CPS Energy Solar Fee Debate Continues

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CPS Energy Executive Vice President Cris Eugster explains the new grid fee proposal to City Council members during B Session June 11, 2014. Photo by Iris Dimmick.

CPS Energy Executive Vice President Cris Eugster explains the new grid fee proposal to City Council members during B Session June 11, 2014. Photo by Iris Dimmick.

CPS Energy has cut proposed solar fees in half, but local solar energy advocates continue to oppose mandatory fees for solar customers. The standoff is leading to delayed resolution after sustained questioning by City Council members during Wednesday’s B Session briefing on the proposal. The meeting ended with likely postponement of the June 19 vote until after the Council’s summer hiatus.

CPS Energy Vice President Cris Eugster presented a plan to Council with phased-in grid fees starting at 50 cents that would ultimately rise to $1.75 per kilowatt (kW) of installed capacity after 20 MW of rooftop solar is distributed through the system (see graph below). The average residential system is about five kW, so the fee would be about $8.75 per month and $105 per year if approved, reduced from $210 per year under the previously proposed rate.

Presented to City Council on June 11, 2014 by CPS Energy.

Presented to City Council on June 11, 2014 by CPS Energy.

The $450 “commissioning fee” proposed was also cut in half to $225. This fee pays for resources associated with hooking up panels to the grid and installing meters. City Council members and the solar industry have agreed that this portion of the proposal makes fiscal sense.

The proposal would also reallocate $20 million-plus from other energy efficiency initiatives to the solar installation rebate program within the Save For Tomorrow Energy Plan (STEP) for 25 megawatt (MW) more of rooftop solar systems in San Antonio. The 15 STEP programs include rebates for energy efficient appliances, low-income weatherization, smart thermostat installation, building incentives, and more.

(Read more: CPS Energy Approves New Solar Fees)

Almost half of residential solar customers – 47 percent, according to CPS Energy Vice President of Communications Lisa Lewis, do not pay an electricity bill each month because electricity produced by their solar panels is greater than the energy they consume from the grid during solar downtimes. That means these customers aren’t paying for fixed costs associated with maintaining grid infrastructure – the “poles and wires” used by everyone, Lewis said.

In order to recoup these costs, said CPS Energy Executive Vice President Cris Eugster, solar customers need to pay a base fee. Currently, a fixed cost fee of $8.75 is charged to each CPS Energy customer’s bills – which has not changed for more than 10 years.

District 8 Councilman Ron Nirenberg (left) and District 6 Councilman Ray Lopez look on as CPS Energy presents its case for a solar grid fee during B Session on June 11, 2014. Photo by Iris Dimmick.

District 8 Councilman Ron Nirenberg (left) and District 6 Councilman Ray Lopez look on as CPS Energy presents its case for a solar grid fee during B Session on June 11, 2014. Photo by Iris Dimmick.

District 8 Councilman Ron Nirenberg asked where money for fixed costs have been coming from. Eugster said the fixed cost recovery is typically included outside of this line item on customer bills – in usage costs.

“How does that translate to the solar customer?” Nirenberg asked.

“This is an interim solution,” Eugster said. “There is a bigger challenge (in figuring out fixed costs for all customers) that will take years to figure out.”

If solar installations continue on an upward trend, this small problem – CPS Energy projects a total of only 2,234 solar customers by the end of 2014 – may start to have more of an impact.

This is CPS Energy’s attempt to lead the way in finding a sustainable model for solar adoption.

Presented to City Council on June 11, 2014 by CPS Energy.

Presented to City Council on June 11, 2014 by CPS Energy.

The proposed fee before and after the 50 percent cut, however, doesn’t come close to covering the $8 per kW of solar power installed per month – $40 for the average residential system of 5 kW, Lewis stated in an email.

“This is a middle-of-the-road solution,” Eugster said.

Click here to download CPS Energy’s presentation to City Council.

Council members had more questions than answers about the fee by the end of the meeting, and struggled to understand how a new fee imposed on solar customers would encourage solar installation. While the one-time commissioning/set-up fee and reallocation of STEP funds for more solar rebates is widely agreed upon, Council members wanted more data.

“I don’t think a case has been made for why (this fee) is so urgent,” District 1 Councilman Diego Bernal said after the session. “(CPS Energy) is not going to go away with a decision they like without it.”

District 1 Councilman Diego Bernal asks CPS Energy Executive Vice President Cris Eugster (not pictured) questions about the proposed grid fee during B Session on June 11, 2014. Photo by Iris Dimmick.

Sitting beyond City Manager Sheryl Sculley (right) District 1 Councilman Diego Bernal asks CPS Energy questions about the proposed grid fee during B Session on June 11, 2014. Photo by Iris Dimmick.

During the citizens to be heard session after the briefing, several solar installation companies spoke against the fee, claiming it would discourage customers from installing solar panels and would disproportionately charge solar customers for CPS Energy’s fixed costs.

“The purpose of STEP is to reduce consumption,” said Lanny Sinkin, executive director of the solar advocacy nonprofit Solar San Antonio (SSA). STEP’s goal is to reduce the growth in demand for electricity by 771 megawatts (MW) by 2020. “The idea that solar is any different from other energy efficiency measure is false … one kWh reduced from solar power is no different than a one kWh reduction from a new refrigerator.”

Sinkin added, “We think that’s discriminatory, piece-meal ratemaking and a totally inappropriate way to recover costs.”

The SSA Board voted 8-4 in opposition of the grid fee proposal, outlined in a resolution you can download here. Sinkin said he had discussed the fee reduction with CPS Energy President and CEO Doyle Beneby and others previously, but that ultimately no fee could be agreed upon without a thorough, independent study of the factors.

Beyond the technical and logistical problems SSA has with the fee, “there’s also a national element to consider … (after the first 10 MW phase, this would be) the highest fee on solar than any other utility in the country … It’s going to be used to set a precedent.”

A strikingly similar discussion ensued took place in 2013  when Arizona Public Service Co., the largest utility in the state of Arizona, became the first and only utility to impose a similar grid fee of 70 cents per kW.

The nation looks to San Antonio and CPS Energy as a leader in solar energy, Sinkin said, this fee would send the wrong message.

The San Antonio skyline beyond rows of solar panels. Photo courtesy of UTSA.

The San Antonio skyline beyond rows of solar panels. Photo courtesy of UTSA.

At a time when the solar industry is faced with dwindling local and federal subsidies, local solar advocates and companies worry that another fee will further cut into the energy bill savings that solar customers have enjoyed for years. Add to that, the recent significant increase of U.S. tariffs on solar panels from China, and total costs may continue to rise.

Additional costs to the solar customer also increase the length of return on investment/pay-back period for systems which cost on average $21,000 without any rebates and about $9,000 with local and federal rebates.

Eugster said the average return on investment – savings from energy bills to pay off the average system – will not exceed the 10-year “cliff” that has been found as the maximum length the average customer sees as worth it.

Even so, said Sara Schmidt, the recent confusion over whether or not fees will increase or not has already deterred her from signing a contract with a local solar installer.

She was about to sign two days before reading about the proposed fee in the Rivard Report, but decided to sleep on it for a few nights.

“It’s a good thing I did,” she said. It’s not necessarily the fee itself that is the biggest aversion for Schmidt. When she repeatedly called CPS Energy for an update or explanation of the fee, no one seemed to know what to tell her.

“I didn’t have answers to my questions until yesterday,” she said to the Council. “It’s not fair to expect someone to come up with a $10,000 investment without being able to communicate the rules … If you’re wondering if new (solar customers) might be (deterred), I’m going to tell you right now, yes we are.”

She has filed her paperwork to get into the rebate queue to get grandfathered into the system before the possible July 1 implementation date. Thankfully, she said, she found a contractor that is willing to wait for the decision before holding her to a contract.

Don Dickey of Advanced Solar and Electric also spoke of his frustrations with the process of coming up with solar policies.

“What CPS Energy proposed this afternoon is not a product of this working group” established a year ago in cooperation with CPS Energy and solar industry stakeholders in the wake of the rejected SunCredit, he said. “It’s without our endorsement or participation.”

Full disclosure: The Arsenal Group LLC, which publishes the Rivard Report provided consulting services to CPS Energy in 2012. Monika Maeckle, who co-founded the Rivard Report, now works for CPS Energy as director of integrated communications.

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11 thoughts on “CPS Energy Solar Fee Debate Continues

  1. Let’s use existing roof tops, cover parking lots, but please don’t build solar panels over existing open land…

  2. Has anyone mentioned that the excess energy generated by the solar panels installed by homeowners who cut their own costs to 0$ is being re-sold by CPS to other customers at whatever full price they charge? Why should the generators of the energy they re-sell to CPS be also charged fees: Three times for CPS personnel to do paperwork and use the infrastructure that has already been bought and paid for by the customers in all the months that have gone by until they install solar panels?

    • Catherine, solar owners are paid full retail rates for the power they produce — the same price CPS Energy charges for power. It’s a one for one swap.

      The fees are unrelated; they’re for covering the costs of using the poles and wires. Solar customers use them to send energy into the grid, and every night and cloudy moment to draw power from the grid. When their bill is zero, they’re not paying to use the grid.

      Rooftop solar has grown 400 percent in SA in three years, because CPS Energy has one of the most generous rebates in the country. It wants to add another $21 million to pay out. But it also needs to cover the cost of infrastructure, so is proposing this fee, because the infrastructure hasn’t “already been bought and paid for.”

      I work for CPS Energy. I’ve been writing about this topic for more than a year now. It’s complicated, and it’s way bigger than San Antonio. I hope we can keep having an intelligent, informed discussion about it.

      • Tracy, is it fair to say the problem of recovering grid costs from solar customers is not the fundamental problem, but a consequence of the $8.75 Service Availability Charge not being priced correctly? If the bill was structured so all infrastructure costs were recovered from that fee and the Energy Charge paid just for power production, could that eliminate the need to charge solar users a separate fee to pay for their grid charges?

        Assuming it is possible customers might find another alternative energy technology, such as wind, the same problem could surface because the solar fee might not be applicable. However, restructuring the bill for all customers might solve the issue by requiring all customers to pay their fixed distribution costs regardless of how much energy they produce or consume.

        • Kevin, I think you’re right, the current rate/fee structure is part of the problem. And I think CPS Energy has acknowledged that — and I think this solar proposal was always considered an interim solution. There’s no ‘one and done,’ given the array of disruptive changes bearing down on the industry — many of which are quite exciting.

          I expect we will see CPS Energy tackling the rate structure in the future, but I’m also guessing that’s a multi-year, multi-regulatory body approval type of process.

  3. I understand CPS’ challenge, but their approach appears punitive to solar users and does not appear to address the full problem. If there are two components to a customers bill (distribution and generation costs), then bill those components separately. According to this article, the service availability charge is intended to collect the distribution costs, but is not priced right. Fix that pricing and reduce the per kWh charge. Although some users may see a reduction in charges, and others might see an increase, most customers should see no difference in their bill.

    Addressing this discrepancy in billing practices presents an opportunity to more accurately recoup infrastructure costs. Not all customers have the same quality of infrastructure, or have the same impact on infrastructure costs. For example, many communities have aerial distribution while others have more expensive buried distribution. The distribution cost should account for that difference.

    Density could also impact distribution costs. For example, costumers on 1/8 acre lots may have less impact on distribution costs than those in communities with 1/2 acre lots. Apartment complexes would likely have less impact than single family residences. The same could be anticipated for businesses. Big box stores on a 20 acre lot likely have greater impact than multiple multi-story buildings downtown on a 20 acre parcel of land.

    The current pricing structure may very well mean the more urban areas of the city are subsidizing distribution costs in suburban and rural areas, which is just another small part of obscuring the costs of suburban development patterns. Correcting the distribution cost component of the CPS bill would fix the problem with solar installations while addressing additional problems, whether that comes from reduced energy usage because other renewable technologies, improved efficiency, or discrepancies in ratepayer impact to distribution costs.

  4. Wow! After being involved in many commercial, residential, grid tie and standalone systems I can only see this as the utility seeing the writing on the wall and responding out of their own business interests. Once a system is installed it has has no cost effect on the utility infrastructure. Bad precedence, hope it doesn’t pass.

  5. In order for a solar customer to be an off grid user, it requires batteries for storing energy at night. ( read- big money) The easy solar installation generates during the day, and uses the grid at night. The base fee for “infrastructure” of $8.75/month is appropriate. (the norm for the rest of the CPS users) The fee to inspect a solar installation is appropriate because the quality of the “grid” is a particular and must be maintained. Any further fee is regressive, mal conceived and sneaky. The approx. 3708 listed above with solar power should be rewarded, not diminshed by fees as the number (for CPS) is a lot lower than the 750 MW of base power generated by the alternate nuclear plant. (read- really big money to add to the STNP)

  6. Copy of email to the Mayor and City Council

    Dear City Councilperson,

    I’m interested in solar energy. So much so, that I’ve been a member of the Solar San Antonio Board of Directors for a number of years, but this letter represents my personal take on the issue and is not reflective of the Board’s position.

    I don’t have a solar sytem on my house – yet – because it’s still a bit pricey for me, but I will get there one day. That is, unless CPS succeeds in killing distributed solar energy. It says it does not want to do that, but I believe that that is exactly what it is trying to do.

    Nobody “owns” the sun and that, to CPS, is the problem. Since it knows it can’t own the sun, the next best thing to do is tax the people who collect free sunlight. It will do that simply because it can, unless City Council stops it from doing so. You see, even though solar energy is a miniscule source of energy in San Antonio today, CPS is looking down the road and it doesn’t like what it sees – a threat to its business model.

    CPS’s position that individually-owned solar systems creates a class of moochers who are making the rest of us pay for service and maintenance of power lines that are already built is ridiculous on the face of it. This is a lot like making toll lanes on roads that we have already built. First of all, penalizing people for saving energy is a complete non-starter and an amazingly brazen hostile act. CPS is targeting solar for this because it’s an easy and highly-visible target. Saying that solar power users who pay less to CPS because they have gone the extra mile (and paid the extra money) to save energy must be taxed is at best silly, and at worst, mean-spirited and taxation without representation.

    What about the folks who replace all their light bulbs with the new-fangled ones? Shouldn’t they be taxed because they use less energy? And what about all the people who use energy efficient air-conditioning compressors and Energy Star appliances, or just people who have reduced their energy consumption by just turning off their lights and air conditioners? Do they “owe” CPS money? Let’s tax them too because they’re not paying CPS what “they” think we should be paying! For heavens sake, if I go on a diet, do I owe HEB for the groceries I’m not buying from them? Of course not!

    We the people don’t work for CPS; CPS works for us and the sooner they get it, the better for all of us. I expect City Council to do the right thing.

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