Net Metering

Summary

In October 2008, Michigan enacted legislation (P.A. 295) requiring the Michigan Public Service Commission (PSC) to establish a statewide net metering program for renewable-energy systems within 180 days. On May 26, 2009 the PSC issued an order formally adopting revised net metering and interconnection rules to implement P.A. 295 of 2008. The revised rules take the place of a prior net metering "consensus agreement" between the PSC and a number of Michigan utilities.

Eligibility and Availability
Michigan's net metering law applies only to rate-regulated utilities and alternative electric suppliers. The designation "rate-regulated utility" presently includes investor-owned utilities and rural electric distribution cooperatives that have not opted for member regulation. As of April 2011, only Cherryland, Alger Delta, and Tri County electric cooperatives have opted for member regulation. Municipal utility rates are not regulated by the PSC. Annual net metering reports from individual utilities and alternative electricity suppliers are contained in Case U-15787, available through the PSC E-Docket System. 

The legislation authorizes net metering for renewable energy systems using solar, wind, biomass, geothermal, anaerobic digester gas (i.e., animal waste), landfill gas, municipal solid waste, and moving water. The definition of biomass is very broad and includes agricultural crops and crop wastes; energy crops; animal wastes; paper and pulp products; and a variety wood waste materials. Moving water technologies include those using waves, tides, and currents as well as traditional hydropower using water released through a dam. Utilities must provide net metering customers with electric service at nondiscriminatory rates that are identical to those that would be charged if the customer were not participating in net metering.

Net Excess Generation

For systems of 20 kW or less, net excess generation (NEG) during a billing period may be carried forward to the next billing period at the retail rate. Modified net metering (facilities up to 150 kW) allows NEG carry over at the power supply component of the retail rate (i.e., presumably a rate resembling avoided cost) or the monthly average real-time locational marginal price for energy at the commercial pricing node within the electric provider’s distribution service territory each billing period. Customers on time-of-use rates may carry forward NEG at the applicable retail rate for each time-of-use pricing period within a billing period. The legislation does not define an annual true-up or account reconciliation period, meaning that NEG can be carried forward indefinitely. Credits associated with modified net metering may not be applied against distribution charges. Systems larger than 150 kW must pay standby charges that effectively charge the customer the retail distribution rate for all energy produced and used on-site. This practice does not meet the definition of net metering as it is generally understood, thus this summary considers only systems up to 150 kW as eligible for net metering.

Customer generators own the renewable energy credits (RECs) associated with electricity generated under the program. Net metering application fees may not exceed $25 and the combined total of net metering application and interconnection review fees may not exceed $100. Utilities serving more than 1 million customers (i.e., Consumers Energy & DTE Electric) are required, if necessary, to supply true net metering customers with a net metering compatible meter or meters at no cost to the customer. Utilities with fewer than 1 million customers must supply the appropriate meter or meters to the customer at cost, not to exceed the incremental cost above that for meters provided by the utility to similarly situated non-net metering customers. Metering configurations and cost allocations for modified net metering customers are slightly different (see R 460.648 for details).

Interconnection

Finally, P.A. 295 also required the development of statewide uniform interconnection standards for eligible electric generators. Interconnection standards for systems up to 2 megawatts (MW) were adopted by the PSC as part of the same administrative proceeding that addressed net metering.In December 2012, the PSC finalized Category 1 and Category 2 (projects of less than 150 kW or less) interconnection and net metering forms, agreements, and procedures. The forms and procedures are available here.  Categories 3-5 will be addressed in a future order.

Meter Aggregation Provisions
Net metering billing practices are split into two distinct categories. All qualifying customer generators up to 20 kilowatts (kW) are eligible for "true" net metering, while most systems between 20 kW and 150 kW are eligible for "modified" net metering. Methane digesters up to 550 kW are eligible for net metering -- either "true" net metering or "modified" net metering depending on their size. True net metering is available until the aggregate net metered capacity reaches 0.5% of a utility's peak load. Modified net metering is available until the aggregate net-metered capacity reaches an additional 0.25% of a utility's peak load for systems of 150 kW or less and 0.25% for systems larger than 150 kW. In general, the capacity of an individual system is limited to that which will meet their own needs. The rules describe several options a customer can use to arrive at this value.