State regulators have decided that the system under which Appalachian Power will compensate future rooftop solar panel users for generating more electricity than they use will remain largely unchanged from its current setup.
Under the system, known as “net metering,” residential and commercial customers with solar panels that produce extra power, such as on sunny days, can send it back to the grid for others to use. They earn bill credit from this excess generation that can offset purchasing electricity later, such as on cloudy days or at night.
Appalachian Power proposed changes that instead would credit customers for their extra electricity at a rate about 70% lower than the current bill credit. The utility said that solar panel users today aren’t paying their fair share toward maintaining the grid, which shifts costs to those who don’t have panels.
Rooftop solar industry representatives and renewable-energy proponents resisted Appalachian’s proposal. They said that the utility ignored solar power’s full benefits to the grid, the environment and the economy and said its proposal would significantly harm solar adoption by reducing the financial incentive to buy panels.
In a ruling last week, Virginia’s State Corporation Commission mostly kept the existing net metering policies in place, including allowing future solar panel users to bank excess generation credits at full retail value and put them toward their bills during a 12-month period.
“We are very pleased with the SCC’s ruling, which maintains the overall structure and key features of net metering,” said Lindsay Tomsheck, director of business development for Christiansburg-based Baseline Solar Solutions. “It’s a big win for Virginians and for solar, and will help keep the clean energy transition moving in the right direction.”
One change the SCC approved is a new rate for Appalachian Power to compensate solar panel users at the end of each 12-month period for electricity generated above their annual consumption, instead of allowing those customers to carry forward bill credits to the next 12-month period. The rate is about one-third of full retail value.
“Customers should know that the SCC has otherwise maintained net metering, as it is currently implemented,” Appalachian Power spokesperson George Porter said in a statement.
The change applies only to customers who acquire solar panels in the future. Those who already have solar panels connected to the grid are grandfathered in to the current rules for 25 years, and low-income customers can choose which rules they want.
In many cases, it might make little or no difference whether a solar panel user operates under the current or new rule. Virginia law states that solar panel systems in Appalachian Power territory should be sized to produce no more than a customer’s annual needs.
Net metering by the numbers
Nearly 4,000 of Appalachian Power’s 540,000 customers in Western Virginia, or less than 1%, are what the utility refers to as net metering “customer-generators” — those who produce more electricity than they use and send the rest back to the grid.
Nearly all of them use solar panels, and more than 80% are residential customers who mostly put panels on their roofs, or sometimes in ground-mounted installations. The average size of a solar installation is about 8.25 kilowatts, according to testimony filed in the regulatory case.
The basic financial principle of buying solar panels is that a customer saves money on their electricity bill, which eventually pays for the cost of the panels. A solar panel user typically needs years to break even on that upfront cost, and that timeline likely will get longer with the expiration of a federal tax credit at the end of this year.
Proponents say that solar panels provide cleaner energy and act as a hedge against rising electricity bills.
The average Appalachian Power monthly residential bill has increased by about $50 since July 2022 to about $174 today. Some customers have shared stories online and in public hearings about seeing bills hundreds of dollars higher.
By generating electricity with solar panels, a customer avoids having to buy that electricity from Appalachian Power.
When a customer generates more power than they consume, the utility provides bill credit at a “one-to-one” full retail rate, which means one kilowatt-hour sent back to the grid can offset one kilowatt-hour that would otherwise need to be purchased later.
Credit is banked and used throughout a 12-month period, so, for example, credit accrued during summer can be used during winter.
Appalachian Power has said that customer-generators receiving that much bill credit for their excess electricity unfairly shifts costs onto other customers to the tune of about $3.5 million per year.
The utility proposed instead measuring excess electricity at one-hour intervals and crediting the extra at approximately 5 cents per kilowatt-hour instead of the one-to-one rate of approximately 17 cents per kilowatt-hour.
The utility said that 5-cent figure represented its “avoided cost,” or essentially what it would pay to get the power from somewhere else.
In its ruling, the SCC rejected Appalachian’s proposal to change to the hourly “netting interval.” It kept in place the current system of allowing customers to bank excess generation credits each month over a 12-month period.
The change permitted by the SCC affects how customers who generate more electricity than they use in a 12-month period will be compensated.
Currently, customers with excess generation credit at the end of each 12-month period can carry forward some of that credit based on how much electricity they purchased the previous year and how much excess generation credit they previously carried forward. Alternatively, they can choose to have Appalachian purchase it at the utility’s avoided cost.
Under the new rule, customers will no longer be able to carry forward any credits at the end of a 12-month period. Instead, the SCC will allow Appalachian to credit them at about 5.7 cents per kilowatt-hour.
The 5.7-cent rate is slightly higher than Appalachian’s 5-cent proposal because the SCC said it should also include additional value from customers’ solar power generation helping the utility comply with renewable energy standards.
The nonprofit Appalachian Voices and the Southern Environmental Law Center, which represented Appalachian Voices in the state regulatory case, said in a news release that Appalachian’s proposed hourly netting interval would have caused much more customer-generated electricity to be compensated at the lower rate.
Peter Anderson, director of state energy policy for the Appalachian Voices, said that the ruling “has largely preserved a net metering system that reasonably allows customers to finance their own solar energy systems, while balancing other important considerations.”
“However, going forward we need to create as many incentives as possible for folks to own solar, as the benefits to all utility customers are so clear,” Anderson said.
Even if a resident has all of their electricity needs covered by solar panels, they still must pay a basic customer charge of $7.96 monthly. The SCC ruled that charge will remain the same.
The SCC also ruled to keep in place a cap that says no more than 6% of Appalachian Power’s peak electric load can come from energy fed back into the grid.
Appalachian Power put forward its proposal in August 2024. The SCC held a three-day public hearing in May and issued its final order in the case on Friday.
The SCC instructed Appalachian to file revised terms of service and other paperwork related to its order within 90 days.
Meanwhile, Dominion Energy has also asked state regulators for permission to change how it compensates customer-generators for their excess electricity, including by using a half-hour netting interval. A public hearing is set for Jan. 20. (Disclosure: Dominion is one of our donors, but donors have no say in news decisions; see our policy.)