Recent order another step in years-long effort by affordable energy advocates to assure fair valuation of solar energy in Kentucky.
In an Order issued September 24, 2021, the Kentucky Public Service Commission (PSC) has again recognized the value of local, customer-owned renewable energy in Kentucky, setting new net metering rates for LG&E and Kentucky Utilities Co. The Order rejected LG&E and KU’s proposal to drastically reduce the value of solar energy exported back to the utility, which would have ended net metering and slashed the value of fed-back solar power by 75 percent to 2.3 cents per kilowatt hour (kWh). Instead, the Commission set the new compensation rate for net exported energy at 6.9 cents/kWh for LG&E and 7.4 cents/kWh for KU.
“This decision means solar continues to be accessible and economically attractive for small businesses, non-profits, and residential customers of LG&E and KU,” said Joshua Bills, a commercial energy specialist at the Mountain Association. “By recognizing the value that locally-owned solar has to the utility, the Commission has enabled Kentucky’s local solar businesses to continue to grow and serve our communities.”
This ruling builds on a previous decision issued in May 2021 in the Kentucky Power Co. rate case and reinforces the precedent set in that case. The Commission reaffirmed principles and best practices to be used by utilities for determining the value of distributed energy resources such as rooftop solar. The Commission identified multiple ways in which distributed solar resources help the utilities avoid costs and directed that these savings be credited to customers for the excess energy they supply to the grid.
In a statement following the Order, the Commission stated, “LG&E/KU’s avoided cost calculations contain inconsistencies and in some instances are based on false or unreasonable assumptions. Their assumptions and process for estimating costs also failed to adhere to the guiding principles the Commission outlined in the Kentucky Power net metering Order.”
The Commission rejected the utilities’ claim that net metering customers provide no savings to the utility in the areas of generation, transmission, and distribution capacity, or by reducing carbon emissions.
The Mountain Association participated in this case as one of four Joint Intervenors along with Kentuckians For The Commonwealth, the Kentucky Solar Energy Society, and the Metropolitan Housing Coalition. They are represented by Tom FitzGerald, staff attorney for the Kentucky Resources Council, and received technical support from expert witnesses James Owen of Renew Missouri and Karl Rábago. The Sierra Club and the Kentucky Solar Energy Industries Association (KYSEIA) also intervened in the case in support of fair net metering rates.
The testimony by the expert witnesses for the Joint Intervenors and KYSEIA played a critical role in preserving net metering for the customers of LG&E and KU. “This case shows the importance of allowing community stakeholders to fully participate in utility rate cases,” said Catherine Clement of Kentuckians for the Commonwealth. “The Joint Intervenors and KYSEIA’s witnesses provided substantive, detailed, well-researched testimony to the Commission, which helped produce an outcome which is fair, just and reasonable for all ratepayers, and will help the local solar industry to grow in Kentucky. We appreciate the Commission’s acknowledgment that our perspective helps to forge a better outcome for all.”
This Order established new net metering rates for all customers of LG&E or KU installing solar after September 24, 2021. For those net metering customers with solar PV systems already in operation prior to September 24, they have the right to continue operating under the original net metering rules for the next 25 years. Under original net metering, all energy exported to the grid is credited to the customer at the retail rate, currently about 10 cents/kWh for residential and 12 cents/kWh for small commercial customers.
Although the new net metering rates are about 25% lower than current retail rates, this reduced value only applies to net exports at the end of each monthly billing cycle. All solar energy produced and consumed on-site, within a billing period, is still fully credited against usage. The end result is that the changes adopted by the Commission will only reduce the value of a solar PV system by about 5% for future net metering customers who install enough solar to meet 100% of their annual needs. For customers with smaller solar generators, the impact on their savings will be even less.
“We commend the Commission for their diligence and performing a fair and comprehensive analysis of the net metering issue,” said Cathy Kuhn of the Metropolitan Housing Coalition. “While we believe greater value for avoided carbon emissions should be credited to net metering customers, overall, an honest, transparent, and reasoned process was used by the Commission and has produced fair, just and reasonable net metering rates.”
Find the formal PSC order here: https://psc.ky.gov/pscscf/2020%20Cases/2020-00349//20210924_PSC_ORDER.pdf