United States: NV Energy's Latest Net Metering Filing Offers A Cost-Based Solution To The Distributed Generation Industry

Last Updated: August 9 2017
Article by Roman Borisov

Pursuant to the timelines set forth in Assembly Bill 405, NV Energy has recently filed new tariffs that affect Nevada's net metering (NEM) and full requirement customers. Passed by the Nevada Legislature in June 2017 and supported by the rooftop solar industry, Assembly Bill 405 is the latest manifestation of Nevada's policy to support rooftop solar generation. Generally, Assembly Bill 405 (1) mandates new rates for excess energy exported by NEM customers to the grid, which was legislatively set close to NV Energy's retail rate; (2) prohibits separate rate classes for NEM customers; (3) directs NV Energy to file new time-of-use tariffs (TOU) with the goal of encouraging the development and use of distributed energy storage systems; and (4) enacts a number of consumer protections vis-à-vis rooftop solar installers.

With respect to the first mandate, the rates credit for excess energy set by the Legislature starts out at 95 percent of the utility's corresponding retail rate and decreases seven percent for every 80 MW of installed rooftop solar capacity until it reaches a floor of 75 percent of the retail rate. By legislatively setting excess energy rates and prohibiting separate rate classes for NEM customers, Assembly Bill 405 made clear that the current rooftop solar industry model is not economically viable in today's cost-based regulatory environment. Both Democratic and Republican legislators who recognized the continuing cost shift from NEM customers to the rest of the ratepayers nevertheless supported the bill as a policy solution for the state to continue its support of rooftop solar regardless of the costs.

To meet the mandates of Assembly Bill 405, NV Energy's latest tariff filing proposes new excess energy credit rates, combines previously separate NEM and full requirement customer classes, and introduces new TOU tariffs. The new rates, including the excess energy credit rates, for the combined NEM and full requirement customer classes are designed to maintain overall class revenue neutrality. In the case of the newly-combined single-family residential class, maintaining class revenue requirement translates into a $4 increase in the basic service charge for full requirement customers coupled with only a minor decrease to their volumetric rate. At the same time, single-family residential NEM customers will benefit from a $1.33 decrease in the basic service charge and a lower volumetric rate.

This tariff borne out of the mandates of Assembly Bill 405 demonstrates inherent limitations of the current rooftop solar industry model. Namely, to make rooftop solar systems economically viable, non-NEM ratepayers must pay higher rates and subsidize NEM customers. This outcome is obvious and logical because NEM customers cost the utility just as much to serve as non-NEM customers, but pay next to nothing for the distribution, transmission, and generation infrastructure that serves them. NEM customers cost just as much to serve because their rooftop solar generation does not help offset the cost of the utility's energy infrastructure. NV Energy's generation assets, substations, transmission lines, and distribution networks are built to serve the peak load which occurs in the early evening hours of July and August. Rooftop solar, while helping to shift the peak demand to later hours, does not reduce the peak demand because the peak occurs during the hours when rooftop solar systems stop producing. Thus, no matter how many rooftop solar systems are installed in NV Energy's territory, their contribution to the reduction of the cost of the overall energy infrastructure is negligible.

However, the TOU portion of NV Energy's filing demonstrates that rooftop solar systems can be used in a way that benefits the customers who installed them and the rest of the ratepayers. As an alternative to the two-part basic service charge and volumetric charge rate design, NV Energy proposes a four-part rate design that additionally includes two types of demand charges: a maximum demand charge and peak demand charge. A maximum demand charge is based on the maximum demand a customer places on the system in a given month regardless of when that maximum occurs. Maximum demand charges incentivize customers to levelize their energy consumption by avoiding energy consumption peaks. A peak demand charge is based on the maximum demand a customer places on the system during the system's on-peak period. Peak demand charges incentivize customers to minimize their energy consumption during the system's on-peak period.

Under the proposed TOU rates, the effects of combining rooftop solar systems with battery storage can be substantial. NV Energy's filing demonstrates that, if done properly, a NEM customer can achieve considerable savings. If a NEM customer were to charge the battery during the off-peak period by using either the solar array or the grid, the customer can completely avoid on-peak utility charges by utilizing the solar array during the early on-peak hours and discharging the battery during the later on-peak hours. Importantly, such a behavior will not only benefit the NEM customer, but will also produce system-wide benefits. By not contributing to the peak load, the customer permanently reduces system-wide peak demand which allows the utility to forego investment in the infrastructure that would otherwise be necessary. This relative reduction in rate base in turn reduces electricity costs for all ratepayers.

Although NV Energy's optional TOU demand charge proposal has already faced attacks from some members of the rooftop solar industry, it is important to recognize that NV Energy's proposal is not guided by the company's profit-making motives. To the contrary, by advocating for a rate design that reduces peak demand, NV Energy reduces its profit-making opportunities. Investor-owned regulated utilities earn profits by investing equity into infrastructure that serves their customers. By creating conditions that will reduce the peak demand on NV Energy's system, NV Energy foregoes an opportunity to build additional generation and, as a direct result, foregoes an opportunity to earn additional profits on such investment. The attacks on the proposal by some members of the industry can be explained by their desire to maintain the economically non-viable model that currently benefits them. While the combined SolarCity/Tesla operation is poised to benefit greatly under the proposed TOU rates by supplying both rooftop solar systems and batteries, some of its competitors appear to be more interested in defending the legislatively-mandated current rooftop solar business model and stifle NV Energy's TOU proposal.

As Nevada gears up to deregulate its electric market, it would serve potential retail energy providers well to analyze NV Energy's TOU proposal. In addition to recognizing that the current rooftop solar business model is not viable in the cost-based environment, the proponents of Assembly Bill 405 also recognized that the model may not be viable once Nevada deregulates its electricity market and introduces market pricing. Concerned with the idea that Nevada's future retail energy providers would want to compensate NEM customers for excess energy with rates that actually reflect costs and market realities, drafters of the Bill added a contingency provision that will shield the rooftop solar industry and its customers from market pricing even in the deregulated market. As enacted, Assembly Bill 405 requires that future retail energy providers pay legislatively-mandated rates for excess energy and prohibits treating NEM customers differently from full requirement customers.

NV Energy's filing demonstrates how a retail energy provider may comply with the mandates of Assembly Bill 405 and, at the same time, set rates that would approximate the costs of serving NEM customers. By implementing a demand charge, a retail energy provider can collect from both NEM and non-NEM customers in accordance with what their contributions are to the periods when the cost of energy is highest. Customers with energy storage will pay less while customers without energy storage, including NEM customers, who contribute to the provider's peak load will pay more. In light of these economic realities, the rooftop solar industry should work on ways to develop and integrate affordable storage with its solar arrays. Photo-voltaic solar arrays and energy storage should become the industry's complete and standard product that will allow it to break its dependence on legislatively-mandated subsidy rates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Roman Borisov
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions