Thetford School’s solar expansion, delayed by State Commission, will set precedent for “Net-Metering Credits”

What seemed like a routine application to expand the solar array owned by the Thetford Elementary School has morphed into a case that may set precedent for all major expansions to solar arrays in VT.

At the heart of the issue are the so-called net-metering credits, which may be briefly explained as follows.

When solar panels generate more electricity than can be used by the panels’ owner, the excess power is fed into the electric grid.  When this happens, the difference is recorded as a credit to that owner. Some or all of the credits will be used when the owner consumes power while no solar electricity is being generated, e.g. at night. Thus the owner is billed for electricity used minus electricity generated, in other words their “net” electricity use. The value of any excess electricity, the net-metering credit, is set according to net-metering rules issued by the state through the Public Utility Commission (PUC).

Net-metering was introduced in VT in 1999 to provide an incentive for solar development. Since then the law has been revised several times, and the net-metering credit has been lowered.

Net-metering benefits people (or corporate entities) that can afford to install solar panels. However it has the side-effect of increasing the electric rates billed to consumers. Under the law, electric utilities are guaranteed an approximate 8% return on their capital investments, like poles, transmission lines and transformers,  in providing power. This holds true not only in VT but also NH and other states, since it is in everyone’s interest to maintain a reliable electric service by keeping utility companies financially stable. Because private solar panels are not a capital investment of the utility, the company cannot fold the resultant net-metering payments into their capital expenses. Therefore net-metering costs are passed on to all customers (most of whom do not have solar panels) in the form of increased electric rates. This has a disproportionate effect on low-income households.

Under PUC precedent, an expansion to an existing solar array has up till now been eligible for the net metering rate structure that was in effect when the original panels obtained their permit from the state.

Any solar installation that feeds into the grid must first obtain a Certificate of Public Good (CPG) by petitioning the PUC. The expansion of the Thetford Elementary School’s solar, first proposed in 2021, will add 375 kW of electric generation to the existing 120 kW, bringing it to 495 kW,  a four-fold increase in electricity production. Accordingly the school filed a petition to amend the CPG that had been granted for the original solar array, to reflect the proposed increase in generation capacity. It was the expectation that this would be allowed according to PUC precedent.

Nolan Reigler, the Chair of Thetford’s Joint Energy Committee (JTEC) that advises and supports the Town and its schools in the transition to clean energy, explained the reasoning behind the expansion. “TES is the largest public facility in Thetford and is a significant consumer of energy. …..This expansion provides not only the opportunity for the school to completely offset its current electricity consumption, but also provides net-metering opportunities to town infrastructure (Town Hall and the Town Garage) and to income-eligible households. Electricity must come from renewable resources to meet our town and region’s renewable energy goals.

Geoff Martin, the Intermunicipal Regional Energy Coordinator, elaborated in his testimony:

The state’s Climate Action Plan, and Comprehensive Energy Plan have  “….the Electric Sector goal of 100% of energy from carbon-free sources by 2032, with at least 75% from renewable energy. The school’s proposed solar expansion is compliant with the CEP….”

However, in July the PUC determined that the petition “raised a significant issue “ with respect to statute 30 V.S.A. §§ 248(b)(4) (economic benefit to the State and its residents) and §§ 248(b)(7) (compliance with the state’s Comprehensive Energy Plan or CEP) and rescinded the conditional waivers of these criteria. This reflects the concern of the PUC, and also the VT Department of Public Service, that net-metering costs are driving up the price of electricity in the state.

Due to these concerns the PUC rules have been rewritten several times, and in 2018 there was a significant decrease in the net-metering credit. The school’s original solar installation was built in 2014, when net metering rates were more favorable.

In August a utility that does not serve Thetford, the Vermont Electric Cooperative (VEC), jumped into the act. They filed a “motion to intervene” in the PUC case regarding the school.  VEC is a consumer-owned electric distributor headquartered in Johnson, Lamoille County, VT.  Their concern was the shift of net-metering costs to the consumers that raises electric bills across the board. In this case the consumers are also the owners of the utility which affords them standing with the PUC. In September their status as an intervener was granted. VEC also asked that the schedule of the school’s case be delayed to allow VEC more time to build their case. Objections from Thetford were overruled.

VEC now asks that when any existing facility expands, that the net metering rate must be set under the PUC rules in effect at the time of the expansion.

There are in fact four other pending PUC cases involving expansion of existing, net-metering solar installations, and one of them is in VEC’s district. The Thetford case was the first to come before the PUC, therefore it would set the precedent for the other four cases.  On November 7th the PUC put a hold (or “stay” in legal terms) on the other cases “that raise a common issue regarding the appropriate compensation and credits that would apply to a net-metering system that is amended to increase its overall capacity.”

Green Mountain Power is the electric service provider in our region that would pay the additional net metering costs resulting from the school’s solar expansion. GMP did not initially register any objection with the PUC about the school’s petition to increase its solar capacity. But because GMP is automatically a party to the process the PUC has “joined” GMP in the case. GMP stated that they would prefer not to cover solar expansions at their original net-metering credit rate structure.

The PUC went on to say “We have previously concluded that…. the compensation rate and duration of any net-metering credits for an amended net-metering system are the same as what the original system received. However, our past decisions…. involved relatively modest capacity increases in uncontested cases where this legal issue was never actively litigated. Now, in three (of five) cases pending before the Commission, the Vermont Department of Public Service or the Vermont Electric Cooperative, Inc. has challenged this approach…”

“Based on our review of the affected cases, we have determined that Case No. 22-1136- NMP - the Thetford Elementary School/ JTEC case - is the most appropriate case to allow to proceed to a final order.“ In addition, in order to “resolve this case as expeditiously as possible” the PUC will preside over this case in person, rather than its customary practice of delegating that role to a Hearing Officer.

The PUC “contemplates” that the evidentiary hearings in the Thetford case will be completed in February of 2023.  The overall affordability and long-term payback for the school’s solar expansion could be impacted by the outcome. And if the PUC rules that Thetford is not allowed to use its original net-metering rate structure, it would set a precedent for other major solar expansions in VT.