The Colorado Public Utilities Commission issued a major ruling Wednesday on net metering for solar.

The commission ruled in favor of the Colorado Energy Office (CEO) motion requesting the debate on net metering be separated from a larger proceeding on the state's renewable energy standard.

Net metering allows system owners to earn a bill credit for electricity sent to the grid. Because this diminishes utility revenues, it has sparked conflict across the country between utilities, rooftop solar owners and installers.

“This follows Arizona’s decision,” said energy consultant and former Arizona commission policy advisor Nancy LaPlaca. “Now that Colorado's PUC has decided to open a separate docket, this bodes well for open, transparent discussions in the states that are looking at the same issues."

The issue came to the PUC because Xcel Energy, Colorado’s primary electricity provider, proposed a change in net metering as part of its 2014 renewable energy standard compliance plan.

The PUC decision will keep Colorado’s net metering policies in place and unchanged until the commissioners open a new docket and listen to the arguments in detail.

This is a “big victory” for distributed solar, said SolarCity Policy and Electricity Markets Director Meghan Nutting. But the commission did not indicate whether the proceeding will be a “litigated docket” or a “miscellaneous docket” followed by a CPUC rulemaking.

If the process is litigated, the debate will be limited to legal proceedings, Nutting explained. If it is miscellaneous, it will be more transparent and inclusive. “Solar is favored by 78 percent of all Coloradans, and they deserve to be heard in this decision,” she said.

“The net metering incentive may be too high relative to the cost of solar system installation, resulting in the company [Xcel Energy] paying too much to acquire customer-sited solar generation,” Xcel VP Karen Hyde testified to the commission last year.

The utility's concern is that an unfair cost shift may be occurring, according to Robin Kittel, Xcel's Director of Regulatory Administration. Solar owners’ reduced power bills don’t only decrease utility electricity sales revenues. They also lower other prorated infrastructure and bill charges. This shifts system costs to non-solar-owners, argue utilities.

To validate its assertions, Xcel filed a value-of-solar study, which Nutting called “unvetted.”

The study’s “avoided costs” method concluded the revenue lost to net metering is the retail rate of $0.104 per kilowatt-hour and the benefit is $0.046 per kilowatt-hour, according to Kittel. As compensation for lost revenues, Xcel wants to be paid the $0.058 per kilowatt-hour difference from funds earmarked to support renewables.

The solar industry critique of the study identified specific benefits of distributed solar that were either undervalued or not considered by Xcel’s study. As a result, the critique concluded, “the annual net benefits of solar DG on the [Xcel] system are $13.6 million per year.”

Because of the disputed studies, the CEO filed its motion to sever and asked the commission to establish a process through a miscellaneous docket that would establish methodologies for assessing solar's costs and benefits, determine the impact of distributed generation on rate design, and finalize a definitive cost-benefit analysis.

It is not clear when further PUC decisions on net metering will come. Nutting said the commissioners seemed anxious to act. But there is no need to rush, she added. 

“NEM [net energy metering] is applied to only 18,000 of Xcel’s 1.4 million ratepayers,” Nutting said. “By their own estimation, in a study that vastly undervalues solar, NEM’s impact will only be $1.2 million in 2014. And they paid $23.69 million in 2012 for executive salaries, according to their public records.”

Xcel did not respond to GTM's requests for a response to the PUC decision. "We just need to be clear about how that will proceed," Xcel spokesperson Mark Stutz told the Denver Post.

Tags: clean power finance, colorado, colorado energy office, coseia, cost shift, net energy metering, net metering, public utilities commission, rooftop solar, solarcity, sunpower, the alliance for solar choice, value of solar, votesolar, xcel energy