Colorado has joined the growing list of states where utility companies have put the solar industry on the defense, fighting to protect net metering.

Net metering laws, which are on the books in 43 states, require utilities to credit customers at the retail power rate for the electricity they generate at their homes and businesses.

Xcel, the largest utility provider in Colorado, asked the Public Utilities Commission to consider the almost 6 cents per kilowatt-hour it credits solar customers through net metering – the difference between retail and wholesale rates – a subsidy.

The utility company can presently levy up to 2 percent on electric rates to reimburse itself for renewable energy subsidies as part of the state’s aggressive 30 percent renewable energy portfolio standard legislation.

If the PUC agrees that net metering is a subsidy and allows Xcel to levy rates to offset net metering credits, it means the company will not have to invest as much in other renewable projects and net metering will essentially be capped in Colorado, said Meghan Nutting, a member of solar advocacy group The Alliance for Solar Choice and director of policy and electricity markets for SolarCity. It will also send a dangerous message to the rest of the country, where net metering laws are becoming a hot debate topic.

According to Nutting, there are several issues with Xcel’s compliance plan, which was submitted to the PUC in late July.

“Partly what was so shocking about it was that Xcel based its proposal on this un-vetted study,” she stated.

The PUC asked Xcel in 2010 to study net metering costs and benefits.  It was requested that the company include stakeholders in the process.  Nutting was on the committee assigned to offer input and help with the study.

“We convened a few times the first year,” she said. “But they neglected to convene the group again or get any input for the last two years.”

Xcel sent the draft study out to stakeholders in April. They were surprised by it, but agreed to review the study and offer feedback. Several months later, before the public comment period had even closed on the study, Xcel submitted a compliance plan based on its own internal and un-reviewed study, which suggested net metering cost the utility and other ratepayers.

Solar advocacy groups in the state paid for an independent review of the study, which found that net metering is not a cost to the utility company or ratepayers and that instead, provides more than $11 million in benefits to Xcel’s Colorado customers.

Nutting feels as though Xcel has created an ultimatum.  If the PUC agrees to let Xcel collect on the renewable energy adjustment for net metering credits, the utility will pursue 36 megawatts of new solar installations over the next two years. If the PUC disagrees, Xcel will only pursue six megawatts.  

Nutting added that there was testimony included in the plan that suggests Xcel might try to pursue legislative changes to Colorado’s net metering law in the next session.

The PUC has now forwarded the plan to an administrative law judge. The plan could be approved as early as December, but the last two-year compliance plan wasn’t approved until half way through 2012.  The likelihood is that it will take longer and there’s no telling how it will turn out.