Maine’s largest electric utility is seeking permission from state regulators to impose a new “standby” rate that would add roughly $13 to the monthly bill of a residential customer with a grid-tied renewable energy system.
The plan would tack on $24.83 a month to the Central Maine Power power bill for a net-metered residential customer vs. the flat $12 charge for a customer without renewables, CMP said. The proposal is part of a rate case before the Maine Public Utilities Commission.
CMP is a subsidiary of Iberdrola USA, a Spanish-owned holding company with energy operations in 24 states. CMP’s service area, which takes in the most densely populated southern and central quadrants of the state, includes more than 546,000 residential and 62,300 commercial and industrial customers.
Like a number of other utilities around the country, CMP is looking for a way to recoup some of the money it’s not earning in electricity sales to customers who generate some of their electricity but still remain connected to the grid.
The company views the new standby rate as a way of spreading costs evenly among customers and ensuring that consumers who don’t generate any of their own electricity aren’t forced to subsidize the renewable energy systems other customers have installed. Although grid-tied solar or wind customers don’t spend as much on electricity, CMP spokeswoman Gail N. Rice said, the cost of serving them doesn’t go down. “This is not a fight against renewables,” she said.
The new rate would affect about 1,000 customers
How the standby rate is calculated was described as “very complicated” and “not totally intuitive” by those involved in the rate hearings. But in the case of residential customers with grid-tied systems, the charge is a flat $24.83 regardless of the rated capacity of the system. So someone with a 5-kW photovoltaic (PV) system would pay the same amount as someone with a 3-kW system.
An article about the rate case in the Portland Press Herald cited the example of Thomas College in Waterville, Maine, which had installed a 12,600-square-foot PV system. The college’s president said the standby charge would add $38,000 to the college’s power bill over five years, a 56% increase, according to the Press Herald. The article didn’t explain how that number was determined.
There are about 1,000 customers in Maine who would be affected by the new standby rate, Rice said. They include institutional, residential, and commercial installations.
A number of interests oppose the potential surcharge, including the Maine Public Advocate’s Office, Thomas College President Laurie Lachance, and Fortunat Mueller, co-founder of a renewable energy company called ReVision Energy.
A basic change in the rate structure
Under CMP’s current rate plan, residential customers pay a delivery or service charge and a separate charge for the energy itself (electricity is provided through independent suppliers). On the delivery side of the bill, CMP says it now charges $9.36 per month, which includes the first 100 kWh of electricity, and then 6.9 cents per kWh after that.
Under the new plan, the service charge would climb to $12 per month ($24.83 for net-metered residential customers) and the per kWh charge would drop to 5 cents. In other words, monthly charges are still related to how much electricity a customer uses, just not as much.
“We are striving to move in the direction of higher service charges and lower kWh charges in our distribution pricing structure,” Rice said in an e-mail. “This would make it more closely reflect the actual cost of providing service.”
But to Mueller, any rate plan that disconnects the amount customers pay from the volume of electricity they use “sends the wrong market signals to energy consumers.”
“By eliminating volumetric charges and transitioning to (higher) fixed rates, CMP’s proposal will eliminate the incentive for customers to reduce their peak usage or overall consumption,” Mueller said in written comments filed with the PUC in December. “As a result, use of the electric grid will be less efficient and will likely require construction of additional expensive infrastructure that would otherwise be unnecessary.”
He called the proposed standby rates “illegal under Maine law.”
Longer payback for solar renewable investments
Mueller also said that replacing “volumetric charges” with another billing model is a “back door attack” on net-metering, the financial backbone of grid-tied renewable systems.
Under net-metering rules in Maine, excess PV production is credited to a customer’s bill at the customer’s per-kWh rate, Mueller says. These credits are carried forward for up to one year and used to offset times when a PV array or a wind turbine doesn’t make enough power.
“Under net energy billing, excess solar production is credited only at the customer’s per kWh rate (volumetric charges), not against any fixed costs,” Mueller wrote to the PUC. “As such, any rate design changes that replace volumetric charges with fixed fees reduces the benefits of net metering and makes solar system economics far more challenging and, in the case of CMP’s proposal, will extend payback periods by several years.”
In a telephone interview, Mueller also argued that while CMP says the cost of providing service isn’t driven by the amount of electricity it sells, that’s really not the case. Ultimately, he said, the cost of providing service is driven by the peak load on the system, which typically occurs on a summer afternoon.
“The great irony is that solar customers who have low or in some cases negative consumption at the time of system peak, and therefore are reducing the cost to serve, are the ones who will be penalized by this change. It’s totally nonsensical and inequitable.”
The same issue is percolating elsewhere around the country
Maine is far from alone in this debate. It’s also popped up in California, North Carolina, Wisconsin, and Arizona, where regulators last fall approved an Arizona Pubic Service plan to begin charging a fee for customers who generate some of their own power. That added an average of $5 a month to the bills of solar customers.
The fee was later blamed for a drop in new photovoltaic installations, and Mueller said CMP’s proposal would be “absolutely devastating” to the rate of solar installations in Maine.
“We believe, based on past experience with pricing, that if CMP’s rate structure is adopted, the rate of solar adoption in Maine will slow to a crawl and our dependence on fossil fuel energy will increase as a result,” Mueller’s written comment said.
In Vermont, Mueller said a study a year or two ago found that non-solar customers don’t actually subsidize net-metered customers, as several utilities have argued. Because they are exporting power when both energy and transmission/distribution costs are at their highest, they are probably under-compensated for the power they generate, he said.
A bill now in the state Legislature would seek a similar study in Maine. The current rate hearings are expected to be wrapped up by July.