KY Public Service Commission establishes a fair process for calculating compensation credits for rooftop solar

The grassroots campaign to protect rooftop solar in Kentucky and prevent electric utilities from rigging the rules against locally-owned distributed solar generation won a major victory in May, ending (for now) a multi-year dispute between solar advocates and monopoly utility companies over the value of fed-back rooftop solar energy.

On May 14, 2021 the Kentucky Public Service Commission (PSC) issued a ruling rejecting Kentucky Power Company’s proposal to slash by seventy-five percent the value of the credit that new solar customers would receive for electric power from their panels that is fed back to the grid. Importantly, the PSC order established a methodology to determine a fair value of that fed-back distributed solar energy. The Commissioners then applied that new framework to calculate that, for Kentucky Power customers, the value for that credit is just twelve percent below what it would have been under the old policy.  

Kentucky Power immediately asked the PSC to rehear the case and reconsider the ruling. But the Public Service Commission affirmed its decision on June 23, 2021, underscoring that the many costs that solar customer-generators help utilities and other customers avoid must be taken into account in order for the compensation rate to be fair, just, and reasonable.

After the ruling Cathy Clement, a KFTC member in Lexington who has invested countless volunteer hours to protect low- and moderate-income ratepayers and preserve a future for rooftop solar in Kentucky, celebrated. “I am so pleased that rooftop solar will remain an economic option for homeowners, non-profits, and small businesses in the Kentucky Power region who want to save on their energy bills, rely on clean energy, and support a growing clean energy economy in Kentucky,” she said. “So many people worked hard to secure this good outcome. It’s wonderful that our voices were heard.”

The Kentucky Public Service Commission’s role in setting a value for rooftop solar was set in motion by the passage of SB 100 in 2019. That legislation, which KFTC and solar advocates strongly opposed, allowed utilities to depart from Kentucky’s solar net-metering policy which had given solar customers a one-for-one credit on their electric bill for each kilowatt-hour of electricity their systems fed-back to the grid. But before SB 100 passed, solar advocates won changes to the legislation that pushed the question of what the new solar compensation rate should be – and how to calculate it – to future rate cases before the Kentucky Public Service Commission, and secured a commitment from the Commission that the benefits as well as costs of serving rooftop solar customers would be considered. 

Kentucky Power was the first utility to come before the PSC with a new and sharply lower proposed compensation rate for rooftop solar, and KFTC members and solar advocates approached it as a precedent setting case. KFTC joined with Mountain Association and Kentucky Solar Energy Society to formally intervene in the case to defend ratepayers and seek a fair value for distributed solar. In this and several related cases before the PSC, our groups were jointly represented by Tom FitzGerald of Kentucky Resources Council. As co-intervenors, we hired and worked closely with expert witnesses James Owen of Renew Missouri and Karl Rábago. The Metropolitan Housing Coalition also joined as a co-intervenor in a related case dealing with Louisville Gas and Electric.

Andy McDonald, who has represented the Kentucky Solar Energy Society in this and other related rate cases, explained why the methodology established by the PSC matters just as much, if not more, than the actual compensation rate set in this case. “The order creates the framework for how the Commission will handle net metering in future rate cases brought by other utilities. The Commission acknowledged multiple benefits provided by distributed solar generation to the utility and to ratepayers. They adopted principles and best practices to be used for determining the value of distributed energy resources such as rooftop solar. The inclusion of the cost of carbon and the impact on jobs among the benefits to be considered is especially significant.”

Carrie Ray with Mountain Association underscored the importance of the PSC ruling for customers of Kentucky Power, which serves a large share of eastern Kentucky. “Many of our clients are looking to solar as a way to afford their ever-increasing Kentucky Power bills. With this ruling, rooftop solar remains within reach – and the growing solar industry can continue to provide good-paying jobs to folks in the region.” 

With representation by the Kentucky Resources Council, the set of ally organizations who have worked together on this and related rate cases will continue to be vigilant. It is not yet known if Kentucky Power will appeal the PSC’s decision in court. Another PSC ruling on the value of distributed solar for customers served by Louisville Gas and Electric and Kentucky Utilities is expected by fall.