Solar advocates say the first utility proposal to replace net metering in Michigan would unfairly compensate customers for their power while also charging them “punitive” fixed fees.
DTE Energy filed a broad rate request on July 6 with the Michigan Public Service Commission that includes a new distributed generation tariff. Energy laws passed in 2016 now require Michigan utilities to develop programs that replace net metering, effective June 1.
While net metering customers will be grandfathered for 10 years once a plan is approved, the process has already caused uncertainty and concerns about a patchwork of programs among utilities.
DTE proposes an “inflow/outflow” model that charges solar customers the full retail rate of power they use from the grid. The excess power they send back would be compensated essentially at wholesale prices. Critics say not only is the compensation rate inadequate, but they also question the utility’s request for a fixed charge on solar customers for using the grid. Under net metering, excess generation sent to the grid from customers is credited at retail rates.
“DTE Energy is clearly using the distributed generation tariff to try to discourage people from going solar,” said Becky Stanfield, senior director of western states with Vote Solar. “It’s pretty outrageous.”
How Michigan would replace net metering has been a contentious issue for more than a year. At issue is determining solar customers’ true cost of service.
Through stakeholder meetings with advocates and utilities, the MPSC was tasked with coming up with a net metering replacement. In April, the MPSC approved a tariff recommending the new compensation for excess generation (or outflow) be set at a utility’s avoided cost, or roughly 9 to 10 cents per kilowatt-hour. The MPSC’s order also allowed utilities to design their own distributed generation program.
DTE is requesting to credit customers at the “locational marginal price” for energy, or roughly wholesale prices, which is less than half of avoided cost prices. DTE is also requesting a monthly “system access contribution” charge of roughly $2.30 per kW of capacity, essentially for solar customers to use the grid when needed.
In MPSC filings, DTE officials opted for the proposed structure to reflect what it believes are the true costs of servicing solar customers. The company maintains that net metering customers are subsidized by all other ratepayers for using the grid, a common argument used by utilities that is disputed by many solar experts.
“Distributed generation customers, while driving somewhat lower fuel and purchased power costs through their onsite generation, do not reduce their reliance on the electric system nor their option to use it at will,” according to testimony from Camilo Serna, DTE’s vice president of corporate strategy.
The company cites a 2016 study, “Rethinking Rationale for Net Metering,” to say distributed generation causes an “induced annual cost shift” of $444 to more than $1,700 per customer. DTE also says solar customers shouldn’t be compensated at the avoided cost because they are not typical plants from which utilities purchase power under the Public Utilities Regulatory Policy Act, or PURPA.
“Simply stated, distributed generation customers cannot be counted on to generate when needed by the DTE system and have no obligation to do so,” Serna says.
However, Stanfield and others question the assumption that solar customers are being subsidized by other ratepayers.
“There is no data in the record in Michigan on whether solar customers are actually under-contributing compared to the cost of service,” Stanfield said.
Ed Rivet, executive director of the Michigan Conservative Energy Forum, said solar customers should receive a discount for the electricity they buy because they produce energy at peak times, based on findings from MPSC staff.
“The idea that it’s up to $1,700 a year per customer seems to defy the facts that are out there,” Rivet said.
While he said proceedings on the issue will likely span months, he is concerned about what DTE’s program could mean for utility customers looking to install solar.
“It’s quite shocking,” he said. “It’s just short of a death sentence for residential solar.”
Stanfield says the proposed program would cost the average residential solar customer $500 a year, while the grid charge would add roughly $150 a year.
“It gets to be almost punitive, not just discouraging,” she said.