What was in SDCEA’s proposed rate change?
In October, the SDCEA Board of Directors voted to change the rate structure for the utility. This followed the release of a “Cost of Service Study” conducted by a firm in Wisconsin with whom SDCEA contracted. It should be noted at the top here, the utility doesn’t have a revenue shortfall - in fact, they already collect more money than they need (your capital credits reflect this). The rate change was not stimulated by a need for more revenue to meet rising costs. (update: on Feb 23, the board voted to rescind the rate change vote)
What’s going on?
There were many changes included in the rate restructuring, but the two big changes were:
a new Net metering rate which changed the current structure of “net metering” to one of “net billing” (in conflict with Colorado Law which requires utilities to provide net metering at non-discriminatory rates).
A shift of some of the volumetric or kWh rate charged to customers into the fixed monthly “service” costs. More discussion of what these changes mean is below.
Why the change in rates?
The utility doesn’t have a revenue shortfall. They collect more revenue than they need already. As a non-profit they can’t keep this additional revenue, which is why you receive a credit on your bill - called a “capital credit”. The board presents these changes as an attempt to shift costs to individuals they define as “cost causers” - this is a reflection of two core beliefs the utility has: 1) that solar customers are being subsidized by non-solar customers and 2) that the increase in second homes is shifting infrastructure costs to non-second home owners. They attempt to get at this perceived discrepancy by increasing the costs for people who use less energy under the belief that if someone has a second home, they aren’t using much energy and if you don’t have a second home, you probably use a lot more energy. Both of these strongly held beliefs by the board are remarkably flawed.
First of all, do second home owners drive costs for the rest of the rate class? Sometimes they do and sometimes they don’t. For example, if maintenance of long distribution lines is required to reach a second home, or if it’s located in an area where there currently isn’t any service, it might drive an increase in costs. If the second home is in downtown, or other areas where there is existing development, it won’t drive a substantial increase in costs. This is true not only for second home owners, but also for primary residents.
The theory the utility operates under is: if a home is a second home, it uses less electricity because it’s empty, so they have to increase the fixed costs. But, in reality, many second homes in the valley are being rented out through VRBO or Airbnb, so they’re not empty most of the time. Furthermore, I personally don’t have solar on my home and I live here full time - last month, I used 396 kWh of electricity - far below what SDCEA says they think a full time person uses (650 kWh). So the idea that a second home owner doesn’t use a certain amount of electricity and that a full time resident uses much more is just wrong - therefore the increase in monthly fixed costs is not acheiving their objective.
Meanwhile, it’s hurting a lot of other people.
Who does this rate change hurt?
In short, everyone.
The shift of some of the kWh rate into fixed costs means that every member of Sangre de Cristo will see their base costs increase by 45% even before they turn on a light. As a consumer, you have many options to reduce costs associated with your electricity use by increasing the efficiency of your lighting, water heating, space heating, appliances, etc…. But those cost savings are dramatically reduced when the amount you pay regardless of your energy use is increased.
Whom this hurts to the greatest extent are low-income customers. Why? Low income customers generally live in smaller houses with fewer gadgets and appliances. This is a generalization, but it is born out in the data. Multi-family low income units use 18% less than the average non low-income multi family unit. Low income single family homes use on average 38% less than non-low income homes. Furthermore, the federal weatherization assistance program run by the state which provides energy efficiency upgrades for low income homes would be greatly damaged by this rate change because much of the savings they hope to achieve for their customers would be lost to the high fixed fees. Finally, low income households have a much higher “energy burden” than the rest of the population - meaning more of their income goes to paying their energy bills than that of the general population, even though they use less energy.
This proposed rate change would establish highest fixed fees in the state.
Again - this is not being done because there is a shortage in revenue. The utility already collects more than they need.
What is Net Metering?
Very simply, net metering says if you generate electricity (from solar, wind, hydro or some other source) at your home or business, you have the right to put that power on the grid and get credit for the kWh you put on the grid against a kWh you take off the grid at a later time. You will only be billed for the net energy you use above what you put on.
Prior to net metering, a customer had two options if they wanted to invest in a solar electricity system. 1) they could purchase a large bank of batteries so they could go to work during the day, fill the batteries and then use the electricity they generated during the day at night when they came home. 2) if their utility offered a net billing policy, they could get credit for an “energy rate” that was a fraction of the overall kWh rate when they put solar power on the grid and be charged the full rate when they took power off the grid. This is a practice called “net billing” - billing the customer for the net of a kWh value put on the grid against a kWh value taken off the grid.
Net metering said that instead of net billing, you would receive a full kWh for kWh credit, not a monetary credit. You put a kWh on, you can take a kWh off with no additional charge. Net metering provided a simple, logical and cost effective solution.
In 2004, the state passed net metering for investor owned utility customers (Xcel and Black Hills) at the ballot with Amendment 37. In 2008, that law was extended to apply to rural cooperative customers.
As soon as the law passed in 2008, all cooperatives in the state changed from net billing to net metering. Solar companies have flourished around the state offering good paying local jobs and contributing to the state’s economy. It has stayed that way for the last 14 years, until the Sangre de Cristo board voted instead to return to net billing - in violation of the state net metering law.
How would this work: the utility is now saying they are dividing the value of a kWh into a “distribution rate” and an “energy rate. The new rate schedule for net metered customers (rate schedule 6), which will only credit a customer for a partial value of the kWh they put on the grid (the energy rate), but would charge the customer a full kWh cost (both distribution and energy rate) for electricity taken off the grid. Essentially, switching back to a system of net billing that existed prior to the passage of the law in 2008. This is blatantly illegal in violation of the Colorado law:
CO Rev Stat § 40-9.5-118(2) Each cooperative electric association shall allow a customer-generator's retail electricity consumption to be offset by the electricity generated from eligible energy resources on the customer-generator's side of the meter that are interconnected with the facilities of the cooperative electric association, subject to the following:
(a) Monthly excess generation. If a customer-generator generates electricity in excess of the customer-generator's monthly consumption, all such excess energy, expressed in kilowatt-hours, shall be carried forward from month to month and credited at a ratio of one to one against the customer-generator's energy consumption, expressed in kilowatt-hours, in subsequent months.
(b) Annual excess generation. Within sixty days after the end of each annual period, or within sixty days after the customer-generator terminates its retail service, the cooperative electric association shall account for any excess energy generation, expressed in kilowatt-hours, accrued by the customer-generator and shall credit such excess generation to the customer-generator in a manner deemed appropriate by the cooperative electric association.
(c) Nondiscriminatory rates. A cooperative electric association shall provide net metering service at nondiscriminatory rates.
The Sangre de Cristo utility disagrees with this law and has simply chosen to violate it with their new rate structure.
SDCEA maintains that solar customers don’t pay their fair share of distribution charges because they get credit for distribution costs when they put solar on the grid - and that credit allows them to use the grid when they take power off without paying. What they fail to mention is that when a solar customer puts power on the grid, that power travels to the next customer, goes through that customer’s meter and that customer pays the utility for their power - even though the utility has not assumed any cost of that power - it was produced by the person who invested in a solar system. The credit comes back to the solar customer only after the utility has already been paid the full value. So, no. There is no cost shift. Solar customers are paying more than their fair share while providing other benefits to the system.
WHAT IS THE ARKANSAS VALLEY COALITION FOR A SUSTAINABLE ENERGY FUTURE ASKING OF THE SDCEA BOARD OF DIRECTORS?
We are requesting that the board reverse their decision to implement this ill-conceived and poorly crafted rate change.
The SDCEA Utility commit to an open public process of engagement with the utility members to understand the priorities of the utility members so they can craft policies that reflect those priorities.
We hope you will join us in this effort.