Kentucky PSC Issues Groundbreaking Order on Net Metering, Delivering Victory for Rooftop Solar
Commission Supports Principles for Valuing Distributed Solar Presented by Solar Advocates, Rejects Utility’s Proposed Rates
By Andy McDonald, May 25, 2021
After more than six years of debate among solar advocates and Kentucky’s electric utilities, the Kentucky Public Service Commission (PSC) delivered a clear victory for the future of local, customer-owned renewable energy resources in Kentucky. On May 14, 2021, the PSC issued a final Order in the first case to propose changes to net metering since passage of the controversial Net Metering Act of 2019 (SB 100). In the Order, the Commission rejected the Kentucky Power Company’s proposal to reduce the value of solar energy exported back to the grid to 3.7 cents/kWh (a 75% reduction). Instead, the Commission set the new compensatory credit at 9.7 cents/kWh (which is 12% below the retail rate of 11 cents/kWh).
In the May 14th Order, the Commission directed that properly valuing exported solar energy must include consideration of the many benefits that distributed solar provides to the utility and other ratepayers. The Commission adopted principles and best practices suggested by expert witnesses for the Kentucky Solar Energy Society, the Mountain Association, and Kentuckians for the Commonwealth, who participated in the case as Joint Intervenors. It directed that those principles be used for determining both the value of distributed energy resources such as rooftop solar, and for determining the cost of serving those customers.
The Commission based their calculation of the value of exported solar energy on the utility’s ‘avoided costs,’ but expanded on the components to be considered to achieve a ‘just and reasonable’ avoided cost rate. These factors include avoided generation, distribution and transmission capacity, ancillary services, and carbon and environmental compliance costs. The Commission also acknowledged the economic development and job creation potential of distributed generation and indicated that these benefits should be assessed in setting a value for exported solar electricity. Finally, the Commission noted that fair compensation for solar exports would discourage net metering customers from seeking to participate in the wholesale market under FERC Order No. 2222, and that avoiding the higher costs of serving those customers if they chose that path should be considered as avoided costs.
The PSC has set an important precedent by recognizing the multiple ways that small-scale distributed solar generation provides value to the utility. The inclusion of the cost of carbon and the impact on jobs among the benefits to be considered is especially significant.
The Order outlined principles and best practices for net-metering compensation and rate design which were consistent with the testimony of the Joint Intervenors:
As the first base rate case decided following implementation of the Net Metering Act of 2019, this Order establishes a framework for how the Commission will handle net metering in pending and future rate cases brought by other utilities, including the Kentucky Utilities Company and Louisville Gas & Electric, whose cases are now pending before the Commission. Decisions in these cases are expected in the coming months.
This Order is a promising sign for the expansion of distributed energy resources in Kentucky. As the Commission stated, “Kentucky Power’s testimony framed the increases in solar PV as an operational challenge, while intervenors have demonstrated that solar PV provides an opportunity to integrate a new resource onto the power system. The Commission acknowledges that solar PV and other eligible generating facilities may, at some point in the future, create system challenges, 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.” (See the Order, p. 40)
The Commission’s Order also:
The Joint Intervenors- the Kentucky Solar Energy Society, Kentuckians for the Commonwealth, and the Mountain Association- are represented by Tom FitzGerald of the Kentucky Resources Council and received technical support from expert witnesses James Owen of Renew Missouri and Karl Rábago. The Kentucky Solar Energy Industries Association also intervened in the case and provided crucial testimony in support of fair net metering rates.
The Kentucky Solar Energy Society will be hosting a free webinar to review the PSC’s Order on Thursday, June 3rd at 7:00pm. Presenters will be Joshua Bills of the Mountain Association, Tom FitzGerald of the Kentucky Resources Council, and Andy McDonald of KySES.
Andy McDonald is the Vice Chair of the Kentucky Solar Energy Society and Director of Apogee-Climate & Energy Transitions. He is based in Frankfort, Kentucky. He can be reached at email@example.com.
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