Overview
On May 18, 2022, 235 self-described “consumer, anti-monopoly advocates, public interest and environmental organizations, and rooftop solar companies” (Petitioners), petitioned the FTC to exercise its authority under Section 6(b) of the FTC Act to study electric utility industry practices that they claim impede renewable energy competition and harm consumers (the FTC Petition) (link and press release).
Why did they make this filing? It appears that they did so to stave off actions by certain states to reduce compensation for energy produced by DERs under net energy metering (NEM) laws and policies.
The participants in the rooftop solar industry are on the verge of possible defeat, or a partial defeat, in their most important state, California. Even though NEM reform battles may eventually occur in most every state with NEM (it ended in a loss in Hawaii years ago), California matters most. And California’s regulators preliminarily have determined that the subsidies to NEM participants are too high. So, Petitioners hope that the can persuade three FTC Commissioners to assist them in quashing all efforts to reform “full NEM,” whether in California or elsewhere.
The concept of full NEM is simple. A retail customer produces energy from a DER (typically, but not always with on-site, rooftop solar panels) and the energy not consumed on site in real time is credited to the customer at the full retail rate. Thus, this means that the customer producing energy from rooftop solar that is not in excess of its total needs during the billing period gets paid a rate equal to the utility’s cost of energy plus the utility’s costs of transmission, distribution, back-up power, and much more. This compensation is many times higher than the amount paid for energy and capacity sold by solar and wind power developers selling to the market or bilaterally. (Note that no actual wind or solar power companies or their trade associations signed onto the Petition.) This over payment to NEM participants results in the costs of the utilities’ transmission and distribution system (as well as many other costs) being shifted from the NEM participants to other customers, generally from wealthier people with larger houses on which to put solar panels to power customers without. Currently, California has a closed (but ongoing) NEM 1.0 program (full NEM) and an open NEM 2.0 program (best characterized as “almost full” NEM).
The Petition’s primary aim is to retain full NEM. The Petition characterizes as “unfair” any NEM rate structure “below-retail tariff rates.” Petitioners complain about those who opposed the “the restoration of previous net metering rates for solar customers” in Michigan. The Petition touts all victories over states or utilities seeking to impose any fixed fees on NEM customers. The Petition criticizes when a state adopts a “monthly fee that eats into the solar adopter’s return on exported energy.” Any attempt to reduce compensation away from full NEM is “unfair competitive behavior.” The FTC Petition condemns unidentified California utilities for funding a coalition that supported new monthly charges on NEM customers. The Petition acknowledges the Proposed Decision in the CPUC’s NEM reform proceeding. That Proposed Decision, which is being re-examined, presumably due to an outcry from rooftop solar industry interests, finds that “the [CPUC-requested] Lookback Study found that NEM 2.0 is not cost-effective; has negatively impacted non-participant ratepayers; and has disproportionately harmed low-income customers; certain parties contend the cost shift ranges between $1 and $3.4 billion a year.” Rather than present a balanced discussion of whether there is any merit to the positions of those who seek to reduce rooftop solar compensation, the FTC Petition is replete with claims of “utility attacks” on the industry, if a utility dares to seek to reduce compensation. It portrays all utilities as competitors of rooftop solar, ignoring that many utilities have fully divested their and do not even compete in the generation market. Tellingly, the FTC Petition makes scant mention of non-NEM DERs, presumably because compensation for such DERs typically reflects the actual value of the products they sell.
The FTC Petition also rails against claimed utility delays in the interconnection process, onerous connection times, insurance requirements, permitting, fees, and additional inspection requirements that make installing rooftop solar “more difficult.” There are no statistics backing this up, just anecdotal evidence involving one utility. The reality is, according to Solar Energy Industries Association (a notable non-Petitioner), that the residential solar market experienced its fifth consecutive record year in 2021, growing 30% over 2020.
The harm to the majority of electric consumers from full NEM is real and well documented by a state-commissioned studies showing that full NEM is economically regressive and not sustainable at meaningful levels of participation. The CPUC-commissioned Net Energy Metering 2.0 Lookback Study explained:
Prior to the installation of the NEM eligible generator, residential NEM 2.0 customers pay approximately $112.5 million higher bills relative to the costs for the utility to provide them service. Following the installation of the NEM generator, these same customers are estimated to pay approximately $618.6 million less on their bills relative to the utilities’ cost to provide service.
Even in states that have programs that allow low-income tenants and other non-property owners to access NEM programs, those who have studied that matter at MIT say “[t]here are cost shifts between solar adopters and non-solar adopters in the low-income communities as well.”
The role of the FTC is to root out actual misconduct that falls within the scope of its Congressional mandates. Regulatory and legislative efforts to reform net metering, based on well-grounded, ample, and independent economic studies that support such reform is not inside such scope. FTC Petitions’ underlying assumption is that state commissions and legislatures that set net metering policies are falling down on the job. It is antithetical to the FTC’s role to second guess the state’s policy decisions regarding the proper treatment of DERs participating in NEM and the manner in which utility costs get allocated among customers to further the states’ environmental policy and social equity goals.
