IOWA - State Supreme Court Orders Net Metering

Tuesday, August 10, 2004

By Chris Cook

On July 21, 2004, the Iowa Supreme Court issued an opinion in the case of Windway v. Midland Power Cooperative, ordering Midland to allow net metering to the owner of a 65-kilowatt wind turbine. The system owner previously had sued Midland, requesting that the cooperative provide net metering for his facility. The case had been before the Federal Energy Regulatory Commission (FERC), the federal court system, the Iowa Utilities Board and, finally, the Iowa state court system.

While FERC had previously ordered net metering for the system owner and had admonished Midland for its recalcitrance, FERC's decision was of limited scope. The issue of interaction between PURPA and net metering was still ripe for decision by the Iowa Supreme Court. In ruling in favor of the generator, the Court decided "[t]he problem with Midland's case for separate billing is that it is inconsistent with the interpretation of PURPA and the federal regulations by FERC and the Iowa Utilities Board...We think net metering is appropriate for the additional reason that it maximizes the incentive for cogeneration."

The Solar Energy Industries Association (SEIA) filed an amicus brief in the case to dispel some confusion created by Midland's arguments. Among these was Midland's convoluted proposition that the terms "net metering" and "net billing" had substantially different meanings. SEIA argued that these terms could, and in fact are, used interchangeably.

On this issue the Court agreed, stating "It appears that the terms 'net metering' and 'net billing' are used interchangeably to refer to the same method of measuring the power used by a cogenerator over a specified period of time." The Court explained the two meter approach requested by the cooperative as follows: "A more appropriate description of Midland's proposed billing system is separate or independent billing, which is the terminology we will use in this opinion."

There was one dissenting justice who noted that "the Supreme Court...has determined that the term 'full avoided costs' as used in the regulations is the equivalent of the term 'incremental cost of alternative electric energy'....There is no way that net metering which has been approved, and in practical effect required, by the opinion of the court will produce a reimbursement to the cogenerator that is reflective of the utility's full avoided cost. What is accomplished by net metering is automatically reimbursing the cogenerator on the basis of the utility's retail rate for electricity. This is manifestly not the cost to the utility of the electric energy that, but for the purchase from such cogenerator, the utility would generate or purchase from another source."

This argument is well reasoned, but not the majority opinion. As a result, net metering advocates will now have a precedent to cite when arguing that PURPA can only be effectuated through net metering. The Iowa Supreme Court's decision could make net metering universal.