One of Eagle Point Solar's installations sits across the street from Alliant Energy's office in Dubuque, Iowa. (Photo courtesy Eagle Point Solar)

Iowa utilities: No net metering for third-party solar projects

Iowa’s two major investor-owned utilities are refusing to net-meter solar projects financed by a third party, a funding mechanism that was upheld last summer by the Iowa Supreme Court.

By prohibiting customers from banking excess power for later use, the utilities are making solar projects financially less viable and, in the opinion of some clean-energy advocates, may be violating the court’s judgment in the case involving Eagle Point Solar, a solar installer based in Dubuque.

Eagle Point is working on a third-party solar installation for the city of Asbury. Eagle Point and Asbury have reduced the scale of the project because, company president Barry Shear says, Alliant Energy is “artificially suppressing the economics of the project.”

Alliant is doing this by taking the position that under a third-party ownership structure, net metering would be “reselling” energy, which would be a violation of their rate tariffs.

The Asbury project is the first third-party solar installation that Eagle Point has developed since the ruling last summer. Shear initially sized the project at 586 kilowatts. Of that, 230 kilowatts were slated for city hall and three small structures. Shear was not aiming to produce more than the buildings required, and therefore didn’t need net metering.

He had bigger plans for the city’s wastewater treatment plant, however. He intended to install 356 kilowatts there, producing enough power to offset 90 percent of the building’s electricity use. He would need net metering to make that viable, but Alliant told him net metering was not an option.

Shear then pared the wastewater treatment plant from the plan. He contends that Alliant’s position “is not supported in the rate tariffs or in the Iowa code.”

Shear is not the only one who believes that Alliant and MidAmerican are flouting the Iowa Supreme Court’s ruling in the Eagle Point case.

The two utilities persist in “trying to make the same distinction that the court rejected,” said Josh Mandelbaum, a lawyer for the Environmental Law & Policy Center, the non-profit entity that brought the case before the Iowa Supreme Court. “It doesn’t make a difference if a project is leased or paid for outright or paid for through a (power-purchase agreement).”

While the net metering issue “is not directly on-point,” he said, “certainly the spirit (of the ruling) is being violated.”

Nathaniel Baer, energy program director for the Iowa Environmental Council, said he believes that “net metering would apply whether it’s a third-party owned or a customer-owned system. Net metering is a metering arrangement that should be in place regardless.”

‘Some real challenges’

Alliant will “gladly” purchase excess power from those projects, said spokesman Justin Foss, but at a substantially lower price than the net-metering rate, which is basically the retail price for power.

And that, according to Baer, “creates some real challenges to making the projects viable.”

MidAmerican Energy takes a similar position: net metering is offered only to customers who buy all of their power direct from MidAmerican, not to people buying at least some of their energy from the owner of the solar panels on their property.

“That’s in our rates as approved by the (Iowa Utilities Board),” said MidAmerican spokeswoman Ruth Comer.

“What exactly are they referencing there?” Baer asked. “The rules on net metering are silent on ownership.”

The Iowa Utilities Board “cannot take a position at this time on whether the provision (to deny net metering to third-party installations) is, or is not, reasonable and lawful,” board spokesman Don Tormey wrote in an e-mail. “Any interested person can file a complaint with the Iowa Utilities Board, arguing that the prohibition on net metering for third-party installations is unreasonable or unlawful.”

Other projects scaled back

Following the court’s ruling last summer, there were predictions of a solar boom among tax-exempt utility customers that, subsequent to the court’s determination, finally would have a path to reap state and federal solar tax incentives. But projects have been slow to materialize.

The Iowa Falls school district began crafting a plan to put solar panels on all four of its schools, assuming it could net meter and use excess energy at times when consumption exceeded production. But the picture changed when the district’s solar partner, Novel Energy, informed the district that Alliant would not allow the third-party installation to bank credit for energy sent back to the grid.

The district hasn’t given up, according to superintendent John Robbins, but without net metering, he said the project becomes “financially difficult” and may have to be reduced in size. He’s concerned that he may have trouble finding investors as a result.

Johnson County is another case in point. The local government had planned to install a 140-kilowatt system at one of its maintenance buildings. But after MidAmerican Energy said it doesn’t pay a net metering rate to customers with third-party solar installations, the county government revised its plan down to 87 kilowatts.

The county originally sized the system to generate enough power that the county could bank what it didn’t need during high-production times of year, and then tap into it when its consumption exceeded production. Without net metering, banking credit for excess energy isn’t an option, leading the county to scale back on its ambitions. The projected 25-year savings consequently tumbled from $275,000 to $152,000.

Shrinking the size of the array “unfortunately limits our abilities to make this truly a funding mechanism that would be in the best interests of the county,” said Terrence Neuzil, a member of the Johnson County Board of Supervisors. “We are frustrated that there isn’t a better arrangement between local governments and the state and those who have oversight on energy regulation.”

Mandelbaum, of the Environmental Law & Policy Center, said that the utilities “have been alerted that folks are concerned and have a different interpretation of the rules. They’re not indicating any changes based on customer concern. We will look at what options are available for how to address this.”

Shear indicated that he, too, will not let the matter rest.

“Essentially,” he said, “they’re inviting another court challenge.”

The Environmental Law & Policy Center and the Iowa Environmental Council are members of RE-AMP, which publishes Midwest Energy News.

7 thoughts on “Iowa utilities: No net metering for third-party solar projects

  1. In my opinion, the Iowa Supreme Court by not following the laws and policies of the state of Iowa, that the state regulators and utility companies are required to follow regardless of what the court rules, has delayed the revision of the state’s laws and policies, by the legislature the only body given the right to revise laws by the state constitution, to adjust for the dramatic increase of distributed solar power adoption, due to the jump in solar power generation technology.
    The fact that laws and policies are slower to evolve than technology does not surprise me. Scientists do seem more able to develop new technology faster, than legislature’s can develop new laws and policies that do an effective job at governing over an issue.

  2. I do not know about Alliant but MidAmerican is a company owned by Warren Buffet’s Berkshire Hathaway. I have always thought of Warren Buffet as a charitable and progressive business person. Net metering for third party leases (or PPA) is a progressive electric grid policy and I just assumed that a progressive business person like Warren Buffet would support it.

  3. This stance by Iowa utilities will make their state a target for promoting battery storage and local grid systems. Better start shorting these company stocks.

  4. Just another attempt by a monopoly utility putting their finger in the dyke to try and stave off the clean energy will of the people. These utilities will throw everything including the kitchen sink at protecting their crumbling business models. They are now fighting Moore’s law like Britannica tried to ignore the CD, and Kodak tried to thwart the digital camera. They are just making up rules as they go along, even though the Net Metering law is silent on the ownership of the panels – they might get 12-24 months out of this one as legal challenges mount and knock it own.

  5. Doug,

    I think you’ve got it upside down: Courts interpret and rule upon the law. They do not “follow” or “not follow” the law. When there are disputes, Courts and only Courts decide how to interpret the law. Nor could a Court “delay” the revision of any law by the Legislature. The Legislature can always take it upon itself to amend or abolish or create a new law.
    Your entire comment is disingenous; that, or you have no idea of basic civics.

  6. @M.Staevy,
    So because Warren Buffet is charitable, he should allow companies and cities to be subsidized by ratepayers? Solar power only makes sense if these companies are allowed to sell power to the utility at a retail rate (~$0.12/kwh) which is 3 to 4 times that of the wholesale rate ($0.03-$0.04/kwh) that the utility would normally have to pay. Now you are asking the utility to allow that expensive energy to flow on its reliable grid system and somehow try to make a profit from it- guess they have to raise the price to $0.20/kwh to help pay for the transmission and distribution equipment and backup generation plants that are sitting idle waiting to provide these subsidized entities with power.

  7. Your article misses the point behind rate tariffs and state/ federal law that allows Alliant and MEC the right and mandates the obligation to provide electric power in their respective service territories to all customers. That right and obligation is underpinned by the economic efficiency of allowing franchised areas suppliers so that there is not a duplication of expensive capital equipment needed to provide everyone with reliable electric service. When another party builds a generator, this is a duplication of capital investment already made by the utility with the obligation to serve. The new generation diminishing the utility’s market share resulting in increased cost for all customers.

    But the larger omission is that the third party owners also want to use the Utility’s wires and other very expensive facilities to “bank the excess solar power” and then deliver it back to the customers for free. For example; if the retail tariff per KWh is 10 cents only about 2 to 3 cents per KWh is avoidable by the utility. These are the fuel related costs in generating the KWh that can be avoided. The other 7 to 8 cents is not avoidable. These are the long term cost the utility has assumed for owning the generation, transmission, substations and distribution facilities that provide reliable 24×7 electric service to all customers. These costs are not avoidable and if the utility pays the full 10 cents for power from third party solar then the solar owners are being greatly subsidized by all other customers.
    All customers interconnected with the utility system get the benefits of the investments already made and they should pay for these whether they have solar or not. Customers with solar or customers who contract to buy solar from a third party supplier should not be subsidized by other customers. If you want to interconnect and gain all the benefits of the utility grid you need to pay your fair share of the cost of that utility grid.