WV Far Behind in Solar Industry Job Creation, HB2201 Would Only Make It Worse

Dan Heyman has a solid piece on Public News Service about the impact of HB2201 on WV’s already dismal job creation record.

An annual census by The Solar Foundation found the number of jobs in the solar industry is up by nearly a quarter over the year before, and up nearly 90 percent since 2010.
Those are national figures.  When was the last time you heard of any job category in WV that was “up nearly 90 percent since 2010?”  Yeah, me neither.
Solar Foundation president and executive director Andrea Luecke says most of these jobs pay well, and says much of the new work is in sales and installation. As solar power becomes more competitive, Luecke says more people will want it installed.

“It’s been phenomenal. Homeowners, commercial owners, even utilities,” she says. “And as we have more solar installed on rooftops, on land, in parking lots and on top of landfills, we need people to do those installations.”

But WV young people who want to work in this rapidly growing industry will have to leave the state.
But in West Virginia, Luecke says state energy policies have limited the growth of solar employment. A good example is House Bill 2201, now sitting on the desk of Governor Earl Ray Tomblin awaiting his signature or veto. According to solar supporters, the bill could limit the ability of homeowners and businesses who have installed solar power to sell any excess power back to the grid.
Dan ends his piece with the following dismal news:
Only about 300 West Virginians work in solar-related fields, while the census says there are nearly 175,000 people employed in the industry nationwide.

Does the “Compact” Between Regulators and Utilities Really Exist?

Utility lawyer Scott Hempling always has something well informed and original to say about electricity in the US.  This month’s essay is no exception:

I recently came across this quote:

There is … a long-standing, but unwritten, rule that governs cost recovery and lies at the heart of establishing regulated prices. This rule is known as the regulatory compact. Under the regulatory compact, the regulator grants the company a protected monopoly, essentially a franchise, for the sale and distribution of electricity or natural gas to customers in its defined service territory. In return, the company commits to supply the full quantities demanded by those customers at a price calculated to cover all operating costs plus a “reasonable” return on the capital invested in the enterprise.1

This is the formula fed to regulatory newcomers:  smooth, sweet and easily digested.  But it lacks the essential nutrients. As commonly misused, the phrase “regulatory compact” refers to the regulatory treatment of shareholder investment under the statutory “just and reasonable” standard and the Fifth Amendment’s Takings Clause in the U.S. Constitution.2 There is a legal relationship between utility and regulator, and between utility investment and regulator-set rates.  But that legal relationship is not “long-standing,” it is not “unwritten,” and it is not a “rule.”  To call a “compact” what the Supreme Court has described as “essentially … ad hoc and factual” is artificially narrow, incumbent-protective, and legally wrong.

Mr. Hempling takes apart the “ad hoc and factual” relationship between electric companies and regulators, masquerading as some kind of regulated utility compact, and blows away much of what we are taught about electric utility monopolies.

The next paragraph is particularly relevant to AEP’s and FirstEnergy’s grab to control the regulation process in HB2201:

Those who cite the “regulatory compact” talk only of an exchange of service for money.  The real relationship is richer.  It requires the utility to satisfy the regulator’s standards for performance at “lowest feasible cost,”3 to use “all available cost savings opportunities”4; and to pursue its customers’ legitimate interests free of conflicting business objectives.  In return, the regulator must establish compensation that is commensurate with the utility’s performance.  But there is more.  To set standards for performance and ensure compliance, the regulator must have the resources, expertise and political support that is at least the equal of the utility’s.  And for this relationship to work to each party’s benefit, it must include a mutual commitment not to use the political process to undermine either the utility’s or the regulator’s ability to do their jobs.  Those who talk of a “regulatory compact” leave most of these factors out. [emphasis mine]

And

Utilities often cite the “compact” self-referentially, as if it is their compact, created solely to support their specific revenue needs and their specific business success.  (As in, “Utility of the Future” rather than “Customer Needs of the Future.”)  But the legal relationship just described transcends any particular utility.  Its foundation is a franchise, of which the incumbent utility is but a temporary grantee, one whose rights depend on performance.  The utility has no lifetime lock on the franchise (see “Regulatory Capture I:  Is It Real?“); nor is it like a New York City taxi medallion—bought from government, resold  for profit.  The franchise is a right to be earned, not demanded.

This describes perfectly the entitled attitude of both AEP and FirstEnergy in West Virginia, as well as that of our supposed regulators, the supine WV PSC.

Read Mr. Hempling’s entire piece.  It will open your eyes about what utility regulation really is.

Electric Industry’s War on Solar Comes to WV

In the fight over preserving net metering, the electric industry’s war on solar, declared in 2013 by the Edison Electric Institute, has come to the WV Legislature.  The war has come in the form of two vague and misleading words, “cross-subsidization”.

As House Bill 2001 moved through the Legislature early in the 2015 session, another bill, HB2201 was introduced.  HB2001 repealed the do-nothing ARPS law that was put in place by then-Gov. Manchin and the coal industry in 2009, but preserved the section of the law that authorized the WV PSC to institute net metering in WV.

HB2201 attempted to add a definition of net metering back into the newly constituted net metering law preserved in HB2001 .  However, that definition was slightly modified to add new restrictions on which solar power producers were eligible for net metering.  This modification, which changed an “or” to “and” from the definition of net metering which had been in another section of the ARPS law, signaled that AEP and FirstEnergy, the two Ohio-based holding companies that control WV’s electrical system, were going to use HB2201 to perform stealth attacks on net metering that most legislators thought they had “saved.”

When HB2201 passed out of the House, Del. Folk, a Republican from Berkeley County, successfully added an amendment to the bill which read:

The [Public Service] commission shall assure that any net metering tariff does not create a cross-subsidization between customers within one class of service.

This was the first time the words “cross-subsidization” had crept into the policy discussion about net metering in WV.  The word “subsidization” is part of the power industry’s propaganda lexicon in its fight against solar power.  It is a buzzword implying falsely that solar power needs subsidies to compete “in the marketplace” with fossil fuel power, which is portrayed as requiring no subsidies.

This characterization is particularly ironic in WV considering that the WV PSC has just saddled WV rate payers with huge subsidies to protect AEP’s Mitchell Plant near Moundsville and FE’s Harrison Plant near Clarksburg from having to compete in wholesale energy markets with lower priced alternatives.  The Legislature did its part in 2013 by dumping responsibility for AEP’s failed fuel choices in 2008 onto the company’s rate payers in the form of decades of bond payments to cover AEP’s coal costs with the deceptively named “consumer relief charge.”

Del. Folk’s “cross-subsidization” now joins “free loader” and “standby charges” and all the other propaganda that has been used by power companies in their fights against solar power in Republican-controlled states like Arizona, East Virginia and Wisconsin.

Throughout all solar advocates’ attempts to remove the cross-subsidization language from HB2201, power companies and legislators resisted any change.  In fact, the Senate added a definition of cross-subsidization to the bill which only made matters worse.

To be clear, HB2201 does not direct the PSC to make any changes to its rules concerning net metering.  Nor does the bill require power companies to make any changes in their current rate tariffs.  But the bill does create a legislative directive that could be used the AEP and FE to push for those changes in the future.

The possibility of an attack on net metering is essentially the same as it has always been.  The Ohio holding companies could have tried to add fees or change the way power producers are compensated in the base rate cases both companies filed at the PSC in 2014.  They chose not to attack in those cases, which indicates that attacking net metering is not a high priority for them, right now.

I have personally heard FirstEnergy’s lobbyist tell two different legislative committees that his company only intends the cross-subsidization language to apply to larger solar power systems that might require power companies to change their equipment for interconnection.  When solar advocates lobbied legislators to reflect these statements in changes to HB2201, both FirstEnergy and AEP refused to support the changes.  That is an indication that FirstEnergy is not willing to stand behind the verbal assurances of its lobbyist and may have other things in mind for the future.

So, with HB2201, the WV Legislature has created a classic case of regulatory uncertainty that now hangs over the entire solar power industry in our state.  Hundreds of WV citizens and businesses have made millions of dollars of investment in our state which is now at risk because of sloppy legislating and power company power plays.

West Virginians have one more chance to stop this attack on our state’s future.  Click here to send an email to Gov. Tomblin asking him to veto HB2201 when it crosses his desk in the coming week.  Send your email now, because time is limited.  You can also call the Governor’s Office on Monday morning at 304-558-2000.

PUCO Dumps AEP’s Ohio Coal Bail Out

The Public Utility Commission of Ohio has told AEP that is will not allow the company to lock Ohio rate payers into power purchase agreements with AEP’s uncompetitive coal burners.  FirstEnergy also has a similar bail out plan pending before PUCO.

The Public Utilities Commission of Ohio made history Wednesday in a ruling refusing to allow AEP Ohio to saddle ratepayers with extra charges to subsidize the continued operation of a 1950s-era coal-fired power plant that it owns along with FirstEnergy and other state utilities.

The decision to reject AEP’s request for a subsidy — immediately applauded by some consumer and environmental groups — sends a shot over the bow of FirstEnergy’s similar proposal and could jeopardize the continued operation of the Davis-Besse nuclear power plant and the W.H. Sammis coal-fired power plant on the Ohio River.

The Cleveland Plain Dealer goes on to explain:

The Ohio Consumers’ Counsel has opposed the PPA proposals offered by both utilities. And it lost no time Wednesday arguing that the real issue in the case is the impact on home electric bills.

“AEP’s customers already pay the highest electric rates in the state.  Ohioans pay higher rates on average than consumers in 31 other states,” said OCC spokesman Scott Gerfen.

“Ohio’s electric utilities want the protection of more government regulation but consumers need the protection of more competition to lower their electric bills in this era of historically low energy prices.

“It’s time to end the electric utilities’ slow march to competition and adopt the competitive markets that Ohio lawmakers envisioned in 1999.”

Still, Wednesday’s ruling is not absolutely a death knell for power purchase agreements, despite the hosannas issued by other consumer groups and some environmental organizations soon after the ruling.

In fact the PUCO order declares that the concept of a PPA in a marketplace that is supposed to be free of state regulation is legal under Ohio law.

What the order says is that the commission could find no benefit to customers in allowing the PPA as it was proposed by AEP Ohio.

“Although the magnitude of the impact of the proposed PPA rider cannot be known to any degree of certainty, the Commission agrees with the Ohio Consumers’ Counsel, the Industrial Energy Users-Ohio and other intervenors that the evidence of record reflects that the rider may result in a net cost to customers, with little offsetting benefit from the rider’s intended purpose as a hedge against market volatility,” the ruling asserts.

Unlike the WV PSC, PUCO is interested in protecting electric customers.  As time goes on, the WV Harrison (FirstEnergy) and Mitchell (AEP) deals will look worse and worse, compared with PUCO’s wise decision.

 

WV PSC Orders 8.8% Rate Increase for FirstEnergy Customers

Today, the WV PSC issued its final order in the pending FirstEnergy base rate case.

If you are a residential customer and pay your electric bill to Mon Power or Potomac Edison, your electric rate is going up 8.1% 8.8%* according to the settlement agreement between FirstEnergy and the other parties in the case.

This increase includes new separate charge, or surcharge, for vegetation management costs.  (And you thought they were already doing vegetation management.  Silly you.)  The rate increase also includes the costs for repair of distribution and transmission systems after the 2012 Derecho and Hurricane Sandy.  Many of these costs could have been avoided if FirstEnergy had been doing proper maintenance of its equipment and rights of way before PSC granted them a new surcharge.

And don’t forget the Harrison plant.  The former surcharge for the Harrison boondoggle goes away, but that cost is incorporated directly into the overall rate base.  This increase is also included in the 8.1% rise in rates.

Because the WV PSC will not require WV’s Ohio-based power companies to implement real energy efficiency programs that will reduce West Virginians’ electric bills, monthly electric bills will continue to rise as a result of these new rate increases.

For West Virginians with solar power systems, these increases in electric rates shorten the recovery period for their initial investments by increasing the value of the electric rates they avoid paying.

*I must have missed a charge when I calculated the rate increase from the PSC order.  FirstEnergy says the rate increase is 8.8% in their press release.

Incorporating both rate changes, typical Mon Power and Potomac Edison residential customers using 1,000 kilowatt hours per month can expect their bill to increase from $92.38 to $100.49.  The new rates will take effect February 25, 2015.

That increase is 8.8%.

Gov. Tomblin Signs HB 2001 Into Law

Gov. Tomblin signed HB 2001 into law today.  The bill repealed the Alternative and Renewable Energy Act of 2009 and replaced it with a statute titled “Net Metering of Customer-Generators,” preserving statutory authority for net metering.

SB 1 remains in the House Energy Committee.  HB 2201, a stand alone bill to insert a faulty definition into the net metering law, remains in the Senate Judiciary Committee.  While it looks more likely that these bills will languish in these committees for the rest of the session, they could be revived and might effect some further changes in the net metering law that Gov. Tomblin signed today.

Thanks to the vigilant and swift acting solar power community in WV, the new net metering law is a great victory for all West Virginians.  As a bonus, the veneer of having something called a portfolio standard has been stripped away from WV’s coal and gas industry controlled state government.

Solar Economics Picking Up Momentum in US

A recent study calculates that home solar power generation is now cheaper than centralized power in 42 of the 50 largest cities in the US.

“Right now, buying an average-sized, fully-financed solar PV system costs less than electricity from their local utility for 93 percent of single-family homeowners in America’s 50 largest cities, and in most places, is a better investment than many of the stocks that are in their 401(k),” said Jim Kennerly, project manager for the Going Solar in America report. “Nevertheless, most people are unaware that solar is this affordable for people of all walks of life.”

Many customers mistakenly think going solar requires having a lot of sunshine. The report points out that solar’s value to the customer is more about how much grid energy it can offset.

One of the fundamental problems here is that most people in the US have a poor understanding of how to calculate the value of different investment options.  High schools, and even colleges, don’t teach basic business math such as calculating net present value.  If you can’t calculate the terms of your own investment, you set yourself up to be exploited by the power companies that benefit from your ignorance.

Solar is not just competitive in markets with high electric rates.

It’s no surprise that places with high electricity rates — New York, Boston and several cities in California — claimed some of the top spots on the list. But the study found that solar is also competitive in Kansas City, Atlanta, Charlotte, Milwaukee, Wichita, Columbus and other smaller markets.

That’s because low electricity prices don’t necessarily mean consumers save money. U.S. Energy Information Administration (EIA) data shows that customer in regions with the lowest rates tend to use the most energy and pay the highest bills. For instance, in 2012, the latest year with vetted data, customers in the South Atlantic region paid 11.4 cents per kilowatt-hour on average and $123 for their monthly bill, whereas customers in New England paid 15.7 cents per kilowatt-hour and only $100 on their monthly bill.

The rate/bill comparison is one I have made on The Power Line in the past.

The report also compared an investment in your own solar power with an investment in stocks.  Low interest rates and investment returns are a big problem for a lot of small investors.  The study shows that in a lot of US cities, investing in your own solar panels is the best way to invest for retirement.

The report finds that for many of America’s 50 largest cities, the net present value of a dollar invested in solar (what the lifetime of the system is worth in today’s dollars) is greater than a dollar invested in the stock market.

In twenty of the 50 cities, customers paying upfront with cash for a 5-kilowatt system will see greater returns than on the stock market over the 25-year life of the system. In 46 of the 50 cities, customers with a fully financed solar project will see better performance than the stock market. Financing over time benefits more people in all cities. San Jose ($23,171), San Francisco ($21,859) and Oakland ($21,839) came out on top.