Is Net Metering Fair to the other Customers

Do you want to understand if is Net Metering fair or unfair to the other customers? What kind of approach to net metering must we have? This article a is small, but effective guide to help you.

What are the benefits of Net Metering to me? First, net metering allows you to get full retail value for most, it not all, of the electricity you produce. It does this by permitting you to put any excess electricity you generate back into the electric grid and retrieve it later, free of charge, for your use.

Your excess electricity now offsets electricity you would otherwise haveto buy at full retail prices. Getting this high retail value for your excess electricity makes owning your own generating system more cost-effective.

Secondly, because net metering permits you to effectively “store” your excess electricity on the electric grid, you can also now size your system larger and offset more of your annual electricity needs.

Without net metering to give value to this “excess” electricity, you might otherwise make your generating system smaller to minimize the amount of time your system produces electricity in excess of your immediate needs.

Unfortunately, a smaller system also means that you would produce less electricity when you did need it.

Without net metering, your only alternative would be to purchase some additional device to store this excess power for your later use, such as adding batteries to you system.

While having your own electricity storage would mean that you could supply your own power even if there were a “black-out” on the electrical grid, such storage is expensive.

Concerns for Utilities

• Is a net metered generator a competitor who sells higher priced electricity than could be found elsewhere?

• Will other customers have to pay for these higher rates and is that fair?

• If net metering is adopted by a significant percentage of customers in the future, how will the utility continue to cover fixed costs as revenues decline?

• Is the utility providing a storage service with the electric grid, for which the costs aren’t being compensated?

Cross Subsidization

Utility Concern:

Net metered customers benefit by receiving credits for each kWh produced. However, these credits don’t take into account the fixed costs bundled into the typical customer’s rate.

Thus, net metered customers are subsidized because the value of the kWs fed into the grid is less than the bundled rate.

The Reality:

From a marginal cost perspective, a net metered customer may in fact be providing power to the local grid that is much cheaper than peak electricity costs to generate and deliver. There may well be circumstances where customers are subsidizing the rest of the system through net metering.

Cross Subsidies

Typical Cross Subsidies in Rate Making:

1. Customers who are bad credit risks or are late are not charged higher rates
2. Rural customers cost more to serve than customers in town
3. Residential customers tend to cost the utility more in terms of fixed costs (poles, wires, transformers) and line loss as compared to commercial and industrial customers, especially in rural areas.
4. Residential customers don’t need as high a reliability levels as demanded by commercial and most industrial customers, yet often pay for this service.

Do you see any mistakes with these reviews? Would you like to suggest other point of view about if is Net Metering fair or unfair to the other customers? Please leave a comment below.

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