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Fast and furious rearguard action

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Despite the steady stream of state and federal legislative support for net metering, legal challenges are threatening to undermine the whole idea. In states where legislation is trying to give net metering for wind power a fair chance, as in Iowa, utility opposition is fast and furious.

Iowa utility MidAmerican Energy has appealed the net metering rule of the Iowa Utilities Board to the Federal Energy Regulatory Commission (FERC) and has challenged the rule in Iowa state court, claiming it violates either the Public Utility Regulatory Policy Act (PURPA) or the Federal Power Act.

"The utility's position is that as soon as a kilowatt hour is delivered to the utility, it is a purchase of energy," explains Tom Starrs, an attorney representing renewables advocates at FERC. "And if so, the utility says the price is constrained by PURPA or the Federal Power Act. If it's PURPA then the price is the avoided cost, according to FERC. If it's the Federal Power Act, then it is a wholesale transaction not subject to state jurisdiction, but FERC's," and the net metering legislation therefore becomes irrelevant as its not applicable to the deal.

Starrs argues that under net metering the power transaction is neither a purchase nor a sale until it has been recorded, and shows up on the monthly bill. The netting out process is a non-monetary exchange or offset, he says. But since net metering allows customers to offset their own power consumption, the offset is worth the retail rate, and is thus higher than the avoided cost, which reflects the wholesale cost of power.

Starrs says that argument hinges on whether the netting out process is considered a sale of energy or whether it's an offset of energy. "In some respects it's a matter of semantics," he explains. "But that's what the legal argument will turn on."

Starrs also questions whether net metering facilities are qualifying facilities (QFs) subject to PURPA. "It's a new category of customer, not a new category of generator," he argues. He points out that in the net metering laws adopted by 15 states in the past five years there is no mention of PURPA. "It's clear to me that the states are seeking to establish a new category of customer."

The FERC dispute raises other more complicated issues. FERC has traditionally not regulated utilities at the distribution level, and net metering is clearly at that level. To accept MidAmerican's argument would mean exerting new authority for itself at a time when the whole game is up in the air. "It wouldn't surprise me if FERC is just waiting to see what happens with federal bills," says Starrs. "It's a tricky question for FERC, and I'd guess they'd be happy not to deal with it."

FERC has taken no action, despite requests for an expedited decision. This is one driver for a federal bill introduced by Representative Jay Inslee, which would resolve the dispute over jurisdiction (main story).

Meanwhile MidAmerican has pushed forward on other fronts, winning a decision on August 24 from the Polk County District Court in Iowa. According to Bill Smith of the Iowa Utilities Board (IUB), Judge Arthur E. Gamble ruled that net metering was a sale of power and that Iowa's rules thus violated PURPA. The IUB and the Office of Consumer Advocate have appealed the ruling to the state supreme court, which could render a decision in the spring.

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