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A rural electric cooperative in Iowa has backed away from a plan to impose an additional $57.50 monthly fee on customers with solar panels.
On Thursday afternoon, Pella Cooperative Electric informed the Iowa Utilities Board that it was withdrawing the tariff it filed earlier this summer.
“It kinda made my day,” said Bryce Engbers, a hog farmer living outside of Grinnell. Engbers has arrays on his house and on each of two confinement barns, and had said he’d sooner remove the arrays than pay the higher fee.
“There are a lot of eyes on this, and I think it was a great move by [Pella], and I appreciate it,” Engbers said.
In June, Pella Cooperative Electric sent a letter to its approximately 3,000 members telling them that anyone installing solar panels after Aug. 15 would be charged the higher monthly fee.
Residential customers now pay a $27.50 monthly fixed fee. The additional charge would have meant an $85 monthly fixed fee for those with solar panels. Members with solar panels installed and operational before that date would not have to pay the higher fee for another five years.
The co-op’s management had commissioned a routine cost-of-service study earlier this year to determine whether any class of customers was not paying its fair share towards maintenance of the power system.
John Smith, the utility’s chief executive officer, said the study made clear that customers with their own solar generation — because they use less power — would as a consequence not pay their share of fixed costs.
The fee hike irked a couple of co-op members enough that they met with the co-op’s board of directors and asked to see the cost-of-service study. The utility’s management refused and then, apparently, relented.
“They gave us something,” Engbers said. “I don’t know if it was a cost-of-service study, but that’s what they said it was.”
The Environmental Law & Policy Center then got involved, and filed a petition to intervene before the utilities board. The center said that a fee levied only on customers with distributed generation facilities ran counter to two provisions in Iowa law.
The state’s Office of Consumer Advocate, concerned that the fee might have constituted discrimination against solar customers, also weighed in. It told the utility it wanted to see the cost-of-service study and any other documents used to calculate and justify the monthly charge.
Smith had previously declined a request from Midwest Energy News to review the study, saying it is “confidential” and “not subject to distribution.” He could not be reached Thursday afternoon for comment.
The co-op issued a press release that said, in part: “The proposed revision in the facility charge has drawn significant attention and has portrayed the Cooperative as discriminatory in establishing a different facility charge for those members who elect to install and maintain on-site generation which will provide some, but not all, the electrical energy needed to supply their needs. That claim is incorrect.
“The Cooperative has a long history of developing rates that collect sufficient and fair cost recovery; simply put, the cost causer must be the cost payer,” Smith stated. “It is unfair to the rest of the membership who would have to pay more so that another rate class can pay less.”
“… we have decided to withdraw the proposed increase on the facility charge for members who own or lease distributed generation until such time that we can better educate our members and the community as to the fair and equitable recovery of fixed costs.”
Josh Mandelbaum, an Environmental Law & Policy Center lawyer who represented two co-op members as well as a few environmental and solar organizations in the matter before the utilities board, said he suspected that when Pella decided to hike the fee for its tiny number of solar customers, the utility “didn’t have a sense of how that might impact members, and the concerns that members would raise. When that was provided, to their credit, they revisited the issue and withdrew the tariff.”
Although the Pella proposal likely would have affected only a small number of customers, Mandelbaum said, “The concern that we have is that although each individual co-op or muni might be a small entity in itself, between co-ops and munis they serve collectively about 30 percent of Iowa customers.
“We want to stop barriers from going up (for those customers), and this was a particularly egregious example of that barrier. The $85 charge was larger than anything we’ve ever seen — not just in Iowa, but around the country. The Minnesota commission just in the last week or two rejected a co-op that tried to impose a $5 charge.”
The debate over whether self-generating customers are being subsidized by the rest of a utility’s ratepayers is playing out across the country.
In the Midwest, Wisconsin utilities got approval for similar fixed rate charges to be imposed on solar customers.
Michigan utilities, on the other hand, are pushing to eliminate the state’s net metering law in favor of a system in which solar generators buy all of their power from the utility at retail and sell back excess power at wholesale. Utility officials say this accomplishes the same goal as imposing a monthly fixed rate.
Mandelbaum said he hopes other utilities will take note of Pella’s experience. He pointed to the Farmer’s Electric Co-op in Kalona, Iowa, which has been in the forefront of embracing and fostering renewable and distributed generation.
“There are other ways this can be done, and hopefully Pella revisting its decision is a sign that they’re willing to work with members to look at other ways this can be done. Hopefully other co-ops will do the same.”