Flawed Reports and Captured Commission Lead to Attack on Louisiana Solar Net Metering

UPDATE September 10, 2019: Documents reported by PV magazine indicate that the position on which the LPSC will be voting on Wednesday September 11, will be a “buy-all, sell-all” arrangement with PV system owners compensated at avoided cost rates.

The proposal will grandfather existing solar customers for 15 years.

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Two reports from utility- and fossil fuel-backed researchers aim to cast doubt on the viability of customer-owned solar in the lead-up to a scheduled September 11 Public Service Commission (PSC) vote on the future of net metering in Louisiana. 

The PSC commissioned David Dismukes, a critic of renewable energy, to write a review of distributed generation policies in January of this year. PSC staff used Dismukes’ report to recommend deep cuts to compensation for solar owners, even though previous such cuts have caused solar installations to plummet. A month later, Gregory Upton Jr. released a utility-funded study which made a variety of extreme assumptions about distributed solar’s impact on the grid and its economic competitiveness.

Upton and Dismukes are colleagues at the LSU Center for Energy Studies and at a private firm, Acadian Consulting Group. The two organizations have worked on behalf of utilities and fossil fuel companies. Dismukes was appointed to the National Petroleum Council in 2017. 

Errors litter Dismukes’ PSC report, which recommends drastic cuts to solar

The PSC-commissioned net metering evaluation, authored by Dismukes and released in January, made serious calculation errors that cause solar to appear as a net cost to ratepayers. 

The PSC staff justified its recommended cuts to net metering by relying on the supposed high cost of the legislatively-mandated state solar tax credit and utility lost revenues. Funds for Louisiana’s now expired state tax credit were collected from taxpayers, not from the electric ratepayers under the PSC’s jurisdiction. 69.4 percent of purported costs for net metering came from the state tax credit, according to Dismukes’ report. But that state tax credit expired in 2016.

The PSC staff further recommended “lost revenues” to be counted as a cost attributable to net metering. When customers generate their own electricity from solar panels, they do indeed reduce the revenue that they send to the utility, since they’re buying less electricity. Basic energy efficiency measures, such as installing a new LED light bulb, or simply turning off the lights when leaving the room, would also reduce a customer’s purchases from a utility. However, utilities do not get to collect “lost revenues” from customers in those cases.

Utility lost revenues and the expired state tax credit constituted 93% of the PSC staff’s supposed “cost” of net metering.

The Dismukes-authored report claims that drastic action is needed to address solar compensation even as it admits that net metered solar represents just 0.4% of the state’s electric capacity and 0.12% of its electric generation. The PSC staff acknowledged that utilities paid only $1.66 million in net metering benefits to customers between 2008 and 2014, the peak period of solar growth in the state. By comparison, Entergy CEO Leo Denault earned more than $9 million in 2018, making him the highest paid CEO in Louisiana.

Net metered solar represents less than 0.4% of state electric capacity and 0.12% of electric generation (p. 35)

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Louisiana currently provides full retail net metering with monthly excess generation credited back to the customer at the utilities’ avoided cost. The PSC staff’s proposed rule language is not clear on whether it would require utilities to tally up the payments that they owe to rooftop solar customers at the end of every month, or instantaneously. An instantaneous billing system would credit customers at the utility’s avoided cost the second any overage occurs, as opposed to the current system, which allows excess to be carried over throughout the month. The adoption of instantaneous billing from full retail net metering in Michigan added approximately 4 years to the payback time of a residential solar installation.

Dismukes’ report acknowledged that the current policy environment had halted solar growth in the state. More than 5,000 solar installations were completed in 2014, less than 2,400 were completed by 2016, and under 1,000 in 2017.

Figure 1. Number of net metered solar installations in Louisiana (2008-2017)

SWEPCO, a subsidiary of American Electric Power (AEP), argued that customers who export electricity to the grid should not be compensated at all. 

The report concluded with a recommendation for drastic cuts to compensation for solar owners, even those who installed their systems under old rules. The PSC staff recommended a short 5-year grandfathering clause, after which current net-metered customers would have their payments cut.

Nevada’s public service commission similarly eliminated grandfathering in 2015, and the move sparked outrage among the state’s solar owners and nationally. Brian Sandoval, Nevada’s Republican governor at the time, chose not to re-appoint two of the public service commissioners responsible for the controversial decision, and a third soon resigned. NV Energy, Nevada’s largest investor owned utility, eventually asked the commission to approve a 20-year grandfathering clause in an attempt to quell the backlash. The Nevada Assembly passed a law in 2017 in near-unanimous, bipartisan fashion to restore net metering compensation to at least 75% of the retail rate.

Utility-funded LSU study makes implausible claims about renewable energy

Gregory Upton Jr.’s February 2019 report, “The Future of Solar in Louisiana,” received “over $40,000” in support from SWEPCO, a utility regulated by the PSC. The report makes a series of questionable assumptions about solar costs.

SWEPCO Funded $40,000 of $177,051 of Study. Originally appropriated in 2016 by Louisiana Board of Regents. (p. 2)

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Upton’s study used an outdated cost for residential solar of $3.57/watt, 15% higher than the current $3.05/watt average, according to the solar marketplace EnergySage. The study also repeatedly referred to scenarios in which capacity values for solar may be poor “if every customer” installed solar, an exceedingly unlikely, if not impossible, scenario for decades.

The study concluded that solar is not cost-effective under any billing scenario, even when including the federal tax credit. Fully net-metered solar would require 23 years to pay back, worse than some of the two-channel billing methods Upton evaluated. The study did not address the contradiction of how solar projects have poor economics yet also need their compensation to be cut drastically.

Upton, under the auspices of the LSU Energy Center, included graphs that appear identical in style to Dismukes’ January 2019 PSC report, written from his Acadian position.

Commissioner Eric Skrmetta’s History with Flawed Studies

Fossil fuel-connected front groups were heavily involved in attacking Louisiana’s solar tax credits in 2015, as previously reported by the Energy and Policy Institute.

Dismukes authored a 2015 draft report for the Louisiana PSC, purportedly to study the costs of net metering, but it instead focused on the cost of the state solar tax credit.

Commissioner Eric Skrmetta promoted the study before the final version was published and conflated net metering with the legislatively-directed state solar tax credit. 

Skrmetta penned an email to Louisiana elected officials calling net metering a “solar subsidy program” and urged them to take legislative action, according to records obtained by the Energy and Policy Institute. He further admitted that he led the effort to “determine the impact of residential solar net-metering.”

Figure 2. Email from Commissioner Skrmetta to “Louisiana Representative”

Utilities and Fossil Fuel Companies Back Skrmetta

Skrmetta has accepted significant funding from the utilities he is charged with regulating. Many states with elected public service commissioners have banned the practice of candidates accepting campaign contributions from companies they would regulate, but Louisiana has not. 

Skrmetta has taken more than $150,000 from electric utilities and the oil and gas industry, according to data from the National Institute on Money in Politics. Top electric utility contributors include Entergy, American Electric Power, and CLECO. 

Figure 3. Top campaign contributors to Eric Skrmetta according to the National Institute for Money in Politics

Lawyers and lobbyists have poured another $168,200 into Skrmetta’s campaign coffers.

Figure 4. Top industries contributing to Eric Skrmetta according to the National Institute for Money in Politics

Skrmetta’s checkered past

Commissioner Skrmetta is no stranger to charges of unethical behavior. Skrmetta asked the Gulf States Renewable Energy Industry Association to “privately and publicly support his re-election” in exchange for lifting the cap on net metering, according to a report by the The Times-Picayune in 2014. Skrmetta also fought efforts to hold telecommunications companies accountable for charging exorbitant fees to inmates and for disregarding the PSC’s orders. Fellow PSC Commissioner Foster Campbell claimed Skrmetta was returning a favor for accepting nearly $20,000 in campaign contributions from “inmate phone companies and related interests”.

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