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Are rate changes needed for customers who generate their own power?

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We’re responsible to advocate on behalf of the residential class as a whole. We need to make sure that those with solar panels are being treated fairly and those without solar panels are treated fairly. – Michele Beck, director of the Utah Office of Consumer Services

SALT LAKE CITY — For Draper resident Mike Rossetti, staying cool during a long, hot Utah summer was an increasingly expensive proposition.

So a little more than three years ago, with some prompting from his wife, Rossetti decided to do something about it.

After extensive research and with the help of a licensed electrician — “just to please the city bureaucrats,” he said — Rossetti installed a 5 kilowatt photovoltaic solar panel array on his home.

In all, Rossetti estimates he spent $28,000 on the project, but he received a 30 percent tax break as an incentive.

Conservation was part of his initial motivation for making such a significant investment, he said, but there were other considerations as well.

“We wanted to reduce our (electricity) bills,” Rossetti explained.

His monthly cost for air conditioning in the warm weather months has gone from the $250 to $300 range to about $120.

Thus far, it has been a worthwhile investment, Rossetti said.

Meanwhile, the state’s largest electric utility has said that the approximately 2,200 customers like Rossetti who are residential energy producers are being subsidized unfairly by customers who do not produce power.

Earlier this month, Rocky Mountain Power announced a rate increase request of $76.3 million, or 4 percent, from the Utah Public Service Commission. If approved, the typical residential customer would pay an additional $3.73 per month for electricity.

The request also included a $4.25 monthly fee for “net-metering” customers. Net metering, also known as customer-generated power, measures the difference between the electricity a customer uses from the existing power generation system and any excess energy produced that goes back on the system. Typically, the energy is generated with solar panels or wind turbines.

Rocky Mountain Power claims that under current state regulations, the company is required to credit customers for excess generation at the full retail rate even though the customer electric generation does not include the capital investment of infrastructure, voltage lines or the utility's overall power generation.

The utility estimates its per kilowatt cost of electricity is slightly less than 11.2 cents, while the cost to net-metering customers was just under 2.6 cents per kilowatt. Still, the utility is forced to credit the customer the much higher amount for excess energy, Rocky Mountain Power President and CEO Rich Walje said.

While the company embraces evolving customer expectations for choice, Walje said the issue needs to be addressed before it becomes a real burden for other Utah customers who choose not to participate in net metering.

The proposed $4.25 monthly fee would help offset some of the fixed costs to supply electric service to net-metering customers and receive the extra power they produce, he said.

Other reasons for the rate increase request include higher costs to maintain reliable electric service, such as the new Lake Side 2 natural gas power plant, new high-voltage transmission lines and equipment upgrades to comply with environmental regulations, Walje said.

The company hopes to start a dialogue about updating residential electricity rates to include the impacts of customer-generated power so residential customers are treated more fairly, Rocky Mountain Power spokesman Paul Murphy said.

“It’s not (their) fault,” Murphy said. “It’s just the way the system was designed (more than) 100 years ago.”

Today, more customers are generating a portion of their own electricity, primarily by installing solar panels, he said. In Utah, there are more than 2,200 net-metering customers, with 14.6 megawatts of generating capacity, Murphy said.

“That’s why we are trying to address the issue now while (net metering) is still in its infancy (so) we don’t continue adding costs, especially for our lower-income customers,” he said. “We’re hoping others will weigh in and help us make sure that we are making the right decision about this.”

The utility reported that a typical $80 residential monthly bill consists of about $25 for neighborhood infrastructure and customer service, $25 for power generation, $19 for fuel and purchased power, with $11 going toward high-voltage lines.

Each residential customer receives about $60 in monthly benefit from the utility, Murphy said, but due to Public Service Commission regulations pay just a few dollars per month for the service, while paying much higher rates for power.

The opposite should be true, he said. It’s a subject Rocky Mountain Power wants the commission to review and hopefully revise sooner rather than later, Murphy added.

Other alternative power advocates adamantly oppose any potential changes to Utah’s net-metering policy.

Utah Clean Energy, a Salt Lake City-based nonprofit organization, said such changes would have far-reaching impacts on all sectors — including governments, military facilities, schools, churches and businesses — that want to or have already made the investment in on-site renewable energy generation.

“It should not be the policy of Utah to interfere in the market and stifle competition,” said Sara Baldwin Auck, Utah Clean Energy senior policy and regulatory associate. “Instead, Utah should continue to encourage personal investments in energy efficiency and renewable energy.”

Net metering provides local governments, businesses and residents a vehicle for personal choice, Auck added. A policy change would set a bad precedent for allowing Utah’s monopoly utility to impose ever-increasing costs on customers without any burden of proof, she said.

The head of the state consumer watchdog agency said Rocky Mountain Power’s proposal is not as “draconian” as some might fear.

However, Michele Beck, director of the Utah Office of Consumer Services, said her agency will investigate to determine if the specific fees proposed by the utility are “the right numbers.”

“We’re responsible to advocate on behalf of the residential class as a whole,” Beck said. “We need to make sure that those with solar panels are being treated fairly and those without solar panels are treated fairly.”

The current evidence strongly suggests that residential customers who do not generate their own power “are clearly subsidizing those who do,” she said.

Achieving an affordable pricing structure would eventually encourage more people to install solar panels or other alternative energy sources, Beck said. But for the time being, the majority of residential users are supporting net-metering customers.

Because customer-generated power still requires the full electric system provided by the utility, those consumers are getting an advantage over other customers, she noted.

“Solar is not offsetting the peak (usage hours),” Beck said. “(Net-metering) folks are still using the grid and the vast majority of the electric infrastructure.”

The utility’s desire to have the rate system revamped has merit, she said, though it will take some time to figure out the most equitable solution for all residential consumers.

Meanwhile, Rossetti called Rocky Mountain Power’s claim that customer electric generation does not include the capital investment of infrastructure, voltage lines or the utility's overall power generation “at a minimum disingenuous and manipulative.”

“Prior to installing my solar PV system, I was already paying for their capital investment and power generation,” he said. “After my installation, I am still paying. Further, I am now also paying for my own capital investment and power generation, (along with) my own maintenance and monitoring.”

Having installed a solar PV system has not placed any additional burden on Rocky Mountain Power, Rossetti said.

E-mail: jlee@deseretnews.com

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