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WKYT Investigates UPDATE | Ky. regulators decide first case on value of rooftop solar power

The case was being watched closely for its possible precedent-setting impact.
WKYT Investigates | The value of solar
WKYT Investigates | The value of solar(WKYT)
Updated: May. 14, 2021 at 4:51 PM EDT
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FRANKFORT, Ky. (WKYT) - In a case being watched closely for its possible precedent-setting impact, state regulators on Friday decided that an eastern Kentucky utility company must consider the benefits of solar power - not just the costs the utility is able to avoid - in setting rates to compensate customers who have their own solar panels.

The order currently prevents Kentucky Power from crediting those customers at the far-reduced rate - roughly 1/3 of the previous rate - the utility company had proposed.

Alternative energy advocates see the decision as a win.

Background

At issue: How much customers with their own solar panels are credited for the extra energy they feed back to the grid. Several utility companies across the commonwealth had asked the Public Service Commission for permission to credit those customers less.

Advocates were worried that, if that happens, an energy source that they believe needs to grow will instead do the opposite. But utilities claim that keeping things the way they are will only push higher costs onto other customers.

It all stems from a bill, passed by the General Assembly in 2019 and signed into law by then-Governor Matt Bevin, that changed the rules for net metering - the difference between the dollar value of energy used by a customer with solar panels, and how much excess energy they generate, feed back to the grid and sell to the utility.

[MORE: WKYT Investigates | The value of solar power]

Under the new way of doing things, it is up to the Public Service Commission, which regulates utilities across Kentucky, to approve or reject the amount that individual utility companies now want to credit net metering customers for the extra power they generate. Utility companies are “entitled to implement rates to recover from its eligible [net metering customers] all costs necessary to serve” them, according to the text of the law.

Before, it was basically a one-for-one trade. The utility company would buy back the extra solar energy generated at the same rate of the energy they are selling - the retail rate, or what has been roughly about a dime per kilowatt-hour in bill credits.

Decision

Kentucky Power had asked the Public Service Commission for permission to credit residential net metering customers at a rate of $0.03553/kWh, and net metered commercial customers at a rate of $0.03778/kWh.

“Kentucky Power developed the export rate based upon avoided costs,” the commission wrote. “Avoided costs are the incremental costs that a utility would have incurred but for services purchased from net metered customers instead of purchasing or generating the same amount of services from another source. Avoidance of a cost is a system benefit.”

In its order published Friday, the P.S.C. took issue with Kentucky Power’s calculation of that avoided cost rate, determining that multiple other factors needed to be considered in order to come up with a “fair, just and reasonable” rate.

The Public Service Commission instead set the utility’s residential net metering rate for excess generation at $0.09746/kWh, with the commercial rate at $0.09657/kWh.

“The Commission acknowledges that solar PV [photovoltaic systems] and other eligible generating facilities may, at some point in the future, create system challenges,” the order states, “but currently the Commission sees an opportunity to begin processes that will comprehensively integrate solar PV and other resources into the power system and provide significant benefits to ratepayers; participating and non-participating alike.”

The P.S.C. also clarified that the legacy period for current net metering customers with solar power facilities already in service is 25 years from the effective date of the order (May 14), not the date from which the net metering service began.

Reaction

A spokesperson for Kentucky Power said on Friday that company officials are still working to determine what to do next in the aftermath of the P.S.C. decision.

“In the net metering order issued today, the Kentucky Public Service Commission (PSC) established rates for Kentucky Power customers,” Cynthia Wiseman, vice president of external affairs and customer services, said via email when asked for comment. “The rates approved by the PSC do not align with the proposed methodology by Kentucky Power, as it was Kentucky Power’s intent to provide a fair and balanced approach for all customers, not just the net metering customers.

“We are still reviewing the order to gain a better understanding of the path forward,” Wiseman said.

Andy McDonald, a solar power net metering customer, advocate and expert (who supplied expert testimony in the net metering case) said the decision is a win for solar power.

“Overall I’m very pleased and excited by the order,” McDonald told WKYT’s Garrett Wymer when reached by phone on Friday afternoon. “I am disappointed that the compensation rates still fall below the retail rate, but for the principles the commission used in deciding the case, they largely listened to the arguments we made and the principles we brought to the discussion.”

What’s next

The Kentucky Power case had been watched closely by advocates and other industry observers because of its potential for setting a precedent with other net metering cases moving forward.

“[T]he Commission must ensure that customers have fair, just and reasonable rate and service choices in the future,” the P.S.C. order reads, going on to highlight several technological advances that are changing the energy field. “Committing to gradual compensation changes will provide customers and third parties with confidence to operate in Kentucky and, with improved integration, create significant benefits for all ratepayers.”

Louisville Gas and Electric and Kentucky Utilities - which together serve more than 90 counties across the commonwealth - currently have net metering cases in front of the Public Service Commission.

Hearings were held last month; a decision on their proposals is expected soon.

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