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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

May 8, 2020

Challenge to Net Metering Before FERC May Have Broader Impact

In a complaint filed with the Federal Energy Regulatory Commission (FERC) on April 14, the National Electric Ratepayers Association (NERA) contended that net-metering arrangements violate established FERC policy and place unfair burdens on a utility’s other customers.

According to NERA, the Public Utility Regulatory Policies Act of 1978 (PURPA) protects other utility customers by prohibiting states from requiring utilities to pay customer-generators more for their electric power than the utility’s actual avoided cost of obtaining a similar quantity of electric power from other wholesale sources.

Net-metering programs adopted by New York and other states allow consumers to offset electricity taken from the utility by electricity supplied from solar and other qualifying on-site generating facilities. While the utility must supply the electric power it receives in the transactions to its other utility customers, FERC does not regulate net-metering transactions as wholesale power sales as long as the customer-generator’s total power production is less than its total electricity needs. Where the customer’s total power production exceeds its total electricity needs, FERC regards only the excess production as a wholesale sale subject to federal regulation.

While the validity of NERA’s claims concerning net metering under established FERC policy is far from clear, this proceeding will nevertheless provide FERC with an opportunity to consider whether net metering should be abolished and if the avoided cost price ceiling established in PURPA should apply to all electricity currently supplied under net-metering arrangements. If FERC were to accept NERA’s claims, there is a very real risk it may also impose similar price caps on other state programs providing similar benefits to renewable resources, such as the Value of Distributed Energy Resources (VDER) compensation program established by the NYS Public Service Commission.

Comments on the NERA complaint are due June 15. Our regulatory attorneys will continue to monitor this and other relevant proceedings before FERC and will issue subsequent legal alerts.

If you have any questions regarding this proceeding, other issues regarding net metering, or the VDER and other similar programs established by the NYS Public Service Commission, please contact Brenda Colella, Regulatory Practice Area co-chair and co-team leader of the Energy Markets Teams, at bcolella@barclaydamon.com; George Pond, partner, at gpond@barclaydamon.com; or Ekin Senlet, partner, at esenlet@barclaydamon.com.

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