This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.Guest Blog | August 22, 2016
From Colorado to the Southeast? A major settlement on vexing renewable energy issues has just been announced in Colorado that has important implications for the Southeast.
On August 15, a major settlement was announced between Xcel Energy, the staff of the Colorado Public Utilities Commission, and numerous businesses and associations in Xcel Energy’s rate case. This rate case saw discussion of some of the most vexing issues confronting renewable energy advocates and utilities across the country, including in the Southeast. As discussed at a recent National Association of Regulatory Utility Commissioners (NARUC) meeting, economic pressures related to renewable energy development, especially electric rate structures, are some of “the most divisive issues facing regulators today.”
What the Colorado deal indicates is that there is a path forward for resolving these issues. Unfortunately, there are two big obstacles to seeing these solutions in the Southeast. First, few of these solutions are being considered (much less implemented) in the Southeast. Second, utilities and their regulators are showing little leadership on these issues. Below, I’ll discuss what I think are the five most important elements of the deal (as summarized by Xcel Energy and Western Resource Advocates), and where things stand in the Southeast on each of these five issues.
Update: The settlement agreement became available after this blog was published. In addition to the settlement itself, those with an interest in understanding the settlement better may wish to review the testimony filed by Xcel Colorado’s witness Alice Jackson or the Solar Energy Industries Association witness Tom Beach.
No discriminatory rates for solar customers
Xcel Energy has agreed to withdraw its “grid-use charge” proposal under the settlement. Generally speaking, a “grid-use charge” would be a fee or rate on a customer’s bill that reflects the customer’s decision to install and use solar power for personal or business consumption. What this means is that any Xcel Energy customer has the option to choose to install solar and generate power – thus avoiding paying the utility for that power – without being penalized. This is what is known as “net metering,” although precise definitions of this term vary widely.
In the Southeast, similar “grid-use charges” have been proposed in two states. Georgia Power proposed such a charge in its 2013 rate case, and ultimately withdrew the solar tariff when faced with opposition from solar advocates and Georgia’s utility commissioners. After similar charges were discussed in South Carolina, a multi-party settlement in response to Act 236 effectively postponed the question of how solar customers might be billed (or credited) until 2021.
Elsewhere in the Southeast, even though net metering is generally available to customers, the question of special rates for solar customers has not been formally discussed. This is mostly because other policies have blocked customers from choosing to use solar power. For example, Florida has numerous challenging restrictions and policies, such as burdensome taxes on solar energy systems that are relatively unique to Florida. Mississippi’s utility regulators, as well as major public utilities like Florida’s Jacksonville Electric Authority and Santee Cooper in South Carolina, have also taken steps to reduce the bill savings associated with solar generation, with TVA also seeming inclined to join them.
Transition to “time of use” rates for all customers
Xcel Energy will be piloting voluntary “time of use” (TOU) rate programs for its customers through 2019. If successful, Xcel Energy would transition all its customers to this rate structure beginning in 2020. Well designed TOU rate programs provide all customers with a fair price for power that is related to its actual cost of supply and address many, if not all, of the concerns that utilities have about the impact of customer choices to install solar panels.
(Briefly, utilities are concerned that solar production during low demand hours (like pleasant spring afternoons) are being overpaid when customers can get essentially “full credit” for power generated during those hours. Solar advocates complain that fixed rates underpay for the excellent value solar provides on hot, sunny summer afternoons. For solar, well-designed TOU rates mean that solar power is credited based on whether it generates during the hours it is most needed.)
Currently, nearly all small residential and commercial customers in the Southeast pay for electricity on a level, metered basis. Unlike TOU rates, these level, metered rates do not reflect the fact that it costs more to supply power during certain hours than during other hours, mainly due to higher demand requiring use of more costly power plants during those hours.
Across the Southeast, many utilities offer TOU rates on a voluntary basis to their customers. But some TOU programs are poorly designed, and no utility is promoting an overall transition to TOU rates with the same vigor that they are demonstrating in expressing their concerns about the “threat” of solar development to their business model.
Focus on making solar accessible to low-income customers
While there are not a lot of publicly available details about the low-income solar programs that Xcel Energy would provide, it appears that the Colorado Energy Office would encourage both solar gardens (more commonly referred to as “community solar”) and customer-sited solar installations that would be accessible to low-income customers. The National Community Solar Partnership, sponsored by the Department of Energy, was formed in 2016 to increase solar access to low to moderate income communities as part of a larger White House initiative to achieve 1 gigawatt of low and moderate income solar by 2020.
Low-income customers are typically unable to access solar power and its benefits because they often don’t own their homes, can’t afford the high up-front costs, and don’t have access to financing. Community solar is usually designed so that customers who “buy in” are able to quickly save on their electric bills, and are able to participate regardless of whether they own, rent or simply can’t install solar for whatever reason.
Across our Southeast region, we are seeing some utilities take a strong interest in community solar programs. South Carolina utilities are a good example, with SCE&G and Duke Energy planning to open new programs in 2017, and we are deeply engaged with Tennessee Valley Authority on what we hope will evolve into a very strong program involving both solar and energy efficiency opportunities for low income communities.
Voluntary 100% “green energy” purchases
Xcel Energy is improving and simplifying its program that offers customers a chance to get a 100% “green energy” choice. Customers in much of the country already have this option if their region has a “retail choice” market. For small commercial and residential customers, this is not really an option in the Southeast. So only if the monopoly utility offers a “green energy” program can customers make this choice.
Most states in the Southeast have some kind of green energy product available to utility customers. From what we have seen, however, these products have been overly complicated (customers often buy “blocks” of energy, which is hard to understand) or there has been mismanagement (such as FPL’s mismanaged Sunshine Energy program). Generally, it appears that Southeastern utilities don’t want to offer “100% renewable energy” options to their customers.
Support for industrial “recycled energy” projects
This is perhaps one of the most surprising elements of the Xcel Energy deal. Many industrial (or even large commercial, such as hospitals) customers generate large volumes of waste heat. Although technology exists to capture that waste heat and convert it to electricity, application of these technologies is often limited by utility rate structures. Often utilities require these systems to pay a “backup charge” and do not offer them the same incentives that are available for other energy saving technologies.
Nowhere in the Southeast are any of our utilities providing effective support for the development of these “recycled energy” projects. It is great to see this partnered with renewable energy in this settlement – looking at how to make the most of what we are using is a smart strategy that has meet too many regulatory bottlenecks in the southeast.
Southeastern states should take action
SACE is working to encourage utilities and their regulators to take each of these steps. What are your thoughts? How can these ideas be encouraged in the Southeast?