Scott Sklar, former head of the Solar Electric Industries Association and now the principal of The Stella Group, is one of America’s most knowledgeable and outspoken proponents of solar power, and has been for decades. In this piece, first posted (but with a somewhat garbled ending) on RenewableEnergyWorld.com, he takes on the false notion that everyone pays the same rates for electricity. We don’t. And that makes a difference when there are nuclear and fossil fuel utilities arguing that people without solar power are somehow subsidizing those who do have it. They don’t.
Many electric utilities are flexing their political muscles against solar net metering and state renewable portfolio standards (RPS). Their main issue is that other consumers are subsidizing solar (and renewables), particularly pointing to lower-income consumers. I have already written about the numerous studies that disprove those allegations, but that is not what this article is about.
There are several fantasies about electricity rates, and it is time to address “ratepayers subsidizing solar.” The corollary is “at no other time do ratepayers subsidize other ratepayers.” I am here to tell you, dear readers, that this belief is hogwash. Cross-ratepayer subsidies occur every single day in every utility service territory.
Fantasy One: There Is One Electric Rate
In many states, residential ratepayers have one homogenized rate, and commercial/industrial/institutional (CII) ratepayers have a series of electric sub-rates called demand charges (rates increase over a certain level of electric use), peak and season rates, and in deregulated states “spot” or “ratchet” rates (which are time-specific rates) and some even have time-of-use (TOU) rates. So in states where residential customers have a singular rate, those CII ratepayers subsidize residential rates.
Fantasy Two: There Are No Cross-rate Subsidies
Every utility in their service area allows large industrial, commercial, and institutional customers to receive lower electric rates. In fact, these large players negotiate with the electric utility on what rate they expect when they move a facility or building into an area. The larger they are, the lower electric rates they get.
According to the Energy Information Administration, 2014 electric utility rates for New England stand at 17.98/kWh for residential while commercial is 14.04/kWh and industrial is 10.97/kWh, which is the only electric rate that went down from the year prior. Pacific coast rates are at 13.81/kWh for residential and 8.51/kWh for industrial, while West South Central states are at 11.01/kWh for residential, 8.17/kWh for commercial and 5.75/kWh for industrial.
In fact there is a whole industry of consultants that represent companies to negotiate lower electric rates with their electric utilities. One such consultant advertises: “Our energy consultants routinely negotiate with utilities to generate savings for companies. These negotiations extend beyond tariff rates into other utility opportunities, incentives and programs that involve: obtaining preferable contract terms and developing specialized rates.”
Manuals for officials from commercial and industry that move or open new facilities routinely state: “Electricity price negotiations: In contrast to negotiating your interconnection agreement, you may have more bargaining flexibility in negotiating your price for electricity. In … Read More