New Maine Law Restricts Participation in Net Energy Billing; Creates Solar and Energy Storage Program
On July 10, 2023, Maine Governor Janet Mills signed into law An Act Relating to Net Energy Billing and Distributed Solar and Energy Storage Systems. The Act was proposed as an amended version of L.D. 1986 and is intended to mitigate some of the adverse effects Maine’s Net Energy Billing Program (NEB Program) costs on electric customers resulting from higher than anticipated participation in the NEB Program, while continuing to encourage the development of distributed energy generation in Maine.
Limitations on Maine’s NEB Programs
The Act limits participation in both the Kilowatt Hour Credit NEB Program (35-A M.R.S. § 3209-A) and the Tariff Rate NEB Program (35-A M.R.S. § 3209-B). First, the Act only allows a distributed generation resource that is between 1 and 2 MW in capacity to participate in the NEB Program if the project reaches commercial operation by: (i) the date specified in its NEB agreement (or an allowable modification to the agreement), and (ii) December 31, 2024.
Second, with respect to the Tariff Rate NEB Program, after December 31, 2023, the Act permits a project that is less than 5 MW in size to participate in the NEB Program only if the project is collocated with customers that subscribe to 100% of the project’s output. This limitation will not apply to projects that enter into NEB agreements on or before December 31, 2023.
Distributed Solar and Energy Storage Program
The Act also directs the Governor’s Energy Office to establish the Distributed Solar and Energy Storage Program (DSES Program), which will obtain and disburse federal funding for the continued growth of distributed solar facilities and energy storage systems in Maine. Notably, the DSES Program may not use Maine electric ratepayer funds except in limited circumstances, such as to cover costs associated with obtaining technical analysis and consulting services.
Public Utilities Commission May Conduct a New Distributed Generation Procurement and Establish an Opt-in Program
To offset some of the new NEB Program limitations and further incentivize the development of distributed generation, the Act allows the PUC to conduct competitive solicitations to select distributed generation resources to enter into long-term contracts of up to 20 years with investor-owned Transmission and Distribution (T&D) utilities for the procurement of energy or renewable energy credits (RECs). However, the PUC must determine whether to issue a competitive solicitation by January 31, 2024, and any distributed generation resource that is awarded a contract pursuant to a PUC procurement is required to terminate all of its NEB arrangements and cannot participate in the NEB Program.
The Act also permits the PUC to consider, develop, and implement an “Opt-in Program” that is designed to reduce NEB Program costs long-term through financial mechanisms and buy-down arrangements, among other means. Of note, the PUC is not required to implement an Opt-in Program and may do so if, after a proceeding to investigate options for opt-in program designs, the PUC determines that such an Opt-in Program is in the public interest and issues a rule governing the program. The PUC must consult with the Finance Authority of Maine regarding Opt-in Program design and give preference to designs that enable the continued development and operation of distributed generation resources, but it may not require any distributed generation resources to participate.
Quantifying the Costs and Benefits of the NEB Program
To ensure the benefits of distributed generation under the NEB Program are properly identified, the Act requires the PUC to determine, on an annual basis, the Program’s costs and benefits. Such benefits may include, among others:
- Avoided energy, capacity, transmission, and distribution costs
- Demand reduction induced price decreases
- Avoided transmission and distribution line losses
The PUC is then required to allocate the net costs to each T&D utility in Maine based on each utility’s pro rata share of the total retail sales to ratepayers that pay NEB costs. In calculating the net costs, the PUC must assess whether the distributed generation provides a monetized net financial benefit to the T&D utility that the PUC does not otherwise account for when setting the utility’s rates. The PUC must also provide a report to the Legislature on or before March 31st of each year, which must include the costs of the NEB Program authorized to be collected by T&D utilities in electric rates, and the benefits of the NEB Program directly received by electric ratepayers.
For questions regarding the Act, distributed generation, energy storage systems, or any other energy-related matter, please contact Sarah Tracy, Jared des Rosiers, Nick Salalayko, or any other member of Pierce Atwood’s Energy Practice Group.