The way customers are using and getting energy is changing rapidly, and Rocky Mountain Power (RMP) is responding to those changes in a way that balances the interests of all of its customers – including those with rooftop solar panels. After the Salt Lake City-based energy company unveiled a proposal to change its net energy metering (NEM) program in November 2016, some clean energy groups opposed the proposal because they feared it would hurt the solar industry.
The debate in Utah over NEM is between two industries with similar goals. The solar industry is standing up for its customers against anything making rooftop solar more expensive. RMP, which is part of the utility industry, is also standing up for its customers to keep electricity prices low.
Both industries are in transition. Energy companies are changing from using coal to using more renewable energy. The solar industry will be moving toward a time when customers may no longer get government tax breaks and utility subsidies.
The Utah Legislature in 2014 passed a law requiring the state Public Service Commission (PSC) to determine the costs and benefits of NEM. Later that summer, rate experts for the Utah Division of Public Utilities and the Office of Consumer Services testified at PSC hearings that the rate subsidy should be changed.
After nearly a year of exploring the arguments about how solar NEM should be valued, the commission directed RMP with specific parameters to make a detailed study on the actual costs and benefits of NEM.
The study found the average Utah rooftop solar customer receives an annual subsidy from other customers without solar panels of almost $400. With the substantial growth of the solar industry in Utah, this transfer of wealth between different residential customers is projected to total $667 million over the next 20 years.
How does someone who generates his or her own power gain a subsidy? NEM customers rely on the grid 23.99 hours per day, either to take power from the grid or to return their excess energy. These customers purchase less power from the energy company but continue to use the grid. This results in NEM customers underpaying their share of fixed grid costs. They are also currently being credited three to four times the market rate for their excess generation. Those costs are also passed on to customers who can’t or choose not to have rooftop solar.
In an effort to make costs fair, RMP is proposing that future rooftop solar customers pay a rate that matches their use and covers their costs without being subsidized by other customers. The rate includes a basic charge that closer reflects fixed costs like customer service and meters; a demand charge to cover poles, wires and generation; and a much lower kilowatt-hour use rate for electricity purchased from the energy company. The proposal would also credit rooftop solar customers for the value of the energy they contribute to the grid at a rate that removes subsidies from other customers.
RMP did not propose the new rate for customers with rooftop solar panels before Dec. 9, 2016, because of the financial decisions these customers already made in purchasing a rooftop solar system.
The commission will hold hearings in August before making a decision. It is easy to question motivations rather than try to work together, which is why at this writing, RMP is meeting with solar industry representatives and other stakeholders to hear their concerns and see if a mutual solution can be found.
RMP believes subsidies are a matter of public policy that should be addressed at the federal and state level instead of being included in rate making. Legislators are elected by the people and can decide whether incentives are needed for certain industries. We are interested in working with the solar industry in finding a path forward that is fair to all customers.
Gary Hoogeveen is senior vice president and chief commercial officer of Rocky Mountain Power.