Sierra Club Exposes Flaws in Louisiana Net Metering Report

By Casey Roberts & Joshua Smith, Staff Attorneys, Sierra Club Environmental Law Program

Policies to promote rooftop solar are under attack across the country. Earlier this year, we wrote about utilities' efforts to prop up their revenues by adopting higher fixed customer fees, which discourage the installation of rooftop solar or energy efficiency measures. Now, a draft report prepared by the Acadian Consulting Group for the Louisiana Public Service Commission concludes that the costs of state’s net-metering program vastly outweigh the benefits.  The Sierra Club and other solar advocates have called this study out for its hidden and unsubstantiated assumptions and data inputs, its misleading assertion that rooftop solar customers don’t pay their fair share of costs, and its baseless decision to include legislative tax incentives for solar as a utility cost of the net metering program.

Net metering is a billing arrangement that grants customers with rooftop solar panels an energy credit for any excess electricity that they generate on site and export back onto the grid.[1] Utilities are often hostile towards net metering because the customers who install rooftop solar panels on their homes essentially become competitors of the utility. Despite the numerous and widely-recognized benefits of net metering—including avoided energy generation costs, avoided environmental impacts associated with burning fossil fuels, and increased grid stability during periods of peak energy demand—utilities don’t like having to pay owners of rooftop solar panels the same price for electricity that they charge their other customers.

Seriously Flawed Study

The last year has seen a series of Commission-sponsored studies showing that net metering benefits all utility consumers.[2] The LPSC study is the first commissioned-sponsored study to reach the opposite conclusion. In doing so, , the study relies on numerous unsupported or questionable assumptions, inexplicably includes legislative tax incentives as a cost to utilities, and consistently overestimates the costs of net metering to utilities, while underestimating the benefits to consumers and the public. Moreover, despite spending nearly ten months preparing the 200 page plus report, Acadian’s sprawling and disjointed study is riddled with analytical errors, factual inaccuracies, and omitted data critical to a full and meaningful evaluation of the study.

Rather than filing the draft report in an ongoing net metering rulemaking docket, the Commission quietly opened a separate docket and then provided only 25 days for interested parties to intervene file comments on the study. Nevertheless, Sierra Club is taking steps to fight the Commission or the utilities’ use of the draft study as a basis for amending or eliminating the state’s popular net-metering program. In particular, Sierra Club urged the Commission to:

• Reject the study’s inclusion of legislative tax incentives as a cost of the LPSC net metering program. No other net-metering cost-benefit analysis in the Nation has included state-authorized tax incentives as a cost. Public utility commissions have no authority over tax incentives and legislative policy choices, and such incentives are a cost to the state treasury not utilities or ratepayers. When these tax incentives are excluded from the utility’s cost calculation, as they should be, the study demonstrates actually that net metering provides a clear economic benefit to utilities and ratepayers.  
• Require the Acadian Consulting Group to show its work. The authors failed to disclose information that is critical to meaningfully evaluating the reliability and accuracy of the study’s cost benefit analysis.  
• Reject the study’s erroneous assumption that Louisiana utilities bear significant costs associated with allowing rooftop solar customers to “interconnect” with the grid. In fact, each of the investor-owned utilities in Louisiana requires net-metering customers to pay all costs associated with interconnection. Properly account for the numerous benefits of rooftop solar generation, including avoided energy generation and fuel costs, avoided operational and maintenance costs, avoided transmission and distribution costs, and several other widely recognized benefits including the avoidance of adverse environmental and public health impacts. 

Biased Authors = Biased Results

Given Acadian Consulting Group’s close ties with utility and industry interests, the study’s conclusions are not particularly surprising. The primary author of the study, David Dismukes, has a long history of lobbying againstrenewable energy tax credits as a government effort to choose winners and losers in the energy industry, while at the same time lobbying extensively for continued subsidies for the fossil fuel industry.[3]

The Sierra Club will continue to resist efforts to distort the benefits and costs of rooftop solar generation. The LPSC study, in particular, has the potential to derail the significant progress that distributed solar generation has made in Louisiana and the entire southeast. As the report itself recognizes, the installation of distributed generation in Louisiana has grown over 180 percent on an annual average basis over the past five years. Other state commissions in the region will be keeping a close eye on the outcome of this proceeding, and if the LPSC adopts the report as written, we can be sure that utilities and industry in other states will point to Louisiana as a template for rolling back popular and beneficial net-metering programs.