Any accountant will tell you that cost allocation is a black art. Subtle shifts in fixed and variable costs can make the difference between a product or customer appearing profitable or unprofitable.
That should be kept in mind in the fight over Rocky Mountain Power’s proposed fee on those who produce some of their own power with solar panels. On one side are the 2,000 or so solar-equipped homeowners and alternative-energy advocates who say they’re providing a benefit to the community at large that should be encouraged, and on the other side is the power company arguing that the solar users still depend on their grid, and those users shouldn’t be subsidized by the rest of power customers.
To its credit, the Utah Legislature foresaw this when it passed Senate Bill 208 last session. Among other things, the bill had specific language directing the Utah Public Service Commission to carry out, with public participation, a cost-benefit analysis of "net metering" before any separate fees are charged for it.
On July 29 the PSC will conduct a public hearing on the fee (originally $4.25, now $4.65 per month) as part of Rocky Mountain’s larger rate request. The power company maintains that hearing and previous study by the commission is enough to satisfy SB 208. Company officials point out that representatives from state Division of Public Utilities and Office of Consumer Services have testified in support of a net-metering charge. Those officials agree with Rocky Mountain’s argument that, without the fee, net meterers are subsidized by regular customers.
Rocky Mountain maintains that rooftop solar only benefits those who have it and there is no larger benefit to consider. It says those individual power generators will never reduce the need for more power plants because peak demand in summer comes late in the day when solar panels contribute little. Citing a 2010 study of a neighborhood near the University of Utah, the power company argues that because of roof orientations, shade trees etc., rooftop solar can’t contribute more than 7 percent to power demand.
But to make that assertion the company relies on some speculation about future customers’ unwillingness to invest in things like pivoting solar panels or power-storage systems to keep from drawing power at peak. It also minimizes inevitable gains from improving technology and the rising cost of the alternative, burning fossil fuels.
This is where the power company’s interests diverge from its customers, both net metering and non-net metering. Rocky Mountain is foresighted enough to see a day when carbon becomes more expensive and less desirable, but they’re in no hurry to get there. Indeed, Rocky Mountain owns coal mines and coal-fired power plants. It doesn’t just transmit power. It also sells it.
Ultimately, the commission has to show it has made quantifiable estimates on net metering’s benefits as the Legislature mandated. In other words, give that black art of cost allocation the full light of public scrutiny. Otherwise, this decision will be made on Rocky Mountain’s terms.
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