Net Energy Billing Facts and Myth Busting
Net Energy Billing (NEB) is a pivotal mechanism for Maine’s energy transition and democratizing energy access. This year in the Maine Legislature, a wave of bills opposing the program is occurring. These bills are prompted by myths propagated by utility misinformation about NEB’s costs. In this article, we discuss the intricacies and impacts of NEB, dispel utility myths, highlight the program's benefits. We ultimately aim to inspire informed action, advocacy, and collaboration towards a cleaner, more equitable energy future.
Before you continue, take a moment to envision how our electric grid could best serve us. When we pose this question to communities, the responses often include desires for a grid that is powered by renewable energy, resilient, reliable, flexible, affordable, equitable, and harmonious with ecological systems. When thinking about how to support that vision we see distributed energy projects like solar and battery storage, and we need programs that support their implementation.
Net Energy Billing in Maine
Net energy billing, also known as net metering in other states, is a program that accelerates the adoption of distributed renewable energy by allowing customers to offset their electrical bills based on generation of renewable energy. NEB can serve as a pathway to more equitable access to renewable energy ownership. Specific programs are structured differently state-to-state and not all states have net energy billing. Programs are set by the legislature and then regulated by the Public Utilities Commission (PUC).
In Maine, we have two NEB programs: the kilowatt-hour program and the Tariff-rate program. These programs are designed to benefit different rate classes, because medium and large accounts are billed on a demand basis instead of a volumetric basis like small accounts.
The kilowatt hour program serves smaller, consistent electricity users like households or small businesses and participants receive a 1-to-1 kilowatt hour credit. In other words, for every kilowatt exported from the array to the distribution grid the owner or subscriber of the array will receive a credit equivalent of transmission, distribution, and supply credits under the standard offer.
The tariff rate program is designed for large energy users, particularly those with high electrical demands like grocery stores, water treatment plants, hospitals, or conference centers. These accounts put more significant strain on the electric grid system and thus pay demand charges. NEB is structured differently for tariff-rate users; compensated by a dollar-denominated credit, vs. per kilowatt hour, at a rate set annually by the MPUC.
These programs have changed over the years, as demonstrated by the timeline below.
Understanding the Utility Landscape
Before diving into the misinformation being spread by the utilities, it’s important to have a foundational understanding of the electric utility’s investment model and how it relates to upgrading our transmission and distribution (T&D) infrastructure. The Investor-owned utility model is built on spending money. Utilities have a guaranteed rate of return on infrastructure investments, so the more money the utility spends on building infrastructure the more money their investments make. This is what's known as a capital bias.
The transmission grid is large and built to transfer high volumes of electricity across long distances. The transmission grid is expensive to upgrade and thus has a high return on investment for investors. The distribution grid, on the other hand, consists of smaller poles and wires and is designed to transfer electricity within communities, distributing it to homes, businesses, and municipal infrastructure. Distribution infrastructure is less expensive than transmission lines to upgrade and does not yield as high a return on investment for the privately owned utility. The types of projects that participate in Net Energy Billing are connected to the distribution grid, and more often than not pay for distribution grid upgrades when they interconnect. Distributed energy projects also lower the need for expensive transmission upgrades.
Dispelling Myths Spread by Utilities
(U.S. Energy Information Administration’s September 9, 2024)
Electrical rates are rising across the country and the utilities are seeking to shift the blame. The utilities are pointing to net energy billing, claiming it is the reason why rates are rising. The truth is, unfortunately, but undeniably, the electrical infrastructure across the country is aging, and the costs associated with its maintenance and repair are only increasing and further compounded by more frequent and intense storms caused by climate change. Utilities across the country have been delaying necessary grid upgrades, particularly to the distribution grid. Necessary grid modernization upgrades, as well as ongoing O&M, will be expensive, and rates will continue to rise. The need to upgrade aging infrastructure exists independent of solar adoption. In fact, NEB customers often end up covering upgrades that would have been needed with or without solar interconnection.
It’s also critical to recognize that natural gas drives electricity prices in New England. The price Maine pays for electricity pulled from the greater New England grid (when we don’t have enough energy generation in the state to cover our electricity needs) is driven by natural gas prices 80% of the time. The more electricity we produce in state (through projects like solar) the less we need to pull from out-of-state and expensive natural gas-generated electricity sources.
Utilities are heavily investing in campaigns to spread misinformation. They control the narrative about the NEB program, possessing data on both its costs and benefits. The utilities choose to emphasize the program’s costs with misleading or exaggerated claims. Utilities frame the program as a cost-shifting issue, suggesting that non-NEB ratepayers bear the costs that NEB participants supposedly avoid, particularly in transmission and distribution charges. However, NEB participants contribute to grid improvements and pay flat monthly T&D charges, contradicting the claim of cost-shifting. It's important to remember that utilities have a vested interest in capital investments, preferring to build new infrastructure, and distributed energy projects reduce the need for such developments. As highlighted in the section below, the benefits that NEB participants contribute to our grid have been proven to significantly outweigh any actual program costs.
The Benefits of NEB for All Ratepayers
Despite the utility narrative, the Maine legislature mandated via LD 1986 that the Maine Public Utilities Commission (MPUC) hire a third party to evaluate the cost and benefits of the NEB programs and report annually on their findings. The MPUC hired Sustainable Energy Advantage (SEA) to evaluate the program and found that the program provided roughly $30 million more in benefits than costs in 2023 alone. The report outlined exactly how the NEB program reduces energy costs for all rate payers. The report showed that generating solar locally lowers peak demand, leading Maine to buy less electricity from the New England market. NEB projects also generate electricity close to where it’s used, thus reducing transmission line losses. As mentioned above, NEB increases grid investment and upgrades from solar owners that would otherwise have been paid for by ratepayers.
Additionally, the utilities are required to meet a certain renewable portfolio standard (RPS) set by the MPUC. In other words, the utilities need to ensure that a certain percentage of electricity comes from renewable energy sources, and they do this by purchasing Renewable Energy Certificates (RECs). Behind-the-meter solar projects lower the amount of electricity purchased from the grid. If less electricity is being used (because households and small businesses are producing it themselves) then the utility doesn't need to purchase as many RECs to meet the required RPS. All of these benefits provide substantial savings for all ratepayers, not just those participating in a net energy billing project.
NEB and Equity
If the NEB program is lost, Maine stands to lose more than just the benefits listed above. NEB allows individuals and communities to own their power generation. Without NEB only large-scale developers would own and build solar in Maine. The program allows low and moderate-income people to own or be off-takers of an array, which lowers their electricity bills significantly and insulates them from rate increases.
NEB increases adoption of community-driven energy projects which, in turn, incease energy democracy by distributing ownership, building local energy and literacy, and prioritizing community-driven siting and additional considerations. Remember the grid we want to build. Without programs like NEB, Maine will not move towards energy democracy, and a more flexible, resilient, equitable grid driven by distributed resources.
Best Next Steps
In advocating for NEB moving forward, ACTT believes Maine needs to maintain the current NEB for rooftop solar. Additionally, we oppose any onsite or co-location requirement, as those changes would harm the development of cooperative solar projects and municipal arrays on previously disturbed land. Finally, it's essential to honor existing NEB contracts amid any program changes, to ensure that early adopters of solar are not negatively impacted.
There has already been strong curtailment and modification of the NEB program in 2023. The state should assess the impacts of these modifications before making further cuts to the program. It takes years for arrays to be constructed and interconnected. It will be a couple of years before we get a full picture of the impact of the 2023 legislation.
How to get involved
Give testimony: Watch for relevant hearings in the Energy, Utilities, and Technology Committee schedule and/or through updates from ACTT’s policy list (sign up below) and provide testimony, whether written, virtual, or in-person.
Call and write your representatives: Let them know you care about NEB and want to see the program, as currently modified, preserved.
Write Op-eds: Help combat the misinformation campaign underway.
Talk to your neighbors and share what you are learning.