What is “Net Metering” and why should you care?

What is “Net Metering” and why should you care? By Peter Burrows 5/4/18  elburropete@gmail.com – silvercityburro.com 

 To encourage homeowners to install solar panels, most public utilities, including Public Service of New Mexico (PNM), are required by law to pay homeowners for any excess electricity the solar panels produce.  This doesn’t happen all the time, but when it does, the excess electricity is fed into the utility’s grid for sale to other customers. 

Imagine that homes with solar panels have two meters, one that measures the electricity coming into the home from the electric utility, and another that measures the excess solar electricity that goes into the utility grid on those occasions when the solar panels produce more electricity than is being used.  The net of the two is the “net metering” that determines the electric bill.  

In reality, when excess electricity is fed into the utility’s grid, the homeowner’s meter runs in reverse, lowering the electric bill in real time. 

A very important feature of net-metering is that the utility is required to pay the homeowner the same price it charges the homeowner, i.e. the retail price.  At first glance, this sounds fair.  If you’re paying the utility $.11 per kwh for the electricity they sell you, the utility should pay you $.11 per kwh for the electricity you sell them.  

There are two problems with that thinking. The first is that when the utility buys a kwh from you for $.11 and then resells that kwh at for $.11, the utility loses money.  Even a co-op run by pathological profit haters will realize that there must be a markup over the cost of something to cover heat, lights, taxes, accounting and so on.  

You may say, “Oh no, the utility doesn’t need to charge for all that because it’s only giving me back my own electricity when I need it.”  In essence, the utility has stored your excess electricity so you can use it at a later time. Conceptually, that is perfectly accurate.  In practice, that is hugely inaccurate. 

This is the second problem with net metering: It allows the homeowner to use the electric grid as though it was a huge COST-FREE storage battery when there is no such thing as cost-free electric storage, battery or otherwise.   

To illustrate the point, if you disconnect your home from the utility’s power, go “off the grid,” any excess electricity generated by your solar system will be wasted unless you can store it.  The most economical way to do that today is to buy a Powerwall battery from Tesla Motors. Tesla’s 7-kilowatt/13.5-kilowatt-hour storage system costs $5,900, plus “supporting hardware,” whatever that is, and installation.   

You’ll probably need several of these, depending on the size of your solar array, how much sunshine you get, and how much electricity you need.  Regardless, it’s hardly free.  

Bottom line: Net metering is a subsidy to homeowners who have solar installations. If you think this subsidy is paid by the electric utility, you are sadly mistaken.  Look at your electric bill. You will note that there is a “Renewable Energy Rider” which is an addition to your bill, not a reduction. On my bills, this adds about five percent to my electricity cost, before taxes.  

This is how WE, not Public Service of New Mexico (PNM) help to pay the monthly electric bills of people wealthy enough to install solar panels. This is in addition to the subsidy we paid, indirectly, through tax credits given to people as an incentive to buy the solar systems. Tax credits are a reduction in income taxes owed, which means somebody else must pay higher income taxes.   

A case can be made that such subsidies are necessary in order to get a new industry up and running.  I don’t agree but, regardless, it would be a great victory for transparency if candidates for public office would say: “I am in favor of raising your taxes so that rich people can install solar systems and have lower electric bills in order to save all of us from global warming.”   

Or something like that.  

Until recently, 41 states required net metering at retail prices. In Michigan, the Public Service Commission, the equivalent of our Public Regulatory Commission, just last month replaced retail pricing with something closer to wholesale pricing, a step in the right direction.  Montana is considering a similar change. 

In New Mexico the chances of anything so sensible are remote.  Politicians of both parties are enamored of renewable energy, and the Public Regulatory Commission (PRC) will do what is necessary to help PNM meet the renewable fuel standards mandated by New Mexico’s legislators, something the PRC should do, even if that means raising our electric bills. 

Considering its importance, one would hope that candidates running for election to the PRC would be familiar with net metering.  There are five candidates running to represent our district, District Five, two are Democrats, three are Republicans. 

I have met two of the Republicans and neither was familiar with net metering.  One, Ben Hall, was on the PRC from 2010 to 2014 when he was defeated for reelection, and I think he should have been knowledgeable about net metering. Instead, he tried to tell me that it was some kind of Federal mandate.  Ben Hall should withdraw from the race.  

The other candidate I have met, Chris Mathys, also didn’t know about net metering but at least he didn’t try to BS me. There’s hope for him.  I have not met the third Republican candidate, Joe Bizzell, but I did email him yesterday, “Is net metering a good idea?”  

No answer yet. I plan on asking the two Democratic candidates the same question, and I’ll let you know how all three respond.   


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