Net Metering Basics

Net metering is an accounting mechanism whereby retail electric utility customers who generate a portion or all of their own retail electricity needs are billed for generation (or energy) by their electric utility for only their net energy consumption during each billing period.

Net energy consumption during a billing period is defined as the amount of energy delivered by the Utility and used by the customer, minus the amount of energy, if any, generated by the retail customer and delivered to the utility at the location of the eligible unit.

In Michigan, a basic framework for regulated-utility net metering programs was developed through a consensus reached among Michigan utility companies and the Michigan Public Service Commission Staff in 2004. That consensus agreement was subsequently approved, with modification, by the Commission.¹  These are the basic provisions of the Michigan program:

Please note, these are the general outlines of the statewide net metering program. There are some variations in program implementation among Michigan electric utilities. Please be sure to consult the specific Web page for a particular utility in order to understand their program in detail.

• Total Program Size for Each Utility - Each Utility will offer a net metering program with a maximum program limit of either 0.1% (one tenth of one percent) of the Utility's previous year's peak demand (measured in kW), or 100 kW, whichever is greater.
• Duration of the Program -- The net metering program shall be open for customer enrollments for a period of at least 5 years, and customers who enroll shall be eligible to continue their participation for a period of at least 10 years. Unless the program is changed by the Commission in the meantime, this gives customers until summer 2010 to complete their enrollment in the program.
  A participating customer may terminate their participation in a Utility's net metering program at any time for any reason.

• Qualifying Customers and Qualifying Technologies - Net metering will be allowed for any full-requirements customers of Michigan electric utility companies regulated by the MPSC, on a first-come first served basis, who install qualifying renewable energy generators that are intended to serve their own energy needs.

  The maximum size generator that can be installed for net metering is less than 30 kW and systems must be sized not to exceed what is needed to serve the customer's self-service needs.²  Non-dispatchable generation systems (e.g., wind and solar) shall be sized not to exceed the customer's annual energy needs, measured in kilowatt-hours (kWh). Dispatchable systems shall be sized not to exceed the customer's capacity needs, measured in kilowatts (kW).

  Net metering is open to all renewable energy source electric generating technologies. They are defined by Michigan Public Act 141 of 2000, Section 10g, to include "solar, wind, geothermal, biomass, including waste-to-energy and landfill gas, or hydroelectric." Biomass fueled systems will be allowed to blend up to 25% fossil-fuel, as needed to ensure safe, environmentally sound system operation.

• Applications, Application Fees, and Interconnection Standards - Application fees, procedures, and requirements for interconnecting net metering customer generators will be those contained in the Commission's Electric Interconnection Standards Rules (R 460.481-460.489) and the Utility's associated Commission-approved Generator Interconnection Requirements. Some utilities may require additional metering equipment for net metering customers. Program details, including links to obtain guidelines, procedures, and application forms for each utility are included in the descriptions available on the MREP Net Metering Web pages.

  MPSC Interconnection Standards Rules are available on the Internet at http://www.state.mi.us/orr/emi/admincode.asp?AdminCode=Single&Admin_Num=46000481&Dpt=&RngHigh=48702110.

  The Commission approved Interconnection Procedures for Michigan utilities in August 2004 Orders in Cases Nos. U-14085, U-14088, and U-14091.

  U-14085 is for Northern States Power Company-Wisconsin, doing business as (d/b/a) Xcel Energy. See http://efile.mpsc.cis.state.mi.us/cgi-bin/efile/viewcase.pl?casenum=14085.

  U-14088 covers Alpena Power Company, Consumers Energy Company, The Detroit Edison Company, Edison Sault Electric Company, Upper Peninsula Power Company, Wisconsin Electric Power Company, d/b/a We Energies, Wisconsin Public Service Corporation and the Michigan Electric Cooperative Association. See http://efile.mpsc.cis.state.mi.us/cgi-bin/efile/viewcase.pl?casenum=14088.

  U-14091 is for Indiana Michigan Power Company, d/b/a American Electric Power. See http://efile.mpsc.cis.state.mi.us/cgi-bin/efile/viewcase.pl?casenum=14091.

• Credits for Net Excess Generation - In a typical net metering program, there are three different types of energy to consider: (1) energy delivered from the utility to the customer; (2) energy produced by the customer's renewable energy system and utilized on-site; and (3) energy produced by the customer's renewable energy system and delivered to the utility. In Michigan's program, net metered customers will be billed for the first type of energy just as any other similarly situated customer of their utility company. There will be no customer charges for the second type of energy, and no credits from the utility. For the third type of energy, customers will receive a credit equal to the retail power supply charges that the utility charges similarly situated customers.

  If, at the end of a billing period, the customer has produced and delivered to the utility any energy in excess of what the utility has delivered to the customer and the customer has used, that amount is termed net excess generation (NEG). Generally, Michigan utility companies will credit customers for NEG for an amount per kilowatt hour equal to the utility's retail power supply charges, and that dollar amount will be carried forward as a credit on the customer's next monthly bill. At the end of each year, however, the value of any remaining NEG credits will be claimed by the utility company and used to offset program costs, and the customer's NEG account will be reset to zero.

• Renewable Energy Certificates (RECs) - Customers will be eligible to receive renewable energy certificates for the energy they produce using their eligible self-service generators. Although the original Consensus Agreement included provisions for utilities to own RECs associated with net metered systems, the Commission deleted that portion of the Consensus Agreement when it approved the net metering program. For more information about RECs, including a directory of Certificate Marketers, see the U.S. Department of Energy GreenPower Network Web site, at http://www.eere.energy.gov/greenpower/markets/certificates.shtml.

• Utility Reporting Requirements - Each utility will report to MPSC Staff annually (each September) on: (a) the total number of participating customers in its net metering program; (b) 5-digit zip code for each participating customer and starting month and year for each participating customer; (c) technology type and size in kW for each participating customer; (d) total NEG by technology type and cumulative total for each Utility's program (at the end of each 12-billingmonth cycle); and (e) any additional information the Utility believes is necessary in order to properly monitor and evaluate its net metering program. Information that would identify individual customers (such as name, address, account number, etc.) will remain confidential unless the customer gives written permission for such information to be shared.

• Program Monitoring and Evaluation - The net metering program will be monitored and evaluated through the Michigan Renewable Energy Program process. Annual reports will be provided to the Commission and posted on the MREP Web site, with the first report expected in late fall, 2006.

² Larger renewable energy systems can be installed and interconnected with the utility grid in Michigan, but they will not be eligible for net metering treatment. MREP is developing a Web page to explain Interconnection and Rate Options for Non-Net-Metered Renewable Electric Generators in Michigan.