A South Dakota-based utility has decided to withdraw a proposed rate change that likely would have adversely impacted customers generating their own alternative energy. Black Hills Power, a subsidiary of Black Hills Corporation, serves nearly 70,000 customers throughout western South Dakota, northern Wyoming and southeastern Montana. After facing backlash to the proposed changes, the company withdrew the rate plan to allow for more time to discuss it with customers.
“We understand that it’s complicated,” Vance Crocker, Black Hills Power’s vice president of operations, told the Rapid City Journal. “We want to educate our customers about it and have a dialogue with our customers.”
Crocker did not rule out proposing the rate change again in the future, saying the company still thinks it’s fair. Part of a broader debate taking place at the local level throughout the country, Black Hills Power is one of many utilities seemingly stifling the proliferation of distributed solar power due to concerns over business-model disruption and long-term revenue impacts.
According to the Rapid City Journal, Black Hills Power argued that the proposal was necessary because company executives think independent power producers are not paying for their added use of the electrical grid.
Earlier this month Black Hills Power’s Jim Keck said the company is also concerned about covering their costs. “We don’t want to penalize our entire residential customer base to help pay for the fixed costs of these renewable systems,” he said.
Earlier this year Black Hills Power requested a rate increase between 10 and 13 percent for all electricity users. The company has stated that it needs to increase rates due to grid damage from weather as well as to address regulatory costs on coal-fired power plants. On October 1st, the new natural gas-fired Cheyenne Prairie Generating Station is slated to come online for Black Hills Power customers, replacing the company’s three oldest coal-fired power plants.
“Careful analysis of the long-term costs associated with retrofitting the three plants to comply with the new EPA standards make it clear that replacing them with a new, natural gas-fired generating station is less expensive for our customers,” said Crocker in a statement.
According to Dakota Rural Action, a conservation and agriculture group that opposed the rate change, in the rate increase request included a “Residential Demand Service” rate that would require those who install small solar or wind systems on their property to pay an additional $5 to $20 beyond what a non-generating customer pays.
“Putting in a Residential Demand Service charge is really a hidden fee or penalty charge on solar energy and is the wrong thing to do,” said Steve Hammond, Dakota Rural Action member and owner of a solar electric system.
Utilities involved in the distributed solar debate see solar customers as using less energy but paying the same rate as other customers per kilowatt-hour, meaning non-solar customers end up paying more of the fixed costs, such as maintenance. Alternatively, distributed solar advocates argue that solar can generate energy for the grid during peak demand hours when costs are highest, thus reducing strain on utilities. In the last year, this dynamic has made news in Arizona, where fixed fees were imposed on solar installers; Utah, where it led to customer outrage; and recently in Wisconsin, where a proposed fixed charge escalated the already heated debate.
Solar can also help reduce the amount that utilities rely on fossil fuel generation, thus helping them reduce emissions that may otherwise prove costly under new regulations. In either case, distributed solar is growing nationwide and utilities are being forced to slowly adapt to the reality that they can no longer bank on the simple business model of providing reliable electricity — they also now need to receive it. This is definitely true in Wyoming, where wind power is readily available and there are also superb solar resources waiting to be developed. However, the state still currently gets about 88 percent of its electricity generation from coal, according to the EIA.
Black Hills Power and Dakota Rural Action did not respond immediately to request for comment.