Iowa farmer says he’ll remove solar if co-op’s $85 fixed charge stands; Could this happen in Indiana?

Posted by Laura Arnold  /   July 27, 2015  /   Posted in Net Metering  /   No Comments

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Iowa farmer says he’ll remove solar if co-op’s $85 fixed charge stands

A small rural electric cooperative in Iowa has informed its 3,000 customer-members that, should they install solar panels or other distributed generation, they will pay what appears to be one of the highest monthly charges in the nation.

Pella Cooperative Electric sent out a notification on June 18 alerting customers that the “facilities fee,” which is the fixed part of the monthly bill, will triple from $27.50 per month to $85 per month – but only for customers with solar panels or another source of their own generation.

“I think it is unlawful, and I think it's outrageous compared to any other RECs (rural electric cooperatives) that I know of,” said Mike Lubberden, a Pella-area resident who, for the time being, has ditched his plan to install solar panels. He is seeking legal representation and intends to file a complaint about the matter with the Iowa Utilities Board.

“I'm hoping to get them to back down on this $85 charge.”

Pella's announced charge is “definitely an extremely high fee,” according to Amy Heart, the senior manager of public policy for The Alliance for Solar Choice. It appears to be one of the highest in the Midwest. Heart noted that Rock Energy Cooperative in Janesville, Wisconsin recently adopted a monthly charge of $22.60 per kilowatt, which likely would amount to about $90 a month for a typical residential solar array.

Utilities and co-ops around the country are seeking to increase flat fees that are assessed on customers' bills, saying ratepayers who generate their own power aren't covering their share of the costs of maintaining the grid. Advocates say this approach fails to account for the full value of distributed solar.

Pella's board of directors decided to hike the fee for distributed generators on its system after it did a “cost of service” study, something it does periodically “to make sure the cost-causer is the cost-payer,” according to John Smith, the co-op's chief executive officer.

The study concluded that customers who generate some of their own energy – there are now 12 of them in Pella's territory – are not paying their share of the co-op's costs to maintain and operate assets such as poles and power lines and transformers.

Smith declined to allow Midwest Energy News to review the study, saying it is “confidential” and “not subject to distribution.”

Although there is a fixed portion of the bill that is designed to cover fixed costs, Smith said it doesn't really do that. The co-op actually looks to the variable part of the bill, which reflects the amount of energy used, to cover some of the fixed costs, according to Smith. Therefore, a customer-generator, by using less power, also pays less towards maintaining the entire transmission and distribution system. How much less? $57.50 per month less, according to the coop's calculation.

By hiking the fee paid by the system's distributed generators, Smith said, the coop is “protecting the rest of the ratepayers to make sure they don't pay costs unfairly.”

Michelle Wei, a solar installer in the Des Moines area, dismissed that as “total nonsense,” and said that the increased fee likely would exceed the total monthly bill of many customers.

In his June 5 bill, for example, Lubberden said there's an “energy charge” of $83 – less than the $85 fee the co-op is proposing.

The co-op is giving its current customer-generators five years before they have to pay the higher fee. That applies also to anyone who can get a system operating by Aug. 15. Anyone installing a system after that date will be required to begin paying the $85 monthly fee immediately.

Bryce Engbers, whose hog-confinement operation accounts for three of the 12 distributed generators now on Pella's system, said that he's done the math and foresees removing the solar panels on his home and his two hog barns before mid-August, 2020. He anticipates that his son will also remove his solar system.

Last year, Engbers said, the 3.5-kilowatt system on his home produced about 5,320 kilowatt hours of power. At 12 cents per kilowatt hour, that's a savings of $638, he said – compared with the $85 monthly fee, which over the course of a year would amount to $1,020.

“As you can see, this fee makes my home system absolutely and totally worthless,” he said. “In fact, I will have them de-install it, or I will be losing $400 a year.”

He has scheduled a meeting in a couple of weeks to discuss his concerns with the co-op's board of directors.

“I've informed them that they're in violation of Iowa Code 476.21.

It states: “A municipality, corporation or co-operative association providing electrical or gas service shall not consider the use of renewable energy sources by a customer as a basis for establishing discriminatory rates or charges for any service or commodity sold to the customer or discontinue services or subject the customer to any other prejudice or disadvantage based on the customer's use or intended use of renewable energy sources.”

Although the arrays on his two hog barns perform better, Engbers said, “In 2020, all of my systems will be shut down, even my 10K systems. The advantage is going to be so small that the savings won't be worth keeping them running, unless we have battery storage at that time....in which case I'll double all my systems and keep that energy in a battery. And I'll be using even less of [Pella's] energy.”

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