Net metering windfall in works?

A state program designed to help homeowners and municipalities launch renewable energy projects is getting a makeover on Beacon Hill that could give private wind power developers a financial bonanza.

The state program is called net metering. It was approved as part of the Green Communities Act of 2008 as a way of giving municipalities and homeowners an incentive to put up a wind turbine or solar panels. But a measure pending before the Legislature would transform this small-scale incentive program into a much broader, and costlier, renewable energy initiative.

“This really isn’t net metering anymore,” said one industry official familiar with the legislative proposal. “This is wholesale power production but with retail rates.”

Under net metering, homeowners and municipalities can use the power they generate on-site to reduce the size of their electric bill, while also selling any unneeded power back to the local utility and be paid for it at the retail price of electricity (15 to 20 cents per kilowatt hour) rather than the wholesale price (roughly 6 to 9 cents). The difference in price – the effective subsidy – is paid by all of the utility’s ratepayers as part of the distribution charge on their bills.

Two concerns about the program soon emerged. The law set a cap on net metering projects equal to 1 percent of the local utility’s peak load. The cap hasn’t been reached yet, but the program has attracted so much interest that participants have become concerned they might spend months putting up a wind turbine only to discover that the 1 percent cap has been reached and they don’t qualify for net metering.

Utility officials are also concerned about the types of net metering projects being proposed. They say some of the private projects are not designed to offset a homeowner’s or municipality’s electricity usage, but instead are being set up as small power-generating facilities selling electricity directly to the grid to take advantage of the ratepayer subsidy. Current law limits the size of these private projects to no more than 2 megawatts.

Legislation currently pending on Beacon Hill would dramatically change net metering by raising the overall cap on the program from 1 to 3 percent of a utility’s peak load and allowing private developers to launch much bigger projects as long as they work in tandem with a municipality.

Lawmakers inserted the net metering provision in the wind siting reform legislation that stalled in the Senate at the end of the legislative session in July. With that bill going nowhere, an identical provision was slipped into a more-likely-to-pass spending bill that squeaked through the House this week and is currently pending in the Senate.

State officials say the net metering provision will spur wind power development, reduce fossil fuel use, and save electric ratepayers money in the long run. Opponents complain that the net metering approval process is largely hidden from public view, unregulated, and costly. Some officials estimate the customers of some utilities could be on the hook for $30 million in extra costs from net metering.

The net metering provision allows private renewable energy developers to build projects much bigger than 2 megawatts as long as they assign all of the power output to a municipality. The provision doesn’t spell out how this will work, but presumably the town would receive compensation for helping the developer obtain net metering subsidies for his power.

A proposed wind farm project in Kingston, which is represented on Beacon Hill by Senate President Therese Murray, stands to benefit from the net metering changes. Mary O’Donnell, the owner of a large piece of property adjacent to the former town landfill, wants to put up four, 2-megawatt wind turbines and assign all the power output to the town. Under net metering, she would be paid the retail price for her power instead of the much lower wholesale price, with ratepayers picking up the much higher tab.

The net metering provision is unclear on whether a private renewable energy developer would have to assign his power to the municipality in which the project is located or could shop it to any municipality in the state to land a better deal.

Lisa Capone, a spokesperson for Gov. Deval Patrick’s Office of Energy and Environmental Affairs, which supports the net metering provision, says she believes the developer would have to deal with the municipality in which his project is located. 

“However, if and when the legislation passes, this issue would ultimately be clarified by the Department of Public Utilities, which would need to revise the state’s net metering regulations to reflect this provision,” she said.