Saturday, April 13, 2013

Solar Proposals would Shake Up Utility Scheme

Georgia Power’s monopoly is under attack.

Last session, legislation by Sen. Buddy Carter, R-Pooler, would have ended it in limited situations by allowing companies to lease rooftop space for their solar panels and then sell the electricity to the property owner through so-called power-purchase agreements. Current law only allows power to be sold to utilities, and only utilities can sell to retail customers.

The bill stalled, but not before becoming a cause celeb for environmentalists and the state’s fledgling solar industry. Look for it to be introduced again for next year’s legislative session.

After the General Assembly adjourned, a start-up, solar-electricity company filed its own monopoly-busting proposal with the Public Service Commission that could have a broader, statewide impact. Its aim to compete for retail customers with Georgia Power could have far-ranging repercussions for the state’s economy that go far beyond the solar industry.

Both ideas to clip Georgia Power’s monopoly have won support from all three of the candidates challenging the two commissioners up for re-election this year.

Environmentalists, and folks who see the logic in harnessing free sunshine, support the proposal by Georgia Solar Utilities because they see it as a boon to the solar industry. They have long argued that, on economic terms, increasing sales of solar power and the components that generate it -- specifically photovoltaic panels -- would lead to so-called economies of scale and innovations that would lower the price.

Indeed, the price of solar panels has dropped significantly in recent years, partly due to cheaper production of them in China and demand created by mandates on utilities in other states. Even Georgia Power executives cite the price reduction as a signal that adding solar generation to that company’s fuel mix is now appropriate because it wouldn’t add upward pressure on overall consumer’s electricity rates.

The Libertarian candidates this year also argue that competition would force Georgia Power to become more efficient, despite the fact that observers claim the state has among the lowest electricity rates in the nation. Both incumbents say existing law has mechanisms to keep rates low while also expanding the use of solar.

Indeed, Georgia Power recently sought permission to triple its solar generation to become the largest voluntary, solar-producing utility. It wants to take capacity that had been designated for biomass plants that fell through and buy solar instead from small and medium-sized producers at wholesale prices.

Many observers believe that the giant utility’s latest solar proposal was a defensive move to fend off purchase-power agreements since the Georgia Solar initiative wasn’t public when Georgia Power began its planning. After all, earlier in the month, the Athens Banner-Herald quoted Georgia Power CEO Paul Bowers giving short shrift to all renewable sources.

"Renewable is going to have a sliver (of the company’s fuel mix)," he said. "Is it going to be 2 or 4 percent? That's yet to be determined. Economics will drive that. But you always remember (that renewable energy is) an intermittent resource. It's not one you can depend on 100 percent of the time."

At the very least, his comment added fuel of its own to the debate for advocates who say the company will only accept green energy sources if forced by regulations or competition. Since none of the current commissioners or the candidates running this year favor mandating specific sources, that leaves competition as the most politically viable route.

Breaking the monopoly requires changing the law.

While the utility has traditionally been very adept in dealing with the General Assembly, Georgia Solar has already launched a petition drive, and the Georgia Solar Energy Association already has a lobbying presence at the Capitol.

It would be a huge legislative battle, with the electric-membership cooperatives and four dozen cities that sell electricity joining in, too.

The proposal would be similar to the deregulation of the natural-gas market here, except that Atlanta Gas Light went down that road willingly. The Public Service Commission would regulate the transmission grid, and the retailers would pay to use it.

However, there would no longer be the justification for the commission to regulate Georgia Power and its retail rates if the company is not a monopoly. That could lead to one of two outcomes, high or lower rates.

If the EMCs begin marketing beyond their current territories, they could provide the muscle that the start-up Georgia Solar would not have to push downward pressure on Georgia Power’s rates. After all, a company offering solar power won’t have anything to sell at night or on cloudy days.

But, the loss of monopoly status could also have the opposite effect and send rates higher.

How? It has to do with the reason governments granted monopolies to utilities in the first place, the need for economies of scale and a guaranteed income in order to attract bond investors at affordable interest rates. Without a monopoly, investors will want a higher return in exchange to taking more risk, and Georgia Power could very well have to raise its rates in order to expand or upgrade, including retiring aging coal plants.

The irony is that making the company compete with solar providers could have the opposite effect of what proponents desire. Rates could go up, and the environment could get dirtier.

Georgia was one of the first states to deregulate its natural-gas market, with mixed results. Considering the deregulation of its electricity market will keep economists on both sides of the issue as busy as the lobbyists.


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