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.
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 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.
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."
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.
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.