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BCUC Fortis Net Metering Update: Profit's not the priority

Tom Hackney
Thursday, August 4, 2016

In June, we described Fortis electric’s application to the Utilities Commission for permission to change its net metering tariff, including slashing the rate Fortis pays customers for year-end credit balances.

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The issues in the review of the application are emerging more clearly. Interveners have tested Fortis’s application through information requests – 271 to be exact – and Fortis’s responses have added 167 pages to the record of evidence.

First, slashing the payout rate from 15.2 cents per kilowatt-hour (kWh) to 4.52 cents per kWh will, surprisingly, have little or no effect on most net metering customers. In the present system, most of the electricity that a net metering customer generates ends up being credited against the cost of the electricity they consume, so at the end of the year there is little or no remaining “net excess generation” to be subjected to the lowered rate.

This is the way Fortis wants the program to be run and how they say it was meant to be run all along:

“It is the overriding intent of the program that customers gain the ability to offset their own consumption with a clean and renewable resource. It is not the intent of the program to provide a means for larger scale Independent Power Producers (“IPP”) to bring their output to the market.”

Is the proposed 4.52 cents/kWh a fair rate for Fortis to pay? Some information requests probed the basis for that figure. In response, Fortis affirmed that this is the price it currently pays for non-firm electricity it acquires from various sources. It will be challenging to argue that Fortis should pay more than this market based price.

Fortis also rejects the suggestion that customer generation provides system benefits that should be recognized with a premium price. Fortis says customer generation is not reliable enough to substitute for investments in system upgrades and resource acquisitions. In particular, photovoltaic generation provides the least amount of power during the winter months, when the demands on the grid are the greatest, so it does not help to reduce Fortis’s peak load requirements.

Who will suffer the worst impacts of Fortis’s proposed changes? In 2015, only half a dozen customers qualified for cash payments for excess generation. Had the proposed new pricing been in place in 2015, one customer would have been worse off by $11,000, another by $4,000, and the others worse off by anywhere from $150 to $900. Customers with micro-hydro installations have been accumulating the largest credits and would suffer the largest loss.

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Several solar installers and net metering customers with solar generation have talked of sizing solar systems with the intention of generating energy surpluses for sale to the grid. Some customers have invested substantially in such “over-sized” systems. Fortis clearly wants to discourage this.

This leads to the argument that there is a general social benefit to promoting customer generation in a world where climate change is a critical issue and more renewable energy is needed. BCSEA and Sierra Club support this position, and it is supported by government policy. This argument may have some traction with the Commission, though its qualitative nature puts it at a disadvantage to Fortis’s dollars and cents argument.

There is also a complicated argument over whether a residential net metering customer’s generation should be netted against their consumption before or after allocating that consumption between the two tiers of the residential inclining block rate. No one, apparently, foresaw this issue when the rates were being designed. The details are too complicated to explain here, but if the Commission rules as Fortis requests, it will slightly benefit net metering customers who generate less energy and will disadvantage those with substantial excess generation.

Finally, BCSEA and Sierra Club will assert the rights of net metering customers that, in Fortis’s words, “have persistent annual net excess generation” beyond what Fortis envisions for the program. This could occur if a customer deliberately over-sized their generation system. But a customer’s energy use might also decrease over time, for example as children leave home, or if energy efficiency investments cut energy losses. Fortis says that it might remove such customers from the net metering program.

Final arguments will be written and filed in September, and we can expect a Commission decision this fall. Stay tuned.