Type: Law Bulletins
Date: 07/02/2015

The Net-Metering Wars: Ohio is one of the Battlegrounds in the Fight between Electric Utilities and Net-Metering Supporters

There is a growing population of electric customers in Ohio who are interested in installing rooftop solar panels and other small-scale power sources on their homes and places of business. These “on-site” power sources are often referred to as distributed generation. Not only do distributed generation resources allow customers to reduce their monthly electric bills, but on-site resources can potentially earn customers money in the form of credits from their local electric utility. The credits are earned when distributed generation customers produce more electricity than they use during the month and the excess is distributed into the electric utility’s grid. The mechanism that is used to track the amount of excess electricity produced by small-scale on-site power sources and credit owners of these resources for the excess electricity is called “net-metering.”

As rooftop solar has increased, so too has the tension between advocates of net-metering and electric utilities. In a number of states, electric utilities have attempted to convince regulators and legislators that net-metering policies cause potential subsidies or “free-rider” issues. One of primary arguments raised by utilities in this regard is that net-metering customers do not pay their fair share for use of the electric grid, which results in non-net-metering customers picking up the tab for the cost of maintaining the grid.

Ohio recently became a battleground in the dispute between supporters of distributed generation and electric utilities. This dispute is largely focused on the amount of credits net-metering customers receive and which customers are entitled to receive credits from utilities. The issues arose out of the Public Utilities Commission of Ohio’s (“PUCO”) revaluation of its net-metering rules. AEP Ohio filed an appeal to the Ohio Supreme Court challenging the commission’s revisions to the net-metering rules. AEP Ohio raises two primary arguments. First, AEP Ohio argues that the rules are unlawful because they require AEP Ohio to provide credits to customers who do not purchase their electric supply from AEP Ohio. These customers are frequently referred to as “shopping customers” because they purchase their electric supply from a competitive retail electric service provider as opposed to purchasing electric supply from the utility company. (The “electric supply” is the actual energy commodity being used by the customer that flows through the “wires," as opposed to the “wires” themselves, which are owned by the utility.) AEP Ohio argues that electric utilities are only required to provide net-metering to non-shopping customers pursuant to R.C. 4928.67.

In addition, AEP Ohio argues that the credit in the new rules is excessive because the credit is based upon AEP Ohio’s standard service offer rate, which includes both energy and capacity charges. AEP Ohio argues that it is incorrect and unfair to credit net-metering customers for capacity because, according to AEP Ohio, net-metering customers do not contribute to the capacity required by the utility. AEP Ohio argues that net-metering customers’ credit should only reflect energy charges. FirstEnergy has joined AEP Ohio in challenging the PUCO’s new net-metering rules.

Although AEP Ohio and FirstEnergy’s appeal is still pending, recent developments have put the court battle on hold. The parties asked the court to stay the procedural schedule for the appeal to allow the PUCO to consider potential revisions to the rules. The PUCO recently held a workshop to allow stakeholders to share further input on the rules. While the PUCO considers potentially revising its net-metering rules, at least one member of Ohio Legislature has expressed concerns over the structure of net-metering credits in Ohio. Sen. William Seitz (R-Cincinnati), who is the chair of the Senate Public Utilities Committee, recently indicated at an Energy Ohio Network event that he is watching the results of the PUCO’s net-metering rule review very closely.

It remains to be seen whether the Legislature will weigh in on the net-metering battle, or whether a potential modification to the net-metering rules will satisfy the interests of the various parties.

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