Ohio’s net-metering rules appear destined for the state’s Supreme Court as utilities and their opponents dig in against each other over proposed changes.

The disagreement over how customers with solar panels should be compensated for electricity they generate was on display last week before the Public Utilities Commission of Ohio.

The commission adopted new net-metering rules in November, and in oral arguments on Jan. 10 challengers urged it to reconsider many of the new provisions. Among the more contentious changes is a section that limits the part of a customer’s bill that can be offset by solar generation.

Under the rules, when a customer sells electricity back to the grid, the utility would only deduct the part of the retail rate that’s based on the cost to buy electricity from the grid. No matter how many times the meter spins backward, the rules wouldn’t subtract from the part of the retail rate that represents capacity. That part covers the payments made to generation suppliers to make sure there will be enough electricity available to meet expected needs.

Capacity charges typically make up 10 percent to 15 percent of customers’ electricity charges.

Utilities support the change and argued last week that net-metering customers are already being subsidized by other electricity users — presumably because they use less electricity from the grid and thus pay less to maintain the system. Customer and environmental advocates disagreed.

Arguments like that are “exactly why Ohio has a statute that protects net-metering customers from being targeted by rate design decisions that have no factual basis,” attorney Madeline Fleisher of the Environmental Law & Policy Center said.

Adding value or burden?

The utility industry has made the argument since 2012, according to the Energy and Policy Institute, which has posted online a presentation by the Edison Electric Institute that encourages framing issues like net-metering as “hidden subsidies” that leave lower- and middle-income consumers paying more utility costs. The attack frames people who install solar panels on homes as freeloaders rather than environmentally responsible or energy independent consumers.

Customer-generated electricity reduces peak load requirements on the grid and thus costs for everyone, Fleisher said. “Giving that value to … the customers who actually own the [distributed-generation] systems is fair and appropriate.”

A 1999 Ohio law calls for utilities’ net-metering rates to be “identical in rate structure, all retail rate components, and any monthly charges” that a customer would otherwise pay. The Ohio Supreme Court has said utilities can’t collect distribution charges. But capacity charges are generally considered part of electricity generation rates.

The November rules are an about-face from rules adopted by the commission in 2014 that explicitly called for payment of capacity charges. American Electric Power appealed to the Ohio Supreme Court, but that case has been stayed pending resolution of the current rulemaking process.

FirstEnergy attorney Robert Endris argued that excluding capacity charges from net-metering credits “avoids further burdening non-net metering customers.”

Other disagreements

Other terms in the new rules erect artificial barriers for net metering, such as a requirement they participate in time-of-day pricing programs, said attorney Miranda Leppla of the Ohio Environmental Council.

“Millions of Ohioans do not have advanced meters right now,” Leppla said. And in any case, Ohio utilities don’t yet offer most customers time-of-use rates for electricity they buy from the grid.

Leppla likes the rules’ allowance for systems to be sized up to 20 percent above expected needs based on past use. In her view, that “good happy medium” allows flexibility as consumers’ needs may change or when people may buy homes with existing rooftop solar panels.

Utilities oppose that provision. Endris argued that “120 percent does not satisfy the ‘part of all’ limitation on net metering compensation in the statute.”

Attorney Joseph Oliker of competitive supplier IGS Energy in Dublin, Ohio, said he would accept a system-sizing limit of 100 percent. But he objected to terms allowing net metering only for so-called non-shopping customers. AEP and other utilities had urged the PUCO to add that limitation.

“We don’t think individuals wishing to build distributed generation should have to choose between shopping and building a distributed generation resource,” Oliker said.

As written, the Ohio net metering law imposes its payment obligation on utilities. As a practical matter, Oliker noted that utilities are the only ones who can realistically provide net metering right now, due to the lack of smart meters for most customers, plus the fact that utilities generally don’t provide timely detailed data to competitive suppliers.

“The utility… is not supplying electricity generation service to a generation-shopping customer,” replied American Electric Power counsel Steven Nourse.

Meanwhile, attorney Katie Johnson Treadway of Findlay-based One Energy objected to terms that would require utility approval for any net metering project on multiple parcels of land. The company constructs wind energy projects at large industrial facilities that typically span multiple parcels. Often they also include some roads and rights-of-way.

“All of it is essentially behind the customer’s meter,” she explained.

Lawyers for Dayton Power & Light and other utilities claimed the new provision is necessary for safety. But adequate safeguards already exist to make sure grid connections for net metering don’t jeopardize safety, performance or reliability, Treadway said.

As written, the new rules’ vague safety standard “infringes on private property rights,” she said, and “gives customers unfettered authority to create new standards on a case-by-case basis and apply those standards to the very companies that are challenging their business model.”

Few Ohio utility customers use any form of net metering right now. Implicit in all parties’ comments last week was an expectation that the share could grow substantially in the coming years.

“The General Assembly here has not only set forth a policy of encouraging distributed generation, but has specifically directed how that policy is to be implemented,” Fleisher said — with the same treatment that non-net metering customers would get.

“There is value here,” she stressed. “It should be compensated.”