Future of Utah’s rooftop solar industry at stake in utility rate case starting Tuesday

(Chris Detrick | Tribune file photo) A technician installs solar panels on top of a home in Salt Lake City in 2016. The Utah Public Service Commission is beginning a two-week hearing that likely will determine the future of rooftop solar in Utah because it will decide the value of the credits solar-users receive in selling excess power to the state's regulated electric utility, Rocky Mountain Power.

A two-week hearing starting Tuesday before the Utah Public Service Commission could result in a “make-or-break” ruling for the rooftop solar industry in one of the nation’s sunniest states.

The three-member PSC panel is weighing competing proposals for the amount Utah electrical-utility customers are to be credited for excess solar power they export into the grid for their neighbors to use.

Rocky Mountain Power, Utah’s largest utility, is seeking an 84% reduction, while solar advocates are pressing for an increase over the current export credit of 9.2 cents per kilowatt-hour (kWh), or 90% of the utility’s average residential retail rate.

The utility’s proposal ignores numerous benefits “distributed” power generation provides the utility in addition to avoided fuel costs, such as reduced line losses and reduced grid upkeep, according to Kate Bowman of Utah Clean Energy.

Currently, 40,000 homes and businesses are pumping rooftop-generated power into the RMP grid. That’s 2% of the utility’s customers, indicating there is plenty of opportunity for growth in a business sector that employs 7,000 people in Utah, Bowman said.

“If Rocky Mountain Power’s proposal is approved, it sends a strong signal to prospective solar customers that their energy exported to the grid is essentially worthless,” she said. “It would take up to 25 years, potentially longer, to pay back the upfront investment in solar panels. And that means many solar customers will never realize any savings over the life of their panels.”

Utah Clean Energy and its allies are asking for a rate of 12 cents per kWh locked in for 20 years. A generous credit is key to continued expansion of emission-free renewable energy, because it would give homeowners a financial incentive to invest in rooftop photovoltaic panels, advocates say. When the sun’s rays are not available, these homeowners rely on electricity supplied by the power company that they purchase with the credits they earn from piping their excess power into the grid.

But RMP argues it can buy or generate this power at far lower prices, so it insists on a sliding rate that averages 1.5 cents per kWh.

According to an analysis by the advocacy group Vote Solar, RMP’s solar customers generated a total of 406 million kWh in 2019, of which 235 million were exported into the grid. That exported power, for which the utility provided credits worth up $20 million, represents less than 1% of the utility’s sales that year, which totaled 23.7 billion kilowatt-hours.

A typical 7-kilowatt residential installation in Salt Lake City generates 10,450 kWh per year, about half of which would be exported from the home. Under the current credit structure, that homeowner would see an annual credit of $480, but only $78 under the utility’s proposal.

It its filings to the PSC, Rocky Mountain Power says the current credit is “unsustainable, not lowest cost, and shifts costs to other customers.”

Its proposal is designed to minimize the shifting of solar customers' share of the grid’s fixed cost to other ratepayers, according to written testimony submitted by Joelle Steward, the utility’s vice president for regulation. The export credit paid to “customer generators” is borne by other customers, and the rate has no impact on Rocky Mountain Power’s earnings.

In other words, she argued, the utility’s proposal is not borne of self-interest, as solar advocates allege, but rather public interest.

Solar advocates “continue to focus on the impact to a single industry without consideration for the impacts their proposal will have on the other industries and jobs that rely on affordable electric rates,” Steward wrote. “Asking those customers to pay more than is reasonably justified in order to support a single sector of the economy is, by definition, a violation of the public interest.”

The utility’s proposed credit ranges from 1.3 to 2.7 cents, depending on the time of day and time of year. The credit would be higher during peak-use periods and lower when electrical demand is low.

In recent weeks, public comments have flooded the PSC, most favoring a higher export credit. One came from Evan Johnson, a Salt Lake City software developer, who is weighing whether to spend the $10,000 to $20,000 it would take to install photovoltaics on his home.

“There should be some middle ground where the utility doesn’t get overcharged for rooftop generation, but where the consumer doesn’t get undercharged either,” he wrote. “At the end of the day, we want the same thing: more energy captured from the sun instead of released by burning carbon.”

Investing in solar panels would have no financial upside if the commission approves Rocky Mountain Power’s proposal, according to Johnson.

“This would be a big hit. It’s already borderline. The payoff rate is about 20 years,” he said in an interview. “I’m hoping the net-metered rates stay up where they compensate homeowners for their investment. I’m still interested in doing it from the environmental perspective.”

Members of the public are invited to testify Oct. 5, but they must sign up by this Wednesday to speak.

In its filings, the Utah Office of Consumer Services said it prefers the utility’s proposal, which it found to be consistent with true cost-based rates.

But solar advocates argued Rocky Mountain Power focused narrowly on avoided fuel costs, without considering other tangible benefits. Their 12-cent proposal doesn’t cover unquantifiable benefits to the community, such as reduced emissions and improved air quality, but rather keys exclusively on value to the utility, which is passed on to all ratepayers, according to Sachu Constantine, general director for regulatory programs for Vote Solar.

For example, because rooftop-generated power travels only to neighboring homes, it puts far less wear and tear on the grid than centrally generated power.

“So we’re talking about the avoided energy that no longer has to be generated by the utility because customers are generating it,” said Constantine. “We don’t have to move that energy from distant plants, sometimes out of state, across long transmission lines or even some of the secondary parts of the system to get it to the customers. So there’s energy losses that are avoided.”

Rooftop power also lowers the utility’s need for investing in additional generating and transmission capacity, advocates argue. And reduced carbon emissions lower the utility’s costs for meeting clean-energy targets.

But these advocates are not fully accounting for the huge benefit solar-equipped customers reap from being connected to the grid, which the utility is responsible for maintaining and promptly fixing when outages hit, according to utility spokesman Spencer Hall. The massive costs of grid upkeep should be equitably distributed among all customers. But the utility fears solar-powered ratepayers could dodge their share, a concern also held by Utah utility regulators and consumer advocates.

“When the sun goes down, we’re happy to provide reliable electric service to our solar customers who don’t have on-site storage,” Hall said. “However, asking our other customers to pay double the retail rate for rooftop solar when the market price for nonutility solar farms is significantly less expensive is simply not acceptable.”