Michigan PSC moves to replace net metering with DG tariff

Starting June 1, Michigan's net metering program will be replaced by a distributed generation inflow/outflow tariff that the Public Service Commission, which approved the new billing system on April 18, says will more accurately reflect the cost of service for customers who elect to generate their own electricity, mostly through rooftop solar panels.

PSC spokesman Nick Assendelft said the new system will be fairer to all customers of the state's regulated electric utilities and is in response to energy laws, Public Acts 341 and 342, passed by the Republican-controlled Legislature and signed into law by Republican Governor Rick Snyder in December 2016.

Solar energy advocates, though, said the change was unnecessary and fear it will have a dampening effect on the installation of rooftop solar panels across the state.

Current solar net metering customers will be grandfathered in for a decade after June 1, the PSC noted.

Sunrun, which bills itself as a leading solar panel provider, opposed the new tariff at the PSC, arguing among other things that the commission failed to conduct a bonafide cost of service study to explore the advantages and disadvantages of an inflow/outflow billing system.

Critics of the existing net metering program, as well as the PSC staff, pointed to the relatively small number of utility customers participating in the current program.

According to the PSC, there were 2,508 net metering customers in Michigan in 2016, the last year for which such data is available. They represented only 16.4 MW of capacity.

The vast majority of those participants - more than 1,900 - are customers of DTE Electric and Consumers Energy, the state's two largest regulated electric utilities.

Referring to the small number of distributed generation customers now enrolled in the program, the commission staff suggested the new cost-based program should be implemented through "retail rate-schedule riders" approved by the PSC. That is to happen after June 1 as new DG customers "are assessed for their fair and equitable use of the electrical grid," the PSC said.

In its order, the PSC said its staff "developed a tariff reflecting [cost of service] for DG customers based on extensive analysis and the available data, proposed the full retail rate be assigned to customer inflow, and recommended avoided cost as a viable option for the outflow credit."

The cost and benefit impacts associated with DG customers "are not static, but can vary based on a multitude of factors including location, utility infrastructure conditions, weather, and the number of DG customers on the grid, among other factors," the commission added.

The inflow/outflow tariff assigns a rate to the DG customer's total inflow and total outflow which is then measured by automated meters. "These simultaneous measurements create a complete picture of the customer's energy usage and excess generation, unlike traditional net metering that only captures the customer's net usage," the PSC continued. "This improved data collection will allow the commission to continuously evaluate DG program costs and benefits and provide accurate price signals to DG customers."

In its report to the commission, the PSC staff said the DG tariff will allow the commission to collect the data and information necessary to accurately capture the costs and benefits to DG customers in a way that could not be done under traditional net metering.

In recommending the inflow/outflow billing mechanism be implemented, the staff it would enable customer energy purchases from a utility to be priced at the full retail rate, while power outflows to the grid from the customer's generation would be valued, at least initially, at the utility's avoided cost.

Staff said the new tariff's framework is simple and "accommodates a wide array of potential future rate designs, such as those including demand charges, dynamic pricing, and dynamic credits."

In addition, it said, the inflow/outflow billing mechanism is "transparent" in effecting clear and accurate price signals, "and thus can form the basis for future load-control and demand-response programs that target DG customers."