Net Energy Billing: Isn’t it time for reform?

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In recent years, Maine has embraced renewable energy initiatives to meet its climate and clean energy goals. As part of this transition, the state adopted Net Energy Billing (NEB), a policy designed to promote the use of solar power. However, the upcoming rate increase set to start on July 1 has renewed debates about the impact of these subsidies on homeowners and businesses. To understand the controversy, it’s important to understand the difference between net energy billing and gross billing, and explore how Maine’s current NEB policy is affecting ratepayers.

Net Energy Billing vs. Gross Billing

Net Energy Billing refers to the system where customers are provided with kilowatt-hour or dollar credits on electricity bills for the energy they produce. This allows them to offset their usage or total bill charges. For customers in the tariff rate program, bill credits are calculated based on the tariff rate multiplied by their share of the facility output during the applicable period. These credits apply to their total bill amount and cannot result in a negative bill.

Gross billing, on the other hand, refers to a system where customers pay for the total amount of energy they consume from the grid, regardless of how much energy they generate themselves. They might receive a separate payment for the energy they feed back into the grid, but consumption and production are billed separately.

Impact of Maine’s Net Energy Billing

Maine’s net energy billing (NEB) policy, which is intended to boost renewable energy production, is significantly harming ratepayers. This policy, designed to help transition the state to renewable forms of energy, has led to substantial rate increases that are placing a heavy financial burden on residents and businesses alike.

Starting July 1, 2024, Central Maine Power (CMP) customers will face a 12% monthly rate increase, translating to approximately $15 more per month for the average residential customer. Versant Power customers will experience a 6% increase, or about $7.40 more per month. Although the recent storms are part of the increase in rate, about one-third of the increase is a direct result of the NEB subsidies designed to support solar. 

However, these policies are unfair to ratepayers. According to Maine’s Public Advocate, Bill Harwood, electricity ratepayers in Maine will collectively pay $220 million per year in stranded costs to make up for the savings solar producers enjoy via NEB.

As the Maine Public Utilities Commission (PUC) Chairman Phil Bartlett put it,

“And these are the community solar farms that you may be hearing about and seeing going up, all across the state. Those are effectively subsidized through your electricity rates. So as those projects are coming online, we’re seeing stranded costs increase to cover the subsidy for those projects.” 

Additionally, businesses in particular are hit hard by these rate hikes. They are experiencing dramatic cost increases due to the NEB policy. For example, one business’s costs to support renewable power generation soared from just under $200 per year to $3,432 per year. Another business saw an increase from $3,626 per year to $4,341 per year. These significant increases strain businesses’ budgets, potentially leading to higher prices for consumers, reduced business investment and even job losses in our state.

Also, the rapid growth in solar energy production, with a 700% increase since 2018, suggests that the solar industry is sufficiently established to thrive without such heavy subsidies. This begs numerous questions: Is it necessary for ratepayers to continue to shoulder the financial burden of solar incentives? Are the subsidies, which are causing harm to ratepayers, not ripe for reform? 

The state’s Republicans have argued that these subsidies are no longer necessary and are excessively burdensome.They proposed LD 1531 in the last Legislature to ensure a 4-year pause on solar energy subsidies and to conduct a study into the economic impacts of the NEB policy. This bill was, however, killed by the legislative majority. 

Furthermore, the financial impact of the NEB policy is not limited to now but the future as well. As stated above, Maine’s Office of the Public Advocate in 2023 estimated that solar subsidies will cost ratepayers $220 million for the next 20 years. These substantial costs are borne by all electric ratepayers. It is therefore imperative for lawmakers and the PUC to find a better solution to the current rate increases. 

Conclusion

Maine’s NEB is causing significant harm to ratepayers. The substantial rate increases and excessive financial burdens placed on businesses and individuals highlight the need to reassess the policy.

Afua Kwarteng is a graduate student at the University of Maine pursuing a dual MBA and Global Policy degree. She graduated from the University of Ghana with a BA in Political Science and Swahili. She is passionate about state and international policy and is serving as Maine Policy Institute’s 2024 communications intern.