NC Utilities Commission approves Duke Energy solar rates, strikes down key incentive

The N.C. Utilities Commission has approved a new rate design that will reduce the credits people with solar panels on their homes receive for energy they send to the grid while also striking down an incentive program that would have made it cheaper to install those panels in the first place.

Rather than receiving a one-to-one credit for energy they add to the grid, homeowners with rooftop solar will now need to pay a mandatory monthly minimum bill and monthly fees for things like energy efficiency and storm damage. Those customers also will pay more for energy used at certain times of day, namely around breakfast and dinner times.

An agreement between Duke Energy and several solar installers that was included in the Utilities Commission’s order provides a bridge rate for customers, allowing those who install solar before 2027 to pay the mandatory minimum bill and fees while receiving a higher credit for energy sent to the grid.

Net metering is the term for how customers with solar panels are credited for the power they contribute to the grid.

In 2017, North Carolina’s House Bill 589 directed the Utilities Commission to establish a new net metering scheme by 2027. The General Assembly reiterated its desire for a new net metering system in 2021’s House Bill 951.

“This proactive attempt to come up with net metering rates prior to that deadline was really informed by everyone in that collaborative group’s understanding looking around the country, seeing net metering policies being really aggressively rolled back in states that had revised net metering in the last couple years,” Taylor Jones, the N.C. Sustainable Energy Association’s senior regulatory counsel, told The News & Observer.

Jones pointed to California and Nevada as states where revised net metering policies have been less profitable for customers.

The Utilities Commission is made up of seven members appointed by the governor, currently all appointed by Gov. Roy Cooper. It regulates Duke Energy, Dominion and other gas and water utilities that operate in the state, among other matters.

The new net metering system is set to become effective on July 1.

Potential legal challenge

Duke Energy has long argued that rooftop solar customers are not paying enough to use the transmission system and grid that allow energy to flow to and from their homes, an argument that utilities in other states have used to curb net metering rates. In a rate design study, Duke determined that customers on the existing net metering scheme were being subsidized by as much as $40 a month in the Duke Energy Progress service area and $30 in the Duke Energy Carolinas service area.

“The analyses in the embedded and marginal cost studies that Duke conducted as part of its Rate Design Study capture the majority, if not all, of the known and verifiable benefits of solar generation,” the commission wrote in its order.

NC WARN and other environmental groups argue that 2017’s HB 589 required the Utilities Commission to conduct its own analysis of the costs and benefits of rooftop solar. The failure to do so could be central to a legal challenge to the net metering ruling, Jim Warren, NC WARN’s executive director, said in a press release.

“The law requires the utilities commission to conduct a cost-benefit analysis to see if net metering — how it really works, does it really contain the cost shift that has been Duke Energy’s only argument, virtually,” Warren told The News & Observer.

Warren also argues that rooftop solar and associated storage systems are key tools in North Carolina’s efforts to reduce greenhouse gas emissions.

A calculator allowing Duke Energy customers interested in rooftop solar to gauge how the panels would affect their bills is central to the Utilities Commission’s order. A similar calculator is available in South Carolina, but the North Carolina version could be slightly different.

Per the commission’s order, the new calculator will be available to the public by June 1.

“We are planning on building an enhanced version of the calculator for North Carolina and are discussing this with rooftop solar installers,” Randy Wheeless, a Duke Energy spokesman, said in an email to The News & Observer.

Key elements in the North Carolina version would include allowing customers to put in their Duke Energy account number and automatically upload their energy usage, Jones said. From there, Jones said, customers or installers should be able to evaluate how different systems would affect their bills.

“These are complicated tariff designs. I think that really highlights the importance of this online bill calculator for customers. That’s going to be a really necessary tool for people to really understand any implications,” Jones said.

No Smart $aver program

The “Smart $aver” program proposed by Duke Energy would have given people installing rooftop solar an incentive to let the utility manage their homes’ thermostats at times of high energy usage.

For Duke Energy Carolinas customers, the anticipated incentive would have averaged $2,822. Duke Energy Progress customers would have averaged a $3,002 incentive. The program would reduce energy usage more effectively than building new power plants and other generation sources, Duke argued.

Customers would have agreed to participate in Duke Energy’s thermostat management program for 25 years, repaying that year’s part of the incentive if they overrode the utilities’ management too many times.

The program was critical to an agreement between Duke Energy and several solar installers that saw the installers agree to support the net metering system in return for the incentive.

“I hope that in a future docket or law the legislature, NCUC and NC Public Staff iterate their views of small-scale solar and storage as valuable for the grid,” Bob Kingery, the founder of Southern Energy Management, said in a statement. Kingery was one of the installers who agreed to the memorandum of understanding with Duke.

But the Utilities Commission declined the program, instead directing Duke Energy to create a pilot program that would explore how solar and storage impact the greater electrical grid.

In a concurring opinion, Utilities Commissioner Floyd McKissick Jr. explained that he did not believe the proposed Smart $aver program met the statutory definition of energy efficiency because it would not result in less energy usage, but instead resulted in less energy produced from the grid.

“Building solar generation to be paid for by ratepayers, whether it is utility built or customer built with utility (ratepayer paid) incentives, is a supply side resource, not (energy efficiency),” McKissick wrote.

Failing to approve the incentive could leave the installers in a difficult position, Warren said, pointing to a difficult-to-grasp rate scheme that could make it hard for costumers to understand the impact of solar panels.

“It remains just a hash of factors that makes it really difficult for them to market their product,” Warren said.

The solar-plus-storage pilot program would be available to people installing solar on their homes for the first time, with half of the participants maintaining total control over their storage and half giving that control to Duke Energy. The incentive for the solar panels would be the same as that proposed in the Smart $aver program, with Duke developing an additional incentive for the battery.

Additionally, the commission directed that the pilot program be open for three years, with both Duke Energy Carolinas and Duke Energy Progress capping the total energy accepted into the program at 10,000 kilowatts per utility annually, or roughly enough to cover about 1,000 customers in each service area.

“While we thought the Smart $aver incentive was a good proposal, we are looking forward to filing the Solar+Storage Pilot that the NCUC requested as part of their order. We will work with the settling parties, including rooftop solar installers, on this upcoming filing,” Wheeless wrote in an email.

This story was produced with financial support from 1Earth Fund, in partnership with Journalism Funding Partners, as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.