Kansas utilities’ proposed new fees could wipe out savings for some solar customers

New installations of rooftop solar panels on homes across most of Kansas likely will come to a near-standstill if state regulators approve of demand fees proposed by the state’s two largest utilities.

Both Kansas City Power & Light and Westar Energy, which together provide electricity to about two-thirds of Kansas households, have demand-fee proposals bundled into rate cases that are now pending before the Kansas Corporation Commission. Rulings are expected by Sept. 27 in the Westar case and by Dec. 27 in the KCP&L case.

“If (the demand fees) pass as written, our residential client base will evaporate. We won’t install hardly anything residential in Westar territory,” said Mark Horst, who owns King Solar in Hutchinson, Kansas. Overall, he estimates he would lose half to two-thirds of his current business.

Commercial and industrial clients would not be impacted by the proposed demand fee.

Kevin Good, who owns Good Energy Solutions in Lawrence, Kansas, projected that his business “will drop off dramatically” if the Kansas Corporation Commission approves of the residential demand fees.

The proposals are almost identical, and would add a third fee – a demand charge – to the fixed customer fee and the energy charge that now constitute bills. They have proposed charging solar customers $9 per kilowatt during four summer months, and $2 or $3 per kilowatt during the remaining cooler months. The utilities would determine the peak energy use during any 15-minute period between 2 and 7 p.m. in the case of Westar, and 4 to 8 p.m. in the cast of KCP&L.

The demand fee is high enough that it would actually offset all of the energy savings provided by smaller solar arrays, according to Horst. He analyzed the finances of one customer’s 2.32-kilowatt array, and determined that her average monthly savings of $35 would be more than negated by an average monthly demand charge of $45.

The upshot: “She would have to pay $10 a month for the luxury of having solar panels,” Horst said, adding that he would have to advise her for financial reasons to remove the panels.

Her situation “would be pretty typical for a small solar generator,” he said. “I’d guess anybody who has less than 20 solar panels, their savings would be zero.”

Residential customers with higher usage and self-generation would fare better with a demand fee, according to Horst. Although he said he agrees that utilities “deserve to recover what it costs them to provide my house with service,” he is troubled that the financial pain of a demand fee would fall disproportionately on those customers who use the least electricity.

Utilities contend that all of their customers – no matter how little energy they use – must pay to maintain a system capable of meeting spikes in demand. They generally assert that customers who use a minimum of electricity because they produce some of their own energy do not pay enough to cover their use of transmission and distribution systems, and other company assets.

Demand fees a growing tactic

Utilities for years have looked for ways to maintain their revenues from customers who are generating some of their own power. Demand fees to be levied on at least some residential customers have been proposed in about 20 states.

In January, the Massachusetts Department of Public Utilities approved demand charges for net metering customers of Eversource utilities. It also eliminated optional time-of-use rates for residential customers.

Residential demand fees could be coming next to New York, where a proposal is before state regulators. In every other case, according to the web site, proposals “have either been rejected by the state’s regulatory body or withdrawn entirely.”

Demand fees are particularly problematic, according to Dorothy Barnett, executive director of the Climate & Energy Project in Kansas. She said she would be willing to consider some additional fee for solar customers – but not in the form of a demand charge.

Residential customers don’t know how much demand they’re putting on the system at any given time, she said, and so have trouble controlling it.

“If one day I come home and my AC cycles on on, my refrigerator cycles on, my husband pops something in the microwave and I put something in the dryer, I might get a spike in demand. When I get my bill, I’m not going to know when I look back on the previous month what I did to see the demand spike like that.”

“There are lots of better ways” to ensure a utility’s financial viability than what’s been proposed in Kansas, she said. Some states have proposed that solar customers be required to pay some monthly minimum amount, like a higher fixed fee, she said. While that’s more predictable than a demand fee, it also slashes the savings from distributed generation.

If state regulators approve the fees submitted by KCP&L and Westar, Barnett said she expects ripples to affect customers of unregulated rural electric cooperatives.

“We’re all concerned about precedent,” added Scott White, research and project analyst for Cromwell Environmental in Lawrence. “Some (rural electric) co-ops are following suit. They are using this as cover to add charges of their own. We’ve seen co-ops add what they call grid access charges. That’s a per-kilowatt of installed capacity per month. In some co-ops, it’s $4 per kilowatt. Most of these co-ops don’t have a lot of solar. They just preventing people from going solar.”

Barnett foresees a domino game coming up in the next few months.

“If Westar gets what they want, it’ll be hard for the KCC not to give KCP&L what they want.” And that effectively would give the green light to many of the smaller utilities serving the rest of the state, she said.

 

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