Pennsylvania PUC approves plan to limit resales of customer-generated electricity

| Thursday, Feb. 11, 2016, 11:00 p.m.

State utility regulators on Thursday approved a plan to cap the amount of surplus electricity customers with solar and wind systems can sell to their power companies, restrictions they say are designed to prevent these sales from being used as money-making ventures that can drive up energy prices.

The cap would limit the amount of excess power residential customers and small business can generate to no more than 200 percent of their annual consumption over the 60 months before they installed their alternative energy systems. Opponents had argued that the cap would discourage investment in solar and wind power, cleaner sources of energy that could reduce the reliance on fossil fuels.

The restriction applies to customer-generators who want to sell surplus power to their utility and doesn't affect those who are producing electricity solely for their own consumption. “There is no limitation and no effort to limit total power being generated by anyone who wants to generate power,” said Nils Hagen-Frederiksen, spokesman for the Pennsylvania Public Utility Commission.

Pennsylvania utilities are required by a 2004 state law to buy a certain amount of electricity generated from alternative sources to sell to customers each year. The amount increases progressively each year. The cap on non-utility generators is intended to prevent these sales from inflating the cost of electricity, Hagen-Frederiksen said, because they are sold at retail rather than wholesale prices. Retail rates are twice as high as wholesale rates, the PUC said.

There is no percentage cap in Pennsylvania on how much surplus electricity customers can sell to their utility at retail prices. The percentage cap is based on a customer's electric consumption and the utility industry had pushed for a lower limit. An earlier proposal floated by regulators called for a limit of 110 percent of a customer's annual consumption. But regulators proposed an increase in April based on public comments.

“It's better than having no limitation, because we are concerned about cost shifting” to other customers, said Donna M.J. Clark, vice president and general counsel of the Energy Association of Pennsylvania, which represents all of the large regulated gas and electric utilities in the state.“The costs have to be paid by somebody.”

Opponents, however, said the PUC overstepped its authority because the Legislature already had set limits on the amount of power non-utility generators can produce. The Legislature had limited installed systems to 50 kilowatts of capacity for residential customers and 3,000 kilowatts for commercial customers, said Rob Altenburg, director of environmental advocacy group PennFuture's Energy Center in Harrisburg.

“We think the new rules, as they are written, will discourage new installations,” Altenburg said.

In Pennsylvania, the number of alternative energy systems owned by residents and small businesses that sell power back to the grid at retail rates almost doubled to more than 9,200 in the past four years, and 97 percent of that is solar power, the PUC said. Still, all of those represent a small portion, 3 percent, of total alterative energy generation, while the rest comes from about 100 large-scale generation facilities that sell power on the wholesale market.

The rule changes, which were originally proposed in February 2014 and approved after public comments, were brought because the PUC code requires that the utilities take steps to ensure they're getting the lowest prices over time, since those are the costs that get passed on to customers.

PUC Chair Gladys M. Brown, one of the two commissioners who voted against the changes, cited the existing limitations on installed systems as a reason for voting against the revisions.

“Any rational regulator would be tempted to limit a customer generator from being paid retail rates for energy produced by a system that was purposefully oversized — but, setting such a limit ignores the very specific size limitation provided” by existing law, she said.

PennFuture is opposed to the revisions because they allow the utilities to seek PUC approval to charge a fee to homeowners or small businesses selling energy but don't limit the fee, Altenburg said.

Shadyside-based Chatham University is developing a new campus, Eden Hall in Richland, whose four buildings produce solar energy that is sold to Duquesne Light, said Walt Fowler, senior vice president of finance and administration.

“And that's a risk for us going forward, so they can basically charge whatever they want,” he said.

Utility companies support the rule changes.

“Duquesne Light supports the commission's recommendation to limit the size of the systems that are eligible for net metering. Clarity was needed to prevent customer generators from receiving excessive retail rate subsidies,” said Ashlee Yingling, spokeswoman for the Downtown-based utility.

The PUC will submit the revisions for review to several agencies, including the Office of Attorney General, General Assembly committees and the Independent Regulatory Review Commission. The PUC's rules are final, pending those reviews.

Akron, Ohio-based FirstEnergy, which owns four utilities that operate in Western Pennsylvania, including West Penn Power and Penn Power, declined to comment.

“We are in the process of reviewing, and until the proposed regulations are reviewed by the Independent Regulatory Review Commission, any comment would be premature,” the company said in a statement.

Forty-four states and Washington, D.C., allow people or businesses to sell energy they produce to utilities, according to the National Conference of State Legislatures in Washington.

Tory N. Parrish is a Tribune-Review staff writer. Reach her at 412-380-5662 or tparrish@tribweb.com.

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