Eversource’s solar proposal needs to go

Eversource’s solar proposal needs to go

Special charge violates principles of utility ratemaking

HEADS UP EVERSOURCE CUSTOMERS – a discriminatory charge could be coming your way. In its latest general rate case, Eversource announced that it would like to impose a “demand charge” on utility customers with home solar. To put it simply, homeowners with solar would be hit with an additional, unnecessary charge based on how much electricity they consume at their highest point during the month. The solar industry feels strongly that the Department of Public Utilities should reject this proposal as it violates the core principles of utility ratemaking.

For more than 100 years, electric rate regulation has been guided by the following:

  1. Simplicity, ensuring that consumers can understand their bills and how their charges are established;
  2. Fairness, ensuring that all customers have access to essential services and are treated equitably; and
  3. Efficiency, ensuring electric rates encourage conservation of scarce resources, while providing reasonable compensation to investors.

Eversource’s proposed demand charge deviates from these principles on all three accounts.

First, very few residential electricity customers have any concrete sense of their consumption patterns over the course of the month, let alone over 15-minute intervals during times of their peak electricity use. Shifting more of the customer’s bill to an opaque demand charge effectively creates a pricing signal that a consumer is unlikely to understand and to which they have almost no ability to respond.

Second, establishing a new demand charge discriminates against solar customers by establishing a charge based on a particular customer’s peak use, not on the peak use on the grid. This has nothing to do with what the overall system can handle, but is simply a punitive charge on customers that choose to install solar.

Third, customers sign up for solar power because it allows them to save on their utility bills, and use cleaner power. They take less power from the grid, promoting overall electric system efficiency. By shifting more of the bill to a demand charges that are difficult for customers to understand or avoid, Eversource is attempting to lower the amount of the bill that can be reduced by going solar or taking other measures to reduce energy use, blunting the value that solar provides to both customer and grid. This violates the third principle of ratemaking.

Importantly, the implementation of mandatory demand charges would undermine decades of public utility policies that have allowed Massachusetts to become a national leader in the development of clean energy. Today, Massachusetts ranks sixth in the nation in total solar capacity, with installation equivalent to that needed to power 286,000 homes in the Bay State. Use of solar is soaring, with nearly 15,000 Massachusetts jobs in the installation and production of solar energy.

Meet the Author

Sean Gallagher

Vice president of state affairs, Solar Energy Industries Association
Instead of proposing a successful pricing program grounded in economic theory and experience, Eversource is seeking an opaque and inequitable system that will remove most of the incentive to go solar and save energy. Without a doubt, the Department of Public Utilities needs to reject this proposal.

Sean Gallagher is vice president of state affairs for the Solar Energy Industries Association.

  • NortheasternEE

    While we pay for electricity by the kilowatt hour (kWh), Power companies’ operating costs are related to hourly peak power demand (KW). Peak demand has been predictable within a small enough error margin that payments by KWh are a fair, simple, and predictable method for consumers to pay their fair share. As more and more consumers install solar panels that reduce the KWh’s they receive from the power company, the money they save does not effect the potential peak power they might need, so the operating cost to deliver power is not reduced. The power company still needs the same capacity of transmission lines, and needs to make available the same amount of KW power just in case it’s cloudy some part of the day.

    So far, the savings that have been accruing to solar installations have come as a result of shifting the extra cost to consumers with North facing roofs, or those who cannot afford the investment in solar panels. If we all invested in enough solar panels to reduce our bill to zero, where will the power company get the money to maintain the transmission lines and have enough power available for rainy days?

    Power companies everywhere are just trying to apportion the cost of supplying power on a fair basis to the public. The free ride on the grid by the solar industry has to come to an end, and they need to pay their fair share for using the grid.

    • RedWhitandBlue

      Common sense would tell you that that rooftop solar installations kick into their highest production during both peak demand in the Summer (air conditioning use) and during the “ramp up” period in the morning and afternoon all year. This does, indeed, reduce peak demand and “ramp up” demand, therefore reduce the need for capital expenditure to increase capacity at those times. You don’t need a PhD in EE to figure that one out. Let’s not forget that the power that gets produced at the plant loses about 8%-15% of its strength as it gets distributed over the grid. excess rooftop solar production gets used by immediate neighbors that dodges the same reduction in power, and they get charged the full retail price. Free Ride, EE? I don’t think so. You sound like a bought and paid for shill of the power industry. What the industry objects to is a loss of their hold on their power monopoly. Now people and businesses have more choices about how where to get their energy from, which means less to the existing power companies.

      • NortheasternEE

        Your common sense explanation the concludes “This does, indeed, reduce peak demand and “ramp up” demand, therefore reduce the need for capital expenditure to increase capacity at those times.” is incorrect. The dispatched capacity of conventional power at these times stays the same. Grid operators cannot dispatch solar generators in advance. The amount of power available from solar installations is unknown far enough in advance to be reliable. Cloud cover is too unpredictable. As a result, dispatchers schedule enough conventional power as if solar generators did not exist. As the generation from solar increases on sunny days, already dispatched conventional power (natural gas). is forced to ramp up and down to ensured a firm voltage supply of electricity to the public.

        The added cost of solar is shifted in rate increases. No existing power stations can be retired regardless of how much solar power is added to the grid. The extra ramping needed for firming the variable and intermittent power from solar reduces the efficiency of dispatched natural gas to the point where little to no carbon is avoided.

        • RedWhitandBlue

          EE, you assert that power companies generate electricity at the same rate throughout the day, regardless of the actual demand. You state that if they cannot predict what the demand pattern will be on any given day, they just pick one that they assume will be adequate, and they cannot accommodate flexibility in output. That is simply not how power plants operate. They have base load generators, intermediate load generators and peak load generators. Their ability to start up quickly and run efficiently determine how they are used. Base load plants have long start up times but run at higher efficiency rates, peak plants start quickly but do not run as efficiently. Peak plants are the most expensive to operate. Power companies will adjust to demand and choose to run or not run plants and to different degrees based on demand. This is how electricity utilities operate in general, not necessarily in reaction to solar or wind based electricity generation. Wind and solar generated energy is 5% or less of the current total. Whatever the variability might be in that small amount is easily dealt with under normal operating conditions. It’s not that complicated.

          • NortheasternEE

            The only generators that self schedule are wind and solar. The rest are scheduled by ISO-NE to address anticipated the demand conditions you describe. Yes, at 5% the variability of wind and solar have a small impact on the system, and they are handled along with the variability of demand. However, the current mandate is for 20% by 2020, and Beacon Hill wants to go all in for 100% by 2050. Eversource along with other utilities are beginning to feel the added cost of wind and solar, and as we look to the future, the variability of wind and solar, forced on the grid, is already killing baseload plants. in favor of the more flexible natural gas. While we can all be happy to shut down highly polluting coal power, these benefits are canceled by the early closure of clean nuclear power, both being replaced by natural gas forced to run inefficiently to supply firming for the volatile nature of wind and solar power.

            The continuing increase of wind and solar is not sustainable, rates are increasing without too much impact in avoiding carbon.

          • Scottar

            And they must be charged for the use of the grid. Supply and demand dictates that the less a product is used the more it will cost. So if a fossil power producer sells less the more it has to charge for the use of the grid (maintenance) and the use of the fossil power plants (maintenance and fuel transportation.)