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Utility Regulators Consider Solar ‘Costs’ In Kentucky Power Rate Case

Ryan Van Velzer

The future of renewable energy in Kentucky, and who is going to pay for it, is taking shape at a hearing before Kentucky utility regulators.  

Kentucky Power is asking the Public Service Commission this week to lower the rates utilities pay residential solar customers for power they produce. That’s the billing system known as net metering, which credits utility customers for the excess power they put on the grid. 

On Tuesday, The Public Service Commission heard public comments and expert witness testimony from utilities on the value of net-metering during a hearing held remotely at the regulator’s headquarters in Frankfort. 

Kentucky Power’s argument is that utilities pay a lower wholesale rate for power, and then charge a retail rate to customers (which includes the cost of delivery and maintenance). But with net metering as it is currently structured, utilities are the ones paying the one-to-one retail rate to net metering customers for the energy they produce and put on the grid. 

Renewable energy advocates say lowering that rate makes solar less financially feasible for customers, who shoulder significant costs to install the solar equipment, and fails to take into consideration all of the benefits customer generation provides to utilities and the planet. 

It’s up to three commissioners serving on the Kentucky Public Service Commission to weigh the costs and benefits of customer-generated power, and decide the value that net-metering customers contribute. 

The stakes are high. It’s the first case since the passage of a 2019 law that says net-metering customers will receive a “dollar-denominated bill credit” for the excess energy they feed into the electric grid. Utilities propose the rate, but the Public Service Commission has the final say

On Tuesday, Kentucky Power CEO Brett Mattison testified that fewer than 100 net-metering customers are in the company’s service area, which includes 168,000 customers across eastern Kentucky. 

An employee for Kentucky Power’s parent company, American Electric Power, testified that net-metering causes them to pass on costs of less than $23,000 per year, spread out among all residential customers. 

Attorney Tom FitzGerald, representing the Mountain Association, an economic development group in Eastern Kentucky, pointed out that extra cost would amount to about 15 cents per residential customer per year.  

Advocates for rooftop solar offered public comments both in writing and in phone calls to Tuesday’s public hearing defending the current rate. They say growth of small-scale energy systems like rooftop solar depends on their financial viability. 

Lowering the value of that credit makes it harder for families to see a return on their investment and slows the adoption of renewable energy when the planet has no time to waste in transitioning away from fossil fuels

“Nature will not be denied, and the public will pay the cost,” said Jack Morris, a net-metering customer with Kentucky Power. “Public service is in the name of this commission, make sure it shows.”

Among those who offered comments was a representative of aRoman Catholic convent, which has committed to reducing greenhouse gas emissions to zero by 2037 in line with recommendations from the Intergovernmental Panel on Climate Change.

“In order to lower the greenhouse gas emissions that impact the warming of the planet, we have installed solar panels and are benefiting at the 1 to 1 rate. This rate makes it possible for us to afford the up-front cost of installing the solar panels,” wrote Joetta Venneman with the Sisters of Charity of Nazareth. 

Shelby Linton-Keddie, senior director of state policy with the Edison Electric Institute, a lobbying association representing all investor-owned utilities in the country, said there’s no longer a need to pay net-metering customers the retail rate for the power they generate. 

Linton-Keddie said a lower rate would address the extra costs Kentucky Power’s customers are paying for net metering electricity. 

If the Public Service Commission agrees to the net-metering rates Kentucky Power is proposing, it would only affect new solar customers. Current net metering customers will continue to receive the full retail rate for the next 25 years.

The Public Service Commission’s decision is likely to set a precedent for other utilities in Kentucky, which will also be seeking changes to their net-metering rates during rate cases that go before the commission. 

The Kentucky Power hearing is expected to last three days. A decision is expected in early May. Louisville Gas and Electric is scheduled to appear before the PSC later this month for its own rate case that includes changes to net metering.  

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