United States

United States

Major threat to community initiatives

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In a precedent setting case, the legality of net billing -- a fundamental prerequisite for small scale community based wind development -- is being called into question in the state of Iowa. A controversial proposal by state regulators to eliminate net billing for new customers has met with fierce opposition, to the extent that at a packed meeting on January 12 in Des Moines no decision was made either way.

Net billing is allowed in some 20 states in the US. It allows customers who generate their own electricity from renewable sources of energy to run their meters backwards when they generate more electricity than they are using. In effect, electricity is being offset against buying it from the grid at retail rates.

The current furore in Iowa was prompted when the Iowa Utilities Board (IUB) issued a "rule-making" on November 26 proposing to eliminate net billing. It cited a decision by the Federal Energy Regulatory Commission (FERC) that involved Iowa utility MidAmerican Energy Company in January 1997 and which the IUB said "called into question" net billing arrangements.

The state regulators contend that net billing involves actual selling and buying of electricity -- whereas an attorney for the American Wind Energy Association (AWEA) and the Solar Energy Industries Association -- testified that the procedure is instead a "power exchange." Thus it should not be subject to a federal regulatory ruling of 1995.

More than avoided cost

This ruling requires utilities to buy all power offered them from renewables resources, but stipulates that utilities need not pay more than the avoided cost of buying in electricity from elsewhere. The IUB argues that net billing customers are in effect being paid the end consumer price for their renewables power: by allowing customers to run metres backwards, instead of paying for the electricity they draw from the grid, utilities are giving the renewables power fed into the grid the same value as the end consumer price.

No other state has so far repealed net billing, says John Dunlop of AWEA. Indeed, regulators in Minnesota last year reviewed net billing and decided that it was legal and enforceable. Their decision was based upon the fact that utilities deduct a fixed monthly charge for net billing before calculating the average retail rate that applies to those with their own generating systems. Therefore, they said, the method of billing could be considered a proxy for avoided cost. The IUB is still accepting comments until February 2 on the matter. It will most likely then take a number of weeks to come to a final decision. Since there is no upper limit in Iowa on the size of wind turbine, utility grade machines can currently operate under the net billing system.

Among those that would be affected, were they new customers, is the Vestas V27 225 kW turbine at Schaefer Manufacturing in the town of Adair. The company, which only invested in the machine quite recently, anticipates hundreds of thousands of dollars in income over the system's 20-year life. Also affected, if they were just being installed, would be the two Wind World turbines in Nevada, Iowa, owned by a local school. And any new smaller residential turbines, such as 20 kW Jacobs machines, would also be hit.

Opponents to the IUB proposal packed the board's hearing last month. The only party to speak in favour of the change was the utility MidAmerican. A representative for another utility, IES, did address the board, but his comments were non-committal -- he was neither in favour nor opposed to the proposed changes. A total of 14 people formally spoke against the IUB's suggested policy.

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