Iowa regulators open door to more net metering

Net metering will be available to more electricity customers in Iowa as a result of a decision made on Tuesday by state regulators.

As part of a long-running discussion about distributed generation, the Iowa Utilities Board ruled that the state’s two major utilities – MidAmerican and Alliant Energy – must increase their net metering cap from 500 kilowatts to 1 megawatt. Also, the new tariffs will have to make net metering available to all classes of customers but will change some rules for compensation.

“They’ve left the structure of net metering in place, and focused on how to expand that in a very narrow way that is on the whole positive,” said Josh Mandelbaum, an attorney in Des Moines with the Environmental Law & Policy Center. “They didn’t invite any of the changes you’ve seen in the utility pilot project. They could have, but they kept the pilot projects separate, and to me, that is a positive.”

As part of the board’s distributed-generation docket, the board last October asked MidAmerican and Alliant to submit pilot projects to encourage the development of distributed generation in the state. For the most part, the utilities did the opposite: proposing rate changes that would penalize solar customers.

The new rules regarding net metering will be adopted on a temporary basis. At the end of three years, the board will assess the experiment and decide whether to make the changes permanent. Customers of the two utilities who currently have solar panels can choose to continue in their current net metering arrangement, or can opt to try the new net metering tariff. Those choosing the new tariff may not return to the former tariff.

Any customer installing solar panels after the new tariffs are adopted will be required to operate under the new rules. Under existing rules, net meterers can roll over excess credits indefinitely, to be applied against future bills. There is no option for trading credits for cash.

The new tariffs will institute a yearly true-up. Early in the year, excess credits will be removed from the books, compensated at the avoided-cost rate and the proceeds divided in two: half will go to a utility fund to aid low-income customers, and half will return to the customer.

Although he praised the board’s directive overall, Mandelbaum said the cashout piece “could potentially be losses and gains. I don’t think the cashout is going to make much difference on most projects, but there is some potential for it to impact some projects.”

Barry Shear, a solar developer in Iowa, had harsher words for the yearly true-up and cash out features.

“The true up is probably the most difficult thing to swallow, and will have an adverse effect on solar development in the state,” he said. “Instead of carrying the metering credit forward, they’ll cash you out, pay you avoided cost – and then on top of that, they’re only giving you 50 percent of that avoided cost.”

At cash out time, likely to be January, customers would lose all of their production credits and would need to pay their bills until they could start to overproduce again. Shear said the ideal true-up time would be late March.

“I don’t think this is at all fair to the consumer, and I don’t think it will encourage renewable energy.”

The ruling will eliminate any incentive a solar customer might have felt to overproduce. The increased cap of 1 megawatt will apply only up to 100 percent of the solar customer’s load. And while the new rules will extend net metering to a couple of groups of customers who are currently excluded, the rules stipulate that each customer’s generation will only offset the energy charge and will not apply to demand or customer charges.

Because demand and customer charges account for at least half of the bills of many large and industrial customers, Shear said the economics of solar are unlikely to work for them.

One class that now will gain access is customers who obtain solar power through third-party power-purchase agreements or lease arrangements. After a customer filed a complaint, Alliant changed its policy a year ago to allow third-party customers – generally public and non-profit entities – to net meter. While Alliant extended net metering to that group, MidAmerican did not, according to Mandelbaum. The ruling made yesterday requires that MidAmerican adopt the same standard.

The other class that now will be able to net meter is the large general service category, such as manufacturing plants and wastewater-treatment facilities. Barry Shear, a solar developer in Iowa, went to the utilities board because Alliant’s policy stymied one city’s attempt to install a solar array at its water treatment plant.

Although the new rules will allow large general service customers to net meter, the presence of a large demand fee as part of their bill may continue to interfere with the economics of net metering.

The board’s Tuesday ruling did something else: it seemed to bypass much of the pilot projects that Alliant and MidAmerican submitted in March. Although the board instructed the utilities to devise pilot projects that would experiment with ways to expand rooftop solar, clean-energy supporters in the state mostly viewed the pilots as designed to discourage people from generating their own power. Alliant proposed paying less to solar customers, and MidAmerican suggested imposing a demand charge on them. Both of them, however, also said they wanted to experiment with community solar.

The message in Tuesday’s ruling, as Mandelbaum sees it, was, “You can continue working on community solar projects,” he said, “The rate-design pilots – it essentially rejects those.”

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