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FERC Rejects Challenge to State Net Metering Programs

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On July 16, 2020, FERC dismissed a petition filed by the New England Ratepayers Association (NERA) requesting that FERC assert jurisdiction over electricity subject to state net metering programs and replace net metering credits with a lower “avoided-cost”-type rate or other wholesale rate approved by FERC.

On April 14, 2020, NERA filed a petition for declaratory order (PDO) requesting that FERC: (1) assert exclusive jurisdiction over energy “sales” made by behind the meter generation (such as rooftop solar) under state-administered “Full Net Metering” programs; and (2) direct that “sales” of such energy be priced consistent with the Public Utility Regulatory Policies Act of 1978 (PURPA) (i.e., at a utility’s avoided cost) or at a rate approved by FERC pursuant to Section 205 of the Federal Power Act.

State net metering programs allow a retail customer to produce electricity from a generation source located on the same side of the retail meter as the customer’s load and net the amount of energy it produces against the amount of energy it consumes from the interconnecting utility.  In many states, net metering credits for behind the meter generation are equal to the retail electric rate.  That rate may be greater than wholesale prices for energy.  For example, the PDO alleges that the average residential retail rate in the United States is approximately 13 cents/kWh, whereas wholesale energy prices average between 2 and 6 cents/kWh.

For almost two decades, FERC has disclaimed jurisdiction over net metering transactions where there is no net sale over the applicable billing period, typically one month.  According to FERC, such transactions do not constitute sales of electric energy at wholesale in interstate commerce under the Federal Power Act because there is no “sale.”  Instead, net metering transactions have long been regulated by the states.

In its July 16, 2020 order, FERC dismissed NERA’s request on procedural grounds, maintaining the current status quo for the regulation of net metering and leaving intact FERC’s longstanding precedent disclaiming jurisdiction.  FERC found that NERA did not raise a specific controversy or harm appropriate for resolution through a declaratory order, but instead raised only generalized claims about all net metering programs. Further, FERC found that NERA was not permitted by PURPA to challenge net metering programs on grounds related to that act because it was not an electric utility, qualifying small power production facility, or qualifying cogeneration facility.

While no party sought rehearing of FERC’s order, future challenges to net metering remain possible. As discussed in the separate concurring statements of Commissioners McNamee and Danly, the substantive issues could in the future be raised again in a request for a FERC rulemaking, a complaint filed under the Federal Power Act, or in a lawsuit filed in a federal district court.

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