Double Dipping
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Double-dipping

If the NEM fee is approved by the PSC,RMP will be collecting DOUBLE for the supposed fixed costs being cost-shifted. We will show why this is true, but first we need to explain how the net-metering system works.

How Net-metering Works – An Overview

A regular house, one without solar, gets all of its electricity from RMP. The electricity comes in fro the utility and flows into the house. Like this:
There’s a lot of utility infrastructure involved in this electricity delivery: a fossil fuel generator, step-up and step-down transformers, switches, substations, monitoring equipment, high-tension lines, local poles and underground feeds. RMP ‘amortizes’ this equipment over a number of years, allocating a portion to each year, and calls this "fixed costs". They also add the costs for sending out a monthly bill to the owner of the house or apartment to these "fixed costs".

A house with solar, and which net-meters, is hooked up just like their neighbor. The only difference is that the meter on this house records both electricity that comes in and electricity that goes out. For the average solar house, the electricity flows into the house:
This means that it is using all of the same RMP infrastructure that a ‘regular’ house uses.

Occasionally, though, the solar panels on the house will generate more electricity than the house needs. In this case, that excess solar electricity is fed back out through the meter.

RMP would like you to believe that this flow involves the entire infrastructure, overheating the high-tension lines and rattling the transformers (just kidding about the overheating and rattling but RMP does claim that there is "wear and tear" though they have not substantiated that claim—in fact, they’ve admitted that they have not measured any wear and tear):
But that’s not what actually happens. When a solar house generates excess, that electricity always goes out to the closest common junction with a neighbor and then directly into a neighbor’s house, running the neighbor’s meter forward:
Electricity, like water, always flows ‘downstream'; it goes to the closest ‘thing’ that wants electricity, and that is almost always a neighboring house.

The owner of the solar house receives credit for the excess sent off to the neighbor. The solar house gets a credit for each kilowatt-hour of excess. That credit is redeemed later in the day (when the sun is getting lower in the sky). At that time, the flow looks like this:
Once those credits have been used up, the solar house goes back to paying regular per-kWh prices.

Back to Double-dipping

Let’s now look at how RMP would be getting double the ‘recovery’ if an NEM fee is charged.

Looking at It from Just the Net-metered Perspective

During the month, House A (with solar) and its neighbor, House B (no solar), use electricity as follows. Note: only the excess electricity is considered in this example because that is the only factor taken into consideration by RMP when justifying the NEM fee.

Credit Recorded Consumption Recorded Actual Utility Usage
Sun comes up
House A produces X kWhs of excess X 0 0
House B consumes X kWhs of A’s excess 0 X 0
Sun goes down
House A consumes X kWhs of credit 0 X X
Total X 2X X

Here are two scenarios for the end of the month, when billing charges are calculated. The first shows how things balance when there is no NEM fee, while the second shows how things do not balance when there is an NEM fee.

Scenario A – No NEM Fee

Generation Recovery
House A billed for X(consumed) - X(credit) = 0 0
House B billed for X(consumed) = X X
Total Billed = X X
Actual Utility Usage = X X
Does It Balance? = YES YES

Scenario B – Monthly NEM Fee

Generation Recovery
House A billed for X(consumed) - X(credit) + NEM Fee = 0 X
House B billed for X(consumed) = X X
Total Billed = X 2X
Actual Utility Usage = X X
Does It Balance? = YES NO

The "Does It Balance" row compares the "Total Billed" to the "Actual Utility Usage".

As you can see from Scenario B, when an NEM fee is charged, the fixed costs are doubly recovered while in Scenario A, with no NEM fee, the proper fixed costs are recovered.

Looking at It from Billing Perspective

Now let’s compare two different neighborhoods, each with two houses. Both neighborhoods have one ‘regular’ house. The other house in one neighborhood employs efficiency and conservation while the house in the other neighborhood has a renewable energy system employing net-metering

Conserved/Efficiency Netted
------------------------------- -------------------------------
House A House B Total House C House D Total
--------- --------- --------- --------- --------- ---------
RMP Supplied Power
------------------
1. Drawn Power 600 + 800 = 1400 800 + 600 = 1400
2. Billed 54.89 + 87.39 = 142.28 87.39 + 54.89 = 142.28


Meter Readings
------------------
3. Gross 600 + 800 = 1400 800 + 800 = 1600
4. Net 0 + 0 = 0 200 + 0 = 200
5. Total 600 + 800 = 1400 600 + 800 = 1400


Cost Recovery
------------------
6. Power drawn from RMP 1400 1400
7. Power billed for 1400 1400
8. Were fixed costs recovered? YES YES

What these calculations demonstrate is that using renewable energy has exactly the same effect as conserving and improving efficiency. Here’s why...

The ‘conserver’ in House A saves 200 kWh by aggressively optimizing the use of electricity. Instead of the old 800 kWh, House A now uses only 600 kWh while House B still uses 800 kWh. The bottom line is that the neighborhood with the ‘conserver’ is drawing a total of 1,400 kWh of power from the utility, starting with the fossil fuel generator, running through various switches, transformers, and high-tension lines. Since all of the utility drawn power, all 1,400 kWh, were billed to the neighborhood the entire fixed cost of service was recovered by the utility.

The ‘netter’ in House C, on the other hand, uses more electricity in his house than the 800 kWh that the meter records (as ‘gross'). The meter never sees that electricity since it is consumed in the house before it gets out to the meter. Occasionally, when the sun is high in the sky, the solar panels on the house can produce more electricity than the House C can use. We call this ‘excess’ and it flows out of House C, out of the meter, gets recorded as ‘Net', and flows straight to the neighbor’s House D. At House D, that excess is recorded as regular ‘gross’ electricity.

For House C and D, total of 1,400 kWhs are drawn from the utility and, not surprisingly, the neighborhood was billed for 1,400 kWh. This means, just like for the conserving neighborhood, the fixed cost of service was fully recovered by RMP.

Conclusion

If RMP is allowed to charge an NEM fee they will be recovering twice the actual fixed costs that they incur.


Updated on Jul 4, 2014 by Mike Rossetti (Version 23)