Net Energy Metering

The growth of distributed generation (DG), also known as local generation, has raised new discussion about the value of the grid and who pays to use it. Although the current number of net energy metering (NEM) customers on the AEP system is relatively modest, it is increasing.

NEM customers do not go “off the grid.” In fact, NEM customers choose to stay connected and rely on the grid to support all of their on-demand electricity needs. They use the grid to import energy at times when their system is not meeting their instantaneous needs, and use the grid differently than non-NEM customers.

AEP has been active in net energy metering policy debates and regulatory proceedings to address issues and advocate for fair, equitable and sustainable solutions.

Public policies and rate structures established to encourage early development of local generation have led to unintended consequences that must be addressed. NEM tariffs were established to incent local generation, which has, indeed, occurred. Some NEM tariffs credit DG customers at the full retail rate, which includes both the costs of the energy itself, as well as the fixed costs associated with grid infrastructure (such as the distribution poles, wires and meter necessary to provide service to them). In essence, NEM pays the customer as if they provided all the products and services of a utility, including balancing the system, cyber security and administrative costs such as customer contact centers, when the customer truly only provides energy intermittently to the system.

When NEM customers use the grid under current pricing structures, they aren’t fully paying for the services they receive. Instead, these costs are shifted to other customers. Those who end up paying are customers who do not have local generation, including low-income and other vulnerable customers. This is unfair and ultimately, unsustainable.

This issue is being actively addressed in many policy and regulatory proceedings across the nation. Stakeholders are attempting to find solutions that continue to support customer desires to generate their own electricity with renewable resources at competitive rates, while also correcting the cross-subsidy that causes all other customers to pay more for the benefit of local generation customers. AEP has been active in these policy debates and regulatory proceedings to address these issues and advocate for fair, equitable and sustainable solutions.