Utah’s Rocky Mountain Power, a publicly managed monopoly electricity provider, has proposed a new rate for net-metered solar electricity that will effectively destroy the value of the program.
The Warren Buffett-owned utility, in a docket filed with the state’s public service commission, has proposed that net-metered solar electricity is worth between 1.1¢ and 3.8¢/kWh – with annual averages being just over 2.0¢/kWh. The values vary based upon month of the year, and whether the electricity is generated during an on- or off-peak period.
The current value for net metered solar electricity is 9.2¢/kWh. The utility charges between 10.7¢ and 14.5¢/kWh for residential electricity.
The utility has also requested that two new fees be implemented – an interconnection application fee of $150, and a meter fee of $160.
In the filing, the utility noted that roughly 52% of all electricity generated by an individually-owned solar system was exported to the power grid. If 52% of a solar system’s electricity is dropped by 80% in value, the total revenue generated will fall by around 30% based upon current tariff rates.
The billing structure was calculated based upon the utility’s varying summer and winter electricity demand, as well the daily use profile. During the winter, both a morning and evening peak is seen, while summer electricity shows a massive evening electricity peak.
Utah’s duck curve is a natural occurrence, not caused by solar power, as the state’s total distributed solar generation is well under 1% of all electricity.
This type of action, aggressively attacking the value paid to individual’s exporting electricity to the power grid, is a Buffett marching order to combat a potentially existential threat – the “death spiral.”
This phrase was coined in an Edison Electric Institute report from 2013. The term was used to describe how rates might increase as more individuals effectively defected from the power grid by generating their own electricity via solar power. This increase in rates would then lead to more defections, which would spiral upward — much like the land line telephone business experienced as mobile phones took over.
Buffett has argued that in regulated markets, like Utah, where electricity generation is fully monopolized by the utilities – this spiral can be managed via aggressive anti-net-metering lobbying. He has stated that in deregulated markets this could be a challenge against long-term predictable earnings.
Buffett is not against renewable electricity. NV Energy, a Buffett-owned utility in Nevada, has recently pushed forward some of the largest solar and energy storage projects in the country. Another Buffett-owned utility, MidAmerican, will be the first utility in the U.S. to be 100% renewable electricity powered sometime in late 2020.
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