Massachusetts OKs residential demand charges for Eversource

In a move they acknowledge is “atypical” and outside of the usual ratemaking procedures of the state, the Massachusetts Department of Public Utilities has approved demand charges on residential rooftop solar customers.

January 10, 2018 Frank Andorka

Image: MyGenerationEnergy

Whether they intended to or not is irrelevant. Yesterday, the Massachusetts Department of Public Utilities (DPU) became one of the first state-level commissions to allow a utility to impose separate demand charges on residential customers, in this case on those who own their own PV systems.

It’s not that regulated utilities haven’t tried to get regulators to allow them to impose demand charges on solar customers before. It’s simply that regulators have generally rejected them as too confusing for residential customers to understand or monitor.

Demand charges are fairly routine for commercial/industrial customers because they generally have the technology on their systems to monitor their energy use and can adjust their peak use times accordingly. In general, residential customers don’t have the appropriate technology or understanding of their electricity use.

In the Massachusetts case, Eversource, the utility in question, asked to impose demand charges of $2.21 and $2.71 on its two classes of residential customers, arguing – dubiously – that the demand charges recover the “cost shift” that solar customers impose on other ratepayers because they don’t pay for grid upkeep.

At Intersolar North America 2017, Galen Barbose, a research scientist at Lawrence Berkeley National Laboratory (LBNL), addressed the ever-present issue of cost-shifting, saying that while the argument is technically correct, cost shifting only happens at high rates of penetration – 10% or more. And even at 10%, he estimates an impact of only half a cent per kilowatt-hour.

According to the latest numbers by the U.S. Department of Energy’s Energy Information Administration, Massachusetts residents got around 5% of their electricity from solar in the first nine months of 2017 – although this may fall slightly when winter numbers are added in.

In addition, studies in at least 16 in states around the country have shown that at existing penetrations solar customers don’t impose any net costs on non-solar customers. In fact, most studies have found that customers who deploy solar help non-solar customers by taking pressure off the aging grid.

To address the confusion of residential consumers, Eversource pledged to hold educational sessions for its solar customers and install “demand meters” at their homes. Customers who install solar-electric systems before December 31 will be grandfathered under the old rates, but any consumers that install systems after January 1, 2019 will be subject to the new demand charges.

But despite acknowledging that placing demand charges on residential customers is “atypical” and outside its typical ratemaking procedure, the DPU approved the charges anyway, rejecting arguments from solar advocate Vote Solar that it would inhibit rooftop solar development in the state.

In a small victory for solar consumers, the DPU rejected Eversource’s proposal to calculate the charges on the customer’s peak 15 minutes of use per month, saying that time period instead. Instead, the DPU ordered Eversource to calculate the charge based on the peak hour of electricity use.

What may trouble solar supporters around the country, however, is that while regulators have routinely rejected demand charges in the past, the DPU decision has cracked that wall just a bit – and it’s not unreasonable to suppose that utilities around the country may finally see light through the crack and seek to widen it significantly, citing Massachusetts as precedent.

Autumn Proudlove, manager of energy policy research at the North Carolina Clean Energy Technology Center, which studies state-level solar policy extensively and issues quarterly reports on utility activities, suggested on Twitter yesterday that those fears might be overblown.

“I expect to see more efforts to get [demand charge] language in legislation before pursuing at PUCs,” Proudlove wrote.

Only time will tell whether Proudlove’s instinct will prove correct or whether the DPU decision has opened the floodgates for utilities to attempt again to get demand charges approved at the regulatory level.

As far as pv magazine has been able to find, the only utility that has imposed demand charges on solar customers specifically is the Salt River Project (SRP) in Arizona. The Arizona Corporation Commission (ACC) has rejected demand charges for other utilities in the state, but SRP is not a regulated utility, meaning it is not bound by ACC rulings.

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