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Utility regulators in Nevada have approved a new net-metering plan for their solar customers that will increase the fixed service charge and gradually lower reimbursements for electricity sent from a homeowner’s photovoltaic (PV) array to the grid from the retail to the wholesale rate.
The unanimous vote by the Nevada Public Utilities Commission took place on December 22. The next day, SolarCity announced that it would suspend operations in the state and accused regulators of damaging the state’s economy and jeopardizing thousands of jobs.
“The PUC has protected NV Energy’s monopoly and everyone else will lose,” SolarCity CEO Lyndon Rive said in a statement reported by Greentech Media. “We have no alternative but to cease Nevada sales and installations, but we will fight this flawed decision on behalf of our Nevada customers and employees.”
Changes go into effect on January 1. SolarCity, the nation’s largest installer of residential PV systems, said that the commission’s decision to apply the rates to existing as well as new customers amounted to “sabotage” of customer investments.
“Most disturbing is the Commission’s decision to retroactively sabotage existing solar customer’s investments by not grandfathering them onto current rates,” Rive said. “The Nevada government encouraged these people to go solar, and now the government is putting them at great financial risk.”
Vivint Solar, the second largest residential installer after SolarCity, also said that it would halt operations in Nevada if the plan won approval, Greentech Media said.
Compensation gradually declines
The Associated Press said that the exact amounts of the changes have not yet been determined, but base service charges were expected to double or triple over five years while the reimbursement rate for excess electricity would decline by 75%.
Regulators said that the current net-metering plan, which pays the state’s 17,000 solar customers the retail rate for excess electricity, shifted costs of maintaining the grid to customers who didn’t own any PV panels, the AP reported. This is the same argument that utilities around the country have been making in other net-metering disputes.
The Nevada PUC, however, did reject a proposed “demand charge” because it might confuse customers at a time when other rate changes were going into effect. Demand charges, more common for large commercial customers, bases rates on highest use and can penalize even thrifty customers who experience a spike in electricity consumption at certain times of the billing cycle.
The PUC said in a statement prior to the vote that the changes would “eliminate unreasonable cost shifts between ratepayers without resulting in any additional profits to NV Energy.” NV Energy is a holding company whose two main subsidiaries, Nevada Power Company and Sierra Pacific Power Company, have 1.3 million customers in the state.
“The draft order finds that current rates enable net metering customers to avoid paying for some of the fixed costs associated with the sale of electric service by NV Energy to net metering customers,” the PUC said. “For example, NV Energy incurs significant costs investing in the infrastructure necessary to ensure that it can meet net metering customers’ full electricity demands when the customers’ solar energy systems are not generating electricity.”
It said that paying the full retail rate for electricity “unreasonably increases the costs that are ultimately borne by other ratepayers.” Lowering the rate to the “avoided cost,” what NV Energy would pay to generate or buy the power, would reflect its “true value.”
The order, however, allows customers with PV systems to take advantage of time-of-use and time-of-production rates.
“Time-of-use pricing will enable net metering customers to respond to price signals for both the excess generation produced by their net metering systems and the electricity delivered by NV Energy, while position them to benefit from future advancements in technologies such as storage,” the PUC said.
New training center will close
There’s some painful irony in SolarCity’s decision to stop Nevada installations: SolarCity opened a 13,000-square-foot regional training center in Las Vegas less than a month before the PUC’s vote.
The opening of the West Las Vegas facility, which had been expected to train as many as 4,000 workers per year, was lauded by Governor Brian Sandoval and Senator Harry Reid, among others. SolarCity Public Affairs Manager Amanda Myers said the center will close.
“There are no more jobs to train people for,” she said in an email.
The company said in a news release that it employs more than 2,000 Nevada residents, and that the state is the top solar job creator in the county on a per capita basis. It’s wasn’t immediately clear what would happen to SolarCity’s employees in Nevada.
“We will try to minimize the impact as much as we can with transfers and relocations, but we still expect several hundred Nevada-based employees may be affected by the PUC decision,” Myers’ email said. “The specific impacts will be determined in the coming days and weeks.”
She added that the PUC is considering motions from both the Nevada Bureau of Consumer Protection and The Alliance for Solar Choice to delay the new rate plan. “Both grounds have also suggested they will file a petition for reconsideration of the PUC’s decision,” Myers said.
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6 Comments
Forcing Utilities to pay
Forcing Utilities to pay retail rates for a wholesale commodity was an ignorant policy from the very start. It truly is a regressive tax on the poorest families who have to pay more money to support wealthy individuals who have the credit and capital to install solar.
Simply not so. (Response to the utility industry stooge :-) )
The start of net metering came about because utilities didn't want the expense of differentially metering imports and exports. This wasn't "Forcing Utilities to pay" anything- it was promoted by the utilities themselves as the easiest solution at the time, not a policy forced upon them by regulators.
And, at current penetration rates in NV net metering is still a net savings to the other ratepayers, not a regressive taxation (as is often presented by utilities.) There are both winners and losers here, but the losers are merchant power generators with shrinking capacity factors/revenues, and investor owne utilities that were counting on making guaranteed returns on capital expenditures for both generation and grid upgrades that won't be needed in a widely distributed privately owned generation model represented by PV. Mulitiple independent analysis have show that NV is not yet at the crossroads where net metered distributed power presents an additional cost to other ratepayers. The day will eventually come where marginal increases in distributed PV becomes a cost adder as more of it goes up, but to gouge current PV owning ratepayers retroactively is a serious over-reach benefitting utility investors, not the ratepayers. Staging changes in net metering to the marginal next-kw of PV once that threshold is crossed is a far fairer way to deal with ubiquitous privately owned PV, but it's not in the interest of investor owned utilities, who only see shrinking revenue, and potentially stranded peaking power generation assets.
There's nothing holy about the utility business model as it has been practiced, and utility companies are not a protected spcecies of holy cows that need to be sheltered from the reality that there isn't enough economy of scale in PV to favor them. Thes move is a real policy error, but it can be corrected.
Characterizing PV owners as the well-off exploiting the less well off with a subsidy on their PV also isn't accurate. The NV PUC's own rate analysis indicates that most net metered PV installed to date will have a lifecycle cost more than grid purchased power would have been. Even when penetration of PV reaches the point that it's a net cost to other rate payers, there are equal or greater cross subsidies in play regarding air conditioning, where the very high draw large central air conditioning pay the same per-kwh grid costs as those without air conditioning (or pipsqueak sized AC), despite the much higher capital cost for the grid infrastructure required for serving those loads. If the grid service for all customers were paid for via demand charges based on the highest draw during peak grid load hours it could level that a bit, but it would also induce the well-off to install more PV (and maybe some batteries) to reduce the size of the demand-charge billing, further cutting into utility company revenues.
Utility companies face some serious challenges, no doubt. But trying to block out the competition with regulatory moves isn't really going to save them.
Retail vs Wholesale Electric Metering
To me, what NV is doing won't change things much. PV will happily continue it's market rise. PV capital cost continues to decline and a federal bi-partisan vote means PV subsidies will remain for a while longer. The NV data point will help us to measure the effect of the net metering value. Solar City makes it sound like the sky is falling and maybe it is, but it sounds mostly like political positioning. I'm sure there are those who will only install PV if it's heavily subsidized, but to me energy saving and green energy projects are intrinsically appealing, subsidies or no.
It all reminds me of an old saying: "The dogs bark, the caravan moves on."
The sky IS falling... for existing third party ownership in NV.
A large fraction of the residential scale solar in NV currently is owned by the bigger solar companies like Solar City and Vivint, who have a long term power purchase agreement (PPA) contracts to sell power to the homeowner under that roof, usually at a discount from the utility company rates. If net metering is withdrawn and fees assessed the contract clauses will raise the contract price well above the utility company rate, inviting contract default. On new PV, the third party ownership/PPA or lease options won't pencil out- it's a money loser, and it then becomes a money loser for outright purchase as well, at least until the cost of solar drops to the buck-a-watt range (which it will).
Withdrawing net metering from existing homeowner-owned PV also makes those already-built system a money loser in NV. At the very least existing PV should have been grandfathered in to net metering for say, 20 years from the time they hooked up, since their very existence is in fact saving other ratepayers money on things like deferred grid infrastructure upgrades, lower grid maintenance, lower peak power spot market pricing, etc. The uncertainty factor of wild policy swings such as what the NV PUC just pulled makes new solar too risky to be bankable. PV is a long term investment, and if the regulators seem prone to slapping on extra fees at random or changing the compensation structure without grandfathering in the existing installations it's simply too many unknowns. This move is simply bad policy.
Other states like Minnesota and Maine have settled upon methods of calculating the value of solar and assigning a value of solar tariff (VOST) that may be paid to PV owners in lieu of net metering. Minnesota was the first state to take that approach, and utilities to date have opted for the 20 year grandfathered net metering approach rather than paying the (currently higher) VOST. As the penetration of PV increased in the coming decades it's likely that new installations will eventually be compensated on the VOST schedule rather than net metered. But with this type of structure there is stability in the market- the investor can safely assume that the rug is unlikely to be suddenly yanked out from beneath them in a couple of years, leaving them stranded the way current PV owners in NV are.
The statement the new regulations " ...eliminate unreasonable cost shifts between ratepayers without resulting in any additional profits to NV Energy." is disingenuous. It may be true that this doesn't increase utility profits in the immediate time frame, but they are in fact protecting utility revenues by boxing out competition and declining kwh sales from self-produced power. If they were really interested in eliminating "...unreasonable cost shifts between ratepayers..." all ratepayers would be paying for grid services primarily on a demand charges basis, not a low fixed monthly fee plus a per kwh assessment. This isn't about ratepayer fairness, it's all about strangling competition to head off declining utility revenues in the face of rapidly falling costs for small scale PV. It's as if a brahmin PUC priesthood protecting the holy utility cows, rather than setting up regulations that allow/force them to adjust their business models to accommodate the new reality. Is it possible that the regulators are perhaps a bit too close to the regulated? (Gee, that's never happened before! :-) )
Strangling competition
"This isn't about ratepayer fairness, it's all about strangling competition to head off declining utility revenues in the face of rapidly falling costs for small scale PV."
Absolutely could not agree more. The Republicans took control of the Minnesota House last year and introduced 18 different anti-solar measures. The biggest set back was that Electrical Co-ops can now zero out your meter on January 1, if you have built up a positive number of electricity during the year. And they promised to continue their anti-solar efforts again in 2016 and beyond. Working on behalf of the Koch Brothers and Utility investors while professing to only be thinking of the poor, is the new mantra.
Reply to Steve
While Dana pointed out that Maine had adopted a VOST concept, it hasn't been implemented yet. Now, the net metering deal with Central Maine Power is similar to that you mention in MN. Here, if we produce more than we use over a 12 month period, we lose the excess, which is then sold by CMP, which, by the way, is owned by Iberdrola, a huge Spanish energy company.
Because producing more than we use is of no benefit to us, we planned the size of the PV system based on our estimate of what we would consume over a year and expect to roughly use the same amount as we produce. Were the situation different, we probably would have added more PV.
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