Pennsylvania Caps Energy Customer-Generators Can Sell Back to the Grid

On February 11, the Pennsylvania Public Utility Commission (PUC) formally revised the wording (Docket No. L-2014-2404361) of the Alternative Energy Portfolio Standards Act (AEPS Act) of 2004, in order to clarify issues related to net metering, interconnection and compliance provisions.

The commission voted 3-2 to adopt the Final Rulemaking Order following an extensive review of public comments on the proposed changes, which were initially sought in February 2014 and again in April 2015.

 In particular, the PUC adopted new regulations that would cap the amount of surplus electricity that customer-generators, including residential and small businesses ratepayers, can sell back to utilities.

Going forward, the commission will limit new customer-generators to selling 200 percent of their annual electricity consumption – based on their historical energy usage over the five years prior to the time when their rooftop solar systems were installed. Where there is no history for annual consumption, such as in the case of new construction, that amount will be estimated.

The new regulation is meant to discourage customer-generators from turning a regular and substantial profit on their systems by getting paid the retail rate for system over-production – and in doing so, raising regional energy prices.

The restriction does not apply to customers who are producing electricity solely for their own consumption. “There is no limitation and no effort to limit total power being generated by anyone who wants to generate power,” Nils Hagen-Frederiksen, spokesman for the Pennsylvania PUC, told the local news organization, TRIB Live.

Indeed, the majority of the commissioners believe that the revisions will make reliable and cost-effective power available to more ratepayers. “I firmly believe that all of the new regulations contained in the order being voted on today are much-needed consumer protections, particularly the 200 percent limitation on systems that are eligible for net metering and the clarification of the definition of virtual meter aggregation,” said Commissioner Robert Powelson, noting that, “These regulations are narrowly tailored to balance the Commonwealth’s policy of promoting the development of renewable generation sources with the commission’s mandate of maintaining affordable and reliable electricity service for consumers.”

In dissenting statements, Chairman Gladys Brown and Vice Chairman Andrew Place agreed that consumer protections are a priority for the commission – but disagreed with the rulemaking mechanism used to secure those protections.

“The rationale for imposing the 200 percent limit is noble in that it recognizes that any above-market payments made to customer generators are paid for by the rest of the rate paying class of customers,” Brown said. “Any rational regulator would be tempted to limit a customer-generator from being paid retail rates for energy produced by a system that was purposefully oversized –but, setting such a limit ignores the very specific size limitation provided in the AEPS Act.”

Place argued that the public, including retail customers and customer-generators participating in net-metering programs, would be better served if the PUC reevaluated how the retail value of electric generation is determined, rather than adding further constraints.

“I firmly believe that consumers are best served by getting the ‘retail value’ price right, rather than by seeking to impose net metering capacity restrictions which are not in the Act,” said Place. “Sufficient market signals exist to achieve both the goal of supporting the deployment of alternative generation as well as the obligation to do so at a cost that matches the consumer benefits of retail distributed generation.”

In addition to the cap, the revisions approved by the commission addressed a full slate of concerns that have surfaced since the AEPS Act was previously approved – among them:

  • The addition of definitions for aggregator, default service provider, grid emergencies, microgrids and moving water impoundments;
  • Revisions to net metering rules and inclusion of a process for obtaining commission approval to net meter alternative energy systems with a nameplate capacity of 500 kilowatts (KW) or greater;
  • Clarification of the virtual meter aggregation language;
  • Clarification of net metering compensation for customer-generators receiving generation service from electric distribution companies, default service providers, and electric generation suppliers;
  • Addition of provisions for adjusting Tier I compliance obligations on a quarterly basis to comply with the Act 129 of 2008 amendments;
  • Clarification of the authority given to the program administrator to suspend or revoke the qualification of an alternative energy system and to withhold or retire past, current or future alternative energy credits for violations; and
  • Standards for the qualification of large distributed generation systems as customer-generators.

The AEPS Act requires that a certain percentage of all electric energy sold to retail customers within the Commonwealth be derived from alternative energy sources.  By 2021, electric distribution companies (EDCs) and electric generation suppliers (EGSs) must supply 18.5 percent of electricity using alternative energy resources.  The percentage of Tier I, Tier II, and solar resources gradually increases over this period.

The revisions adopted by the commission now will be submitted for review to the Office of Attorney General, the Governor’s Budget Office, designated committees of both houses of the General Assembly and the Independent Regulatory Review Commission.  Following those reviews, the Final Rulemaking Order will become effective upon publication in the Pennsylvania Bulletin.

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