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:
- Simplicity, ensuring that consumers can understand their bills and how their charges are established;
- Fairness, ensuring that all customers have access to essential services and are treated equitably; and
- 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.
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.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.