Ohio utilities feel burned by solar-energy users

By Dan GearinoThe Columbus Dispatch  •  Sunday November 2, 2014 9:40 AM

 

People like Jack Hedge scare utility executives. He has rooftop solar panels that generate more electricity than his house needs.

“My electric bill was zero most of the year,” the 66-year-old Worthington man said.

Utilities, such as Columbus-based American Electric Power, say their current rate structure doesn’t allow them to cover costs related to renewable-energy owners. The result, the companies say, is that the costs get passed on to other consumers.

The debate over how utilities treat rooftop solar is at the heart of a case heading to the Ohio Supreme Court.

“Are the solar customers using the grid? Unambiguously, the answer is yes,” said Jim Lazar, an electricity consultant in Washington state who advises regulators across the country. “One approach is to say, ‘You’re using the grid; you need to pay for the grid.’  ”

As he sees it, the key question is whether renewable energy is an infant industry that needs special treatment and provides a public good.

“At what point does it cease to be an infant industry?” he asked. “When is it time for the kids to pay the rent or move out of the house?”

He thinks the answer will vary depending on the political climate of each state.

Utilities in most states are not yet feeling a pinch because of electricity generated by home-based systems. Fewer than 1 percent of U.S. households have renewable energy installed. But as solar-panel prices continue to drop and the systems become more popular, utility companies fear that electricity sales will take a sudden dive, depriving them of the money needed to maintain the grid for everyone else.

Within the industry, this scenario is often called the “death spiral,” a kind of doomsday for the regulated-utility business model.

To fight this, utility companies and industry groups are proposing additional surcharges for solar owners. They are also ramping up a campaign to frame the issue in terms of income inequality, arguing that wealthy solar owners receive subsidies that are unavailable to the many people who struggle to pay their electricity bills.

Meanwhile, “green” power advocates say utilities are standing in the way of progress toward an economy that relies less on large power plants.

“The fact of the matter is that the utilities have not done the kind of analysis that needs to be done to calculate the benefits of solar,” said Rob Kelter, senior attorney for the Environmental Law & Policy Center.

He lists two main benefits: Solar power is the most productive on the hottest days of the year, which helps to hold down the wholesale electricity price for all consumers. And, solar power reduces demand for fossil-fuel-burning power plants, which reduces health problems related to air pollution.

The Ohio debate has simmered for the past two years as regulators worked on rules governing renewable-energy installations that are connected to the grid. The Public Utilities Commission of Ohio ruled in January that it would maintain policies saying that utilities are required to issue credits for any surplus power that comes from the systems and that utilities cannot have any special charges for these customers.

The case is being appealed to the Ohio Supreme Court, with some of the state’s major utilities — led by AEP and FirstEnergy — saying the rules amount to an unfair subsidy for some customers. The court accepted this case last month and likely will hear oral arguments early next year.

“It was unreasonable for the commission to impose a new regulatory mandate without providing for an explicit mechanism for recovery of costs associated with the mandate,” Steven Nourse, AEP’s lead attorney, said in a filing.

The Edison Electric Institute, a trade group for large electricity utilities, has helped lead a national push for additional charges on owners of solar systems. The group made its case last year in a warning that “grid costs are shifted to those customers without rooftop solar ... through higher utility bills.”

AEP’s top executive, Nick Akins, discussed the topic last year when interviewed at a forum held by the Columbus Metropolitan Club.

“If you don’t pay at least for the grid portion of (electricity service), then all the other customers are subsidizing that, and usually it’s the poor and the middle class,” he said.

Industry groups have won some allies among advocates for minority and low-income consumers. Last month, the National Policy Alliance, a coalition of black elected officials, approved a resolution saying it opposes policies to allow benefits to rooftop solar owners “while penalizing customers with basic energy needs who cannot afford rooftop solar.”

So far, Arizona is one of the only states with a surcharge for rooftop solar customers, charging about $5 per month for a typical system.

Utilities are trying to get this in other states, with several pending cases before regulators.

Hedge, the Worthington man, is an architect who has long been fascinated with the science of energy efficiency. He designed and built his house in 1980 to use as little energy as possible. In a typical month, he uses about 300 kilowatt-hours, which is about one-third of a typical household.

Five years ago, he installed solar panels on his roof, with a combined capacity of 3.35 kilowatts. In most months, the electricity from the solar array is slightly more than his house needs.

He is an evangelist for solar power. He thinks the world is a better place when electricity systems are less centralized and release fewer pollutants. And, he thinks the utility companies are placing short-term financial interests ahead of the public good.

“They’re fighting against us making it green because they want to make money,” he said.

He doesn’t blame the companies for this, but he hopes that the Ohio court rejects the arguments.

dgearino@dispatch.com

@DanGearino