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Net Metering: So, what happens now?

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Last Thanksgiving, distributed generation consumers and advocates had something to truly give thanks for: a unanimous (5-0) decision by the Montana Public Service Commission (MPSC) adopting MREA/Vote Solar's proposal to maintain net energy metering ("net metering", "NEM") rates and rate structures. The MPSC rejected a utility proposal that would have made it impossible for net metering customers installing rooftop solar and small wind, for example, to save money on their energy bills. The ruling was a huge win, but the question remains: so, what happens now? In short: nothing - and that's a great thing! We explore the more detailed answer to that question below. Read on for a look at net metering and what to expect in the coming months and years.

Before we begin...

A clarifying reminder that net energy metering ("NEM") is a billing mechanism that allows a home or business with a distributed generation system to accrue on-bill credits for excess energy that their system exports to the grid.

Distributed Generation (“DG” or "DGen") is the term used to describe electric generation systems that are located at or near where the energy is used. The most common example of a DG system in Montana is rooftop solar, but also includes small wind or ground mounted solar installations, geothermal, micro-hydro and more.

The terms "net metering system" and "distributed generation system" are often used interchangeably, but the difference is important to note. Learn more about how net metering works here.

What the rate case victory means

In short, it means that nothing changed. And that is a great thing!

Rooftop solar installer at workIn 1999, the Montana Legislature passed laws establishing the state's net metering program. Part of those laws state that customers will receive retail-rate credits on their bill. This one-for-one credit scenario means that if a kWh costs you $0.11 to buy from the utility, then every kWh you export back to the utility will earn you the same amount ($0.11) in bill credits. The rate case victory means that this rate structure, retail rate or one-for-one credits, will be sticking around. Because of the way Montana laws are written, the utility can only change rates in the context of a rate case. A rate case happens before the Montana Public Service Commission, not the Legislature. A rate case proceeding is akin to a court case involving legal filings, witnesses, and attorneys. As we saw with the recent rate case, these are a big and complicated process and require a lot of time and resources to prepare. We don't expect another rate case for at least a few years, which means net metering is safe from regulatory changes for now. (See below for more on whether or not now is a good time to 'go solar'. Spoiler: Yep!)

Another important issue that came to light in the rate case was that legacy customers will be protected. Everyone involved in the rate case – the utility, MREA, the PSC, etc. – acknowledged that current NEM customers would not be subject to any changes if the net metering rates were changed. This is actually dictated by Montana laws - laws that MREA fought for at the Legislature. Montana statute says that if you have a net metering system right now, any future changes to rates will not affect you. However, there were some nuanced situations that were exposed during the rate case discussions. For example, what happens if you sell your home? Would the new owner fall into the new rates? MREA brought this up in the case and it was determined that no, the legacy rates would apply to the system and not the customer. Meaning if you sell your home, the new owner will maintain those legacy rates. For now, all of this is moot because the ruling rejected any changes. Still, this information is important for any future discussions about rate changes.

Is now a good time to go solar?

You bet. Here are three reasons why now is a great time to install solar, wind, or other renewables at your home/business.

#1: The prices just keep dropping. The cost of solar has dropped more than 70% over the last decade. Your payback time and total installed cost is going to depend on the size of your system and the additional features you decide to install. Your installer will address these questions and help you with a price quote. Right now, payback times for a residential system in Montana are averaging between 10-15 years.

#2: Legacy rates are protected. As we discussed above, legacy rates are protected by Montana statute. The best way to lock in long term energy savings and ensure those savings are unaffected is to install now!

#3: Tax incentives are shifting.

ITC step down
Click photo for larger version

As we shared in January, the Federal Investment Tax Credit (ITC) is beginning its step down this year. The ITC has driven huge investment in renewable energy in the past, but this year steps down from 30% to 26%. The step down will continue each year until 2022 when the residential system credit will drop to 0% and the commercial system credit will drop to 10% (and stay there permanently). Installing now ensures you can take advantage of the higher percentages.

BONUS Reason #4: Support local jobs.  By supporting the Montana renewable energy industry, you get the added bonus of supporting a local installer, fueling an industry that is full of small, local businesses offering high quality jobs!

What's on the horizon for net metering in Montana?

Net metering is safe, for now. As we discussed above, we don't expect any more discussions about net metering before the MPSC for a few years. However, the Legislature is a different story. Every odd-numbered year, when the Legislature is in session, MREA watches vigilantly as elected officials discuss small-scale, distributed renewable energy systems and the policies affecting them. Over the past several sessions there have been numerous bills attacking net metering, as well as state tax incentives and other related policies. We likely won't begin hearing the first whispers of what is to come in the 2021 Session until closer to November. Still, MREA will remain watchful to make sure that renewable energy has a safe and healthy future here in Montana.

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More information:

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