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The PUC Cuts Net-Metering Compensation Again… For What Exactly?

by | Jun 17, 2022

In an extremely disappointing decision in the fight against climate change, the Vermont Public Utility Commission (PUC) opted to cut net-metering compensation rates for the sixth time in six years, once again missing a chance to make solar more affordable for Vermonters. Net-metering has been a major reason that we have seen solar grow in Vermont and today’s decision will move our state in the wrong direction.

The PUC’s decision imposes a 1 cent per kWh penalty for net-metered projects of all sizes, partially offset by an increase in the blended residential rate. But from a customer’s perspective, bill credits generated by net-metering just won’t go as far as they used to and that means longer payback periods and ultimately less solar power in Vermont.

The PUC’s rationale for cutting net-metering compensation is that the program imposes a cost on non-participating ratepayers but our back-of-the-envelope calculations suggest that the compensation cut will result in negligible savings for ratepayers at large. The difference in cost for a year’s worth of new net-metering projects, for example, will save GMP customers less than 3 cents a month relative to what they would have paid under the current net-metering rates, and won’t impact BED and VEC ratepayers at all. We’ll be updating our calculation in the coming days to include the rest of Vermont’s utilities but GMP, VEC, and BED cover almost 90% of residential customers so they are a good place to start.

How do we get to these customer cost estimates? Back in November, the Department of Public Service suggested the true value of solar was 9 cents per kWh and that the difference between the net-metering compensation rate and this value “represents the cost shift between participating and non participating customers.” (We have some major reservations about how the Department estimates this value – most notably that it doesn’t include the social cost of carbon which all Vermonters bear – but we use it here to illustrate the worst case “cost shift”.) By applying this differential to the electricity exported from net-metered systems over a year, using installation data from 2021, we can estimate the “cost-shift.” We repeated this for NM 2.4 and the new NM 2.5 rates that will go into effect in September. The differences are underwhelming.

The bottom line is that faced with a climate crisis and an urgent mandate to electrify the transportation and thermal sectors and meet this new demand with renewable energy, Vermont is again disincentivizing solar for a few cents on a monthly utility bill.

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