Markets, Not Feds, Should Power Virginia’s Energy Future
The Federal Energy Regulatory Commission (FERC) will soon rule on a New England Ratepayer Association (NERA) petition that requests the agency federalize the setting of compensation rules for distributed energy technologies. These technologies connect to systems operated by local utilities, including Dominion Energy. The near-term effect could be large, as distributed energy compensation could be cut in half. But the bigger issue is that it would eliminate the ability of the Virginia General Assembly and the State Corporation Commission (SCC) to determine a critical piece of the Commonwealth’s energy future. On Monday, the SCC joined dozens of its state counterparts in protesting the NERA petition. The federal encroachment would undermine Virginia’s potential to achieve a fair and efficient transition to a market-based clean energy future.
Although the NERA petitioners miss the mark on substance and federalism, they raise one fair concern. That is, there are inherent problems with a policy known as net metering, which buys excess power from distributed resources at the same rate the owner pays to consumer power. This simplistic state policy often overcompensates distributed energy owners at the expense of consumers. However, the very existence and extent of these programs varies within states, not to mention between them. In fact, the fair rate of compensation often varies by an order of magnitude across states. A policy tailored to local circumstances is the appropriate response, whereas a uniform federal response would only make matters worse.
Besides, numerous states are already well ahead of where the federal government could ever hope to be. For example, Arkansas Public Service Commission Chairman Ted Thomas has been leading efforts to improve his state’s distributed energy policies in coordination with other states. Chairman Thomas recently referred to the federal petition as a “one-size-fits-all federalization” that would undermine the progress of all states.
Energy policy should be guided by the principle of subsidiarity, where authority is pushed to the lowest level capable of handling a task. States are much better positioned to make distributed energy policy consistent with local circumstances and stakeholders, especially as distributed energy technologies make the grid far more complex. The federal government is simply not equipped to decide the compensation Virginians should receive for rooftop solar, grid-connected batteries and the like. Although Virginia’s current net metering policy is not the long-term answer, it’s a question that Virginians should decide.
Virginia should advance its own consumer-empowering distributed energy policy. Fortunately, pro-market reformists have some great ideas for Richmond, such as those proposed by the Virginia Energy Reform Coalition. The coalition consists of a powerful blend of environmental, free-market and low-income household advocacy groups. A key recommendation in the coalition’s platform is that Virginia’s electricity market should be opened up to a range of retail energy services, including those that aggregate distributed resources to maximize their value.
Yet all this could soon be for naught; federalizing distributed energy policy would gut pathways to a market-based successor for net metering. In a struggling economy, the last thing we need is an electric shock from Uncle Sam. Virginians know best how to handle their own energy. The path to lower costs and innovation runs through markets, consumer choice and subsidiarity. That dream can become reality, but first we must defend the Commonwealth’s authority from federal overreach.
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