This post is the third in a series about a new distributed generation bill introduced in the Rhode Island General Assembly.
On Friday, February 28, a new renewable energy bill – H-7727 – was introduced into the Rhode Island General Assembly. The bill is designed to provide for a steep increase in the amount of so-called “Distributed Generation” (or DG) in Rhode Island. You can read general background about the new bill here. This blog post focuses on two specific, innovative aspects of the bill, both of which concern “net metering.”
What is Net Metering? As I explained in my prior post, net metering allows utilities and owners of small DG projects to track how much electricity is produced by these projects. Most people have electricity meters from the utility that only run one way – measuring (and then billing for) the electricity the ratepayer uses in a month. With net metering, the ratepayer gets a meter that runs both ways. When the ratepayer produces more electricity than she actually uses, the electricity meter literally runs backwards. In some cases, the utility will actually end up sending a check to the ratepayer at the end of the month for the excess electricity put back into the grid.
Designing New Rates for DG and Net Metering Rhode Island’s new DG bill provides that the Public Utilities Commission (PUC), which sets utility rates, must open a docket to re-examine electricity rates in light of the anticipated huge growth of DG and net metering (which this new bill is designed to make happen).
Why this is important. Traditionally, all utilities have recovered their costs (and made their profits) on a volumetric basis – the more electricity (or gas) a utility sells, the more money it takes in. The growth of net metering and DG undermines that traditional revenue model, since this growth will mean the utility will sell less commodity. Thus, unless this problem is addressed, utilities will always be opposed to net metering and DG. Moreover, utilities have legitimate costs associated with running the electricity distribution system; and these costs will continue to have to be met, even in a new world where there are huge increases in net metering and DG. Creating a new rate design that provides appropriate compensation to the utility in the new world of widespread net metering and DG will remove an important disincentive to utility support for these programs. Importantly, the bill carefully sets forth what the PUC must consider, including reducing carbon emissions and properly accounting for the many benefits of distributed generation.
Adding a Second Meter A second innovative provision of the new bill is that it will require renewable energy generators who net meter or receive a DG tariff to add a second electricity meter. Under the current system (in which generators have one meter), the utility only knows net flows for net metered and DG customers; the utility does not have any idea how much load is on site “behind the meter.” Installing a second meter will enable the utility to learn what is going on behind the meter, and understand how much electricity is flowing both ways.
Why this is important. This provision has broad implications for the electricity grid and ISO-NE, the company that runs New England’s electricity grid. (You can read more about CLF’s work with ISO-NE in a prior blog post of mine, here.) Historically, environmentalists have stressed to the public – and to state legislatures – the ratepayer benefits of net metering and DG by emphasizing the money that can be saved by ratepayers at times of peak load when the presence of DG means that the ISO does not need to dispatch (or “turn on”) the most expensive electricity generators on the system. However, the ISO estimates that 85% of the DG now on the system across New England is invisible to its Control Room in Holyoke, MA. Crucially, the ratepayer benefits of DG only occur if the ISO knows about it; if the DG actually on the system is invisible to the grid operator, then it unnecessarily dispatches generators that it doesn’t need – and ratepayers never see the benefits of the DG that is already on the system. This new system of metering will begin to address this problem, with all net metering and DG customers having two meters and making the energy visible to the ISO. The provisions for a rate-design docket at the PUC and for better monitoring of all renewable energy generators) are quite technical. But both are designed to remove disincentives and obstacles from the development of renewable energy. We believe that these innovations may well serve as a model for other states.