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An Iowa utility that failed earlier this year to impose new constraints on solar customers is making another attempt in its currently pending rate case.
Interstate Power & Light has asked the Iowa Utilities Board to allow it to create two new rate classes for “partial requirements” customers — those who generate some of their own energy.
The utility has not requested a new rate for solar customers, but clean energy proponents suspect it will be coming if the Iowa Utilities Board approves the proposed new rate classes.
In another move that would tend to impinge on efforts to reduce energy use, the utility has asked for a $3 increase in the fixed monthly fee for residential customers. The utility wants to raise the fixed fee by $6.20 for small business customers.
Both proposals have stirred up criticism from proponents of clean energy as well as the state office that serves as a watchdog for consumers in the state.
“The proposal to create new rate classes seems to aim to discourage solar investment,” Karl Rabago said in some testimony submitted to the regulators this summer. Rabago is a former utility commissioner who now consults on utility and energy matters.
The creation of new rate classes “is the first step in discouraging distributed generation,” said Josh Mandelbaum, a lawyer for the Environmental Law & Policy Center who has been involved in the rate case. “We are very concerned.”
‘Accurately reflect the cost’
Interstate spokesman Justin Foss did not indicate whether a rate hike is in the future for members of the new classes, provided they are approved.
“We are gathering and presenting data so that we can ensure future customer rates accurately reflect the cost to serve them,” he said in an e-mail. The company’s broader mission in a rate case, he said, is “to balance out customers’ need for reasonable rates with our responsibility to provide services in a safe and reliable manner, recover costs of supplying energy and earning a reasonable return to remain financially strong.”
Mandelbaum called the attempt to create two new rate classes “part of a pattern of hostility towards distributed generation that we’ve seen from IPL for a number of years. They’ve taken multiple bites of that apple, and this would be one of them.”
Earlier this year, Interstate proposed a pilot tariff for solar customers that several solar installers and advocates said would make solar far less economically viable. Regulators approved a modified version of the initial proposal. It’s not yet clear what the repercussions may be on the pace and scale of solar installations.
Three months ago, Interstate asked state regulators to approve a “green tariff” that, according to some solar proponents, would levy an additional fee on willing customers without actually increasing the amount of solar energy in Interstate’s system.
In Interstate’s current rate case, it proposed one class that would encompass residential customers who generate some of their own power. The other class would cover small businesses with solar panels or another renewable technology.
Foss said that Interstate is moving ahead with its own company-owned solar energy, with the development of a 5 megawatt array in Dubuque – the largest community solar project in the state.
Interstate contends that solar customers should be in their own class because their power use is distinctly different from non-solar customers. And in fact, according to data submitted in the rate case, the power demand of solar customers tends to peak a couple hours later than customers who rely on Interstate for all of their power.
Included in the rate case is a graph that illustrates one difference between the 1,200 customers with solar panels and the 400,000 customers without them: the solar customers’ peak demand on Interstate’s grid occurs two to three hours after the peak demand of the other 400,000.
Rabago challenged the idea that a distinct pattern of energy use constitutes a reason to segregate a group of customers for different treatment. Any number of such groups could be identified, he said.
“Firemen, people who work the night shift, senior citizens with limited income, dual-income couples who both work outside the home. We have to ask, ‘Why do these 1,200 people get a separate rate class? What is this exercise for? Especially when (Interstate) refuses to consider the benefits these customers might also be providing.’”
Although 1,200 solar customers do not at this point make much impact of any sort on the grid, Rabago said that if and when their numbers grow, the graph suggests that their impact on the grid could be beneficial.
“They’re making use of the system at a time when it’s not fully loaded. That’s a dream for utilities.”
Fixed charges
In the rate case, Interstate also has requested increases in both the fixed monthly fee and the energy charge, but with an emphasis on the former. It is seeking to raise the fixed fee for residential customers from $10.50 to $13.50 per month. That amounts to a 29 percent increase, compared to a requested 12 percent overall residential rate increase.
The company proposes increasing the fixed fee for General Service (most commercial) customers from $17.80 to $24 per month. That would be a 35 percent increase, compared to an overall rate increase of 11 percent for General Service customers.
As sales of electricity have stagnated in recent years, utilities across the country have been pursuing hikes in their fixed rates to compensate for flatlining or falling revenues from energy charges.
Fixed charges “are discriminatory against low and moderate-income households,” Andy Johnson, director of the Winneshiek Energy District in Decorah, wrote in a statement he submitted to state regulators. “They deny customer control and responsiveness, and they discourage customer initiative for energy efficiency and renewable energy.”
But opinions vary as to what constitutes a fixed cost. To Rabago, it’s only the costs associated with adding a customer to the system – probably no more than $5 or $10 a month.
To Interstate, many of the costs of the distribution system are fixed. And while Rabago agrees that those costs are fixed – over the short term – he contends that over the long term, they become variable, depending on how much demand is put on the system.
Further, in its rate case, Interstate is essentially assigning costs without sufficient facts about which customers impose which costs on the system.
In contrast to earlier directives from the Iowa Utilities Board, Rabago said that Interstate “is not following a data-driven approach. That’s the most frustrating thing about this proposal.”