Net metering in Pennsylvania continues to be a trending topic with regulatory and legislative movement that could drastically change the current compensation for excess generation. In our past article, Pennsylvania’s Lucrative, Yet Risky, Energy Resource: Solar Net Metering, Power Advisory provided a brief history detailing how net metering had arrived at its current state and how the Price to Compare (PTC) provides a highly competitive rate for excess electricity generated by small commercial scale solar projects (of 3 MWAC or less). Most notably, the article reviewed how the Hommrich v. Commonwealth Pennsylvania’s Supreme Court ruling (2020) and the subsequent changes under Pennsylvania Public Utilities Commission (PUC) kickstarted the market by allowing 3 MWAC or less solar facilities to participate in net metering.
Net Metering Customer Classification and Rate Mechanism Change
The most significant update to net metering in the state comes from a regulatory filing by UGI Utilities (“UGI”), a relatively small electric distribution company (EDC) serving around 62,000 customers in Pennsylvania. In May of 2024, UGI filed a default service plan for the period June 1, 2025, through May 31, 2029 (DSP V) under which it changed its large customer generation supply rate (GSR) procurement class, GSR-2, and the respective rate mechanism. Large net metering customers will now be served through GSR-2 as opposed to being served previously through procurement class GSR-1.1 Historically, GSR-1 had been the default service supply rate (PTC) for residential and non-residential customers that had a peak load of under 100 kW. GSR-2 has been the default service supply rate for large commercial and industrial customers since 2010. The GSR-2 PTC is materially lower than the equivalent GSR-1 PTC, resulting in a significant decrease in compensation for net metering solar facilities.
Under GSR-2, the default service PTC rate is based on UGI’s hourly real-time Locational Marginal Price (LMP) in PJM. In comparison, GSR-1’s PTC is filed every 6 months and results in a more “standard” retail rate for small commercial customers. The change in the PTC supply rate significantly reduces the net metering compensation. In fact, because of the volatility in the wholesale LMP market, customer-generators could see negative pricing hours when exporting to the grid. Although, from January 2020 to May 2025, the UGI LMP exhibited negative pricing for only 160 hours, equivalent to 0.34% of the total hours.
As illustrated in Figure 1, the historical monthly average of UGI’s LMP is roughly 65% below the historical GSR-1 PTC. It should be noted that under the new GSR-2 PTC, other costs such as capacity and transmission will be added to the LMP energy charge. Additionally, Figure 1 does not account for the hourly price volatility of LMPs, notably the pricing during solar production hours.
Figure 1. Historical and Effective* UGI PTC Comparison, Jan 2020-May 2025 (cents/kWh)
*The “effective” GSR-2 Energy Charge represents the energy cost component of the PTC at which a net metering customer-generator would have been compensated for excess electricity if the current UGI tariff had been in place for the previous 5 years.
To adjust which supply rate a customer-generator would receive, UGI transitioned the classification of GSR-1 and GSR-2 customers (i.e., the cutoff between two service/procurement classes) from peak demand, historically at 100 kW, to “supply peak load impact” of 100 kW. The supply peak load impact is defined as the customer’s net demand contribution impact to UGI’s default service procurement activity, as determined by the net power flow from or into the utility’s system. Additionally, the new tariff stipulates that the customer-generator’s supply peak load impact be inclusive of the nameplate capacity of the generation system. Given that most net metering solar facilities will be close to 3 MWAC, well above 100 kW, these projects would be pushed into the GSR-2 classification. UGI, at the time of its filing, estimated that 14 facilities with applications to interconnect a total of 22 MW would be classified as GSR-2 customers. Power Advisory’s understanding is that there were no existing customer-generators being served under the GSR-1 class that would have been moved to the GSR-2 class. Consequently, grandfathering provisions to remain in a service rate class were not applicable in this case.
This default service rate mechanism and classification change clearly targets net metering customers. In its filing, UGI Utilities stated that “This approach will better align larger net-metering customer-generators with larger customers that have similar grid impacts.”2
PUC Decision and Penn Renewables Challenge
In February 2025, the PUC approved the default service plan under a Settlement Agreement that includes the modifications described.3 Penn Renewables LLC (“Penn Renewables”), a renewable energy developer, has challenged the new default service plan multiple times in the UGI proceeding but each time the PUC rejected its arguments.4
Penn Renewables’ voiced two primary arguments, citing that the classification and rate mechanism discriminate against customer-generators.
1) PUC regulations require that EDCs base class eligibility on peak load.5 The approved classification using supply peak load impact, which considers generation capacity, does not follow these conditions.
2) As established by the Alternative Energy Portfolio Standard (AEPS) Act and PUC code, customer-generators should be compensated for excess generation at the “full retail value”.6 The new GSR-2 hourly priced rate does not constitute the full retail value, as it is a wholesale rate. In addition, because the rate changes hourly it does not provide customers with an established price-to-compare as required.
UGI contested each of Penn Renewables arguments and the PUC ultimately sided with UGI. In March 2025, Penn Renewables filed an appeal in the Pennsylvania court system.7
The PUC’s decision to allow reclassification, thereby negatively impacting solar net metering, does not come as a surprise. The PUC has previously made its opinion clear on net metering, recommending that “the General Assembly consider modifying the structure of net metering by placing reasonable bounds on net metering to curb the economic harms of subsidizing excessive wholesale generation that the EDC is obligated to purchase at retail, rather than at wholesale rates.”8
Other small EDCs in Pennsylvania have followed suit since PUC’s final order, submitting base rate filings with proposed tariff revisions that alter the classifications of large customer-generators. Citizens’ Electric Company of Lewisburg, Pennsylvania (“Citizens”) proposed a classification change that would use the net power flow from or onto its system to categorize customers into either the Generation Supply Service Rate (GSSR)-1 or GSSR-2 schedules.9 Wellsboro Electric Company (“Wellsboro”) proposed to add a new definition of “Billing Demand”, which will be either “the greater of Gross Generator Rating (kWAC) stated in the generator interconnection application or the maximum demand of the customer during any 15-minute period,” to categorize customers between two procurement classes.10 The PUC is yet to deliver final rulings in these proceedings.
Table 1. Pennsylvania EDC Default Supply Tariff Changes
*Other charges under GSR-2 / GSSR-2 include capacity, transmission, regional transmission expansion, alternative energy credits and administrative.
What’s next?
The PUC has established that utilities may alter their classifications and rate mechanisms, even at the expense of net metering customer-generators. Penn Renewables has challenged this ruling in the Pennsylvania courts. The decision in this case or a similar one may have lasting, substantial impacts on net metering in the state, likely similar to the severity of the “Hommrich Decision.” Larger utilities in the state such as PPL, FirstEnergy and PECO would most likely adopt similar classification changes and rate mechanisms as UGI if Pennsylvania’s courts favor the PUC’s recent decision. A decision favorable to UGI would not eliminate net metering but it would significantly reduce the compensation solar facilities can expect to receive under net metering moving forward.
Other players in the solar industry are also actively intervening in the Citizens and Wellsboro base rate proceedings to prevent similar rate changes.11 However, the PUC has made it evident over the past 20 years that it will favor the limitation of net metering compensation as long it has the authority to do so. Other challenges in the court system are expected to be filed if utilities continue to adopt similar mechanisms.
Legislative Considerations
As described in our original article, legislative action creates another route through which existing net metering compensation can be threatened. Most recently, an amendment added to House Bill (HB) 362 would delegate the PUC to promulgate regulations protecting ratepayers not participating in both the Solar for All Program and net metering.12 HB 362’s original purpose was to enable the Pennsylvania Energy Development Authority to distribute federal funds that were awarded for the state’s Solar for All Program (the 2024 omnibus fiscal code bill required legislative approval for such funds to be distributed). The House Amendment A00170 added late in the process would drastically change the impact on solar in Pennsylvania. While originally meant to kickstart the Solar for All Program which was granted $156 million of federal funding, HB 362 as currently written enables the PUC, with vague language, to form rules that would limit net metering. The bill passed the House Energy Committee and now sits in the state House.
By recent action, HB 362 and its amendment may become obsolete. Pennsylvania legislators tucked language into the current Fiscal Code bill HB 1189 repealing the previous fiscal code that requires a legislative vote to distribute federal funds designated to the state.13 With passage of this bill, the state would be allowed to immediately distribute the $156 million Solar for All funding. HB 1189 sits with the Senate at the time this article was published. This situation shows the fine margins of net metering and solar policy in Pennsylvania. While amendment A00170 may not ultimately impact net metering, it illustrates that there is a faction in the General Assembly willing to propose language to limit net metering.
On a separate solar front, in Harrisburg, House Representative Peter Schweyer and co-sponsors introduced HB 1155 “An Act providing for community solar facilities…” to authorize community solar programs across the state.14 The bill closely mirrors the previous community solar legislation, HB1842, which passed through the House in 2024 with bipartisan support.15 The current HB 1155 requires any community solar bill credit to reward the energy, capacity and transmission values produced by a community solar facility and to be not less than the PTC. This condition aims to ensure that a community solar bill credit is a competitive rate for energy delivered to the grid. However, the current classification and rate mechanism changes by UGI substantially reduce the ultimate value of some small commercial customers’ PTC. The community solar bill credit’s value as written in HB 1155 could also be hampered.
These bills could significantly change the compensation value for energy produced by small commercial scale projects in Pennsylvania. However, it’s worth remembering that recent energy-related legislation has rarely seen full bipartisan support and most have usually stalled in the House or Senate. To exacerbate this trend, lawmakers have stated that they are not currently planning to consider any energy-related bills until the state’s highest court issues a final verdict on the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program.16 The PA Supreme Court is preparing its ruling on the program's fate after hearing arguments in May in the ongoing litigation. In addition, energy-related bills are likely to be incorporated in state budget negotiations, as seen with the distribution requirements of Solar for All funding. It is clear that energy-related legislation on the table does not have a clear path forward; only time will tell if these bills are able to become law.
Conclusion
The greatest current risk to net metering is the classification and rate mechanism changes that were first introduced by UGI. Power Advisory is closely monitoring the situation. New default service plan filings by utilities and grandfathering clauses may have a big impact on projects currently in development or construction. The ultimate ruling on whether these changes can be implemented may be decided in a protracted and contentious legal battle.
Andrew Kinross, Director, can be reached at akinross@poweradvisoryllc.com
Andrew Bracken, Senior Consultant, can be reached at abracken@poweradvisoryllc.com
Sources
1 UGI Utilities, Docket No. P-2024-3049343, “Petition of UGI Utilities, Inc. – Electric Division For Approval of a Default Service Plan (DSP V) for the Period of June 1, 2025 through May 31, 2029”, 2024, May 31.
2 Id. at 1
3 Pennsylvania PUC, Docket No. P-2024-3049343, “Opinion and Order”, 2025, February 20.
4 PA PUC, Docket No. P-2024-3049343, Petition of UGI Utilities, Inc-Electric Div for Approval of a Default Service Plan (DSP V) for the Period of June 1, 2025 through May 31, 2029. https://www.puc.pa.gov/docket/P-2024-3049343
5 52 Pa. Code § 54.187(e) Subchapter G. Default Service. https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/052/chapter54/subchapGtoc.html&d=reduce
6 Act of Nov. 30, 2004, P.L. 1672, No. 213
7 Commonwealth Court of Pennsylvania at Docket No. 337 CD 2025
8 Pennsylvania Public Utility Commission, Compliance for Reporting Year 2023-2024, page 43, 2025, June.. https://www.puc.pa.gov/media/3527/aeps-2024-report-final.pdf
9 PA PUC, R-2025-3054394, Citizens Electric Company of Lewisburg PA filed confidential information. https://www.puc.pa.gov/docket/R-2025-3054394
10 PA PUC, R-2025-3054392, Wellsboro Electric Company filed confidential information. https://www.puc.pa.gov/docket/R-2025-3054392
11 Solar Energy Industries Association & Coalition for Community Solar Access, Docket Nos. R-2025-3054392 & R-2025-3054394, “Joint Petition to Intervene of Solar Energy Industries Association and Coalition for Community Solar Access”, 2025, June 2. https://www.puc.pa.gov/pcdocs/1881292.pdf
12 Bill Information, Regular Session 2025-2026 House Bill 362, Pennsylvania General Assembly. https://www.palegis.us/legislation/bills/2025/hb362
13 Bill Information, Regular Session 2025-2026 House Bill 1189, Pennsylvania General Assembly. https://www.palegis.us/legislation/bills/2025/hb1189
14 Bill Information, Regular Session 2025-2026 House Bill 1155, Pennsylvania General Assembly. https://www.palegis.us/legislation/bills/2025/hb1155
15 Bill Information, Regular Session 2023-2024 House Bill 1842, Pennsylvania General Assembly. https://www.palegis.us/legislation/bills/2023/hb1842
Huangpu, Kate, Spotlight PA, “Key Pa. senator says bipartisan energy bills on hold until contested climate program settled”, 2025, June 9. https://www.spotlightpa.org/news/2025/06/pennsylvania-clean-energy-bills-rggi-court-ruling-delay/