This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0741a.TIE
DATE: 2/3/2022
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 741 Net Metering
SPONSOR(S): Tourism, Infrastructure & Energy Subcommittee, McClure and others
TIED BILLS: IDEN./SIM. BILLS: CS/SB 1024
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Tourism, Infrastructure & Energy Subcommittee 13 Y, 3 N, As CS Walsh Keating
2) State Administration & Technology
Appropriations Subcommittee
3) Commerce Committee
SUMMARY ANALYSIS
The role of the Florida Public Service Commission (PSC) is to ensure that Florida's consumers receive some
of their most essential services in a safe, affordable, and reliable manner. Current law requires the PSC to
allow investor-owned electric utilities (IOUs) to recover honestly and prudently invested costs of providing
service, including investments in infrastructure and operating expenses used to provide electric service.
Florida law states that a utility’s full avoided cost is the incremental costs of electric energy or capacity, which,
but for the purchase from a non-utility generator, the utility would have to generate itself or purchase from
another source.
Net energy metering, commonly referred to as net metering, is a billing arrangement designed to compensate
customers who own on-site renewable energy generation systems and export electricity generated on-site to
an electric utility’s system. Net metering is most commonly referenced in relation to customer-owned solar
panels. Net metering requires customers who own on-site renewable energy generation systems to
interconnect with the electric grid.
In 2008, the Legislature required all electric utilities to develop standardized interconnection agreements and a
net metering program for customer-owned renewable generation systems. Under Florida’s current net metering
framework for IOUs, the credit the customer receives on their monthly bill equates the value of the excess
energy to the utility’s retail rate.
Under the bill, the PSC must propose a revised net metering rule for IOUs by January 1, 2023. The proposed
rule must ensure that: net metering customers pay the full cost of electric service and are not subsidized by the
general body of ratepayers; all energy delivered by the IOU is purchased at the applicable retail rate; all energy
delivered by the customer-owned or leased renewable generation to the IOU’s system is credited to the
customer at the IOU’s full avoided cost; and the net metering may include fixed charges, including base
facilities charges, electric grid access fees, or monthly minimum bills.
The bill allows any IOU customer who owns or leases renewable generation that is in service before January 1,
2023, to continue to use the current net metering rate design for 20 years.
The bill does not appear to have a fiscal impact on state or local government revenues or expenditures.
The bill provides and effective date of July 1, 2022. STORAGE NAME: h0741a.TIE PAGE: 2
DATE: 2/3/2022
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Present Situation
Florida Public Service Commission
The Florida Public Service Commission (PSC) is an arm of the legislative branch of government.
1
The
role of the PSC is to ensure that Florida's consumers receive some of their most essential services –
electric, natural gas, telephone, water, and wastewater – in a safe, affordable, and reliable manner. In
doing so, the PSC exercises regulatory authority over utilities in one or more of three key areas: rate
base/economic regulation; competitive market oversight; and monitoring of safety, reliability, and
service issues.
2
Investor-Owned Electric Utilities
The PSC regulates the rates and services of investor-owned electric utilities (IOUs).
3
There are four
IOUs in Florida: Florida Power & Light Company (FPL),
4
Duke Energy Florida (Duke), Tampa Electric
Company (TECO), and Florida Public Utilities Corporation.
5
Together, these four IOUs serve over 8.1
million customers in Florida.
6
IOU rates and revenues are regulated by the PSC.
7
The IOUs must file
periodic earnings reports, which allow the PSC to monitor earnings levels on an ongoing basis and
adjust customer rates quickly if a company appears to be overearning.
8
IOUs must provide sufficient and adequate service to customers.
9
To fulfill that obligation, utilities
monitor customer usage patterns in order to plan for future energy needs. Utilities use billing data to
predict the future energy needs of customers and make investments in their infrastructure based on
these predictions.
10
Current law requires the PSC to allow IOUs to recover honestly and prudently
invested costs of providing service, including investments in infrastructure and operating expenses
used to provide electric service.
11
Full Avoided Costs
An IOU’s full avoided cost is the incremental cost of electric energy or capacity,
12
which, but for a
purchase from a non-utility generator, the IOU would have to generate itself or purchase from another
source.
13
Full avoided cost is based upon either the utility’s cost to construct and operate its next
1
S. 350.001, F.S.
2
Florida Public Service Commission, http://www.psc.state.fl.us/ (last visited Jan. 17, 2022).
3
The PSC does not regulate the rates of municipal electric utilities or rural electric cooperatives.
4
FPL acquired Gulf Power Company in 2019 and merged as of January 3, 2022.
5
Florida Department of Agriculture and Consumer Services, Electric Utilities, https://www.fdacs.gov/Energy/Florida-
Energy-Clearinghouse/Electric-Utilities (last visited Jan. 19, 2022).
6
Florida Public Service Commission, Facts & Figures of the Florida Utility Industry (2021), p, 4, available at
http://www.psc.state.fl.us/Files/PDF/Publications/Reports/General/Factsandfigures/April%202021.pdf (last visited Jan. 19,
2022).
7
Florida Department of Agriculture and Consumer Services, Electric Utilities, supra at n. 5.
8
Florida Public Service Commission, Florida PSC 2020 Annual Report, p. 6, available at
http://www.psc.state.fl.us/Files/PDF/Publications/Reports/General/Annualreports/2020.pdf (last visited Jan. 19, 2022).
9
S. 366.03, F.S.
10
Florida Public Service Commission, Agency Analysis of 2022 HB 741, p. 2 (Jan. 3, 2022).
11
S. 366.06, F.S.
12
Capacity is the maximum electric output, in megawatts, that an electricity generator can produce under ideal conditions.
See U.S. Energy Information Administration, What is the difference between electricity generation capacity and electricity
generation?, https://www.eia.gov/tools/faqs/faq.php?id=101&t=3 (last visited Jan. 22, 2022).
13
S. 366.051, F.S. STORAGE NAME: h0741a.TIE PAGE: 3
DATE: 2/3/2022
planned generating unit or the cost of purchasing capacity and energy from generating units owned by
other utilities in the wholesale market.
14
An IOU’s full avoided costs is not the same as the rate it pays for energy provided on an as-available
basis. Full avoided costs can include avoided capacity and energy costs, while an as-available energy
rate only includes avoided energy costs, which are largely comprised of fuel costs.
15
In 2021, as-
available energy rates ranged for Florida IOUs from $0.025 to $0.037 per kilowatt hour (kWh).
16
Net Metering
Net energy metering, commonly referred to as net metering, is a billing arrangement designed to
compensate customers who own on-site, renewable energy
17
generation systems and export electricity
generated on-site to the utility grid.
18
Net metering essentially allows customers to sell excess electricity
to an electric utility, and the utility credits the customer’s energy bill on a per kWh basis.
19
The
compensation structure for utility customers who engage in net metering varies by location depending
on state and local policies.
20
Common customer-owned renewable energy generation sources around the country include solar
panels, natural gas micro-turbines, methane digesters, and small wind power generators;
21
however,
net metering is most commonly referenced in relation to customer-owned solar panels.
Net metering requires customers who own on-site renewable energy generation systems to
interconnect with the electric grid, which allows customers to reliably power their homes even when
their systems are not generating enough power to meet their energy needs.
22
The U.S. Department of
Energy defines the term “interconnection” as “the technical procedures and legal requirements
surrounding energy customers’ ability to connect their small-scale renewable energy projects to the
electricity grid.”
23
Utility customers primarily benefit from interconnected renewable generation systems
through personal use and reducing the amount of electricity they purchase from the utility.
24
As of August 2021, thirty-seven states, including Florida, have state-developed mandatory net metering
rules for certain utilities, eight states have statewide compensation rules other than net metering, two
states have some utilities that allow net metering, and three states offer no form of net metering or
compensation.
25
14
Florida Public Service Commission, States’ Electric Restructuring Activities Update: Wholesale Sales,
http://www.psc.state.fl.us/Publications/ElectricRestructuringDetails#4 (last visited Jan. 22, 2022).
15
Florida Public Service Commission, Agency Analysis of 2022 HB 741, supra at n. 10, p. 2.
16
Email from Kaley Slattery, Legislative Director, Florida Public Service Commission, Request for information (Feb. 1,
2022).
17
“Renewable energy” means electrical energy produced from a method that uses one or more of the following fuels or
energy sources: hydrogen produced from sources other than fossil fuels, biomass, solar energy, geothermal energy, wind
energy, ocean energy, and hydroelectric power. The term includes the alternative energy resource, waste heat, from
sulfuric acid manufacturing operations and electrical energy produced using pipeline-quality synthetic gas produced from
waste petroleum coke with carbon capture and sequestration. S. 366.91(2)(d), F.S.
18
National Renewable Energy Laboratory, Net Metering, https://www.nrel.gov/state-local-tribal/basics-net-metering.html
(last visited Jan. 20, 2022).
19
Id.
20
Id.
21
National Conference of State Legislatures, State Net Metering Policies (Nov. 20, 2017),
https://www.ncsl.org/research/energy/net-metering-policy-overview-and-state-legislative-updates.aspx (last visited Jan.
20, 2022).
22
U.S. Department of Energy, Grid-Connected Renewable Energy Systems, https://www.energy.gov/energysaver/grid-
connected-renewable-energy-systems (last visited Jan. 22, 2022).
23
U.S. Department of Energy, Renewable Energy: Distributed Generation Policies and Programs,
https://www.energy.gov/eere/slsc/renewable-energy-distributed-generation-policies-and-programs (last visited Jan. 22,
2022)
24
Florida Public Service Commission, Agency Analysis of 2022 HB 741, supra at n. 10, p. 1.
25
DSIRE, Net Metering, NC Clean Energy Technology Center (August 2021), https://ncsolarcen-
prod.s3.amazonaws.com/wp-content/uploads/2021/08/DSIRE_Net_Metering_August2021.pdf (last visited Jan. 20, 2022). STORAGE NAME: h0741a.TIE PAGE: 4
DATE: 2/3/2022
Net Metering in Florida
In 2008, the Legislature required all electric utilities to develop standardized interconnection
agreements
26
and a net metering
27
program for customer-owned renewable generation
28
systems.
29
Under this section, the PSC is tasked with establishing requirements relating to expedited
interconnection and net metering of customer-owned renewable generation by IOUs and may adopt
rules to accomplish this task.
30, 31
In response to the net metering requirements passed by the Legislature in 2008, the PSC amended
Rule 25-6.065, F.A.C.,
32
to expand the applicability of the rule to all renewable energy types up to two
megawatts (MW) in capacity.
33
The rule creates a billing mechanism by which net metering customers
can offset their usage through self-generated energy, with any excess energy delivered to the IOU’s
system. The amount of any excess energy delivered to the IOU is applied to the customer’s next
monthly bill as a kWh credit. At the end of the calendar year, the IOU pays for any remaining unused
energy credits at a rate based on the utility’s avoided cost of generating electricity.
34
Under Florida’s current net metering framework, the credit the customer receives on their monthly bill
equates the value of the excess energy to the utility’s retail rate. The retail rates for each of the IOUs
range from roughly $0.12 to $0.15 per kWh.
35
A utility’s retail rate accounts for its cost to provide power
to customers, which includes, but is not limited to, the cost of generation, transmission, distribution,
fuel, and operating and maintenance expenses.
36
IOUs must charge net metering customers the applicable rates and charges for the electricity provided
by the utility.
37
The applicable rates and charges are dependent on the rate class the customer falls
under, and these rates and charges can include a fixed monthly customer charge or base facility
charge, volumetric rates based on consumption, demand rates based on the maximum electric demand
in a monthly billing cycle, or a combination of the above.
38
Additionally, FPL and Duke were recently
authorized to charge customers a monthly minimum bill of $25 and $30 respectively.
39
26
An interconnection agreement is a contract between a customer and a utility to interconnect the customer’s renewable
generation system to the utility’s electric grid. See e.g. Florida Public Utilities Company, Interconnection of Customer-
Owned Renewable Generation Systems Application, p. 1, available at https://fpuc.com/wp-content/uploads/FPU17-
123_Interconnection-Form.pdf (last visited Jan. 20, 2022).
27
S. 366.091(2)(d), F.S., defines the term “net metering” as a metering and billing methodology where customer-owned
renewable generation is allowed to offset the customer’s electricity consumption.
28
S. 366.091(2)(c), F.S., defines the term “customer-owned renewable generation” as an electric generating system
located on a customer’s premises that is primarily intended to offset part or all of the customer’s electricity requirements
with renewable energy.
29
S. 366.091(5) and (6), F.S.
30
S. 366.091(5), F.S.
31
Municipal electric utilities and rural cooperatives are required to develop their own standardized interconnection
agreements and net metering programs, but each year they must file a report detailing customer participation in such
programs with the PSC. S. 366.91(6), F.S.
32
This rule was initially promulgated by the PSC in 2002 for the purpose of standardizing and expediting the
interconnection of small solar photovoltaic (PV) systems for customers of IOUs. Florida Public Service Commission,
Agency Analysis of 2022 HB 741, supra at n. 10, p. 1.
33
Id. at 2.
34
Id.
35
Florida Public Service Commission, Florida Investor-Owned Electric Utilities Total Cost for 1,000 Kilowatt Hours –
Residential Service, available at http://www.psc.state.fl.us/Files/PDF/Utilities/Electricgas/BillingAdjustments/ba_total-
2022.pdf (last visited Feb. 1, 2022).
36
Id.
37
R. 25-6.065, F.A.C.
38
Florida Public Service Commission, Agency Analysis of 2022 HB 741, supra at n. 10, p. 2.
39
Florida Power & Light Company, Building a more resilient and sustainable energy future, EnergyNews (January 2022),
available at https://www.fpl.com/#home (last visited Feb. 1, 2022); Sam Sachs, Duke Energy Florida customers to have
minimum $30 bills, News Channel 8 (Jan. 28, 2022), https://www.wfla.com/news/florida/duke-energy-florida-customers-to-
have-minimum-30-bills/ (last visited Feb. 1, 2022). STORAGE NAME: h0741a.TIE PAGE: 5
DATE: 2/3/2022
In 2020, Florida electric utilities reported 90,552 customer-owned renewable generation
interconnections, reflecting more than 30,000 new interconnections since the 59,508 interconnections
reported in 2019.
40
Of the 90,552 customer-owned renewable generation interconnections reported in
2020, Florida’s four IOUs accounted for 71,567 of those interconnections.
41
Almost all customer-owned
renewable generation installations in Florida are solar.
42
As of year-end 2020, less than one percent of
Florida’s 10,504,960 electric utility customers had installed renewable generation equipment.
43
Concerns of cross-subsidization of customers who partake in net metering by non-net metering
customers have been raised before the PSC.
44
There is debate as to the components of the utility’s
cost of service that are offset by energy generated by net metering customers and, accordingly, the
appropriate credit to provide for such energy.
45
Effect of the Bill
The bill requires the PSC to adopt a revised net metering rule that credits excess energy delivered to
an IOU’s system by customer-owned renewable generation at the full avoided cost rate.
The bill provides legislative findings that:
It is in the public interest to promote the development of renewable energy resources in the
state in a manner that is fair to all public utility customers;
The development of the solar industry, the decline in the cost of solar panels, and the increase
in customer-owned renewable generation support the redesign of net metering by the
commission;
Customer-owned and leased renewable generation is not available to public utility customers
who lack the financial resources or who reside in multitenant buildings; and
The growth of customer-owned renewable generation has resulted in increased cross-
subsidization of the full cost of service onto the general body of ratepayers.
The bill requires the PSC to propose a redesigned net metering rate structure that ensures IOU
customers who own or lease renewable generation pay their full cost of electric service and are not
cross-subsidized by the general body of ratepayers.
Under the bill, the PSC must propose a revised net metering rule by January 1, 2023. The bill states
that this proposed rule must comply with the following criteria:
The net metering rate structures and billing must ensure that an IOU’s net metering customers
pay their full cost of electric service and are not subsidized by the IOU’s general body of
ratepayers;
All energy delivered by the IOU is purchased at its applicable retail rate;
All energy delivered by the customer-owned or leased renewable generation to the IOU is
credited to the customer at the IOU’s full avoided costs; and
The net metering may include fixed charges, including base facilities charges, electric grid
access fees, or monthly minimum bills.
40
Florida Public Service Commission, Review of the 2021 Ten-Year Site Plans of Florida’s Electric Utilities (Oct. 2021), p.
29, available at http://www.psc.state.fl.us/Files/PDF/Utilities/Electricgas/TenYearSitePlans/2021/Review.pdf (last visited
Jan. 20, 2022).
41
Florida Public Service Commission, Interconnection and Net Metering of Customer-Owned Renewable Generation
(2020), available at
https://www.floridapsc.com/Files/PDF/Utilities/Electricgas/CustomerRenewable/2020/2020%20Net%20Metering%20Sum
mary%20Spreadsheet/2020%20Net%20Metering%20Report.pdf (last visited Jan. 20, 2022).
42
Florida Public Service Commission, Review of the 2021 Ten-Year Site Plans of Florida’s Electric Utilities, supra at n. 40.
43
Florida Public Service Commission, Agency Analysis of 2022 HB 741, supra at n. 10, p. 3.
44
Id. at 4.
45
See Id. (“For example, questions have been raised as to whether the excess energy offsets the utility’s cost of power
plants, given that power plants must be available to meet a renewable energy customer’s electric needs when their
systems are not operating or when their demand exceeds the capability of their renewable energy system.”). STORAGE NAME: h0741a.TIE PAGE: 6
DATE: 2/3/2022
The bill allows any IOU customer who owns or leases renewable generation that is in service before
January 1, 2023, pursuant to a standard interconnection agreement offered by an IOU, to continue to
use the current net metering rate design and rates for 20 years.
Thus, the effect of the bill is that:
Customers that currently use net metering or begin to use net metering by the end of this year
may continue to be credited at the IOU’s retail rate for excess energy delivered to an IOU’s
system, and
Beginning in 2023, customers that install renewable generation and wish to use net metering
will be credited for the excess energy they deliver to an IOU’s system at the IOU’s full avoided
cost rate as determined by the PSC.
46
The bill directs the PSC to require an IOU requesting a change in base rates to report to the PSC the
impact of net metering on the IOU’s revenues and cost of service.
B. SECTION DIRECTORY:
Section 1: Amends s. 366.91, F.S., relating to renewable energy.
Section 2: Provides an effective date of July 1, 2022.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
The bill may have an insignificant impact on state government expenditures, because the bill
requires the PSC to propose new rules establishing a new rate structure for net metering public
utility customers.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may have an indeterminate negative impact on the revenues of private businesses that install
customer-owned renewable generation systems, since customers may not purchase these systems if
they cannot recoup as much of the costs through the new net metering rate design.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
46
Avoided cost rates vary by utility. STORAGE NAME: h0741a.TIE PAGE: 7
DATE: 2/3/2022
1. Applicability of Municipality/County Mandates Provision:
Not applicable. The bill does not appear to impact county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
The bill requires the PSC to propose a new rule for net metering customer rate design by January 1,
2023.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
On February 3, 2022, the Tourism, Infrastructure & Energy Subcommittee adopted an amendment to the
bill and reported the bill favorably as a committee substitute. The amendment changes the period in which
customers who own or lease renewable generation prior to January 1, 2023, can utilize the existing net
metering rate design from 10 years to 20 years.
This analysis is drafted to the committee substitute as approved by the Tourism, Infrastructure & Energy
Subcommittee.