Wherever he goes, Mark Richards has people coming up to ask his opinion, expressing their frustration and concern.
“I’ve never seen such a hostility from residents as I have on this issue,” said Richards, partner at Woods Cross, Utah-based InterMountain Wind and Solar. “I’m amazed at the intensity I’m seeing.”
The cause of all the uproar? Utah’s main utility, Rocky Mountain Power, has proposed a new fee on its residential solar customers. While solar users make up a small percentage of RMP’s customer base — only about 2,000 people — that number is growing quickly and the prospect of paying an additional $4.25 a month is not sitting well with residents and solar installers.
Utah’s fight is indicative of a rapidly escalating tension: As rooftop solar becomes more and more mainstream, driven largely by middle class customers, utility companies across the country are looking to soften the blow to their business model by charging solar customers a monthly fee.
On the surface, it’s a heated debate over the immediate value of solar power — who pays, who benefits, and how to make the situation equitable — but the core issue is really the increasing likelihood that distributed generation sources, like rooftop solar, will completely upend the traditional utility business model.
I’ve never seen such a hostility from residents as I have on this issue.
Mike Rossetti, a resident of Draper, Utah, took the decision to invest in solar power very seriously. A little over four years ago, inspired by his wife and the tech companies he’s worked for that have made serious investments in renewable energy, he studied for an entire year and ultimately did his own solar installation (with the help of an electrician, he adds).
Rossetti has been thrilled with his decision to go solar and thinks any Utah resident who wants to do the same should have that opportunity — something he worries is jeopardized by an additional charge on solar customers. “When I heard about this net metering fee I got very concerned because the four and a quarter over a 25 year lifespan would really make a hefty chunk of a person’s investment,” he said.
While Rossetti has a large 24 panel array, he recognizes most people have a much smaller system, meaning the additional charge would be an even bigger blow. “Depending on the size of their system, it could be 10 percent or even more because some people only put in four or five panels and this is a flat fee,” he explained. As a result, Rossetti fears the additional charge could really impact lower income or elderly people “who just want to put their foot into renewable investment.”
After hearing about the proposed charge in January, Rossetti formed Utah Citizens Advocating Renewable Energy (UCARE), which he emphasizes is not an official organization of any kind, just a loose group of solar customers and advocates who volunteer their time. Rossetti and the other members of UCARE are now gearing up for the Utah Public Service Commission to consider the solar fee as part of its upcoming rate case and have filed as official interveners.
My primary concern is the dampening effect this will have on residential choice.
“My primary concern is the dampening effect this will have on residential choice,” Rossetti said. As the commission prepares to take up the rate case, UCARE intends to continue standing up for residential solar customers “by pointing out that the charter of the Public Service Commission is to consider both costs and benefits and Rocky Mountain Power is only bringing out costs and they are ignoring the benefits.”
Rocky Mountain Power argues that as more households go solar, it might be saving them on their monthly electricity bills but it’s costing the company more because those customers still use the utility’s transmission and distribution infrastructure. “We’ve seen a significant increase in [residential solar] over the years and we expect those increases to continue so we need to design a rate structure for those customers,” said David Eskelsen, company spokesman.
As the utility sees the writing on the wall in regard to rooftop solar’s explosive growth, it is using this opportunity to get out ahead of the issue and begin to cover its costs. From RMP’s perspective, solar customers are 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. “It’s important to emphasize that this is all about rate design; it doesn’t result in more revenue for the company, it doesn’t result in more profit,” Eskelsen said. “It’s about designing a rate structure for the future when more customers use their power in a very different way.”
Solar customers and installers in Utah, however, say the utility is ignoring the benefits of distributed generation, like rooftop solar. Because solar generates during peak demand, when energy costs are at their highest, for example, it helps reduce the strain on utilities. And an increase in solar-powered generation cuts back on the electricity generated by dirtier sources like coal, something that will be a priority for utilities in light of the Environmental Protection Agency’s new rule for limiting carbon emissions from the nation’s existing power plants.
Earlier this year, Minnesota adopted the first statewide method for calculating the value of solar power — a methodology that looks beyond the economic value of solar power to the utility and customers by considering the greater cost to society and the environment that comes from burning fossil fuels.
According to Eskelsen, Utah doesn’t have enough solar power on the system to observe an appreciable difference right now. “Benefits exist,” he said of residential solar, “but I think they tend to be overstated by advocates.”
Both Mark Richards and Mike Rossetti emphasize that transparency is their top priority in the commission’s upcoming decision. “We can assume there’s both — there is some cost but there are benefits,” Richards said. “All I want [Rocky Mountain Power] to do is meet with the PSC, who is their regulatory body, our voice as a power user … and show us their costs and their concerns.”
This isn’t the first time clean energy groups and solar customers have gone up against RMP over rooftop solar. Sarah Wright, Executive Director of Utah Clean Energy, said that they expected the additional fee might come up in the latest rate case, but “what was alarming is that Rocky Mountain Power also went to the legislature with a bill that was structured very much like some of the ALEC model legislation to direct our Public Service Commission to rule in their favor without proper analysis.”
ALEC, the American Legislative Exchange Council, is a secretive group whose donors include fossil fuel corporations and petrochemical billionaires Charles and David Koch. The organization works to push conservative model legislation in states across the country and while their effort to upend clean energy standards last year failed in every instance, ALEC has identified net metering as a policy it intends to explore. John Eick of ALEC’s energy, environment, and agriculture program told the Guardian in December that homeowners who own their own solar panels are “essentially freeriders on the system.”
Despite the initial shock back in January, Wright said Utah Clean Energy was able to work with a wide coalition of stakeholders and state legislators to amend the bill; the version that passed requires the PSC to complete a full cost-benefit analysis to determine whether there should be an additional charge for solar customers — or even a credit for the additional electricity they send back to the grid.
Thus far, however, Rocky Mountain Power has only presented their costs in terms of lost revenue, Wright said. The utility found that residential solar customers use, on average, 100 kilowatt-hours less than a typical residential customer, but their analysis stopped there. “They didn’t even look at the cost on the system and they looked at no benefits,” she said. According to Wright, Utah Clean Energy and the Sierra Club undertook their own analyses and both “showed that there were significant benefits” associated with rooftop solar.
For residential customers, net metering is a simple mechanism and … it’s a fair mechanism for all ratepayers
Utah Clean Energy worked with Clean Power Research to deliberately conduct a much more conservative analysis because they “wanted it to stand up to the scrutiny of our stakeholders and regulators here,” Wright explained. Whereas Rocky Mountain Power, ALEC and others often claim rooftop solar customers are benefiting at the expense of other customers, Utah Clean Energy’s study reached a different conclusion.
“For residential customers, net metering is a simple mechanism and based on this analysis, it’s a fair mechanism for all ratepayers because the value of solar is very near to the residential rate even with a projected two percent increase per year for the next 25 years,” Wright said. Because the residential rate reflects the costs incurred by the utility for maintenance and other fixed charges, solar customers aren’t getting away with cheaper electricity at the expense of their neighbors, though she notes that the analysis “doesn’t address lost revenues.”
On that topic, however, Wright said the utility has much more robust energy efficiency programs that also result in lost revenues amounting to “much more than residential solar.”
This fight is not unique to Utah. In nearby Arizona, solar advocates and customers have been wrestling with the state’s largest utility, Arizona Public Service, for several months. APS has taken a much more aggressive stance against solar than many other utilities, going as far as secretly contributing to outside groups running negative ads against solar power, namely the Koch-backed “60 Plus.” And after publicly leaving ALEC in 2012, APS quietly rejoined the anti-clean energy organization last fall, in the midst of the major fight over a surcharge on solar customers.
In the end, the state’s energy regulator, Arizona Corporation Commission, voted to add what amounts to a $5 per month surcharge on solar customers. While it was largely viewed as a compromise, particularly considering the significant sum of money APS has spent to fight solar, solar applications in APS territory dropped 40 percent in the first quarter of 2014 compared to the same time last year. And it didn’t end there. The latest fight in Arizona involves a new interpretation of state law that could lead to customers who lease their solar panels being forced to pay property taxes on the systems — a move the state’s solar advocates say is again being driven by APS.
The Oklahoma state legislature and even San Antonio’s pro-renewable municipal utility have also shocked current and potential customers by flirting with an additional fee for residential solar. But those fees are just a temporary solution that ignore the root of the conflict, explains Elias Hinckley, an energy and tax partner with the law firm Sullivan & Worcester.
“If you lay that solar charge on a customer … it doesn’t address the underlying fundamental problem,” Hinckley said, “which is the model in which you get paid to sell units of electricity, and it’s the only way you get paid.”
You’re throwing Band-Aids on it and hoping it goes away.
Utilities currently make their profit by providing two services, reliability and units of electricity, but that model “doesn’t fit in a world where I’ve got choices where my electricity is coming from, your wires or my roof,” said Hinckley. Until that’s reconciled, “you’re throwing Band-Aids on it and hoping it goes away.”
It’s not likely to go away anytime soon. Barclays, a multinational banking and financial services company, recently downgraded electric utility bonds across the sector because they “believe that a confluence of declining cost trends in distributed solar photovoltaic (PV) power generation and residential-scale power storage is likely to disrupt the status quo.”
“That’s a big deal because we’re not just talking about reducing just what the shareholders can expect from the utilities and making them a less appealing investment, they’re talking about bankruptcy risk,” Hinckley said.
Barclays’ point about residential-scale power storage is particularly important, according to Hinckley. Currently, solar power follows demand and provides energy when it’s needed. But if advancements can be made to scale up storage plus distributed generation and provide customers with the reliability they currently depend on the utility for, then rooftop solar becomes even more of a threat.
For now, the focus in Utah is on ensuring the Public Service Commission takes a balanced approach to the immediate issue of residential solar. If the proposed fee is approved, “it will send a message to the solar industry that our commission is not basing their decision on analysis and industry will see it as a risky place,” said Sarah Wright with Utah Clean Energy. “The fee they put forward is an arbitrary fee.”
For Mark Richards’ solar customers, it comes down to a matter of principle. “We’re a little more conservative state,” he said. “It has a little less to do with some of their political or environmental views. It’s them taking responsibility for how they power their home or business.”