The empire strikes back: NV Energy uses net metering revival to change rates

One could accuse NV Energy of being a sore loser. Only six weeks after a bill to revive the state’s net metering policy was passed, the utility’s next filing to comply with AB 405 takes several digs against the new law.

But NV Energy is nothing if not resourceful. And now that the ability to destroy the state’s rooftop solar market through eviscerating net metering has been taken away, the utility is trying to use implementation of the law to change its rate structures outside of the rate-setting process, while paving the way for even more dramatic changes.

In its filing to comply with AB 405, NV Energy has proposed a series of new rate structures for its utilities Nevada Power and Sierra Pacific Power, which the utility says is necessary now that it has been barred from setting discriminatory rates for its customers who adopt solar.

However, solar installer Sunrun disagrees, stating that there was nothing in AB 405 that required the utilities to set new rates, when they could have simply implemented the net metering successor policy with existing rates.

“It’s a general restructuring outside of a rate case,” Sunrun VP of Policy Alex McDonough told pv magazine. “It’s so opportunistic in nature.”

McDonough notes that the new rate changes will increase fixed charges and reduce volumetric charges, which is bad for not only solar, but low-income customers and energy efficiency. And while Sunrun declined to comment on what the full impact of these rates will be if they are approved, there will likely be an effect on the state’s solar market.

“They make the economics tighter,” McDonough explains.

But this is far from all that is included in NV Energy’s 376-page filing.

 

Strange rate design

There was one area where NV Energy was required to set a new rate. As part of AB 405, Nevada Power and Sierra Pacific were tasked with offering rate structures to support the deployment of customer-sided energy storage, and for this NV Energy has proposed a four-part rate structure based on time-of-use (TOU) pricing, which includes two separate demand charges.

EQ Research notes that this is an unusual rate design proposal. “I’ve never heard of this kind of proposal for residential customers,” notes EQ Research Policy Research Manager Rusty Haynes. “It is curiously complex.”

“NVE’s stated purpose of the proposed new TOU rate options is to promote the deployment of customer-site energy storage, as required by AB 405. But why would any residential customer without storage sign up for this stuff?”

 

Demand charges on the way?

But the demand charges in the optional rate are just the tip of the iceberg. While it has not included demand charges for residential customers in the main rate classes it is proposing, NV Energy is calling for the study of a mandatory “maximum demand charge”, as a component of its retail electricity pricing.

As part of AB 405 the state’s Public Utility Commission (PUC) is required to study the affect, if any, of the law on electricity costs for non-solar customers, and NV Energy is already trying to shoehorn in a consideration of this maximum demand charge into this study.

The company says that this is in the interest of “transparency in rate design”, however demand charges for residential customers are extremely unpopular with both the solar industry and ratepayer advocates – both because they are seen as very difficult for residential customers to understand and predict, and because they undermine the economics of customer-sited solar

Several utilities have proposed demand charges for their customers, but with the exception of Arizona cooperative Salt River Project, none have been approved for residential customers. Public utility commissions have consistently rejected them, citing their complexity, and Salt River Project as a cooperative was able to implement them as it is overseen by its own elected board but not state regulators.

In the territory of Salt River Project, customer-site solar installations ground to a halt after the adoption of these rates. This may have been the purpose of these charges, as they were imposed on customers who owned solar PV but not other residential customers.

Such demand charges can be mitigated through the use of battery storage. However according to a recent study by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL), adding even a modest-sized battery system doubles the cost of the typical residential PV installation.

 

PURPA vs. net metering?

But demand charges and higher fixed charges may not be the only way that NV Energy is seeking to stifle rooftop solar. The company alleges that AB 405 will force its customers to “pay more for energy than is necessary”, and alleging that customers with private generation are “receiving services for which they are not paying the full cost of service” – arguments that will be familiar to anyone who has followed the disproven allegations of “cost shift” that utilities have routinely made.

In its filing, NV Energy has suggested that AB 405’s setting the price of excess energy at a percentage of the utility’s retail price may be in violation of the Public Utilities Regulatory Policy Act of 1978 (PURPA), which states that generation procured from third parties should be paid at avoided cost.

NV Energy says that while it has filed tariffs in accordance with AB 405, that it does not “waive any claims regarding, or challenges to, the pricing structure for excess energy set forth in AB 405 in any other judicial or regulatory forum”.

PURPA has been a foundational law for the independent power producer segment, however this is the first pv magazine staff has ever heard of the law being considered as a means to challenge a net metering policy.

 

Delays

Sunrun says that the overall effect of NV Energy’s filing will be to slow down implementation of AB 405. Along with the utility’s request to change its basic rate structures, NV Energy has asked for a November hearing.

“This is going to cause a delay, a long time frame, to implement a fairly simple law,” notes McDonough. “A more simple filing that just implements the law, that just applies the net metering rate – that is something that the PUC could move quickly on. The PUC could do this in a matter of weeks.”

As such, the battle over customer-sited solar in Nevada is not over. In fact, it may just be beginning.