A nonprofit publication of the Kentucky Center for Public Service Journalism

Jim Gooch: Clearing up misconceptions about HB 227 and Kentucky’s net metering law

As chairman of the Kentucky House of Representatives Energy and Natural Resources Committee for more than 19 years, I have seen both the highs and lows of energy policy in Kentucky. I chaired the committee when coal production was at its all-time peak in Kentucky, and I fought the federal government as it tried to take down one of Kentucky’s signature industries. Electricity rates in Kentucky have increased by 30 to 40 percent over the past decade. Many of the factors driving those cost increases were outside the control of the General Assembly. At every turn, I have kept as my core principle what is best for affordable energy for Kentuckians. I firmly believe that low-income Kentuckian’s should not pay any more on their electric bills if it can be avoided.

This is why I’m sponsoring HB 227, a bill to modernize Kentucky’s outdated net metering law. The net metering “subsidy” or “mandate” is not a utility issue and it’s certainly not a partisan issue. It is a cost issue for all electric customers who choose not to install solar panels. Kentucky is a cost-of-service, regulated utility state.   The costs of Kentucky’s electric infrastructure are shared by all customers—as are the benefits. When one class of customers avoid paying the costs of the system, those costs must be paid by others to ensure around the clock reliable service. Solar produced energy is no more valuable than any other type of energy. For those who say otherwise, I would argue that coal-produced energy provide more benefits to Kentuckians.   

For supporters of solar power and solar contractors, HB 227 would not affect larger scale private solar projects, which do not fall under Kentucky’s net metering law. It would not prevent those who choose to install private solar to do so for their own benefit and be fairly compensated. And the bill clearly grandfathers all current net metered customers for 25 years, whether they sell their house or rent it. That timeframe exceeds the life of all private net metered solar installations currently in Kentucky. Those systems already installed have been sold by contractors on the promise of paying off in ten or fifteen years. Another guaranteed 10 years of return absolutely will not hurt those customers’ investments. 

HB 227 will not put solar contractors out of business. By rewarding net metered customers for their excess energy at a market price, it merely stretches out the time needed for a net metering customer to earn a return on their investment.Those who want to go solar can still choose solar and will still make a return. Solar advocates are the first to point out that the costs of solar panels have come down 70 percent over the past decade. Who knows what the next decade will hold for them? As this market grows, other utility customers cannot afford to continue paying new net metered customers 300 percent of the market value of their electricity. 

Net metering was always meant to help someone who wants solar panels to afford them. It was not meant to turn net metering customers into energy marketers, and it was not meant to enrich them with other customers’ money. If the cost of solar is 70 percent less today than when we enacted this law, at what point do the subsidies end? The executive director of the Harvard Electricity Policy Group, Ashley Brown, calls rooftop solar net metering and the returns they provide, ”Robin Hood in reverse” meaning it is “a wealth transfer from less affluent ratepayers to more affluent ones.” 

Charles G. Snavely, Secretary of the Kentucky Energy and Environment Cabinet, also supports the bill. “It is about not paying more for something than is necessary, yet also paying the solar generator customer for the equitable value of the excess solar produced,” he said.

Now is the time to address this inequity. We cannot delay this any further. We have a chance to head this off in Kentucky before it becomes an even bigger issue. Every year we don’t fix this structural problem with our electric rates, it gets harder and harder. Every year we don’t address this issue, more and more grid reliability costs are pushed onto Kentuckians who can least afford it.

Rep. Jim Gooch, R-Providence, represents parts of Daviess and Hopkins Counties as well as all of McLean and Webster Counties.

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  1. Mark Nolan says:

    If there is an accurate statement in this article, I could not find it. A pack of lies and misdirection, but that is what we have come to expect from Mr Gooch.

    BTW, if HB 227 is such a great bill, why have you had so much trouble getting some of your GOP colleagues to sign on that you had to pack the committee?

  2. Jonathan Walker says:

    Jim Gooch and the Consumer Energy Alliance are spreading misinformation in media outlets far and wide.

    Who is this Consumer Energy Alliance? What do they stand for?

    The Consumer Energy Alliance is a Houston based lobbing group for big oil, gas, and utility companies.

    Google it yourself. I would urge the people of Kentucky not to be fooled by the propaganda being spread by Gooch and the lobbyists behind HB 227.

    The people of Kentucky do not need CEO’s from Houston to push through self serving legislation.

  3. Jay says:

    HB 227 is economically flawed, but not how either side is stating. HB 227 should not be setting an absolute price on energy. Solar ‘farmers’ need a free market to sell their energy based upon demand alone and the government should have nothing to do with price setting based on any decrease in the cost of panels or any other individual costs. Conversely, if I want to set up a solar array and live off the grid and it costs me more to produce energy than Kentucky Power would charge, so what! BUT, once I enter the marketplace as a seller of electricity, then I should compete and be compensated fairly.
    Previously solar energy was reimbursed at the retail rate, which economically speaking, is a subsidy. How? Because the producers of the raw energy, (solar panel owners) were not paying the infrastructure and other costs that are included in the full retail price. A portion of every dollar they received was a subsidy by returning the portion of that dollar that usually is consumed by overhead cost in production taxes, and transmission maintenance costs, etc. As Mr. Snavely alluded to in the article, “it is (HB 227)… about paying the solar generator customer for the equitable value of the excess solar produced,” What is the value set by HB 227? If it is the same as the wholesale price of electricity, why would that be fair? Here’s an analogy for you. When the power line goes down in an ice storm, will an individual homeowner who ‘produces’ energy go out to clear and repair the line? No, that cost goes to the distributor, who charges a fee above the cost of producing the energy in order to cover delivery.
    Likewise, a farmer only gets the wholesale price of a cow, not the sum total of all of the cuts of meat. It is the butcher gets the profit of running a convenient shop and servicing the customer at the retail end. In this way, solar panel owners are sun farmers, they should get a fair wholesale value for their product. The government’s role in markets CAN BE to prevent a monopoly from abusing their power and should only set a lower price limit (or price floor) for solar energy, NOT an absolute price. Since solar is available during peak usage times, that energy can and should receive a variable rate price. If HB 227 can’t do that, it is flawed and a failure of government (economically speaking).

  4. Jay says:

    Power purchase agreement:
    Compensation which is generally below retail, also known as a “Standard Offer Program,” and can be above retail, particularly in the case of solar, which tends to be generated close to peak demand.

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