Not Just Illegal, Targeting Solar Facilities With Fees is Poor Policy

Date: 12 May 2016 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Should utilities be able to add special fees on customers that have solar or small wind installations?

Not only is it against Minnesota state law, but in our recent comments to the state’s Public Utilities Commission, we explain how one-off fees on customers using distributed generation to cut their energy consumption violates the spirit of good utility rate design, and inhibits development of a more efficient electricity system.

Six Minnesota utilities were singled out by the Commission in the recent investigation, all guilty of having fees imposed (usually associated with metering) on customers with distributed generation systems. The fees were wide ranging, as were the purported costs they were intended to recover. The fees also directly conflict with the state laws meant to encourage “maximum encouragement” of distributed renewable energy resources.

From our comments:

“Targeted fees on qualifying facilities can hardly be considered consistent with ‘maximum possible encouragement,’ especially when there has been so little evidence presented by the state’s electric utilities that such fees reflect a full and accurate accounting of the costs and benefits of such facilities. A regulatory tool does exist to fulfill this purpose, called the value of solar tariff, but no utility has yet opted to use it.”

It’s unfortunately not unexpected to see utility companies reacting to change on the electric grid in this manner, as several other technological shifts in other industries suggest:

To an extent, this reaction reflects the slow and conservative nature of the electric utility business. Electric utilities are often as unprepared for the rapid technological changes in efficiency or solar as were typewriter manufacturers or landline phone companies were for computers or cell phones. But such a lack of preparation is not an excuse to penalize customers whose own investment of capital can offer system benefits greater than their compensation, as suggested by the premium of Xcel’s 2016 value of solar price over its residential retail rate.

What could utilities do differently? In Minnesota, specifically, they could learn a lot from the Commission’s Alternative Rate Design proceeding, exploring ways to design rates in a way that incentivizes customers to act in a way with maximum benefit to themselves and the electric grid. Examples include time-of-use rates that charge customers less to use electricity when it costs less to deliver, or reward them more for putting power onto the grid at times of high demand.

The fees aren’t just illegal or poorly conceived, as we say in our comments, “they reflect a knee-jerk reaction to change—reflected in inconsistent and incomplete rationale—rather than a thoughtful and transparent approach to appropriate rate design. ”

We can do better.

Download the full comments here.

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John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.