Is a fee for solar energy users a ‘sun tax’ or fair play?
By Brian Maffly
The Salt Lake TribuneFirst published Jul 27 2014 01:01AM
Angled to the southeast, Stan Holmes’ home above the state Capitol has a great view of City Creek Canyon but a less optimal position for solar panels — they generate most of their electricity in the morning, not during afternoon surges in demand.
But his new is 3.78-kilowatt system still produces more power than his family can use much of the year, and sends the surplus into the grid to power the neighbors’ lights, kitchens and air conditioners.
The photovoltaic array greatly reduces their utility bills, but "that’s not what drove us," said Holmes, a retired high school history teacher. "The idea was to do everything we could to reduce our carbon footprint."
The Holmes family is among 2,700 Rocky Mountain Power customers who "net meter" — earning credit for the excess power they produce — and this number is growing rapidly as the cost of solar installations drops. Now the utility wants to charge such customers $4.65 a month to help cover the grid’s fixed costs, those associated with transmission and distribution of electricity through a vast network of wires, transformers and substations.
While this charge would raise only $150,000 in its first year, a disparate group, including local governments, businesses and religious leaders, criticizes it as a "sun tax" or "solar penalty" that would inhibit the market for energy from renewable sources.
Distributed solar power "reduces air pollution and greenhouse gas emissions, generates local economic development and empowers our constituents to be directly involved in the improvement of our local community," said Salt Lake City Mayor Ralph Becker, who has asked the Public Service Commission (PSC) to reject the fee.
But the utility, joined by state regulators and consumer advocates, contends critics are ignoring a good case for imposing the charge, which is a small part of RMP’s request for a general 5 percent rate increase.
"It’s not a tax, and it’s not a penalty. It is designed to be cost-based, which is how all rates are set," said Michele Beck, director of the Utah Office of Consumer Services. "These talking points are very compelling but they do not tell the whole story."
Beck and others say net metering shifts the costs of operating and maintaining the grid from consumers who generate their own power — but who also rely on RMP-generated power when the sun isn’t shining — to those who do not.
The ‘shifting’ debate • The utility’s larger rate increase request has been resolved. RMP asked for $76 million and settled on $35 million after its case before the PSC was vigorously challenged by Beck’s office.
The net metering charge is the remaining issue, and the most contentious.
"There is cost shifting going on and we need to take care of it before it becomes burdensome, before all these people put solar arrays on their roofs," Beck said. "It’s not fair for them to make their decision under one set of circumstances and be faced with another set."
Arizona is the only state to have authorized such a fee, but utilities in other states are trying to get them approved — a trend that environmentalists say bodes ill for the climate and a clean energy future.
The Utah dispute has attracted the attention of clean energy advocates from around the nation who hope to thwart disincentives to renewable power, seen as the best way to cut use of fossil fuels.
"There is a tremendous urgency to reduce carbon emissions. Distributed solar energy is the main growth area for renewable energy. To strangle it in the crib would be doing a tremendous disservice to the people in Utah and around the country," said Casey Roberts, an attorney for the Sierra Club’s Beyond Coal campaign.
According to a Sierra Club analysis submitted to the PSC, Utah’s current net metered customers save the utility $1.4 million a year, mostly in the form of avoiding costs associated with power generation.
Assuming a 6.8 percent annual growth rate, the analysis concludes such solar installations will save the utility nearly $140 million in costs through 2040, while generating nearly 2 gigawatts of clean power and keeping 20.5 metric tons of greenhouse gases out of the atmosphere.
"There is no empirical evidence that shows that [net metered] customers cause additional wear on grid equipment," wrote Dustin Mulvaney of EcoShift Consulting. "To the contrary, lower operating temperature from relieved grid congestion suggests the opposite effect."
Reflected benefits • Environmentalists and liberal politicians aren’t the only voices denouncing the proposed fee. Religious leaders are calling on the PSC to reject it.
Mark Thomas, co-founder of Mormon Environmental Stewardship Alliance, said Utah has a "fiduciary" obligation to future generations to stop depending on coal, which now accounts for two-thirds of RMP’s power generation.
The utility "is part of the coal industry. They mine and burn it here. This poses a threat [to Rocky Mountain Power] from the standpoint that we are mining what is glaring in my eyes right now," Holmes said Friday morning, standing under his solar array. "These panels are contributing nothing to the pollution caused by fossil fuels."
And a Republican group called TUSK, or Tell Utilities Solar won’t be Killed, plans to rally against the fee on Tuesday.
"This tax would threaten local job creation and hinder the ability of homes to produce their own energy," TUSK proclaims in a flyer. Led by Barry Goldwater, Jr., a former California congressman, the rally will be held at 4 p.m. Tuesday in front of the Heber M. Wells Building at 160 E. 300 South in Salt Lake City, just before the PSC takes public comment.
A state bill passed last session enables utilities to impose a charge on net metered customers to cover costs they incur to the electrical grid. But SB208 requires the PSC to weigh those costs against the benefits net metering provides.
Salt Lake City and 11 community councils around the valley have asked the commission to reject the fee, many of them arguing RMP has ignored those benefits.
"If someone is putting solar on their home, that is avoided [cost] to the power company," said Vicki Bennett, Salt Lake City’s sustainability director. "We don’t believe the benefits are reflected. Let’s do a thorough analysis. The benefits include air quality and reduction in greenhouse gases."
Community councils argue solar offers broad benefits to all Utahns, as well as to the utility.
"Rooftop solar reduces the need for expensive power at or near times of peak demand; reduces the need to transmit power over long distances using expensive transmission infrastructure; and delays the need to build new and expensive power plants," the Sugar House Community Council said in its submitted comments.
Moving away from coal • But Beck and RMP spokesman Dave Eskelsen say the Sierra Club analysis is flawed. "The benefits are overstated and the assumptions they used aren’t appropriate," said Eskelsen. "We are sensitive to the issues of air quality. None of our coal plants are near the Wasatch Front. The transition [away from coal] is already happening. All plants we’ve built since 2000 are natural gas and wind."
Solar’s major drawback, from the point of view of utilities, is that its peak output occurs in the early afternoon, a few hours ahead of peak demand when people get home from work.
RMP studied the Salt Lake City neighborhood served by its Northeast Substation, at 144 S. 1100 East, examining what would happen if solar was installed on every rooftop that faces the most effective directions — south and west — and is not shaded.
It determined such a scenario would reduce peak demand by only 7 percent, according to Eskelsen.
Holmes’ 14 American-made panels, each measuring 40 inches by 60 inches, cost $14,000 to install. He expects to recoup about $5,500 through state and federal tax credits and predicts his overall investment will pay for itself in eight years.
For the community, he thinks a 7 percent demand in reduction is a strong benefit.
"That’s energy the system does not have to generate from a distant plant," Holmes said. "When you are generating solar energy from a rooftop it is being consumed locally. It may not even make it back to the closest substation. The power RMP is providing is coming, in some cases, great distances over transmission lines where you have loss of energy. This is more efficient."