Net energy metered distributed solar was fading in New Hampshire as developers neared the state policy’s cap. But in March, legislators came together and passed a new law doubling the limit.

Problem solved? Not quite.

One utility is already approaching a portion of the newly-created cap reserved for large net metered systems, and others say they might soon get there. And there’s regulatory proceeding about to kick off that is likely to dispense with the current net metering policy altogether in place of a new tariff.

But will the result be a compromise like the one just reached in New York? Or a knock-down, drag-out fight over incentives like we saw in Nevada?

At this stage, it's tough to tell, as utilities and solar installers are still preparing their proposals. But the looming solar proceeding has already attracted some innovative ideas for valuing and compensating distributed systems.

Hitting the cap

The New Hampshire solar sector was threatened in 2015 as Eversource Energy, Liberty Utilities, and Unitil Energy — the state’s three investor-owned utilities (IOUs) — raced toward their shares of the 50 MW cap written into the first New Hampshire net energy metering (NEM) policy in 1998-99.

In response, bipartisan, multi-stakeholder working groups were formed by the Republican leadership in the state House and Senate. Lawmakers, utilities, solar installers, ratepayers, the state’s public utilities commission (NH PUC), and the Office of Governor Maggie Hassan hashed out a proposal to increase the cap to 75 MW.

Urgency grew as Liberty hit its cap in July 2015 and the other two utilities got closer. There were solar industry layoffs. A bill lifting the cap went to committee. A new debate broke out when solar advocates pushed for a higher cap. The bill was amended to raise it to 100 MW.

That prompted Unitil pulled its support, and Eversource hit its cap soon after, in January of this year. Haggles over language flared and were settled. Finally, the doubled cap of 100 MW stuck. House Bill 1116 was passed in early March and was signed into law by Gov. Hassan in early May.

Somewhat overlooked in the excitement of getting the solar industry and the utility interconnection departments back to work were sections XVI and XVII, the real heart of the new law.

The coming decision

Those sections required the NH PUC to begin a proceeding within three weeks of the bill being signed into law. The commission was instructed “to develop new alternative net metering tariffs, which may include other regulatory mechanisms and tariffs for customer-generators, and determine whether and to what extent such tariffs should be limited in their availability within each electric distribution utility’s service territory.”

The commission was ordered to consider the costs and benefits of customer-sited generation, the impacts on all customers, and how to avoid “unjust and unreasonable cost shifting.”

It was also ordered to evaluate “alternative rate structures,” including time varying rates and the possibility of an “automatic rate adjustment mechanism" that would allow utilities “timely recovery of lost revenue.”

Finally, the commission was ordered to reconsider the size of eligible distributed generation (DG), whether and how the successor tariffs should be capped, and how the utilities should administer them.

It was also authorized to approve “time and/or size limited pilots of alternative tariffs.”

And it was ordered to do all this and issue a decision within ten months.  

Meet the new cap, same problems as the old cap

The new cap allots an additional 50 MW of total capacity between the three IOUs. Of that capacity, 40 MW will go to solar arrays of 100 kW or less and 10 MW will go to systems of over 100 kW.

Trouble is already emerging for large system developers in the Eversource territory. They have interconnected 7.2 MW of their 7.8 MW allocation, and the utility has a pipeline of 26 approved or nearly approved projects representing 15 MW.  

There is presently ample room for growth under Eversource's cap on smaller arrays. It currently has 422 projects in its queue amounting to 4 MW, and 31 MW allocated to it under the cap. Liberty has used less than 200 kW of small capacity in its 3.7 MW allocation. Unitil is equally unthreatened, with most of its 5.3 MW of small system capacity still available.

The availability of NEM for solar under 100 kW has a reasonable chance of lasting until the commission provides a successor tariff, said Kate Epsen, executive director of the New Hampshire Sustainable Energy Association (NH SEA).

The federal investment tax credit for solar has been extended, so there will be no rush to install at the end of the year, she explained. There could, however, be a race to get installations done next year, as the cap is used up and the commission proceeding concludes.

Both Mark Lambert, director of government affairs at Unitil, and John Shore, communications manager at Liberty, were less certain their new allotted capacity for smaller arrays would last that long. And developers could also close in on Liberty’s 900 kW and Unitil’s 1.3 MW of large array capacity under the new cap.

“We think we will go through it quickly because we think the increased cap will cause a flurry of activity,” Shore said.

“It is entirely possible we will reach the cap in the next ten months,” Lambert said.  

But even if that happens, solar deployment should not screech to a halt, as it has in other states that max out their net metering caps. That is because state Senate Majority Leader Jeb Bradley (R) ensured the legislature included a provision in HB 1116 to make the limits “soft caps” and avoid the interconnection waiting lists that had developed with the first NEM law.

“This new cap is not going to stop net metering going forward,” he said. “But a new project will get the existing credit only until the new tariff is set. That means there is some level of uncertainty.”

“The legislators called it a ‘soft’ cap because new projects have to take the new tariff when it becomes available,” Epsen said.

The utilities and business community weigh in

The legislative effort, with all of its negotiations, was nothing if not preliminary. The proceeding at the commission over solar valuation methods and the successor tariff is where the real decisions will be made.

The further work the bill ordered the PUC to do is vital because Eversource believes the existing credits are “more than is needed,” Murray said. “We have to look at who is paying for the cost of the system we all use.”

Eversource supported the bill and the legislature’s decision to leave the question of fair compensation for exported solar generation “to the experts at the PUC,” he said.

“Putting the decision in the PUC’s hands is the right thing to do,” Liberty’s Shore agreed. Unitil also was “very supportive” of that provision in the legislation, Lambert added.

The utilities have no specific plans for successor tariffs but will be active participants in the proceeding, Murray, Shore, and Lambert all said.

“The new law appears to allow everything from a very minor change to a wholesale reworking,” Murray said.

Eversource wants a plan that satisfies both those who hope to grow distributed generation and customers who don’t have renewables and don’t want to shoulder an unfair cost burden.

Unitil would like to see the commission end the debate over NEM caps by addressing the cost of providing utility services to DG owners and address the shift of costs to non-DG owners, Lambert said.

“It is too easy to talk about wholesale, retail, or default rates,” he said. The things the commission should consider are "the costs to serve the unique class of distributed generation customers, the value of the grid, and how to charge for that value without shifting costs to other customers.”

Shore echoed Lambert and Murray.

DG owners benefit from the credit they get for exported generation “but that is a cost of doing business for the utility and gets spread across all customers,” he said. Because that could become a burden to customers who don’t own DG, “the commission should examine what the credit is based on."

None of the utilities argued for a tariff as low as the ISO-New England wholesale electricity spot market rate, a proposition put forward during the legislative debate by the state’s Business and Industry Association (BIA).

Even so, that rate would be “much closer to a level of fairness than what we provide now,” Murray said.

The BIA, which declined to be interviewed, opposed HB 1116 because the existing credits to exported generation “continue the unfair cost-shift to all other rate-payers — business and residential customers alike,” BIA President Jim Roche said in a press release during the legislative process.

Where consumers and solar installers stand

“Like every other state, New Hampshire needs a long term solution,” said Donald Kreis, head of the state Office of Consumer Advocate and former general counsel for the PUC.

PUC decisions are based on a factual record and deliberations are not as difficult as the legislative process, he said, so commissioners are in a better position to find that solution.

Kreis testified in favor of the bill during the legislative process, but insisted “it is unfair to force those who do not net meter to subsidize those who do.”

Solar owners should not expect a retail price, “but stopping net metering in its tracks,” he told lawmakers, “would be a disservice to residential ratepayers.”

He noted two important consumer concerns. One is their insistence, as voiced by groups like the BIA, on keeping rates as low as possible. The other is their opposition to costly, disruptive large-scale pipeline, transmission, or generation infrastructure.

By considering those concerns and the value of DG, the upcoming commission proceeding could lead to “a new and creative approach for how to fairly compensate people for the power they feed to the grid,” Kreis said.

Sen. Bradley also has high hopes for the upcoming proceeding. The law was very specifically constructed with guidance to the commission, he said.

“We didn’t dictate a rate but the words ‘fair to all customers’ means those who are net metered and those who are not,” he said. “‘Just and reasonable rates’ tells the PUC to do a cost of service analysis to get to an equitable net metering rate.”

Bradley expects to hear arguments in the proceeding for a wholesale tariff, for a default rate tariff, and for a retail rate tariff. The default rate is a lower than retail rate credit earned by installations larger than 100 kW for generation exported to the grid. The per-kWh rate is negotiated twice yearly with wholesale electricity suppliers by New Hampshire’s distribution utilities. It is currently just below $0.10/kWh for Eversource’s territory, according to Murray.

Bradley believes the fair, just, and reasonable tariff is the default rate, “plus a small adder because solar does cut down on generation costs.”

NH SEA does not yet have a specific successor tariff proposal.

"We will go into the proceeding with data defining fair value,” Epsen said. The data will come from production statistics, expert witnesses, and ISO-NE and it will draw on other value of solar and value of renewables methodologies.

The commission has to consider factors “like when solar comes onto the grid and when it can most benefit the system,” she said. “The legislation calls for a robust value of solar investigation and that should include time varying factors.”

Though SolarCity is a member of NH SEA, it will participate in the debate through the Energy Freedom Coalition of America (EFCA), a trade association that represents national DERs providers. Its goal going in is the same as Epsen’s, according to Brendan Reed, deputy director of electricity markets and policy.

EFCA will present data quantifying the benefits of DERs. “To the extent there are costs and benefits, we want to define them,” Reed said.

Quantifying the actual benefits avoids a rhetorical back and forth, he added.

A good outcome might be a New Hampshire-specific version of the compromise reached recently by New York’s six dominant IOUs with SolarCity, SunEdison, and SunPower that will phase out NEM and set up a successor tariff.

The agreement will be part of the information EFCA presents the commission, Reed said.

Handicapping the commission

The NH PUC will be issue its Order of Notice to commence the proceeding “by May 23, as required by statute,” Karen Crampton, head of the sustainable energy division at the agency, emailed to Utility Dive. The Notice will include details on a prehearing conference and a summary of issues to be addressed.

All the utility representatives expressed confidence in the commission and its staff.

The commissioners are open-minded but traditional, according to Epsen. “They are used to doing cost of service ratemaking, so this will be new territory for them.”

Staff will be somewhat constrained “because of all the ongoing proceedings,” she added. “They are hiring consulting support for this one.”

This is a very important proceeding, both for solar and other DERs, and will likely determine how they will be treated by New Hampshire’s utilities, Epsen said. “NH SEA would like to see a long term solution that keeps the solar industry strong but also works for all the parties so the matter is settled going forward.”

Who the commission selects as its outside consultant, and what their background and inclinations are, may be an early indication of the type of proceeding it will be, Reed said.

One thing unlikely to affect the proceeding is the type of media campaign that may have swayed some legislators' votes in the recent legislative debate over NEM in Maine, according Clifton Below, a former state lawmaker and PUC Commissioner. In Maine, national solar companies including SolarCity and Sunrun lobbied to defeat a bill to replace retail rate net metering with a successor tariff.  

“That will have no impact on the commission at all,” he said. “New Hampshire is a small state and the stakeholder group is small. Big out-of-state operators that don’t learn to fit in tend to be ignored because New Hampshire has a tradition of bipartisan collaborative effort.”

His acquaintance with the commissioners makes him confident about the proceeding.

“Two are Republicans but on this issue they are likely to be progressive,” the long-time Democrat said. “They get the issues and understand the need to move forward in as timely a way as possible.”

A new take on solar valuation

SEA’s Epsen, Sen. Bradley, and Consumer Advocate Kreis all said they expect a proposal during the proceeding from Below. During his tenure as a state senator, Below led the bipartisan passage of the original law.

“He’s been around energy issues a long time and the work of the stakeholder group he was part of during the drafting of the recent legislation was very important,” Bradley said.

Below plans to present an innovative successor tariff proposal to the commission, he said, because it was given “quite a bit of discretion and quite a bit of guidance on what the legislature wants to achieve."

Below’s value of solar proposal has four components and will be complicated to present, he said. “But it aligns with the guidance the commission has been given.”

The first component is a value for generation that could be less than half the default rate if it is set at the price paid to retail electricity providers in real time wholesale markets, he said.

“Credit and sell to distributed generation owners at the real time price,” he argued, “plus ancillary and capacity charges.”

The second component is a transmission value for the cost solar avoids, he said. “Each unit of solar generation reduces the need and the cost for transmitting a unit of electricity for central generation.”

A distribution value is the third component and it would be somewhat more difficult but important to quantify, Below said. “Solar uses the distribution grid but it also provides value through grid stabilizing and power quality support value.”

This value would not be equal to the full distribution charge that goes to the IOUs, but is important to include in the credit, he said.

“Solar might also earn a premium for relieving load at certain locations to avoid infrastructure upgrades,” Below said.

The final value would be the allocation of renewable energy credits to customers for their onsite generation. The value would likely be small and uncertain without precise real time metering, but could be meaningful if a DG owner was consistently exporting generation during peak demand periods.

“This is not a simple value of solar calculation because it is incorporates real time pricing,” Below said. By separating out the various components it offers the commission the opportunity to introduce time varying pricing, system orientation, and other variables, as well as pilot projects to test its effectiveness.

Finally, his plan addresses the utilities’ need for distribution revenue because it decouples distribution revenues from volumetric sales, he said.

“The bill instructs the commission to consider allowing for timely recovery of lost revenue by the utilities through an automatic rate adjustment mechanism," he added. "That is a way of calling for revenue decoupling."

The commission only has ten months to reach a solution, Below noted.

"It might do something as simple as a fixed price retail rate compensation, but it could also do something more innovative.”

Either way, Bradley said he was satisfied that regulatory experts would make the decision, and that the issue is out of the hands of lawmakers for now.

“Because distributed generation could reduce the cost of updating and moderinizing the grid, I am willing to accept a rate that includes something more than default service,” he said. “But it is better to have the experts at the commission determine how much more that should be than having politicians do it.”