AEP Shows Its Hand on HB2201

The Charleston Daily Mail ran an op ed by AEP’s Jim Fawcett today that revealed for the first time AEP’s interpretation of the just passed HB2201:

The bill defines cross- subsidization as “the practice of charging costs directly incurred by the electric utility in accommodating a net metering system to electric retail customers who are not customer generators.”

In other words, whatever it costs to serve a net metering customer should be borne by the net metering customer, not other customers.

Net metering was first created to encourage the budding solar industry by requiring electric utilities to purchase at the full retail rate any excess energy generated by a customer.

That full retail rate includes the costs of the poles, wires, meters and other infrastructure that keep the electric grid running.

By allowing solar providers to avoid the cost of a service that they benefit from and by paying an inflated cost for the power provided by these solar providers, all customers — even low income customers least able to afford solar panels on their own homes — have to help pay for those who have solar generation installed.

So AEP has just revealed that they believe 2201 throws into question the fundamental one-to-one kwh credit system (which Mr. Fawcett refers to as “inflated costs”) that exists now in WV.  Keep in mind that the actual language in 2201 which defines “cross-subsidization” is not as clear as Mr. Fawcett claims.  The total costs that Mr. Fawcett refers to are indirect costs generally included in AEP’s base rate calculation.

Here’s what 2201 actually says:

 (c) “Cross-subsidization”, for purposes of this section, means the practice of charging costs directly incurred by the electric utility in accommodating a net metering system to electric retail customers who are not customer generators. [emphasis mine]

(d) The Public Service Commission shall adopt a rule requiring that all electric utilities provide a rebate or discount at fair value, to be determined by the Public Service Commission, to customer-generators for any electricity generation that is delivered to the utility under a net metering arrangement. The commission shall assure that any net metering tariff does not create a cross-subsidization between customers within one class of service.

HB2201 does not say all costs, direct and indirect, connected with serving all net metered customers.  It says “costs directly incurred by the electric utility in accommodating a net metering system.”  Costs that cannot create “cross-subsidization” must be “directly incurred” “in accommodating a net metering system.”

Under current PSC net metering regulations, the direct costs required to connect a net metered customer to a power company must already be paid by the net metered customer, and are not passed on to anyone else.  If a special meter is required, or a new transformer must be installed, the net metered customer must pay for it.  There is no “cross-subsidization” as defined by the new law, and there never has been, when it comes to direct costs incurred by the power company in accommodating a net metered customer.

Apparently, Mr. Fawcett thinks otherwise.  And we know where his thinking comes from.

I heard FirstEnergy lobbyist Sammy Gray state twice during the just concluded legislative session, once to the House Energy Committee and once to the Senate Judiciary, that FirstEnergy disagreed with Mr. Fawcett’s (and apparently AEP’s) interpretation of the bill and agreed with my reading.  It will be interesting to see how FirstEnergy responds officially to Mr. Fawcett’s interpretation of HB2201.

When they were encouraged to support language which would further clarify HB2201’s definition of “cross-subsidization” in the law, AEP’s lobbyist Steve Stewart refused to accept any changes.  We also saw AEP misleading legislators from the beginning on HB2201.  Until Mr. Fawcett’s op ed, however, AEP has never stated publicly or privately what their actual interpretation of HB2201 was.

Now we know.

6 thoughts on “AEP Shows Its Hand on HB2201

  1. Pingback: For the Environment: What was gained, what was lost this session

  2. But what about the cross-subsidization involved when power hogs get to pay less for their use of more than 500kwh, which obviously must be subsidized by those paying more for the first 500? Why is nobody talking about that? Social class comes up here, in the implication that it’s rich people who have solar panels (not true in my experience but maybe the people I know are atypical)–but surely it’s also rich people who use more than 500 kwh/month. Why should poorer–and more frugal–people have to subsidize THEM?

  3. The devil will be in the details of the rules the PSC devises based on this legislation. Hopefully the PSC will again allow various rate payer interest groups to have the kind of input they have had in past PSC Net Metering related cases. But the veneer of relative camaraderie among the power companies and those intervening rate payer interest groups is threatened by this legislation.

  4. If I lose my job and have to adjust way back on my expenses by simple conservation, e.g. unplug the refrigerator and use ice from the 7-11 store, wash my clothes in a tub and dry them on a clothes line, etc. and only stay on the grid to run my computer and a couple of low watt bulbs, will I have to pay for not using a minimum amount of kwh? Am I “subsidizing” all the respectable customers by mooching my little bit off their system?

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