August 8, 2024

By Bill Andrews and Tom Hackney

BC Hydro is asking the BC Utilities Commission to approve a major overhaul of Hydro’s Net Metering program. This is one component of BC Hydro’s large rate design application now in front of the BCUC. BCSEA has applied to intervene in the proceeding.

In this article we first provide a brief description of the existing Net Metering program. Then we address Hydro’s proposals to change “net metering” to “net billing,” and to introduce a “Community Generation Service Rate.” Lastly, we touch on the timing of the proposals, BC Hydro’s new rebates for solar generation and batteries, and what’s next in the BCUC’s proceeding.

BC Hydro’s Net Metering program has about 9,000 participants. The number is growing rapidly, although it remains a small fraction of BC Hydro’s almost 2 million accounts. (FortisBC-electric also has a net metering program, but in this article we’ll use the term Net Metering to refer to BC Hydro’s program.) Under the Net Metering program, customers can operate their own small, on-site generation facility to generate electricity for their own use, to be supplemented when needed by power from BC Hydro. When a Net Metering customer produces more electricity than it consumes, the excess is provided to BC Hydro. The excess provided to BC Hydro within a billing period is tracked in kilo-Watt-hours and applied as a credit to reduce the number of kWhs for which the customer is billed in the next billing period. These credits can be accumulated from billing period to billing period. Most Net Metering participants generate less power than they use over the course of a year, so they don’t have any credits left after one year. However, if a Net Metering customer has credits remaining after one year (by having generated more power than it used), then BC Hydro pays the customer on a $/kWh basis to extinguish the credits. The price BC Hydro pays is based on the average price of electricity in the international wholesale market, on the theory that BC Hydro would export the power it gets from Net Metering customers. The BCUC has approved all the key aspects of the Net Metering program after sometimes-contentious proceedings in the past.

Several central features of the Net Metering program are up for change.

First, the size of eligible self-generation facilities would increase as the 100 kW nameplate capacity limit would change to a 100 kW limit on net injection to the BC Hydro system, and this would be for each of the three phases where available. In other words, a participant’s generation equipment could be sized to both meet the customer’s own load and deliver up to 300 kW to BC Hydro.

Second, main purpose of the Net Metering program would change to enabling customers sell power to BC Hydro (“self-generation service”), rather than merely enabling customers to reduce the amount of power they buy from BC Hydro (“net metering”). No longer would a Net Metering participant get a credit in kWhs against its next bill for power delivered to BC Hydro in the previous billing period. Rather, the participant’s bill would show a payment by BC Hydro for power delivered to BC Hydro in the previous billing period. This change is referred to as going from “net metering” to “net billing,” though this terminology isn’t particularly self-explanatory. The point is that participants would be paid on a $/kWh basis for power they deliver to BC Hydro. This $/kWh price has not yet been determined, and BC Hydro will consult with stakeholders before filing a proposal in December 2024. However, the price per kWh will be the same for all participants, in contrast to status quo in which the dollar value of a kWh credit is the same as retail energy rate the customer pays to BC Hydro (i.e., Step 1 or Step 2 of the RIB Rate for Residential customers, or the applicable energy rate for General Service customers). Significantly, the price per kWh for power delivered to BC Hydro is expected to be less than the dollar value of a net metering credit.

Not surprisingly, the proposal to go from “net metering” to “net billing” has already drawn the ire of some existing Net Metering participants. (See the “D” series of letters of comment on the BCUC’s website for the proceeding.) They protest – correctly – that if the price for power they provide to BC Hydro is less than their retail rate then they will be worse off financially under “self-generation service” than under “net metering.” This, they emphasize, would extend the pay-back period for their investment in generation facilities.

On the other hand, advocates of greater amounts of “small distributed generation,” such as BCSEA and others, want the price that BC Hydro pays for power deliveries of electricity from customers to reflect the financial value of that power to BC Hydro. They see small distributed generation as a viable, cost-effective source of electricity supply to BC Hydro that needs value-based pricing to support widespread adoption in BC. For its part, BC Hydro reaches the same conclusion (value-based pricing) while also emphasizing that the kWh credit system under Net Metering overvalues the electricity the utility receives from Net Metering customers. Under the kWh credit system, in other words, Hydro’s cost of serving Net Metering customers is higher than the amount of revenue Hydro gets from Net Metering customers. This argument is that a kWh credit based on the participant’s retail rate reduces BC Hydro’s revenue by an amount greater than the utility’s cost of peak power to serve the participant during the winter peak periods and the utility’s cost to build and maintain the distribution system to deliver power to the participant. . While Net Metering may reduce BC Hydro’s distribution costs somewhat, BC Hydro says this does not fully make up for the revenue lost due to the kWh credit system.

Third, BC Hydro proposes to establish a new “Community General Service Rate.” This comes in response to calls for “virtual net metering,” although Hydro’s proposal is specific to a “Shared Generating Facility” – operated by a community entity not an IPP — and “Benefitting Customers” – who reside in the same region as the Shared Generating Facility. The maximum net injection limit for an eligible generating facility would increase with the number of Benefitting Customers, up to a maximum 1 MegaWatt (i.e., 1000 Kilo-Watts, being ten times as big as the proposed 100 kW net injection limit for the proposed Self-Generation Service Rate.)

BC Hydro says the intent is to encourage “community-based generation that customers can use to offset their energy charges and not to provide an alternative way for independent power producers to sell electricity to BC Hydro.” The Shared Generating Facility could have significant on-site load, such as “where the Community Generator is a strata corporation with extensive common property,” as BC Hydro puts it. Or, the Shared Generating Facility could have minimal on-site load, “such as a solar facility in a field.”

Under the proposal, BC Hydro would pay the Community Generator for electricity delivered from the Shared Generating Facility to BC Hydro in the previous billing period. And, this payment would be shared among the Benefitting Customers, presumably according to the Benefitting Customers’ respective contributions to the cost of the Shared Generating Facility.

Administering the customer side of the proposed rate — keeping track of Benefitting Customers, making payments to Benefitting Customers, etc. – would be a significant responsibility. Presumably, by default this administrative function would be carried out by the Community Generator. However, BC Hydro invites input on whether Hydro itself should offer this administration function as a paid service.

In terms of timing, BC Hydro proposes that the Self-Generation Service Rate and the Community Generation Service Rate would come into effect on January 1, 2026 and that the existing Net Metering rate would be closed to new participants as of January 1, 2026. BC Hydro also proposes a transition period – yet to be determined – after which the existing Net Metering rate would be discontinued and presumably participants would migrate to the Self-Generation Service Rate.

Meanwhile, BC Hydro has recently introduced a rebate program for residential and commercial customers who install new solar generation and/or batteries. Hydro is not seeking BCUC approval of these rebates in the current rate design proceeding. However, the utility says it will ask the BCUC to approve the cost of these rebates in a future application for Demand-Side Management expenditures. Public utilities’ DSM expenditures are subject to detailed benefit/cost requirements that until now would not have been met by rebates for customers to install small solar generation facilities to offset their load. Perhaps, however, the economics of distributed small solar generation and batteries have improved sufficiently to make these rebates cost-effective from the perspective of the utility and its other customers.

Politically, BC Hydro’s new rebates for small solar generation and batteries may be intended to offset the reduced financial benefit of participating in the Self-Generation Service Rate ($/kWh) compared to the Net Metering Rate (kWh credits). However, the rebates are not available for existing participants in Net Metering who have already made their investments in self-generation facilities. From BCSEA’s perspective, an open question is whether the existing Net Metering program (with the kWh credit system) should remain in place for existing, or even new, participants who want to reduce their load from BC Hydro as distinct from wanting to sell power to BC Hydro under the Self-Generation Service Rate.

The net metering component of the BCUC’s proceeding will have interventions in late August, information requests in September, BC Hydro’s responses to information requests in October, and BC Hydro’s proposals for the price for power delivered to BC Hydro in December. Further process will then be determined.