Environment Texas Blog

Solar power is on the verge of hitting the big-time, close to achieving a scale and affordability that will allow it to replace dirty coal-fired power plants and significantly reduce global warming pollution. 

But a Texas agency has proposed rules that will create a serious barrier to solar’s widespread deployment. One of the ways solar can be cost-effective is if a homeowner is given credit by their utility for excess electricity put back on to the grid (known as “net-metering”). On Friday, the Public Utilities Commission (PUC) issued a surprise proposed rule which create heavy burdens on customers wanting to install solar panels and provide financial rewards to the utilities, but provide no guarantees that customers who generate surplus electricity will ever get paid.

Take action here. 

Here's more background on the issue, from our friends at the Interstate Renewable Energy Council.

Keeping the “Net” in Texas Net Metering

Background

§          TX Legislature passed HB 3693 in May 2007.  The 33 sections of H.B. 3693 added or amended different sections of TX law including the Public Utility Regulatory Act (PURA).

§          HB 3693, section 26 created a new section in PURA §39.916 governing “Interconnection of Distributed Renewable Generation”.

§          The Electric Reliability Council of Texas (ERCOT) formed a Distributed Generation Task Force to implement its role under HB 3693;

§          The Public Utilities Commission of Texas (PUCT) has conducted activities to define the rules necessary to comply with HB 3693, including PURA §39.916, under case number 34890. 

Summary of Relevant Sections in HB 3693

Per Bill summary published by the Texas Office of Public Utility Counsel (www.opc.state.tx.us) the relevant highlights of the statute include:

§          The Legislature’s intent to implement ‘net metering and advanced meter information networks ... as rapidly as possible’ to allow customers to better manage energy use and cost controls, and to facilitate demand response initiatives.’

§          That customers must be allowed to interconnect renewable-energy systems up to two megawatts (MW) in capacity, if those systems meet warranty requirements and do not exceed the utility's service capacity;

§          That customers must be provided metering options, including separate meters (to measure both load and output), or a single meter capable of measuring both in-flow and out-flow.   

Summary of Relevant Sections of PURA §39.914 and 39.916

§          39.914(a) “An electric utility or retail electric provider shall provide for net metering and contract with an independent school district…”

§          39.916(a)(1) “’Distributed renewable generation’ means electric generation with a capacity of not more than 2,000 kilowatts provided by a renewable energy technology..”

§          39.916(a)(3) “’Interconnection’ means the right of a distributed renewable generation owner to physically connect distributed renewable generation to an electricity distribution system…”

§          39.916(f) A T&D or electric utility shall make available “ …metering required…including separate meters that measure the load and generator output or a single meter capable of measuring the in-flow and outflow…”

§          39.916(h) An electric utility or retail provider “…may contract..” so that “(2) the net value of that surplus electricity is credited to the distributed renewable generation owner.”

§          39.916(j) In deregulated areas, the DG owner “must sell the owner’s surplus electricity to the retail electric provider…at a value agreed to between the distributed renewable generation owner and the provider…” which may be based on i) the clearing price at the time of the generation; or ii) “it may be a credit applied to an account during a billing period that may be carried over to subsequent billing periods…”

What do Renewable Generators require for success?

Continued growth in distributed renewable generation (DRG) will reflect the extent to which prospective DRG owners can realize: 

§          Revenue certainty – To ensure their ability to offset significant capital costs, prospective DRG owners must be able to estimate project revenue before the system is sized/ purchased. 

§          Maximum revenue – Reduced credit/production revenue reduces the probability that an installation can go forward.  REC ownership can offset lower revenues only slightly.

§          Lowest costs – Permitting and interconnection fees, inspection costs, warranty and insurance requirements, as well as meters more costly than needed for required functions, all raise total installation costs, making fewer new projects economic.

§          Process Simplicity – Requirements for case-by-case contracting, multiple permits/applications and approval periods, variable review standards and metering requirements, all add complication, potential delay and “hassle factor”, significant process barriers to prospective DG owners. 

Missing the Mark: Barriers, not Supports, for Renewable Generators

PUCT’s draft rule in response to HB 3693 and PURA 39.916 creates significant new barriers to DRG implementation.  The chief barrier is rooted in the rule’s reconstruction of net metering –an approach proven in 35 states and federal law -- with a new system of profiling and interconnection that allows no “netting” of the DRG’s production against its usage. 

As a consequence, the benefits of true “net metering” have been replaced by new barriers:

§          Revenue uncertainty – The draft rule contains several provisions that reduce considerably the revenue expectations of any DRG owner:

®      No netting of in-flows and out-flows – Although HB3693 expressly and specifically calls for deployment of net metering as rapidly as possible, §25.213 equally clearly requires the separate reporting of each flow and allows no netting between the two. 

®      No purchase mandate – While §25.216(f)(1) requires a utility or REP serving a school to purchase all electricity produced by the school’s DRG, there is no corresponding mandate for any other class of DRG. 

®      “Willing buyer” sales only – §25.216(f)(3) specifies that sellers of DR electricity “shall sell ….at a price to which both parties agree”.  The market power implications of disagreement between a buyer with many other customers and a DRG with no other potential purchasers are not addressed, leaving the implication that such disagreements will be left unresolved and the DRG system left without income.

§          Minimal/ absent revenue – The accumulation of a) no ability to net generation revenue/credit against consumption; b) the uncertainty of any sale; c) the market power imbalances that favor purchaser over seller in any price negotiation, all leave a prospective DRG buyer wondering about the ability of the new system to cover its costs at any foreseeable time. 

§          Additional costs – The draft rule adds costs not usual under true net metering:

®      Consumption costs -- §25.21(b)(2) “In its tariff, a transmission and distribution utility may charge for the customer’s electricity consumption from the distribution network”.  Because the DRG system cannot use its own generation to offset usage, DRG owners must pay for their electricity consumption as though there is no DRG system in place. 

®      Metering costs -- §25.213 (b)(4) “the distributed renewable generation owner shall pay the differential cost of the metering…”.  Since HB 3693 requires recording of both in-flows and out-flows, a 2-channel meter will be required rather than the usual bi-directional meter, and DRG owners must pay any additional cost.  Systems <50 kW must pay for 2 IDR meters, a requirement many see as technically unnecessary. 

§          Process complexity – Under “willing buyer, willing seller” pricing, DRG owners won’t be able to estimate their system’s revenue until they have negotiated a contract with a “willing buyer”, assuming one exists.  Contracts will be subject to limited term periods, renegotiation and repricing provisions, all adding complexity to be handled by the DRG owner.   

Bottom Line: To all Supporters of HB 3693’s mandate to expand “net metering” – Is this what you thought you were supporting?