Colorado Settlement to Pay Solar Owners Higher Rates for Peak Power

After proposing higher fixed charges, Colorado's biggest electricity utility worked with solar advocates on a compromise, following deals in other states.

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Colorado rate settlement could be a boon to rooftop solar
A new rate settlement in Colorado could help boost rooftop installations like this one in Boulder. Credit: Getty Images

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Colorado’s largest electricity provider, Xcel Energy, reached a rate settlement that will pay homeowners with rooftop solar systems a premium price for power they produce when demand is highest.

The deal still needs approval from the state’s Public Utilities Commission, but it came after widespread opposition to its previously proposed fixed charges that many said would stifle growth of rooftop solar systems. Xcel worked out the new plan after meeting with local governments, solar advocates and conservation groups.

The proposed settlement comes on the heels of similar deals in other states. In Texas, El Paso Electric recently dropped its request for a $15 per month fee on customers with rooftop solar installations. Earlier this month, the New Mexico Public Utilities Commission blocked a proposed 31 percent increase in the per-kilowatt charge for customers with solar installations.

They are the latest twists in a back-and-forth battle between the solar industry and electric power companies over net metering, a billing mechanism adopted in the late 1970s that pays people with rooftop solar for the unused electricity they feed back into the grid.

According to the North Carolina Clean Energy Technology Center, 41 states have some version of net metering. The practice helps homeowners offset the cost of installing rooftop solar panels. It also helps utilities reduce the need to buy expensive power during peak times. 

But with the proliferation of rooftop solar, utilities have argued that customers with rooftop solar systems are taking advantage of the grid to sell their excess power without paying their fair share to maintain the grid. As a result, utilities and regulators around the country have been eying cuts to net metering payback rates, even adding special charges for customers with rooftop solar or restricting third-party financing for solar installations.

Xcel doesn’t expect the program to be a cure-all for the burden placed on its non-solar customers. “In the past we have argued that our non-rooftop solar customers are subsidizing our rooftop solar customers through the retail rate we pay for net metering,” Xcel spokesperson Mark Stutz said. “This issue doesn’t go away with our settlement,” but “the subsidy is less,” he said. 

Last December, the Nevada PUC approved a plan to triple fees for solar customers and cut the payback rate by 75 percent over four years. After the changes went into effect Jan.1, three solar companies said they would cease operations in Nevada, and other solar companies cut their staff, Greentech Media reported.

In California, the PUC last January decided to maintain current net metering rates for another three years and also blocked new fees and charges. A new state law requires the commission to develop a new rate structure that’s fair to all consumers—those with, and those without rooftop solar panels.

As quasi-monopolies, large power companies are required to submit rate plans to state public utilities commissions on a regular basis. In 2015, net metering changes were considered or enacted in 46 states, according to an annual tracking report by the Clean Energy Technology Center. A recent update found that in the second quarter of 2016, utilities in six states wanted to increase charges on rooftop solar customers.

“There are many different ways states can put an end to the cost shift caused by net metering at the full retail rate,” said Jeff Ostermeyer, a spokesperson for the Edison Electric Institute, the utilities’ trade group. “We believe having a balanced energy mix that includes renewables like solar and wind along with 24/7 sources of power such as nuclear and natural gas are critically important to providing reliable and affordable energy to customers.” 

Under the pending Colorado deal, Xcel would pay rates that change with time of day and with the seasons to its customers producing solar power, giving them more credit on their bills for energy produced during peak times. It appropriately values that peak-time energy generation, on sunny afternoons when demand is high and when rooftop systems generate the most power, said Erin Overturf, an attorney with Western Resource Advocates who was involved in the settlement talks. That increases the value of energy produced without penalizing customers who don’t produce their own solar electricity.

“The changes will ensure this increased value is reflected for customers with rooftop solar systems,” she said. 

The settlement also greenlights Xcel’s plan for a 50-megawatt solar facility that will be a voluntary subscription option for customers who cannot access rooftop or solar gardens.

Solar advocates hailed the recent deals as a sign utilities and regulators are taking a more flexible, reasonable approach to rooftop solar.

“They know we are here to stay,” said Sean Gallagher, vice president of state affairs with the Solar Energy Industry Association. “We are standing on the cusp of seeing a greater level of collaboration between utilities and solar providers and other renewable energy providers.”

Environmental groups say the Colorado deal will help support the state’s thriving solar industry by adding 392 megawatts of capacity over the next three years—225 megawatts of rooftop solar, 117 megawatts in community solar gardens and the 50 megawatts from Xcel’s commercial garden.

The PUC will consider Xcel’s plan at a hearing in October. If approved, it would operate as a pilot program for three years.

The proposed settlement includes a low-income rooftop program that will be offered in partnership with the Colorado Energy Office’s weatherization program.

The flexible time-of-use rates at the heart of the proposal would initially go into effect for up to 48,000 customers as a voluntary pilot program. At the end of 2019, Xcel, the PUC and the other stakeholders would evaluate the results and determine whether to expand it.

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