How to be fair in setting rates for electric power … or not

Oh, what a tangled tariff the bureaucrats weave when they attempt to be abundantly fair.

The Public Utilities Commission and NV Energy have decided that those who actually did what state lawmakers wanted them to do — go green and install residential solar panels — are now unfairly cost shifting by not buying enough kilowatt-hours of electricity to cover the base costs. A portion of the cost of each kWh is basic infrastructure such as power plants and transmission lines as well as salaries and other overhead. The rest is the cost of actually generating or purchasing electricity.

In the arcane argot of the PUC these are called Base Tariff General Base (BTGR) and Base Tariff Energy Rate (BTER). The cost breakdown is about 7 cent a kWh for BTGR and 4 cents for BTER.

Apparently, the PUC has decided that those with solar panels aren’t paying their fair share of the BTGR because they buy fewer kWh than those who don’t own solar panels. Thus 7 cents of those unused kWh must be paid by non-panel owners.

How owning solar panels differs from merely being frugal and using fewer kWh differs only in the fact solar panel output can be quantified and frugality can’t. How dare some people not pay their fair share and opt to sweat in the summer heat instead of turning on the air conditioner. Get the torches and pitchforks.

The PUC answer is new tariffs for solar panel owners who are on a net metering system. Over four years the PUC will raise the basic connection fee for those customers from $12.75 to $38.51 and cut the credit for power uploaded to the grid from 11 cents per kWh to 2.6 cents — turning what is currently an asset into a liability, driving down the value of a solar equipped home instead of increasing it. Might that be a taking under the Fifth Amendment?

And the PUC is being completely disingenuous about it. In its recent tariff order they had the audacity to say:

The Commission notes that the NPC (Nevada Power Company) single-family residential class average annual bill increase in the first year of the new NEM rates is $20.15, which equates to just $1.68 per month on average. This will not cause irreparable harm, especially when put in the context of a total average bill of $2,156.54 for a residential non-NEM ratepayer. By adding a rooftop solar system and taking service under the new NEM rates, a residential ratepayer will still save 51% on their annual electric bill, compared to 52% under the old NEM rates.

By their own calculations (see page 5) the “typical” residential solar panel owner will see power bills increase 2.1 percent in the first year and 45.2 percent in 2020. But that is for the “typical” solar panel owner. I’m told that those who installed photovoltaic arrays that generate nearly as much power as their homes use — arrays that produce more than 100 percent are not allowed, of course — may see their power bills increase as much as 300 percent.

But, to be fair, shouldn’t everyone pay for the BTGR?

Let’s say the “typical” customer uses 1,000 kWh per month. Then it would be fair to charge 7 cents for BRGR or $70 and 4 cents for BTER or $40 for a total of $110. That’s 11 cents per kWh.

But the person who uses only 500 kWh would get a bill for $90 or 18 cents per kWh, and the person who uses 2,000 kWh would pay $150 or 7.5 cents per.

Someone’s ox is always gored.

Of course, speaking of fairness, public buildings and schools will not have their net metering tariffs changed.

The power company does not make money by selling power. It makes money by getting a return on equity of about 10 percent, lately higher for NV Energy. The more equity — power plants and transmission lines — the greater the profit.

The aforementioned page 5:

And here is a “simple” explanation for your current power bill: