When a utility customer decides to take the necessary steps to install a small private power generator at his or her home, it creates a bit of a quandary for utilities, and the customer alike.

Federal law says that customers who make the investment to install a private hydro project, solar generation, a wind turbine, or even a fuel cell to generate all of the power the home needs obviously don't want to pay a utility bill. Common sense would dictate that most also would not want to be disconnected from the grid, just in case something went awry with their personal system.

At Sacramento Municipal Utility District (SMUD), the utility will buy solar power their customers generate at the full retail rate. Clark Public Utilities (Vancouver, Wash.), and Snohomish County PUD (Everett, Wash.) buy excess electricity, produced by any environmentally-friendly generation project, also at the full retail rate.

SMUD's program, the SMUD PV Pioneer Program, began in 1993 giving the utility an opportunity to partner with customers who had the ability to assist with the early development and implementation of photovoltaic technology.

State Net Metering Policies

Prepared by Yih-Huei Wan, NREL (revised 10/8/99)

The program's first seeds were planted when SMUD started purchasing, installing, owning and operating 2 to 4 kilowatt rooftop solar systems on "borrowed" rooftops of their customers.

The PV Pioneer Program is one of the nation's leaders in net metering. Nearly 600 systems have been installed on the property of SMUD customers who agreed to help Sacramento reach toward more solar energy.

The program has helped SMUD reduce the cost of solar electricity for the future by helping the district learn and gain valuable experience in terms of installing, operating, maintaining, and pricing home photovoltaic systems.

Because of the experience the utility has gained through the PV Pioneer Program, customers can now take part in true net metering by purchasing their own PV systems, and consuming the electricity in their own homes.

In 2001, SMUD customers paid $4,800 for a typical 2,000 Watt solar system, which would provide roughly 50 percent of an average customer's usage. The district made volume purchases of equipment needed to install a residential system, and bought down nearly half the cost of the system, helping customers to find the capital investment more affordable.

Like most other utilities, when the home-based systems generate more electricity than the customer needs, the excess is purchased by SMUD at retail rates. When customers use more than the solar system provides them, they are given the choice between paying a monthly bill, or to pay an invoice to settle their account at the end of a one-year span.

Snohomish County PUD (Everett, Wash.) has a program that lets those customers who do generate their own environmentally-friendly electricity "store" the electricity that is more than their immediate needs with the PUD for future use.

Those Snohomish PUD customers who use fuel cell, solar, wind or hydroelectric generation in their homes that are capped at 25 kilowatts are eligible for the PUD's Net Metering Program. Those customers who take part in the PUD's program, connect their private generating equipment to the SnoPUD distribution system.

In cases when the customer is producing more power than the household needs, the meter on the customer's home will literally spin backwards, sending power back to the grid. The customer essentially sells their excess electricity back to the utility in return for credits on their account equal to the current rate charged for power by the utility. Any credits earned by net metering are carried over month-to-month, but do not carry over into a new calendar year.

The PUD requires an inspection of the distributed generation project so to ensure that technical and safety requirements are in place to protect the distribution system. It also will install a more modern electric meter, assuring accurate measurement of the power that the customer provides to the grid.

Grays Harbor PUD's (Aberdeen, Wash.) net metering policy is similar to the one at Snohomish PUD. Grays Harbor approved its formal policy in 2002, as required by Washington state law. At Grays Harbor, at the end of each year, the utility pays customers for private generation over and above what they consume. The utility reimburses customers at half of the retail rate, even though the state allows utilities to require customers to deliver the excess generation without reimbursement.

At Clark Public Utilities, net metering has been in place since the early 1980s, according to Corporate Communication Manager Mick Shutt.

"We have one customer who has a little tiny hydro project and one who has a a solar project."

The hydro project, surprisingly, is located in an urban area of Vancouver, fittingly not far from the Columbia River.

Shutt said the Clark program includes systems up to 100 kilowatts, and that the PUD buys excess power at the retail rate.

Federal Law Motivates Net Metering Programs

Federal law (PURPA, Section 210) says electric utility customers can use electricity they generate in their own environmentally- friendly systems to supply the energy needs of their home, allowing them to offset the power they would instead buy from their electric utility. However, the law says that if the customer lives in a state, or is served by a utility where net metering is not allowed, the excess power should be purchased by the utility at the wholesale price.

Net metering makes it easier by letting the customer use any extra electricity to offset utility-provided electricity used elsewhere in the billing cycle. The customer, in exchange, is billed only for the consumed energy provided by the utility.

Seems Like Such a Win-Win

Net metering seems like it could easily be a win-win situation for members of cooperatives and customers of PUDs and municipal systems. But it seems like very few customers are using it.

Part of the reason could be the capital expense of setting up the systems in the first place. Another reason could be that many utilities provide programs as prescribed by law, but most don't publicize the programs. Instead, they view net metering as more of a headache.

In a time when transmission avenues are congested the same way freeways are, and distribution reliability is such a big issue, perhaps it is wise for utilities to begin taking a more serious look at the issue of net metering.

Utilities gain also because they avoid administrative and accounting costs involved with buying and measuring the small amounts of excess energy provided by private generation systems.

Obviously, customers who are involved in net metering buy less power from the utility, which is an indirect cost for the system.

According to the American Wind Energy Association, the revenue loss is similar to what a utility would experience when a customer reduces electricity use through taking energy efficiency actions.

More Than Half of the States Require Net Metering

Thirty states are currently requiring at least some utilities to provide customers with the opportunity to take part in net metering. The requirements in each state are different.

While most states that allow net metering had the rule enacted by regulatory commissions, California, Montana, Nevada, Oregon, Utah, and Washington all had net metering laws enacted laws through action of their legislatures in the late 1990s and early 21st Century. Idaho's Public Utility Commission enacted net metering rules in 1980, and the Arizona Corporation Commission enacted them in 1981.

In every case included among the states served by NWPPA member utilities, residential consumers are given the ability to participate in net metering programs, and each state has different regulations.

For example, in all participating Western states except California all customer groups are allowed to be net metering users. California's law says that only residential and small commercial organizations are eligible.

In all cases throughout the NWPPA service territory, except Idaho, the scope of net metering regulations includes all public power and investor owned utilities.

The Future

The horizon shows that there will likely be some sort of increase in the use of net metering as different systems become available to consumers, and prices begin to fall.

With customers learning more and more about the environmentally friendly nature of wind power and photovoltaics - not to mention the coming emergence of residential fuel cells - they will likely begin learning to use such systems on their own property, and start looking toward their utility for not only some relief on their electricity bills, but also for help and advice with installation.

Net metering makes it easier by letting the customer use any extra electricity to offset utility - provided electricity used elsewhere in the billing cycle. The customer, in exchange, is billed only for the consumed energy provided by the utility.

Nelson P. Holmberg is associate editor at Northwest Public Power Association. He can be reached by telephone at (360) 254-0109, or by e-mail at nelson@nwppa.org. NWPPA

Copyright Northwest Public Power Association Jun 2004