Utilities Once Again Add to Iowa’s Confusing Solar Market

By Paritosh Kasotia

As the price of solar plummets, many consumers are going solar. This has led some utilities to seriously assess what it means for their business and how do they continue to maintain the power grid with fewer electricity sales. Recently, Pella Electric Cooperative introduced a surcharge of $85 per month for those who install solar PV systems to cover the fixed costs associated with the grid. This has certainly raised eyebrows among solar proponents as well as industry experts. The current debate is what is a fair charge? Another equally important question is if customers already pay basic facility fees and user charges, why is there a need for an additional charge? On top of all this, it is worth noting that Pella Electric Cooperative does not offer net-metering to its customers unlike investor-owned utilities that are required to provide net-metering.


It is no doubt that solar customers benefit from the grid infrastructure when their solar PV system is not generating enough power. To solve this, utilities across the nation have proposed to assess a flat fee on customers’ bills. For instance, New Mexico’s utility, PNM proposed a $30/month distributed solar generation fee to cover the fixed costs related to the grid. Arizona imposes a similar surcharge which amounts to $5 per month or $0.70 per kW fee on utility bills. California applies a $10 monthly fee for its solar customers. But, none of these numbers are close to what Pella Electric Cooperative assessed. Even so, solar industry advocates argue that there is no need for a monthly surcharge because this arrangement fails to take into account the benefits of solar PV.  These benefits range from reducing carbon emissions, easing transmission lines congestion and system inefficiencies, as well as reducing peak demand. An objective analysis would ask utilities to apply a monetary value to the benefits it receives from customers installing solar PV. In 2013, Minnesota’s Energy Office provided guidelines to utilities to explore a value-of-solar tariff which includes cost-savings and environmental benefits. This approach also takes into account the unique nature of each utility provider and offers an objective and transparent process to assess the value of solar.

This story also calls into question a utility’s rate structure design. In any business model, if a consumer is not utilizing an infrastructure, it should not have to pay for it. Pella Electric Cooperative recovers its fixed costs under the fixed charges as well as variable charges of the utility bill. If that is the case, then in all fairness, consumers that are receiving less energy from the utility should logically pay less for the infrastructure charges, not the other way around. Conversely, if each consumer is equally responsible for the infrastructure, the fixed cost should be equally divided among consumers and not vary depending on the electricity consumption.  It can be compared to dues of a Homeowners Association. A homeowner’s monthly due does not change based on how much or how little she uses the amenities offered by the association. By affixing fixed cost recovery under variable charges, Pella Electric Cooperative is essentially charging customers more if they consume more electricity and therefore, logically should charge less if consumers are consuming fewer watts. The utility cannot benefit both ways by introducing a solar surcharge to make customers pay even when they are using less energy.

Another topic that should be examined closely is the emerging role of battery storage technologies. Tesla’s new Powerwall provides options for off-grid scenarios as well as battery backup. Powerwall was launched in 2015 and costs about $3000 for a 7kWh model and $3,500 for the 10 kWh model in addition to the installation price of $500. This price range is fairly reasonable and affordable for those who are already installing solar PV systems. Customers that add Powerwall or any similar battery storage technology will create other hosts of issues for utilities that need to be addressed. If a homeowner is able to completely eliminate the need for power from the utility but are connected to the grid, are they still obligated to pay for the system costs and if so, what regulations or tariff systems would then be proposed to make the customers pay for the grid?

Instead of skirting around these issues, Iowa state agencies such as the Office of Consumer Advocate, Iowa Utilities Board, and the Iowa Energy Office should take a proactive role and form a stakeholder group to begin discussions on these topics. Unexpected news such as Pella’s surcharge or Alliant Energy’s recent stand on refusing to net-meter solar PV customers that utilize a power-purchase agreement and later reversing its stand only adds confusion and uncertainty. All the more, this is not good rule-making process. The consumers’ demands and expectations of its utility providers are significantly different from yesteryears and call for a new approach in this changing energy industry.

UPDATE: As reported by Midwest Energy News, Pella Electric Co-operative has now withdrawn it’s proposed fee for solar customers. This is good news for solar owners but also points to the fact that more information and awareness is needed for all stakeholders to really understand what is the true value of solar PV to utilities and to the grid.


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