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Friday, July 18, 2014

Utilities seeking a competitive edge

The following article by Dan Shaw was featured in the Daily Reporter on July 16, 2014:

The owner of a solar-power company is expressing grudging admiration for what he described as We Energies’ latest attempt to fend off competition from businesses such as his.

Matt Neumann’s company, Pewaukee-based SunVest Solar Inc., filed documents with utility regulators Tuesday to formally oppose We Energies’ request to modify the rates charged to its gas and electricity customers. Neumann and his colleagues are particularly concerned about a proposal that, he contends, would provide fair compensation for the production of renewable energy only to those who own the generation equipment they get power from.

In other words, Neumann said, We Energies’ request is a direct assault on third-party ownership, an arrangement that lets an independent company own solar panels or other devices installed on a customer’s property. He said he has many reasons to dislike We Energies’ proposal, but he can at least appreciate the strategy.

If regulators approve the request, Neumann said, We Energies will have taken away the sting from any law state legislators might approve making third-party ownership explicitly legal in the utility’s service territory.

“We are going to be doing away with third-party ownership,” he said. “Even if there is legislation, the rate structure won’t allow it.”

Renewable-energy advocates often tout third-party ownership as the best way to overcome what they say is the greatest barrier to more widespread use of solar panels and similar devices: the high upfront costs of installation. Third-party ownership is explicitly allowed in many states, often providing a spur to the construction of renewable-energy projects, but the arrangement is in a legal gray area in Wisconsin.

Wisconsin regulators have opined that any independent business that sells power directly to a customer is a public utility and thus cannot compete directly with We Energies or other companies that have monopoly rights to certain parts of the state. Even so, officials have not cracked down on various third-party arrangements that are set up using leases rather than direct purchases of electricity.

Two state lawmakers, Reps. Chris Taylor, D-Madison, and Gary Tauchen, R-Bonduel, introduced a bill in March that would lay out the circumstance in which third-party ownership would be legal. But the bill never made it to a debate because the Legislature was about to recess for the rest of the year.

Until such legislation is passed, the assumption among utility officials is that third-party ownership is not permitted in Wisconsin, said Brian Manthey, a spokesman for We Energies. He said the utility’s request is in keeping with that assumption.

“We have to go with what state law is right now,” Manthey said. “We can’t predict what any future policy might be.”
Renewable-energy advocates say We Energies’ request is a threat largely because, if approved, it would prevent customers involved in third-party agreements from taking part in what is known as “net metering.” Net metering lets customers receive credit for power they generate but do not consume immediately. They then use that credit to avoid paying for electricity at other times.

Any excess kilowatts produced by solar panels during the day, for instance, can be used to avoid paying for kilowatts obtained from a utility company when the sun is not shining. We Energies’ proposal would offer net metering only to customers who own the generation equipment.

Those who do not own the solar panels or other devices still could lower their energy bills but would not get credit for any excess produced. Neumann and others say most of the economic benefits of third-party ownership would be lost.

A similar effect would result, renewable-energy advocates argue, from proposals contained not only in We Energies’ rate request but in those from two other utility companies in Wisconsin. We Energies, Madison Gas & Electric and Wisconsin Public Service Corp. all have proposed increasing the so-called “fixed charges” that appear on monthly utility bills regardless of how much power customers use.

MG&E, which serves the area around Madison, originally proposed increasing its fixed charge from $10.50 a month to about $21 in 2015, but has since reduced the request to $19. Wisconsin Public Service Corp., which mainly provides power to customers in the northeastern and central parts of the state, is trying to increase the fixed charge to residential ratepayers from $10.40 a month to $25 and from $12.50 to $35 for small commercial customers.

We Energies is proposing a smaller increase, going from about $9 a month to $16. But the utility also would force those who produce their own power to pay a separate “demand charge,” which would be set in accordance with the production capacity of their generation equipment.

Utility representatives contend the fixed charges need to be higher because they historically have not been set at a level that covers the cost of the electrical grid and other equipment needed to deliver electricity to customers. Even those who generate their own power, the argument goes, still need to pull electricity off the grid from time to time and should pay their fair share for the upkeep of that system.

Neumann said he takes the requests, especially We Energies’ proposal to impose an additional demand charge, as further evidence that utilities are trying to protect themselves from competition. Without third-party ownership, he said, the threat to those monopolies is hypothetical.

“We do 95 percent of our work out of state,” Neumann said, “even though we’d rather do our work here.”

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