‘Don’t throw the baby out with the bathwater,’ BCSEA and Sierra Club BC told the BC utilities commission in a late September argument on FortisBC’s electricity net metering program. FortisBC wants approval to ban net metering customers from having generating equipment big enough to regularly generate an annual surplus of net energy. BCSEA and Sierra Club told the regulator that an annual net surplus is not a problem. In fact, they said, it is highly desirable, assuming the price is reasonable and the equipment is below the maximum 50 kW generator size.
Under net metering, FortisBC’s residential and commercial customers can use their own on-site generation equipment, such as solar photovoltaic panels, to first meet their own electricity load and then put excess power onto the grid (e.g. when the sun is shining) or take power from the grid when they need it (e.g., when it’s dark outside).
As of April 2016, there were 86 participants in FortisBC’s net metering program and the number is rapidly rising. Only 6 to 8 participants have generating equipment that routinely produces more power on a yearly basis than the customer consumes. However, FortisBC became concerned that a quirk in its net metering rules could lure a flood of new net metering customers with extra large generators.
The quirk has to do with what happens when the customer provides more power to the utility than the customer received from the utility over the course of a billing period (one month or two-months depending on the type of customer). This surplus is called net excess power. Net excess power has to be carried forward to the next bill, of course. But as a dollar amount or as a kWh amount? BC Hydro and other Canadian utilities with net metering programs simply take the kWh of net excess energy in one billing period and subtract it from the kWh billed on the next invoice (called a kWh Bank mechanism). FortisBC, uniquely, uses a Dollar Bank approach. It takes the rate the customer pays for electricity (called the retail rate), multiplies it by the amount of net excess energy, and applies a credit (in dollars) to the customer’s next bill.
For customers whose generator isn’t large enough to create net excess power on an annual basis there’s little or no difference between a Dollar Bank and kWh Bank approach.
But if a net metering customer has a large amount of annual net excess energy then the financial consequences are significant. Under its Dollar Bank approach, FortisBC, on behalf of all its customers, pays the net metering customer for the annual net excess power at the customer’s retail rate, which for residential customers can be the 15 cents/kWh, step 2 rate. However, FortisBC, again on behalf of its customers, pays much less than that for clean electricity from wholesale sources like BC Hydro and independent power producers. FortisBC is afraid that customers will install big generating systems, sized to create annual net excess energy that will be reimbursed at the retail rate, leaving regular customers paying more for annual net excess energy than it’s worth.
In regulatory terms, there’s no logical connection between a net metering customer’s retail rate and the proper price for the utility to pay for annual net excess power from the customer. This is not because the retail price is too high or too low, but because the retail price covers not only the utility’s cost of delivered energy but also the utility’s cost of being able to meet system peak demand (which includes transmission) and a large portion of the utility’s cost of providing billing and customer contact services (the rest being covered by the basic charge).
The solution, BCSEA-SCBC told the commission, is to change FortisBC’s Dollar Bank to a kWh Bank approach. BCSEA-SCBC said the price for annual net excess power should equal FortisBC’s cost of power from new B.C. clean or renewable resources. This would be about 11 cents/kWh, which is less than the highest residential retail rate but a lot more than the 4 ½ cents/kWh that FortisBC proposed.
Stay tuned to this channel for the exciting conclusion when the commission issues its Final Decision, likely to be later this fall!
Bill Andrews is legal counsel for BCSEA and SCBC in BC utilities commission proceedings.