Welcome to the Animal Farm, where all of the animals are equal, but some are more equal than others.
The state Public Utilities Commission (PUC) recently changed the rules for billing of residential and small businesses electricity customers who installed solar panels. This was done, it was argued, to be fair to those who did not spend thousands of dollars of their own money along with state subsidies funded by ratepayers to install photovoltaic panels.
Such customers are on what is called a net metering system. In the past, they paid the same connection fee to cover the cost of power lines and NV Energy infrastructure as everyone else. They paid the same per kilowatt-hour price for purchased power as everyone else and were credited at retail rates — about 11 cents per kilowatt-hour — for power uploaded to the grid.
The PUC in December approved raising the connection fee for small net metering customers and slashing to less than a quarter of retail the credit allowed for uploaded power. The new tariffs apply to all new solar panel users and all of those who previously installed solar panels, expecting to be able to recoup their costs under the terms outlined by the state. In other words, retroactively.
By law — according to an appeal of the new rules filed this week by the Bureau of Consumer Protection (BPC), a division of the state attorney general’s office — ratepayers shared the cost of subsidizing $255 million of those solar panels. Less than $9 million, or less than 5 percent, went to residential or small business power users — about 17,000 customers in all. The rest was used to erect solar panels on schools and public buildings.
The PUC totally exempted schools and public buildings from the new rates.
“Many of these school and public building customers paid little to nothing for installing systems worth tens of thousands of dollars and more, but rather were funded by ratepayers,” writes BCP Chief Deputy Attorney General Eric Witkoski and Senior Deputy Attorney General Michael Saunders. “So, the accusation of ‘subsidies’ and ‘cost shifts’ and assessing reasonableness or unreasonableness can be a slippery slope once their overall value is put into larger context.”
Some animals are more equal than others.
As for the retroactive nature of the PUC decision, the BCP appeal states, “This matter is larger than just one subset of residential customers getting a benefit that others do not. This is a matter of integrity and honor that will severely damage the reputation of Nevada’s government and its ability to persuade customers to engage in programs in the future. If the perception is created that the Commission will not honor or recognize deals prior Commissions or Legislatures once offered to encourage people to participate in programs that in many cases cost them thousands out of their own pockets.”
A typical rooftop installation could easily cost $20,000 or more for the homeowner and a like amount in ratepayer subsidies.
BCP asks that the PUC delay any net metering changes and grandfather current net metering customers for eight to 10 years to allow time for recovery of their investments.
The BCP further noted that Senate Bill 374, which authorizes the PUC to change net metering in order to lift the cap on the number of rooftop installations allowed on the NV Energy grid, prohibits the PUC from “unreasonably” shifting costs from customer-generators to other customers. The keyword is “unreasonable.”
SB374 does not repeal existing laws, which state:
1. Encourage private investment in renewable energy resources;
2. Stimulate the economic growth of this State;
3. Enhance the continued diversification of the energy resources used in this State; and
4. Streamline the process for customers of a utility to apply for and install net metering systems.
“The Commission’s rationale and logic is akin to an agency only applying the most recent law, rather than applying all relevant laws …” the BCP appeal states.
It also argues that current net metering customers were given insufficient notice of the pending changes. In fact, the NV Energy submission to the PUC flatly stated that current net metering customers would not be affected.
In addition to the BPC appeal, a group called The Alliance for Solar Choice (TASC), which includes solar panel installation companies, filed an appeal.
TASC noted that the rules have eliminated hundreds of jobs. “Indeed, the rates and rules adopted by the Commission forced the country’s largest solar installation companies to eliminate countless jobs and begin closing their Nevada operations,” their appeal states. “In effect, the Commission eliminated the Nevada rooftop solar industry and frustrated the Legislature’s stated goal to encourage private investment in renewable energy, stimulate economic growth in Nevada, enhance the continued diversification of Nevada’s energy resources and simplify the process for utility customers to install NEM (net energy metering) systems.”
TASC called the PUC action “an unprecedented bait-and-switch.”
Its appeal calculated that the connection fees for net metering customers are slated to increase 300 percent in four years, but could skyrocket 688 percent to $87 a month if NV Energy includes demand costs as the PUC has suggested. “At the same time,” TASC notes, “the Order slashed the value of electricity that is generated and delivered to the grid by 76%, from $0.11142 to $0.02649/kWh.”
This would be tantamount to ordering the contract for power from the Crescent Dunes Solar project be cut from 13 cents per kWh to less than 5 cents, which the PUC has not done and would never do.
TASC also notes that the credit for uploaded power totally ignores the fact power costs vary with the time of day, but is computed by averaging costs over 8,760 hours of the year. “The product is an inaccurate average value that is artificially depressed by the inclusion of nighttime hours when energy costs are low but the sun is not out and solar systems are not producing or exporting electricity,” they point out.
The group also argued that the PUC action is a violation of the Fifth Amendment’s Takings Clause that prohibits reducing property value without compensation.