3 takeaways: NV Energy’s solar-rate proposal sets stage for more heated debate

Solar supporters rally Wednesday, Jan. 13, 2016, in front of Public Utilities Commission offices.

When NV Energy announced last week that it would introduce a proposal allowing existing solar customers to keep a prior rate structure for a period of up to 20 years, many took it as a sign that existing solar customers would be shielded from bill increases approved by regulators in December.

But when the utility filed that proposal Monday with its regulator, the Public Utilities Commission of Nevada, it offered the three-member panel seven proposals to deal with existing customers, leaving itself room for negotiation as the commission prepares to hold a hearing on the issue next week.

Over the next four years, the commission-approved rates for solar customers will gradually increase the fixed fee that solar customers have to pay for using the grid and reduce the value of credits those customers can earn by generating excess electricity under a program known as net metering.

NV Energy’s seven options include largely keeping intact the commission’s current decision, phasing in the bill increases over eight to 16 years, and grandfathering existing customers for 10 or 20 years.

The utility has asked the commission to weigh the relative cost of these options.

The proposal drew ire from the solar industry, which was under the impression that NV Energy sought to stop rate increases for existing customers for up to 20 years. Hours after the filing, solar advocates were calling the revised seven-option proposal a "bait-and-switch” by the utility company.

Grandfathering is important for existing customers because many have made sizable investments in expensive rooftop solar systems, either having purchased them outright or through lease contracts.

In preparation for the commission’s hearing next week, several other parties filed testimony on Monday outlining their positions on the issue of grandfathering some solar customers. Parties include the Alliance for Solar Choice and the utility commission’s independent staff and the Bureau of Consumer Protection, which represents all ratepayers in cases before the commission.

As the commission prepares to hear the filings next week, below are three takeaways on the issue:

NV Energy’s proposal

NV Energy is asking the commission to consider slowing the impact of bill increases for all customers who had systems installed before Sept. 10. That’s the last day a solar customer was notified they qualified for net-metering before a limit on the number of net-metering customers was reached.

In its news release last week, the utility had suggested making a larger number of existing solar customers eligible for its grandfathering proposal. In its filing, the utility offers the commission what it calls a “menu of options” for slowing the impact of the bill increases for solar customers.

The first five options include gradually increasing bills for existing customers over four years, eight years, 12 years, 16 years or 20 years. The final two options would defer any rate increase for at least a decade and allow existing customers to keep the prior rate structure for either 10 years or 20 years.

NV Energy, which has argued that solar customers do not pay their fair share for the grid, believes that each of these options shifts costs to other ratepayers. Every gradual four-year delay, it argues, would cost other ratepayers about $27 million. Deferring the rates for 10 years would result in a cost shift of $158 million and a shift of $315 million over 20 years, the utility argues in its filing Monday.

“In evaluating these options, the commission should, as it did in the original order, consider the cumulative cost shifting associated with each option when it balances the interests of all utility customers,” an NV Energy official wrote in the prepared testimony, which outlined the proposal.

That math is up for debate

Or maybe those numbers are completely off. That’s the argument that the Bureau of Consumer Protection, the state’s official consumer watchdog representing all ratepayers, outlines in its filing.

Like NV Energy, the utilities commission has said that grandfathering customers would result in a cost shift. The bureau believes that the type of study that the commission accepted is inappropriate. Only nine states use the type of study the commission accepted, it argues, compared to 31 states that use a different methodology and six states that use a combination of both methodologies.

Its testimony reads: “The commission’s finding of fact that there are subsidies for (net metering customers) is based solely upon accepting as fact the utilities’ marginal cost-of service studies.”

The filing goes on to point out that the study, which looks at the costs of service, did not factor in rooftop solar as a future resource. The Alliance for Solar Choice argues that had it included rooftop solar, there could be a situation where other ratepayers would be shifting costs to solar customers.

The bureau is recommending the commission approve grandfathering for 20 years.

The solar industry is angry

Advocates of rooftop solar were under the impression that they had scored a minor victory last week. Industry backers took NV Energy’s announcement that it would grandfather existing customers as a sign that those customers could keep their more economically advantageous rates for up to 20 years without any bill increases, regardless of how gradual they might be.

"The people of Nevada, the solar industry, and NV Energy all agree: existing solar customers should be grandfathered under net metering for 20 years,” Bryan Miller, the president of the Alliance for Solar Choice, said in a statement when NV Energy teased its proposal in a news release on Jan. 25.

On Monday, after the proposal was filed, these same advocates quickly changed their tune.

Miller called it another “bait-and-switch” from the utility.

An alliance that supports the No Solar Tax PAC also criticized NV Energy’s proposal.

“Nevadans should be disappointed, but not surprised, that NV Energy went back on its word today,” said Bob Greenlee, a spokesman for the alliance, said in a statement. “Last week, NV Energy publicly claimed that it would support grandfathering for its over 17,000 customers who have invested in solar. But today, NV Energy issued a proposal to undermine the investments their own customers, hardworking Nevada men and women, have made to generate their own power.”

In a filing, the Alliance for Solar Choice recommended grandfathering all existing customers for at least 20 years, citing California and Hawaii as examples of states that have done this effectively.

“Nevada is the only state or regulatory authority, to my knowledge, which has made a major change in the economics of net metering without grandfathering existing … customers,” wrote R. Thomas Beach, a California-based energy consultant who prepared the testimony for the advocacy group.