El Paso Electric drops solar demand charge in settlement

In many of the rate cases that are being decided throughout the United States, utilities are not getting everything that they ask for, but they are often being granted minor increases to fixed charges which negatively impact the economics of solar.

The recent settlement between utility El Paso Electric (EPE) and solar advocates including Solar Energy Industries Association (SEIA) and Energy Freedom Coalition of America (EFCA) approved last Thursday by Texas regulators exemplifies this trend.

Under the settlement, EPE withdrew its proposal for a $15 per month and $3.98 per kilowatt charge its customers to generate electricity behind-the-meter with rooftop solar. However, it was granted increases in its fixed charges for all customers. These will go from $5 to $6.90 per month for residential customers and from $5.95 to $9.95 for small business customers.

EQ Research Policy Research Manager Rusty Haynes calls this outcome “familiar”. “In other U.S. states, regulators have approved either no increase or a modest increase in monthly fixed charges for residential and small  business customers,” Haynes told pv magazine. “And where utilities have sought to impose new or higher charges on DG customers, in almost every single case those proposals either were withdrawn as part of a settlement or were rejected by state regulators.”

Additionally, the Public Utilities Commission of Texas (PUCT) allowed a non-fuel based rate increase of $41 million, including $3.7 million for costs related to the Four Corner Generating Station, a massive coal-fired power plant in New Mexico from which EPE has divested its ownership stake. This was less than the $71 million that the utility had asked for.

EPE serves around 300,000 customers in Texas. This order will not affect its customers in New Mexico.

The Alliance for Solar Choice (TASC), which is backed by Sunrun, a party to the settlement, says that the defeat of the demand charge was particularly important. TASC notes that such charges are confusing for residential customers, that the financial impacts on bills are hard to predict, and that they limit the spread of solar PV.

“Consumers want choices and smart rate structures that enable more investment in rooftop solar, and state leaders are largely united in their resolve to reject punitive demand charges and protect a clean energy future,” said Amy Heart, Director of Public Policy for Sunrun and spokesperson for TASC.

Earlier this month EPE announced that it was the first utility in Texas and New Mexico to go coal-free, after selling its 7% stake in the Four Corners Generating Station and letting a 50-year power supply contract expire. The utility notes that it doubled its utility-scale solar commitments in 2014, and will be launching a community solar program next year.