Wisconsin Offers a Good Example of Bad Solar Rate Design

This month, the Wisconsin PSC voted two to one to approve fairly drastic rate change proposals from We Energies that will make it more difficult and expensive for customers to go solar.   The proposed changes, approved without apparent modification, include:

  • Increasing the monthly flat customer charge by 66%;
  • Dramatically reducing the compensation for any excess electricity that a solar customer sends back to the grid; and
  • Imposing a significant charge to customers that invest in their own solar generating systems

This is a good example of electric rate design gone bad. WE asked the Commission for approval to increase its $9.66 per month customer charge to $16, among the highest in the nation. This fixed fee remains the same no matter how much energy a customer does or doesn’t use – whether that’s the result of conservation or self-generation through solar. So now WE Energies has a high fixed fee that does nothing to encourage efficient energy consumption, meanwhile, the price of electricity itself from WE Energies is low. Message to consumers? – energy is cheap, use lots of it!

Specific to solar customers, WE will now also be severely undervaluing solar energy that they deliver to the grid. A 2009 study of that WE itself commissioned found that distributed solar generation is worth about 15 cents per kilowatt-hour, but the newly-approved marginal rate proposal allows WE to pay customers just 20% of that value. 20%!!. A far cry from fair compensation for their valuable distributed clean energy.

To make matters worse, WE proposed to charge solar customers $3.79 for every kW of solar installed each month. A customer that installs a 5 kW system will be forced to pay almost $230 more every year.  Even customers that consume 100% of their generation on site and never send any electricity back to the grid are hit with this charge. Unsurprisingly, the utility was unable to demonstrate any increased cost imposed by solar for which this discriminatory charge was necessary.

Let’s be clear. Wisconsin has all of 300 solar customers, producing about 3/100ths of one percent of WE’s sales – hardly enough to present a real threat to WE Energies cost recovery. Yet now, WE Energies will be allowed to charge solar customers well beyond what it costs to serve them. These rate changes effectively prop up government regulated monopoly utilities against those few customers that attempt to make the only real choice they have in the electricity market – investing their own hard-earned money into generating their own power.

Rate design is complex, changing and has a tremendous impact on consumer solar investment. It’s not easy to get right (although WE Energies failed to do so with particular aplomb), but it’s oh so important to do so. To that end, we worked with Environment America, Environmental Law and Policy Center, Greenpeace, Pace Energy and Climate Center, Sierra Club, Southern Environmental Law Center to identify six guiding principles that ensure fairness for all customers during this significant transition in our electricity infrastructure.  We encourage policymakers and stakeholders to adhere to these principles of sound electric rate design.

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