Correction: This article was updated to correct the amount that MGE compensates customers for the energy they send back to the grid. It is currently 16.6 cents per kilowatt-hour.
Wisconsin utility MGE is proposing to drastically scale back the net metering rates that residents are paid for their solar generation, putting residential customers with small arrays on the same distributed generation program as commercial customers with large arrays.
Advocates are asking the state Public Service Commission to deny the proposal in MGE’s ongoing rate case and instead continue studying how utilities can best compensate customers for solar.
Under the MGE proposal, customers who install solar after 2024 would receive about 7 cents per kilowatt-hour, as opposed to about 16.6 cents now, for the energy they send back to the grid. The new compensation rate is currently applied to large customers, based on the market and capacity prices set by the MISO regional transmission organization.
Another Wisconsin utility, Alliant Energy, is also proposing major changes to net metering in its rate case, including calculating compensation on an hourly basis instead of monthly and reimbursing customers more for their energy during peak demand periods. Alliant spokesperson Tony Palese said this means customers could be paid anywhere from 7.9 to 13.5 cents per kilowatt-hour for their energy, depending on when it is sent to the grid. That compares to the 7.1 cents per kilowatt-hour that Palese said residents are currently paid.
Palese said the proposed changes will actually increase the total amount Alliant’s customers with solar are paid, and “ensure homeowners that generate solar energy at peak times can offset their consumption at the peak retail rate or sell energy they don’t use to Alliant Energy at the peak buyback rate.”
Clean energy group Renew Wisconsin worked with Alliant on an agreement that through 2025, customers can choose whether to stick with the previous net metering plan or enroll in the new program, called Power Partnership. The agreement also stipulates that Alliant will provide the information necessary for customers to calculate the expected payback period for their solar installations.
“Transitions away from net metering are rarely this favorable to solar customers,” Renew said in a press release.
Meanwhile, solar advocates say the Alliant and MGE cases taken together show that the Public Service Commission should come up with a uniform policy for compensating residential solar generation, rather than allowing “ad-hoc major reforms utility by utility,” as Renew policy director Andrew Kell said in testimony before the commission.
Jeannette LeZaks, an MGE customer, installed a 5.4-kilowatt system two years ago. Under MGE’s proposal, the current net metering policies will continue to apply to existing solar arrays.. But she worries fewer people will be able to install solar in the future if MGE’s proposal is approved.
“If we didn’t have that net metering, the equation becomes different,” she said. “It would come down to wanting to do it to help the climate crisis or feel like you’re producing your own electricity. But for those where money would be an issue, they might choose not to purchase solar. That would be unfortunate blowback to what seems to be a very enthusiastic embrace of solar.”
MGE, which serves the Madison area, has argued that with increasing numbers of customers installing solar, those without solar are paying an unfair amount for grid upkeep.
In testimony, MGE rates director Brian Penington said that in 2024, about 2,100 customers are expected to sell energy back to MGE at a total cost of about $2.1 million — paid by the utility’s overall customer base, at rates higher than they could get from the wholesale market. The average size of residential systems is increasing, and the utility expects 350 to 400 new residential solar systems to be installed each year, including with incentives from the Inflation Reduction Act, Penington testified.
He said the current net metering structure means customers with solar are “utilizing the MGE system as a virtual bank or battery.” Replacing the retail rate they are paid for electricity with the market-based lower rate would reduce costs for purchasing distributed solar.
“This proposal also will ensure that solar energy produced by our customers and sold to MGE will be compensated at the same rate (by transitioning to one rate) when purchased by the utility on behalf of all customers, regardless of the size of the customer’s system,” said MGE spokesperson Steve Schultz. “It also helps to maintain energy affordability for all customers. These solar purchases are considered ‘fuel costs’ and are paid by all other MGE electric customers.”
Solar advocates have long pushed back against this “cost-shifting” argument, noting that solar reduces the need for costly new generation or running peaker plants during heavy demand periods, and makes the grid more resilient for everyone.
Wisconsin Citizens Utility Board director of regulatory affairs Corey Singletary testified to the commission that there may be an imbalance in the current amount customers with and without solar are paying, but revised compensation structures must take into account the full, long-term value that distributed solar provides to the system. This includes decreased transmission needs, he noted, and he called MGE “disingenuous” in arguing that customer solar does not provide transmission value.
A holistic approach
In intervenor testimony, Kell said approving MGE’s proposal would contradict the purpose of the Public Service Commission’s ongoing investigation of parallel generation purchase rates. He said that study “is a more appropriate forum to consider a new precedent that would ultimately change [net metering] policy.”
Net metering rates or other compensation for distributed solar should be based on the avoided costs for generation, transmission, distribution and capacity, Kell said in his testimony, as well as the environmental benefits.
“This approach will allow the Commission to develop a glidepath framework for utilities to adopt and implement as various standards are met and milestones are observed” in distributed solar penetration, he testified.
Kell noted that states like Hawaii and California have much higher proportions of solar on their grid — at 17.6% and 8.7% of net metering participation, respectively — and still offer net metering policies. Wisconsin is only at 0.3% net metering participation, similar to Minnesota and Michigan, and below Illinois and Iowa at 0.6% and 0.5%.
Along with the net metering changes, MGE proposes to offer a one-time $200-per-kilowatt incentive payment for solar, limited to 400 customers per year and to 5 kW per customer. The utility I&M made similar changes in its rate case for Southwest Michigan customers last summer, which were opposed by clean energy advocates and legislators.
Modeling by MGE and Kell showed that the proposed changes will shift the payback period for a typical residential solar installation from 9 years to 16 years. In response to the Energy News Network, MGE said that with the upfront payment, payback times would be similar for systems that are sized appropriately.
“Customers who participate in net metering will continue to see savings from offsetting their own energy use with the electricity generated by their own solar when it’s sized for their own usage,” Schultz said. “Our proposal only addresses the price of the energy the customer is not using and selling to [or] being purchased by MGE on behalf of our other electric customers.”
Renew clean energy deployment manager Michael Vickerman, in his testimony with the commission, called MGE’s proposal a “double whammy,” since it not only lowers compensation rates for solar but switches from monthly to instantaneous calculations. Solar advocates have said that is not “net metering” at all, since customers can’t offset their bills with credit for the energy they’ve generated unless they use that energy at the moment it’s created. If customers are paid anything less than the retail rate for the energy they send back to the grid, this means instantaneous netting will mean less savings for customers than longer netting periods.
Vickerman noted that customers are most likely to be generating solar during the day, when they will be compensated at lower rates than in the evening, when demand is high as people get home from work and turn on lights and appliances.
In his testimony, Vickerman said he finds the “incentive structure to be contrary to Wisconsin’s clean energy goals. Solar PV can provide substantial benefits to MGE, including the supply of electricity at fixed prices during peak system hours. … Removing this generation from the grid would only further extend the need for MGE to maintain its existing fleet of peaker plants to meet system demand, facilities which produce substantial greenhouse gas emissions.”