Utah PSC strikes solar compromise with Rocky Mountain Power
The Utah Public Service Commission (PSC) has responded to Rocky Mountain Power’s request to reduce the price for export credits paid to solar customers on the grid.
Rocky Mountain Power has been paying customers $0.092/kWh since 2017, after an agreement with solar advocates. They had asked for a reduction in that credit, varying from $0.013 to $0.026/kWh (averaging at $0.015), depending on the time of day and season. The utility had argued that this was fair given the avoided costs of solar production.
The order by the Utah PSC set the value for the export credits at $0.05969/kWh in summer and $0.05639/kWh in winter. According to the order, “These rates represent an avoided energy component of 2.439 cents/kWh in summer rates (June through September) and 2.109 cents/kWh in winter rates (October through May), plus total avoided generation, transmission, and distribution capacity costs of 3.53 cents/kWh.”
“We appreciate the work done by the commission to study this issue and arrive at a decision that is fair for all customers,” Rocky Mountain Power said in a statement after the ruling. “This result protects customers who do not have rooftop solar and provides meaningful compensation for excess generation from those customers who have chosen to produce some of their own power while maintaining their connection to the utility grid.”
The PSC also rejected a metering fee and application fee that had been requested by Rocky Mountain Power. The order immediately goes into effect, although the Utah Solar Energy Association filed a motion to change the implementation date to Jan. 2, 2021.
The order is the latest compromise struck among public service commissions across the country to work with both sides.
“There’s been a lot of compromise along these lines. There’s a fairly broad consensus, except among people that sell rooftop solar panels, that net metering just produces too high a price,” said Ashley Brown, executive director of the Harvard Electricity Policy Group. “It has cross subsidies, it hurts the poor. So that, and also solar is a much more mature, much more competitive technology than it used to be, so it doesn’t need all these cross subsidies.”
The economy of solar has changed over the last 50 years, and Brown feels that the market needs to reflect those changes.
“The fact is, net metering was coming to exist at a time when the cost of solar panels was about a hundred times what it is today,” he said. “This goes back to the late seventies, early eighties when it came into existence. The cost has declined, but we haven’t changed the pricing to reflect that. There were a bunch of reasons why we had net metering that relate to technology that’s out of date now, that relate to limitations in technology. [Regulators] didn’t know what to do or how to treat it. So it was a default because it was easy to do. It was never meant to be an accurate pricing.”
Brown agrees that rooftop solar owners are entitled to the energy rate (and “there is not much dispute about that” in the industry), but the Utah PSC also allowed some space for offsetting capacity needs, to both the transmission and generation.
“The Utah commission was being a little bit generous to the solar people, giving them some portion of it,” he said. “They compromised, they took it down from the previous price, cut it not quite in half, but close to in half. But they didn’t get as low as Rocky Mountain Power was looking for.”
According to Brown, solar has been a hot topic among both solar and utilities because it has never been exposed to normal economic forces. Utilities and public service commissions across the country have been looking at those factors in recent years.
“It’s a step in the right direction. It’s a step in the recognition of competitive markets to put it closer to market price,” he said. “But in terms of the future of solar, what’s really interesting – and there’s been emerging evidence of this – is that what net metering has done is shielded rooftop solar from competitive market forces. So what you find is if the cost of solar has declined, the price that consumers pay for rooftop solar has declined, but not declined to the same degree. So somebody is keeping some of those cost reductions. And they’re able to do that because, under net metering, they get the full retail price of electricity, even though they don’t provide for retail electricity service. All they provide is excess energy when it’s not being consumed on the premises where it’s produced.”
Utilities have been pushing back on net metering in recent years, but Brown does not believe it’s because it affects their bottom line. He explained, “it’s because they recognize how inefficient it makes the marketplace. Now that FERC has opened the door for distributed resources like rooftop solar to participate in the wholesale market, that really makes it even clearer that perpetuating net metering is just not in the public interest.”
Rocky Mountain Power agrees. The ruling will help them reduce fees caused by net metering passed on to non-net metering customers.
“Residential customers who have not chosen to generate some of their own power will benefit because the intra-class subsidy that currently flows from their rates to net metering customers will be corrected,” Rocky Mountain Power company spokesperson David Ekselsen explained before the ruling. “It is also important to note that this subsidy exists only within the residential customer class. Rocky Mountain Power’s revenues and profits are not affected either by the existing subsidy or by the proposed change.”
The change seen across the country could provide solar with different incentives that would help them play an even bigger role in the marketplace, according to Brown, “and it does away with the old business model that made solar vendors basically fat and happy without having to be efficient. And that’s what net metering did. It made them fat, happy, and inefficient.”
