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As we head into summer, the prospects of a federal takeover of state electric policy is heating up in Washington. While the issues involved sound technical, behind them lay important questions about federal power and individual choice.
The controversy turns on the authority of states to enact so-called “net metering” programs for electricity customers who generate some of their own power, for example through rooftop solar. The amount of electricity generated from solar panels varies quite a bit throughout the day. Many residents with rooftop solar generate more electricity than they use during some times of the day, while at other times they need to rely on power from the grid. Under a net metering program, customers can sell their excess generation back to the grid and receive credit against their other electricity use.
More than 40 states have some kind of net metering program. How to structure net metering programs (or whether to have one at all) has been a question traditionally left to states and individual state programs vary considerably in their details. Recently, however, there has been a push to have the federal government claim jurisdiction over net metering and impose a one size fits all regulatory system over such programs.
On April 14, 2020, the New England Ratepayers Association submitted a petition with the Federal Energy Regulatory Commission (FERC), which oversees federal regulation of the electric grid. In its petition, NERA asks FERC to “declare that there is exclusive federal jurisdiction over wholesale energy sales from generation sources located on the customer side of the retail meter” and to preempt state net metering programs. Hundreds of comments in opposition to the petition were recently filed at FERC. A decision by FERC is expected soon.
Were FERC to go down this road, it would represent a significant power grab, with implications even some of the petition’s supporters may not like. States have always had primary authority over customer generation. State regulators are not only better equipped to understand the intricacies of customer generation than bureaucrats in Washington, they also have exclusive authority to regulate retail electric programs under the Federal Power Act.
Federal preemption of existing programs would result in the federalization of net metering and disrupt the lives of millions of Americans and businesses. More than two million households, businesses, churches, and schools have entered into long-term contracts based on the assumption that states will retain control over net metering programs. If the petition is granted, these customers could see the price they currently receive for their excess generation fall by half.
New technologies that allow an individual to generate and store power are developing rapidly and could end up remaking the entire electric sector. The growth of this type of resource could have significant effects on everything from electric prices to transmission demand. If the federal government were to take over regulation in this space, it could set up growing tensions in how different parts of the electric industry relate to each other. As Jason Stanek, Chair of Maryland’s Public Services Commission recently noted, “the tension between the states and the federal government is at an all-time high” due to conflicts over electrical jurisdiction. Granting the petition would only exacerbate the problem.
People can have different opinions about the value of net metering in general. But imposing a one-size-fits-all federal system on states is not the way to go. Rather than trying to micromanage the retail electric market, FERC should let states use their knowledge of local conditions to craft programs that best fit their own local circumstances.
Josiah Neeley is a resident senior fellow for the R Street Institute and the director of state affairs for Texas.
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June 30, 2020 at 10:12PM
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