Nevada PUC: Upcoming NEM cost-benefit study ‘won’t win the day’

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Nevada will fund a new study on the economics of rooftop solar, two years after a first report showed millions in benefits for both owners of solar systems and other ratepayers as well. Source: NV Energy

A new assessment of the value of solar will not fundamentally alter the Nevada net metering debate, according to the state’s public utility commission.

The Nevada Board of Examiners have approved nearly US$67,000 so that independent contractor Energy + Environmental Economics (E3) can conduct an update study to the one they commissioned in 2014 that found a US$36 million benefit for ratepayers.

The E3 report from 2014 was a key piece of evidence in the debate about whether to raise rooftop solar rates, with parties on both sides citing the findings. However, the energy landscape has considerably changed since that study was conducted, not least because of the fact that the price of large-scale solar farms has dropped below US$50/MWh – a reduction of almost 50% from when the report was drafted. Therefore, the fresh analysis could inform regulators as they consider rate changes this summer, and has been commissioned in anticipation of net-metering being discussed at the upcoming legislative session.

As has been widely reported, solar policy, particularly in regards to net-metering, has been particularly contentious in the state. Last year the Nevada Public Utilities Commission (NPUC) made several unprecedented changes to the industry that included tripling fixed fees for solar customers and slashing net-metering rates.

“What this is doing, at the request of the legislature, is to provide additional information for policy-making during the upcoming legislative session,” a member of the NPUC told PV Tech. “This is going to use the exact same inputs [as the 2014 study] just with updated data to reflect new market conditions.”

The announcement from Nevada state officials to fund a new cost-benefit analysis comes hot on the heels of the study by SolarCity and the NRDC that found that net-metering provided a benefit for all Nevadans – stating that rooftop PV delivers US$0.016/kWh in net benefits. With environmental benefits included, that figure rises to US$0.036/kWh.

The controversial PUC decision to restrict net-metering

When the PUC initially ruled to restrict net-metering credits and boost charges against solar users in December 2015, there was backlash against the finding, considering commissioners had only assessed two out of a possible 11 variables when determining the value of net-metering, causing some industry bodies to view the assessment as incomplete. According to the NPUC spokesperson, the other nine variables were excluded from the analysis because “there was a complete and utter lack of evidence to support these claimed benefits”.

“The [December 2015] order that the commission issued has been characterised as the commission ‘not having time’ or not addressing those variables. No; the rooftop solar industry did not provide any evidence to support any of those factors. Essentially, in the absence of any evidence, the commission cannot assume that a benefit exists. I think that the industry is making an argument that there should have been a presumption of those benefits,” said the NPUC spokesperson.

Crucially, the impending E3 analysis is to also only take into account some of the 11 variables that the commission identified last year, as it is to be conducted on the exact same criteria as the 2014 study. That study was conducted before the commission did its own separate analysis and identified those 11 variables. However, to prevent a second industry outcry that the study did not fully consider all the potential benefits of rooftop solar, it should be noted that the E3 analysis is being supplemented by a separate comprehensive study that the commission is embarking on. 

NPUC’s General Rate Cases

Upcoming General Rate Cases, (GRC), that are mandatorily heard every three years for electric utilities, will be the overarching evidence that is used by the commission to decide on the rate structure of the state.

“Between now and 1 January 2017, the commission is going to go through this process of reviewing the 11 factors. That is going to be more comprehensive than any study that has been done to date,” added the NPUC spokesperson.

The GRC consists of a contested proceeding where all of the interested parties have an opportunity to file evidence at hearing under oath, subject to cross-examination and scrutiny.

“Frankly, anybody can release a study. It is not surprising that SolarCity came out with a study that shockingly found that SolarCity’s business model was a net-benefit. What is nice about the contested case process is that all parties can scrutinise that information. And what the commission is really hoping is that SolarCity and Sunrun and these rooftop solar companies will meaningfully participate this time around and provide their evidence so it can be subject to scrutiny and peer review,” he said. 

Leverage and influence of the E3 study

Where does this leave the upcoming E3 study? “While the E3 study can certainly be used and filed in the commission’s proceeding as evidence, it is not the analysis that will ultimately determine what rates will be used,” said the NPUC spokesperson.

There are however two places where that study can ultimately have influence: the first is the legislature. As confirmed by the commission, if the legislature is persuaded by the E3 analysis, the latter can pass laws that prescribe the way the rates are set – where there is no discretion given to the commission. Secondly, the parties in the GRC will be likely to use that study as evidence in the GRC to exemplify whatever costs or net benefits it finds for net-metering.

Furthermore, the E3 study, as coming from an independent source, will have more credibility than a study being commissioned by the industry itself. “The PUC though, under the Administrative Procedures Act, can only rely upon evidence that is gathered in a contested proceeding where that evidence is scrutinised and subject to cross examination. So that study can be presented as some of the evidence, but on its own it’s not going to win the day necessarily,” said the spokesperson.

To prevent a similar uproar on the back of the GRC as happened last year, the commission hopes that all interested parties will contribute to proceedings to submit evidence.

“Hopefully the parties who are complaining now will actually fully engage in the contested proceedings and present that evidence. The commission again can’t resume a benefit exists in the absence of evidence. The commission fully intends to address every bit of evidence that is put forward and lay those facts in determining what the appropriate rate will be,” he added.

SolarCity and Sunrun were contacted to comment but had not responded at the time of publication.

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