effect will have their net metering rate structure grandfathered until Dec. 31, 2040.
• Pilot projects will be proposed and a value of DER study will be designed and completed to “inform the development of the next version of net metering or another alternative regulatory mechanism.”

“As the penetration level of DG in the state is quite low in both absolute and relative terms, there is little evidence of significant cost-shifting from DG customers to customers without DG,” the commission said. “Payment of non-bypassable charges by all net-metered customers and a reduction in the distribution credit for net exports should serve to mitigate the potential for such cost-shifting, even if DG penetration levels increase significantly above their low levels.”

The commission said it accepted common elements in the two settlement proposals and resolved differences between them based on the legislative purposes of HB 1116. The bill called for “the continuance of reasonable opportunities for electric customers to invest in and interconnect customer-generator facilities and receive fair compensation for such locally produced power while ensuring costs and benefits are fairly and transparently allocated among all customers.”

The order requires Eversource, Liberty (Granite State Electric) and Unitil to file revised tariffs within 30 days. The commission also approved an automatic rate adjustment mechanism for the companies to recover lost revenue, under the process approved for Unitil in February (Order No. 25,991).

Value of DER Study

The order provides that the alternative net metering tariff take effect while the utilities and stakeholders collect further data, implement pilot programs and conduct a study on the value of DERs.

It directs stakeholders to convene working groups within 60 days to develop proposals on the commission’s mandates. It also requires them to file quarterly progress reports with the PUC. The order also gives concerned parties 30 days to submit written briefs or comments on grandfathering issues, such as the clause that “customer-generators that receive a net metering capacity allocation while the new alternative net metering tariff is in effect to be ‘grandfathered’ at the applicable net metering design and structure then in effect through Dec. 31, 2040.”

Reaction

“The ruling is a mixed bag,” CLF attorney Melissa E. Birchard said.

While the order is an overall win for the state because it sets a path forward to value the broad benefits of clean energy resources and accelerates grid modernization, Birchard said she was dismayed by the cut in the distribution credit.

“It is disturbing to see cuts to an important program like net metering at the same time that New Hampshire is lagging behind the rest of the region on solar penetration and energy efficiency,” Birchard said. “If we’re not careful, other states in the region are going to reap the financial benefits of strong solar and energy efficiency programs while Granite Staters pay more on their electric bill for a disproportionate share of the costs.”

While the distribution portion of the credit is only one piece of the overall credit, “this cut is arbitrary in the sense that there was no real data in the docket to support it, and it will affect the pace of clean energy investments,” Birchard said.

Gradual Change

The commission said that an abrupt change from monthly netting to instantaneous netting would likely confuse customers and send potentially inefficient price signals.

“For example, instantaneous netting may be confusing to customers who lack real-time data about their electricity usage,” said the order. “It may also provide financial incentives for maximum on-site electric consumption during periods when the benefits of DG exports to the system may be greatest, such as at the time of late afternoon system peaks, thereby decreasing the potential system-wide benefits of those energy exports.”

Birchard believes the cuts in net metering will be temporary.

“There should be a new rate established after the commission carries out a value of distributed energy resources study, particularly distributed solar and hydro, and after that study it’s going to open a proceeding to revalue it,” said Birchard. “So the credits that those resources receive will be based on the broad benefits, potentially including climate change and health benefits. That kind of value-based rate can make clean energy innovation more competitive in an open market way so that different kinds of resources can compete with each other based on their value.”