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Rock the Rooftop: Wellinghoff's Plan to Set Solar Straight

The case for utilities to own solar generation behind the meter within their own regulated service territories.

When Jon Wellinghoff sat as chairman of the Federal Energy Regulatory Commission, he guaranteed open access to electric transmission lines. Marketers, traders, merchant power producers, owners, demand response aggregators - each could share in a slice of the grid, courtesy of FERC.

But now tables have turned. Battle lines have shifted. With solar photovoltaics nearing grid parity - and coming closer every day - maybe it's now time to consider rooftop parity. Instead of open access just for the interstate grid, why not also for the physical space on the roof atop the premises of the residential ratepayer?

Since he left Washington, Wellinghoff has returned private legal practice, as a partner in the San Francisco office of Stoel Rives, LLP. But he still looks at the problem much like a regulator. As Wellinghoff sees it, why not optimize the solar experience for ratepayer and utility alike? Why not permit utilities to get in on the action by owning solar behind the meter within their own franchised service territories, with the facility added to rate base and eligible to earn the authorized, regulated rate of return?

As it happens, that's exactly what the former FERC chairman now proposes, joined by co-author James Tong, vice president for strategy and government affairs at Clean Power Finance (CPF), a software and financial services provider for the residential solar PV industry. CPF works with multiple institutional investors, including utilities such as Integrys and Dominion. And CPF counts Duke and Edison International among its equity owners.

Working together, Tong and Wellinghoff have recently completed a policy white paper on these issues, set for publication in the upcoming July issue of Public Utilities Fortnightly:

"Thinking Outside the Box: A Case for Utilities Owning Solar within Regulated Service Areas"

As the white paper explains, regulated utilities today are generally barred from providing solar behind the meter to their own customers. Conflict is thus inevitable and will only intensify as rooftop solar grows. The focal point has been net energy metering (NEM) rules, which many see as the broken policy, but which Tong and Wellinghoff view as a distraction from more fundamental issues.

Current regulations leave the utilities with essentially two business strategies: " nothing and lose their best customers," as Tong and Wellinghoff write, "or 'compete' against solar by making it less attractive.

"Thus differences over NEM are consequences of - not causes for - the two business models being incompatible."

According to the two authors, a simple NEM price fix, standing alone, will ultimately not resolve the challenges from a disruptive innovation. : "No degree of pricing tweaks," they add, could have ever saved Kodak from digital photography, Blockbuster Video from streaming media, or typewriters from PCs."

Wellinghoff and Tong would rather pursue a structural solution - even if it means writing new legislation, state by state. Otherwise, they warn, each side will cling to "its own exclusive sandbox, fighting to prevent the other from playing in it..." to the detriment of both sides and all grid users.

And so the two authors sat down with Fortnightly in early