It is nothing if not a masterful sleight of hand. Two months after reaching a deal with solar advocates to extend net metering in the South Carolina service area of Duke Energy Carolinas to March 2019 – and concurrent with a billion dollar green bond offering – Duke is proposing the highest fixed charges on residential customers in the nation, which could stop rooftop solar in its tracks.
The company’s plans to raise rates by around 10% are also buried in an extensive grid modernization program that it is proposing. But even this 10% may be a bit of a distraction; as Duke’s biggest changes to its rates would not be the absolute value, but a change in the way that they are calculated so as to massively increase fixed charges.
Increasing fixed charges has been a tactic of utilities to claw back more revenue from their customers who install solar and/or to kill rooftop solar markets outright. What these charges mean under net metering is that when customers install solar they can only eliminate so much of their electric bill, as even if they wipe out their total usage the basic monthly charges remain. This in turn weakens the economics of rooftop solar and lengthens payback times of systems.
And it has never been done this boldly to date. The changes to residential fixed charges for Progress and Duke Energy Carolinas would represent 220% and 238% increases, to $28 and $29 per month. According to a tweet by EQ Research
If approved, the fixed charges could be the highest in the USA of all investor-owned utilities, according to our research.
And EQ would know, as the company produces the most careful, in-depth research on how utility rate affect distributed energy of any organization known to pv magazine, including a quarterly review of utility rate cases.
These are only slightly offset by a change in energy charges in the territory of Duke Energy Carolinas which would slightly incentivize those customers who use less than 1000 kilowatt-hours per month.
In its testimony, Duke officials offered a bland excuse for this. “The unit cost study indicates that it is appropriate to raise the basic facilities charge to better reflect all customer-related costs,” stated Duke Energy Director, Southeast Pricing & Regulatory Solutions Michael J. Pirro in his testimony.
This proposed increase is likely to be sharply contested before the South Carolina Public Utilities Commission. Not only are rooftop solar advocates opposed to such charges, but so are ratepayer advocates, as higher fixed charges disproportionately affect low-income customers.
And even if Duke does not get this massive increase, they could still win. As documented in EQ Research’s latest report, even though utilities don’t usually get the fixed charge increases they want, this tactic is slowly ratcheting up fixed charges across the nation.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.
Interesting article. However, This statement you make is inaccurate at best’: ‘as higher fixed charges disproportionately affect low-income customers’ In the southeast, low income housing typically pays the highest bills because of heating and cooling their homes. Which equates to 60+% of their cost. With all cost recovery of fixed expense in a variable component, like energy, the highest energy users pay a disproportionate share of the fixed cost. That means, the low income housing is getting hosed now. That’s the truth. Higher facility charges will lower the energy charges, the variable component, but makes the rate more equitable across the rate class. However, without a demand charge there is still cross-subsidization and that too negatively impacts lower income housing. Utilities have not had to worry about outside forces impacting the models like they do now. We need modern rate design with appropriate rate signals. This is just a start. I will mention that this is not my opinion but based on a comprehensive study with hourly meter data for an entire system.
That’s an interesting perspective; however your claim that low-income customers use more electricity is contrary to every statement I’ve heard from every ratepayer advocate in every rate case I’ve followed. So color me skeptical. And if you want me to take that claim seriously, please cite or supply a link to a credible study that shows this.
By the way, do you work for a utility? Like perhaps Duke?
I work for an electric cooperative. Low income housing in the southeast is typically mobile homes. These are poorly insulted and they heat with electric furnaces. The use more energy than a home twice their size in many cases. Ratepayer advocates also are misinformed about rates in general. You take their statement as fact but are skeptical of someone who actually knows. I would love to discuss in detail how my utility is saving low income housing on their power cost by appropriately recovering cost from each individual on our system. And that comes with a higher facility charge. Feel free to email me and we can set up a time to talk.
I would love to talk with you about this, but I remain skeptical of your complete dismissal of statements by ratepayer advocates.
One factor that has not entered into this conversation: Low-income people tend to have smaller homes than higher-income folks. So while their homes are often not as well insulated (fair point), I would want to see some documentation to back up the claim that they consume more electricity overall.
I’m not dismissing them completely. But I have heard their arguments. They are based on generalizations that are not necessarily representative of the whole truth.
We have a ton of data on mobile homes. They are smaller but use a lot of energy. Here is an article… https://www.eesi.org/files/HelpMyHouseFinalSummaryReport_June2013.pdf
But seriously. Reach out to me. I would love to talk.
What prevents someone from increasing their solar output and introducing storage and telling the energy providers to go fly a kite by discontinuing their service?
Roof space and cost of battery storage. So if you have the roof space for enough panels to power your home and can afford a battery storage (like the Tesla wall), then absolutely. But until panels become more productive and cost of battery storage come down, then for most it is not yet sensible. I believe in 15 years it will be…I hope.
Homeowners and taxpayers need to understand the truth behind the utility industry so they can make informed decisions about solar power and all other choices for powering their homes. Thank you for this eye-opening information.