With state governments at the barricades of federalism, an energy revolution has been launched. Perhaps usurping federal law, thirty-eight states recently mounted a statutory and regulatory charge to establish "net metering," a regulatory innovation to implement decentralized renewable power. This innovation fundamentally shifts the regulatory balance as well as the energy mix in America. Net metering profoundly reshapes the energy landscape, providing the most significant boost of any policy tool at any level of government--both qualitatively and quantitatively--to decentralize and "green" American energy sources.
While only twelve states have passed statutory initiatives to implement renewable energy system benefit charges and eight have elected to implement renewable portfolio standards, (1) thirty-six states to date have implemented net metering. (2) Net metering enables consumers with small generating facilities, for example solar panels, fuel cells, or wind turbine systems, to offset their electric bills with any excess power produced at their facility, running the retail utility meter backwards when the renewable energy generator funnels power to the grid. Net billing, or net metering, is the cornerstone of state energy policies encouraging private investment in renewable energy sources. (3)
Net metering can pay the eligible renewable energy source approximately four times more for this power than paid to any other independent generators and much more than the time-dependent value of this power to the purchasing utility. A 400% price advantage over the competition provides a nationwide platform in thirty-six states-including all of the major states--to launch a revolution in renewable and decentralized energy production.
This article analyzes the key net metering decision, MidAmerican Energy Co. v. Iowa Utilities Board, through its illogical "hairpin" twists in federal and state courts. (4) But that is the beginning, not the resolution, of the tension between state and federal government regulation of net metering. Not one of the precedents cited in the decision support the propositions for which they are summoned. Analysis of the precedential links in the jurisprudential chain erodes the foundation of the holding. The constitutional constraints on state regulation of the traditionally federally governed American energy system are contested on the net metering battleground.
Section II, examines the unique role of electric energy, as well as the emerging role played by decentralized and renewable energy sources, in shaping American institutions and society. Electric energy is fragile and unique; it cannot be preserved or stored and moves at the speed of light, yet when centralized it is vulnerable to disruption. It is protected and distributed under a stringent legal regulatory construct. Section III introduces the mechanics of net metering. Section IV examines and tracks the seminal MidAmerican case through the state courts to an outcome that holds against the state, then to its ultimate reversal in federal court. Section V places a magnifying glass on this federal decision and analyzes the primary precedent on which it relies, and then proceeds to discuss the secondary precedent underlying the decision. The decision rests on much less than meets the eye. The precedent supports a holding contrary to that announced. Section VI examines the commerce clause and supremacy clause constitutional jurisprudence demarcating federal and state jurisdiction over power. Last, this article will set forth the federal statutory and regulatory framework for decentralized and renewable energy sources and finally discuss the supremacy clause issues raised by net metering.
The pending state/federal struggle over net metering replays seventy years of federalism's jurisdictional friction regarding electric power development. This article concludes by suggesting how to construct a more stable foundation for important net metering policy. …