The question of how to charge and compensate customers who have their own solar generation continues in many states. In a presentation to the Advanced Energy Economy (AEE), Jim Lazar outlined RAP’s guiding principles for rate design and applied them to the question of net metering. First, customers connecting to the grid should only pay for the actual cost of connecting to the grid. Second, they should pay for grid services in proportion to the amount they use and the time of use. Third, customers supplying power to the grid should be compensated fairly for the value of the power they supply.

A kilowatt-hour of rooftop solar power is a clean, high-quality product and therefore worth a premium price—much like, for example, a home-grown organic tomato. But unlike solar customers, who in many jurisdictions must pay high fixed monthly charges, growers who run out of their own tomatoes and have to “connect to the tomato grid” (the grocery store) to buy more, do not have to pay a penalty. Though some have advocated fixed charges to address concerns about lost revenue, a balanced view of net metering shows that utilities are compensated for this revenue because they use the clean, flexible power that customers sell them to avoid various long-run costs, including emission cost, fuel cost, and supply risks.