Virginia Regulators Reject APCo Bid to Cut Net Metering Rates

The State Corporation Commission’s (SCC) Final Order on Appalachian Power’s proposal to revise its net metering program issued on August 29, 2025, is a clear victory for distributed residential and commercial solar, wind, and alternative energy resource owners.  

Claiming that its existing Net Energy Metering tariff overcompensated customers who sold their own solar power into the grid, APCo originally sought approval for a new tariff that would cut payments to customer-generators for power they sold to the company to a low “avoided cost” rate.  

APCo’s full retail power rates currently start at about 8 cents a kilowatt hour or higher for residential and commercial customers but the company had proposed cutting the compensation to customer-generators to as low as 4.7 cents a kilowatt hour.

As the SCC summarized the utility’s position: “The Company represented that the current net metering rate structure in place under Rider N.M.S. credits customer-generators with ‘full retail rate’ netting, which compensates customer-generators for energy delivered to the grid at a rate that exceeds the value provided to the grid by their renewable energy systems.” 

REtail Rate Remains to Cover Customer’s Own Usage

As a general principle, the Commission did not agree with the company that net metering in its current form imposes any undue cost shifting to non-participating utility customers. 

Accounting for all benefits of distributed renewable energy generation, including reductions in line losses, congestion, ancillary services, REC purchase requirements, emissions, capacity obligations, and transmission costs, the Commission found that APCo’s existing net metering program is already, on aggregate, cost beneficial to the utility company and therefore to its ratepayers at large.  

Therefore, the SCC rejected the company’s request to compensate customer-generators at the lower avoided-cost rate for power they sell to the utility to cover the power they use themselves. “The amount of generation that is produced by an eligible customer-generator ‘over the [12-month] net metering period’ and which is not ‘fed back to the electric grid’ is to be effectively compensated at the applicable retail rate,” the SCC ordered.

Most importantly, the Commission cited Virginia code § 56-594 in affirming that the 12-month net energy measurement definition defined therein should remain intact. The Final Order thus explicitly defined “excess energy” as energy exported to the grid through the customer-generator’s meter in excess of that imported from the grid, as measured over a 12-month period, rather than the 1-hour period proposed in APCo’s petition.

This means that customer-generators who take service under APCo’s new net metering tariff may apply generation in a given hour, day, or month toward consumption in future hours, days, or months, at the full retail energy rate. 

The Commission also rejected the imposition of additional grid connection costs, including standby charges, on customer-generators. 

Rate for Excess Power Increased to Reflect Additional Avoided Costs

The Commission will allow the company to pay for excess energy, as measured on a 12-month basis, at an avoided-cost rate, but that rate must be recalculated to include additional avoided costs, including the purchase of RECs required by state law.

The new rate will be likely higher than the PJM Locational Marginal Pricing (LMP) rate, which serves as the default compensation rate for excess generation under the Commission’s existing regulations, but will still only apply to customer-generators whose annual generation exceeds their annual consumption and who enter into a power purchase agreement with APCo for that excess generation.  

Net-metered system sizes, as engineered, are still limited to a projected annual output no greater than 100% of a facility’s energy consumption. However, this slightly improved rate, with its additional clarity, may allow customer-generators to more confidently design their systems close to 100% annual energy offset with less fear of oversizing their projects.

Net Metering Cap Unchanged

If the SCC wasn’t going to let APCo cut its rate of compensation to customer-generators from the full retail rate, then in its original proposal, the company asked the Commission to reduce the current 6% cap on net metered projects.

As we saw above, the SCC is allowing APCo to offer a modified version of their avoided cost rate for excess power from customer-generators. But the Commission required the utility to continue paying the full retail rate for power generated on site that covers a customer’s own usage. At the same time, finding that buying net-metered energy did not cost the company money nor did it shift costs to ratepayers without solar, the SCC declined to change the 6% cap. 

The Commission acknowledged that their Final Order will likely increase the attractiveness of APCo’s net metering service to new customer-generators, for the two reasons outlined above (affirmation of 12-month netting period and increase to compensation for excess generation). The Commission stated that these findings are consistent with Virginia code, which directs the Commission to maintain a net metering system that is just and reasonable in light of the aggregate costs and benefits.  

Support for Energy that’s Clean and Distributed

The decision constitutes both confirmation of Virginia’s continued commitment to abundant clean energy under the Virginia Clean Economy Act and a vote of confidence in the Virginia distributed solar industry’s critical role in helping drive down the cost of energy for all Virginia taxpayers.

Distributed energy resources significantly reduce the burden on Virginia’s grid operators not only by generating a growing share of the state’s energy where and when it is consumed, but also though improving grid quality and reliability by riding through faults, helping correct power factor and transient stability issues, and regulating grid frequency and voltage. 

This continued policy and regulatory support for behind-the-meter energy resources is welcome and necessary given Virginia’s enormous projected energy shortfall over the next five to ten years.

As much as 70% of global internet traffic flows through Virginia. Data centers already consume approximately 25% of Virginia’s electricity and are projected to consume double that share by 2030. With reduced federal support for rapid energy investment, Virginia must step up to match its generation capacity to the exploding demand. Some utilities have advocated for a reduction in targets for distributed solar (to as low as 5-10% of the solar energy mix) to encourage greater focus on large-scale projects. However, the pace of utility-scale solar and wind development is too slow to reach Virginia’s stated goal of 100% carbon-free generation. 

When we look at some of the most successful adopters of wind and solar resources — such as Australia — we see a much more even mix, with behind-the-meter solar constituting more than sixty percent of total solar assets nationwide. Meanwhile China, racing to meet the surge of demand from data centers, advanced manufacturing, and AI, has installed more solar generation assets over the past 18 months than the rest of the world combined. Nearly forty percent of that installed capacity came behind the meter, avoiding complex and costly grid upgrades while generating the energy as close as possible to its point of consumption. 

These countries, via economies of scale and improved cooperation between private industry, regulatory bodies, and grid operators, have found that behind-the-meter generation assets are among the fastest, leanest, and least expensive options to increase total generation capacity. If Virginia can develop the same pace of implementation and innovation here, it could reach its clean energy goals much sooner — perhaps 90% carbon-free by 2035 if we play our cards right.