Growing Number of Solar Panels A Concern for Wisconsin Utilities

    Ryan Logterman, an executive with Convergence Energy LLC, works on wiring panels during the 2011 construction of a large solar farm near Delavan. The farm is one of the developments that could get less revenue from its power under utility proposals.

At first glance, solar panels installed on homes and businesses don't seem like much of a threat to Wisconsin utilities.

After all, electricity generated by solar panels accounted for just a a fraction of the state's energy mix last year.

At a time when renewable energy increased again, and now accounts for 10% of Wisconsin electricity sales, solar's share is well under 1%. Yet costs are rapidly declining for homes and businesses to install the solar panels.

And utilities around the country are responding as more customers are generating their own power. One result is a move to make customers pay a larger fixed monthly charge, rather than bill them based on how much energy they use.

Consider:

• A new solar installation went up once every four minutes last year in the United States. That's up from one every 80 minutes in 2006.
• Thanks to a combination of falling prices and improved technology, solar projects are projected to expand 30-fold between 2010 and 2016. By 2016, rooftop solar could generate as much power as one-third of the nation's nuclear power plants.

In Wisconsin:

• We Energies stopped funding its renewable energy development program in 2011, a program that encouraged development of solar projects by churches and nonprofit organizations. The Milwaukee utility and others in the state have let other solar incentives lapse, and the state Focus on Energy program has scaled back incentives as well.
• Utilities and renewable power supporters are at odds over legislation that would allow businesses and homeowners to lease rather than own their solar panels — a tool that can help reduce the high upfront cost of solar.
• Rate case skirmishes are intensifying.

Utilities have moved to dramatically change the way their customers for electricity are billed.

Bill restructuring

The companies want to pay less to customers that generate solar power from their rooftops, and they want to shift a greater portion of a customer's monthly bill to a fixed charge rather than a charge that fluctuates each month depending on how much power is used by the home or business.

The fixed charges, they argue, should pay for everything not tied to the energy cost itself — including the cost of substations and poles, transformers and power lines. Critics say higher fixed charges will discourage customers from conserving energy and open another door for utilities to higher profits.

Utilities increased their fixed charges in 2013, including a 20% increase for We Energies. The Milwaukee utility had proposed a 40% increase.

This year more dramatic changes are in the offing, and Wisconsin regulators will be closely watched for how they handle the proposals.

We Energies, the state's largest utility, is proposing a 75% jump in its fixed charge, to $16 a month from a little over $9 today. Wisconsin Public Service Corp. is proposing to more than double the fixed charge paid by residential customers to $25 a month, and nearly triple the fixed charge paid by small businesses, to $35 a month. In addition, both We Energies and Alliant Energy asked state regulators Friday to reduce the amount they'll pay for customers' solar power, starting next year.

The state's smallest investor-owned utility, Madison Gas & Electric Co., this month sought permission to double its fixed charge in 2015, from $10.44 today to nearly $22 a month for a typical residential customer. Over time, the utility initially proposed to boost customers' non-energy charges to $68 by 2017.

MG&E, whose customers pay the highest rates in the state, believes the change is about making utility pricing "fair and transparent," said Scott Neitzel, senior vice president.

But customer backlash to the proposal, as well as opposition by regional and national environmental groups, prompted the utility to retreat Friday from its initial proposal. Instead of more than doubling, the fixed charge for MG&E customers would rise to $19, an 82% jump.

Ratepayer and renewable energy advocates are concerned that the proposals will not only penalize customers who want to add solar panels but those who have taken steps to shore up their houses to reduce energy waste and cut monthly bills.

"Customers expect that when they use less electricity their bills will go down, but these proposals will do the opposite," said Kira Loehr, acting executive director of the Citizens' Utility Board. "They are a giant step backwards designed to keep as much money as possible flowing into these already highly profitable utilities."

Circling the wagons?

Two energy policy observers who have studied utility and renewable energy trends in Arizona, Wisconsin and across the country say moves to raise fixed charges amount to a circle-the-wagons response by utilities that could irritate customers enough that they try to leave the power grid entirely.

That might not happen overnight but would be an even bigger threat to utilities than the one they see on the horizon now, Elisabeth Graffy of Arizona State University and Steve Kihm of Madison said in a recent national Energy Law Journal article.

"The problem is that electricity markets are changing to more competitive and more market-driven approaches," said Kihm, an expert in utility finance at the Madison-based think tank, the Energy Center of Wisconsin. "I understand why the utilities are doing this; this is how they have been operating for a century. The question is, will that serve them in a situation that's dynamic and changing and competitive?"

In reaching an accord with the Citizens' Utility Board on Friday, the Madison utility agreed to hold off on some of its more aggressive fixed-charge proposals until next year.

Over the long term, Neitzel said its plan will help prepare the company for the approaching wave of customers generating more of their own power. It's possible the utility could one day propose to use customers' own solar projects — or build a community solar garden — to meet future energy needs rather than the traditional model of a new utility-owned power plant, Neitzel said.

Today's pricing structure doesn't let MG&E compete with out-of-state solar companies in the changing utility world ahead.

"We're not trying to fight the tidal wave," Neitzel said. "We're just trying to get ourselves a surfboard to take advantage of the opportunity."

Milwaukee-based We Energies' parent company, Wisconsin Energy Corp., may be at least looking at catching a wave, too. While proposing to cut back on the amount it pays to its own customers with solar panels, the company has agreed to buy a rooftop solar business as part of a $9.1 billion acquisition of Chicago-based Integrys Energy Group Inc.

Though Integrys is shedding a Wisconsin-based business that sells power in states that have opened up their energy markets to competition, Wisconsin Energy said it was going to keep an Integrys rooftop solar development business that has been building commercial solar projects around the country. That business expanded this year to the residential market, helping finance solar projects for homeowners in California, Massachusetts and other states.

The threat of customers moving off the grid may seem far off, given that energy storage technologies are still being developed.

But changes are coming fast, Kihm and Graffy note. National companies like NRG Energy and Solar City are developing products that incorporate battery backup power with residential solar systems. NRG's top executive has discussed a home machine that would run on natural gas that is already flowing to homes for furnaces and hot water heaters.

Other factors include the public's growing appetite for cleaner, less-polluting energy sources, and federal environmental policy that aims to tackle emissions tied to global climate change.

In a statewide public opinion survey released this month, two-thirds of those surveyed said Wisconsin should incorporate more renewable energy into its energy supply, said Joe Cera, survey center director at the Center for Urban Initiatives Research at the University of Wisconsin-Milwaukee.

"The time to prepare for substantially increased competition is now. If utilities wait until competition heats up, it may be too late," Kihm said.

The hardest job in a changing energy world may be that of the regulators like Wisconsin's Public Service Commission. Regulators must determine whether rate increase requests are reasonable and in the public interest.

Kihm says regulators need to help utilities adapt by giving them incentives to try new things — whether that's going into the business of making money from building solar themselves, or something entirely different.

A new approach for regulators is even more critical after the Obama administration's Environmental Protection Agency announced a global warming strategy that seeks to reduce utility greenhouse gas emissions by 30% by 2030.

Because there is no way to attach equipment to a power plant to capture carbon dioxide emissions from the smokestack, the EPA took a different approach, encouraging states to amp up their use of renewable power and energy efficiency along with allowing utilities to shift more of their large power plants from coal to natural gas.

"The burden in some ways is on the PSC and other regulators to take a fresh look and assess what is the public interest," Kihm said. "Society wants something different. There are benefits of using cleaner energy. The PSC can either facilitate that or just say, 'This is how I've done it for 100 years.'"

Source: http://www.jsonline.com/business/growing-number-of-solar-panels-a-concern-for-wisconsin-utilities-b99295581z1-265066971.html