As IOUs push solar, Santee Cooper rate plan draws ire of South Carolina greens
Clean energy activists say the state's public utility is dragging its feet on solar
Hard-won consensus on solar policy between South Carolina utilities and solar stakeholders has made it a model for similar efforts in other Southern states, but just as private power companies are gearing up to implement a key solar-enabling law, activists say the state's public utility is dragging its feet.
Duke Energy Carolinas and South Carolina Electric and Gas (SCE&G) have committed to complying with Act 236, the state's landmark solar legislation passed last year. But Santee Cooper is going its own way, according to the state's solar advocates. The board of directors of the public utility will vote Monday on a new package of solar incentives that have drawn the ire of clean energy supporters.
The IOUs have agreed to solar targets and retail rate net energy metering (NEM), but Santee Cooper officials say rebates and avoided cost remuneration work better.
“Rather than doing a net metering rate, we have rebates and credits that address the cost of solar,” Santee Cooper Spokesperson Mollie Gore said. “Seeing other utilities across the country trying to correct rates or re-address fixed costs now makes our approach keeping it to rebates seem to make more sense.”
The solar programs being put in place in South Carolina by investor-owned utilities SCE&G and Duke Energy are making solar “more accessible and affordable," according to a new white paper, “Santee Cooper Casts A Shadow On Solar,” from the Southern Environmental Law Center (SELC) and the South Carolina Coastal Conservation League (CCL).
But Santee Cooper, the groups argue in the report, "is proposing excessive charges that would squash solar in its territory.”
In question is a proposal from Santee Cooper to not only increase fixed charges on residential customers, but impose a new standby charge — or distributed generation rider — on the bills of customers with rooftop solar systems.
The fees would "make solar a losing proposition for customers even with the incentives that Santee Cooper proposed separately,” the white paper argues. “Santee Cooper should instead follow the lead of other South Carolina utilities, and offer its customers simple 1:1 credit for the power produced by rooftop solar.”
Act 236 and IOU solar
South Carolina’s landmark Act 236 was formulated by a coalition of environmentalists, solar advocates, and utilities and electric cooperatives. It was passed unanimously by both legislative bodies last year.
The law required regulators to approve a Value of Solar (VOS) methodology and led to an agreement for the state’s IOUs to provide retail rate NEM credits to solar owners until that methodology arrives at more accurate values to replace the retail rate.
A second provision required SCE&G and Duke Energy Carolinas to commit to minimum renewables and distributed energy resource (DER) capacities.
With those commitments, the IOUs were allowed to cap the NEM programs, at 2% of their residential peak loads and 1 MW for commercial-industrial customers.
It also established the legality of a limited third party ownership (TPO) of rooftop solar program, making South Carolina one of the first states in the South to allow solar leasing.
Finally, it required regulators and utilities “to harmonize rate structures with the new environment of increasing levels of DER,” according to John Frick, vice president of Electric Cooperatives of South Carolina, the trade group for the state's electric co-ops, and one of the Act’s architects.
Santee Cooper’s plan
Santee Cooper, as a publicly-owned utility and the primary supplier of generation to most of the state’s electric cooperatives, was exempted from many Act 236 provisions, including those requiring the solar capacity minimum, the NEM, and the development of a VOS methodology.
Unlike the state's investor-owned utilities, Santee Cooper is not regulated by the state Public Service Commission, but by a board of directors appointed by the governor and approved by state senators. Its planners will bring a new solar incentive package to the board for approval on Monday, Dec. 7.
“We will not stack up if all you are looking at is net metering," Gore acknowledged. “We have rebates and credits that address the cost of solar because we want to keep our rates pure.”
A stand-alone program available to residential and commercial-industrial customers will provide rebates of $0.65/watt for purchasers of rooftop or community solar, Gore said.
In addition, Santee Cooper will credit solar energy-generated electricity sent to its grid at its avoided energy charge of $0.0388/kWh — less than half the average retail NEM rate of $0.1084/kWh. The first 500 customers who interconnect solar to Santee Cooper’s grid will also get an additional $0.03/kWh credit for three years.
“We are targeting incentives that will allow a solar purchaser to pay off a 5 kW system in 12.5 years,” Gore said.
There is a second part to the utility’s proposal — an increase in residential fixed charges from $12 to about $14. And for solar customers, Santee Cooper would institute a standby generation fee "intended to capture their share of fixed costs for the 17% of the time they get their electricity from their solar," Gore said.
About two-thirds of the cost to Santee Cooper to serve an average customer is to cover infrastructure and other fixed costs, but most of the bill is based on variable, per kWh consumption, Gore explained.
“If you get some of your consumption from rooftop solar, your consumption is reduced, and that reduces the money you pay that covers our fixed costs," she said, "but we still have to have infrastructure on standby for you for when you are not getting your electricity from your solar.”
The standby charge, she said, will prevent the utility from passing the portion of fixed costs not covered by solar-owning customers to the rest of its customers.
The critique of Santee Cooper’s plan
“The proposal is problematic in two major ways,” the Coastal Conservation League's Energy and Climate Director Hamilton Davis wrote in a recent editorial.
The first is that the proposed fee to solar owners is based on the “flawed justification” that Santee Cooper can “charge you for using less power," Davis wrote. "This is like fining customers who install energy efficient appliances in their homes or businesses.”
If SELC and the Conservation League viewed the Santee Cooper plan as good for solar, Davis told Utility Dive, “we would support it just like we are supporting the IOU programs.”
Though he and other critics acknowledge that Santee Cooper is exempted from complying with Act 236, Davis said there could be a customer backlash against the plan, and courts could find that it unfairly discriminates against rooftop solar customers.
A similar solar-only fee from Wisconsin utility We Energies was rejected by a Circuit Court judge in October because its necessity had been inadequately substantiated, Davis noted. "That is the other way Santee Cooper’s plan is problematic."
Under Act 236, the state’s IOUs are “required to quantify the value of rooftop solar through a comprehensive benefit-cost analysis and fully credit solar power," Davis wrote. "Santee Cooper has failed to conduct a comparable analysis, and this proposal significantly undervalues rooftop solar…”
Because there is still no definitive value of solar in South Carolina, Santee Cooper has a right to claim that revenue losses from customers using solar causes a shift of infrastructure costs to other customers, Davis acknowledged.
“But," he said, "they should demonstrate through an analysis there is a cost shift if they claim it,” Davis said. “We have demonstrated NEM is not a problem for other customers with a 2% cap.”
The utility’s cost of service analysis, the basis of its argument for a standby charge, has been widely dismissed as an adequate justification, he added.
The utility also uses its cost of service analysis to value credits for customers’ solar at its avoided energy cost instead of the NEM retail rate, Davis said. That violates the intent of Act 236’s TPO financing provision because it “makes solar leasing a non-starter.”
How Santee Cooper concluded its solar program would allow for a 12.5 year payback period is also less than clear.
“Our numbers show the payback with their incentives is 20 years,” Davis said. “We have sent Santee Cooper our calculations but they have not responded.”
The Coastal Conservation League and SELC argue that Santee Cooper, like the IOUs, should comply with Act 236 dictates by initiating a VOS study and using NEM in the interim.
“It is not NEM for now and forever, but NEM while a more sophisticated analysis is conducted,” Davis said. “NEM will not be the kind of problem for South Carolina that is in Hawaii or California because the grid penetration is still very low and we have a cap that only the legislature can change. At 2% of peak installed capacity, the utilities’ lost revenues would be essentially unnoticeable.”
Remaining points of dispute
The CCL-SELC white paper charges that “energy savings from renewables are 'penalized' by Santee Cooper but that is not true,” Gore said.
“We are recovering fixed costs with the standby generation fee," she said.
“Their proposal is not based on sound ratemaking principals. It is not consistent with other rates they offer like their energy efficiency rates. It is not based on any analysis. And it is discriminatory against solar,” he said. “They should be offering retail rate NEM with no solar specific charges. That works in the marketplace and is what the IOUs are doing.”
Gore objected to a calculation in the paper showing Santee Cooper’s requirement for rooftop solar under Act 236 would be 14.5 MW if it were an IOU regulated by the PSC.
“It should be 3.6 MW," she said. "What they seem to have done is include community solar. Only 25% of the 14.5 MW has to be rooftop. We will be doing rooftop and community solar.”
Davis acknowledged the Act 236 requirement is that 1% of the utility’s peak demand be met with systems smaller than 1 MW. “Small community solar qualifies and we support their community solar efforts.”
Gore, finally, objected to the white paper’s conclusion that Santee Cooper has “no solar commitment” because it overlooks the utility’s longstanding goal for 40% emissions-free generation and energy efficiency by 2020.
“Solar is part of that," she said.
Davis remained unsatisfied with Santee Cooper's program, but both he and Gore expect the board to approve the proposal put forth by utility planners.
“They have not committed to a MW target for any solar programs," he said. “They have isolated the cost shift as a unique problem for them, but they have not demonstrated that it is."
“NEM is a best practice across the country for solar customers and now is used across South Carolina in the IOU territories," he concluded. "Santee Cooper is proposing rates we think are punitive and discriminatory and the onus is on the utility to demonstrate otherwise. It hasn’t done it and I don’t think it can.”
Santee Cooper, Gore said, has seen success over the years with rebates and other up-front incentives in its energy efficiency program.
“Based on that success, we went back to the same playback for solar and renewables. Our customers responded to our energy efficiency rebates and we think we will be similarly successful promoting community and rooftop solar.”