Minnesota’s rural distributed generation customers won a major victory this week when state regulators halted the practice by cooperatives of applying fixed charges for solar installations.
Regulators ruled June 9 that cooperatives must file requests for small power production tariffs with the Minnesota Public Utilities Commission, which makes the final determination on those fees. The commission ruled those fees must now be suspended until an investigation is completed.
Rural cooperatives lost their argument that the PUC had no jurisdiction in the matter of fixed charges for solar customers. Co-ops believed their boards would be the final arbiters of those charges.
“It’s a victory for good government and for good process,” said Brad Klein, an attorney for the Environmental Policy & Law Center. “This is an unusually strong statement from commissioners who saw that distributed generation customers don’t have a strong voice on the boards of directors of these co-ops.”
Attorney and Minnesota Solar Energy Industries Association development director David Shaffer represented two individuals who had brought complaints against their rural co-ops over the fees. “It was a near perfect decision for us,” he said. “We pretty much got everything we wanted.”
Jim Horan, legal counsel of the Minnesota Rural Electric Association, said the decision “was not unexpected.” MREA had believed ratemaking was more the purview of their boards and not the PUC, but the investigation the commission has ordered will seek to clarity those roles, he said.
The issue of extra fees being added to solar customers’ bills has become common throughout the country and in the Midwest. The rationale has been the fees cover the fixed cost of serving solar customers, but others argue they fail to account for benefits that distributed solar provides for the grid.
“We believe these types of proposals are motivated by a desire to chill and block distributed generation,” Shaffer said.
Last year the Minnesota legislature passed a law allowing co-ops to charge fees for distributed generation customers as long as they were “reasonable” and based on a cost-of-service study.
Since then 14 co-ops have added monthly fees ranging from $13 to $83. “That has chilled the market in coop territories,” he said.
The current case involved complaints about fixed charge fees by customers of Meeker Cooperative Light and Power Association and Minnesota Valley Cooperative Light & Power Association.
The ELPC and Fresh Energy, publisher of Midwest Energy News, filed a separate complaint that, in essence, argued that fixed fees were not appropriately filed and that co-ops shouldn’t be allowed to charge them.
The co-ops were represented by the MREA. The organization had instructed members to use a cost-of-service study approach which emphasized income lost from a solar customer rather than the actual cost of having distributed generation on the grid, Shaffer said.
The methodology used is more like “a lost revenue model,” he said. “It’s not how expensive it is to facilitate someone getting on the grid.”
The co-ops took no benefits of solar into account in their cost-of-service studies, he said. The PUC has accepted a “value of solar” study by the Department of Commerce which reveals solar has a net benefit, and therefore distributed generation customers should pay little or nothing to utilities, Shaffer said.
Before the state law passed last year, co-ops charged solar customers anywhere from $2.65 to $5 a month. The state’s investor owned utilities charge from $5 to $10 a month, Shaffer said.
The PUC opened a docket to look at the fees charged by 14 co-ops, and allowed other co-ops to join in. The commission will look at the fixed charge methodology being used and compare it to the statute, which calls for “fixed costs” to be front and center.
“There’s no inherent right of a utility to collect a certain amount of revenue from a customer,” he said. “We certainly believe customers should pay their fair share of the cost of connecting to the grid.”
Co-ops will have to submit data and allow for people to review it, Klein noted. The benefits of solar will have to be included, too, he said.
MREA’s Horan argues co-ops are “at cost providers” without a revenue component that goes to investors. If the cost of service is $45 a month, that’s what the co-op needs to collect from all customers, not just those with solar, he said.
When MREA developed the methodology, clean energy advocates were consulted, he said. “We didn’t get a lot of specific feedback,” Horan said. “We’d be open to suggestions on other ways to do this.”
The benefit of solar is different for distribution co-ops. The value at this point is no higher than what the coops pay now for energy, Horan said, and because their grids cover great distances and have little density even small amounts of distributed energy can be impactful.
One part of the case remains unclear. Meeker Cooperative argued that the complaint brought by Keith Weber over fixed charges was in “bad faith” and “frivolous.” Had the commission ruled against him, he would have had to pay the utility’s attorney fees.
“We were concerned more broadly that if this was how co-ops would respond to customer complaints they would be afraid to come forward and contest these fees,” Klein said.
The commission did not vote on Weber’s case but indicated that he had not violated state statute involving bringing cases against rural coops.
While Shaffer is pleased by the outcome the case is far from settled. The PUC “investigation is ongoing,” he said. “The fight is not over. The docket remains open. We won a big battle but the war is not over.”
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