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Potential windfalls
Both camps in the net metering dispute see the other side gaining an unfair advantage if their position prevails.
“For most customer-generators there is no way to ascertain whether they have contributed to a reduction in capacity costs,” Colafella said. “If they don’t provide capacity, they should not be paid for capacity.”
On the flip side, any excess electricity fed into the grid can be sold to other customers. Those other customers would almost certainly pay the full generation rate, without getting any discount for capacity.
“There’s certainly the potential for a windfall” to utilities, said Martin Kushler, a senior fellow at the American Council for an Energy-Efficient Economy (ACEEE).
Conflicts of interest
Indeed, Ohio’s four large electric utilities have unregulated affiliates that sell electricity.
“It creates this very direct conflict of interest,” said Kushler.
The less customers can get for electricity they put into the grid, the longer it takes to pay off the capital costs for their own generation. Less financial incentive to choose those technologies would reinforce demand from existing electricity suppliers.
“This seems to get into even more issues of corporate separation—yet another attempt by an Ohio distribution utility to make its generation affiliate more profitable,” Sawmiller agreed.
Similar reasoning explains why FirstEnergy and other utilities supported the recent rollback of Ohio’s energy efficiency standard, Kushler said. “Arguably, at least under traditional regulation, the utility would have some obligation to minimize costs to their customers.”
However, that’s not what happened with Ohio Senate Bill 310, he says. The new law, signed by Gov. John Kasich (R) in June, freezes the renewable energy and energy efficiency standards for two years and then scales them back significantly.
“Energy efficiency was saving electricity at about 2 cents a kilowatt-hour—far cheaper than any source of supply—and yet the vested interests were successful in decimating Ohio’s energy efficiency policy,” Kushler said.
So far, three of Ohio’s four electric distribution utilities have said their energy programs will continue for at least part of the freeze period under SB 310. FirstEnergy is the exception.
“At this point we have not made any decision as to whether we’re going to make any changes to our current plan,” Colafella said.
“I would be totally shocked if they do anything but cancel those programs,” said Rob Kelter, an attorney with the Environmental Law and Policy Center. “It would negatively affect FirstEnergy customers, but it would help their unregulated affiliate sell more electricity.”
Meanwhile, on the federal level, FirstEnergy’s ongoing FERC challenge aims to exclude demand response from the results of May’s capacity auction for 2017-2018.
“We believe that removing these demand resources from the capacity market is going to provide vital compensation for essential physical assets like nuclear, coal, [and] gas base load plants,” Colafella said. “It’s going to help foster properly functioning capacity markets.”
“Demand response presents absolutely zero reliability concerns,” Sawmiller noted. “It won’t freeze like a coal plant did during the polar vortex. In addition, it’s incredibly cheap. This applies downward pressure to capacity prices, lowering electric bills for all customers.”
“If FirstEnergy is able to reduce the amount of demand response that goes into these auctions, it will raise prices for customers,” Sawmiller added.
“Having demand response bid in lowers the price for all the generators that bid in,” Kushler agreed. Conversely, keeping demand response out would raise the auction’s closing price. In Kushler’s view, FirstEnergy’s attempt to exclude it is yet another “classic conflict of interest.”
ACEEE, the Sierra Club, and the Environmental Law & Policy Center are members of RE-AMP, which publishes Midwest Energy News.
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