PEC rethinks rate changes for solar customers

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PEC rethinks rate changes for solar customers

Originally published on Austin Business Journal.

The proposed plan drew ire from customers, solar panel installers

The Pedernales Electric Cooperative Inc. board of directors voted not to adopt proposed solar rate changes at its July 16 meeting. Instead, the board will consider a revised version of the plan as early as November.

The company initially proposed the rate changes after a 2020 PEC study concluded that lower rates for solar customers had resulted in cross-subsidization among members, meaning traditional electric customers were paying to maintain solar customers’ costs like infrastructure and manpower.

According to an announcement, PEC solar customers are paying about $1 million less than necessary to cover their costs in 2021.

The original plan proposed a new rate structure, including time of use charges and credits for solar energy. Under the existing rate structure, solar customers pay less than $0.03 per kilowatt-hour for distribution. That would have changed to $5.15 per kilowatt — not kilowatt-hour — at peak demand time. The altered rates would have affected members to varying degrees based on their systems and usage.

At the meeting, many board members spoke about how the proposed rate changes were being misperceived. Randy Kruger, PEC’s chief financial officer, stressed the utility’s nonprofit status. He said the utility operates within its margins as much as possible, in an effort not to accrue more debt.

“Electric co-ops are capital- and labor-intensive businesses,” Kruger said. “We really do have to be careful about allowing subsidies inside a co-op. What that effectively means is you have to either have higher rates on non-subsidized members or incur more debt.”

PEC, based in Johnson City, serves about 356,000 customers, mostly rural and suburban residents west of Austin.

Map: PEC’s coverage area stretches from the Hill Country to the western and northern suburbs of Austin

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The proposed rate changes had sparked concern among some solar customers are spiking electricity bills. One homeowner with rooftop panels previously told Austin Business Journal that his monthly bill, sometimes as low as around $3, could reach $90.

PEC member Dan Mills said he doesn’t see how the utility can justify such a dramatic rate change for such a small subset of its customers. He said he understands the need to cover the costs of new infrastructure, but in areas like his, where the utility poles and lines have been in place for decades, it’s harder for him to see what he’s costing the utility.

“My cost just doesn’t exist,” Mills said. “When most utilities are encouraging wind and solar, why do we want to be a utility that lives in the 19th century?”

Board members emphasized PEC’s nonprofit business model, which makes it ineligible for government funds to subsidize solar. They brought up the importance of maintaining operating margins and highlighted the costs associated with distributing power.

While maintaining that non-solar customers are bearing the brunt of the costs for their solar counterparts, the board of directors chose to rethink the structure of the changes.

“We have been listening and engaging in important conversations with our members and other interested groups,” PEC Vice President of Markets David Thompson said in a statement. “At this point, we continue to focus on a solution that balances our need to recover costs for the cooperative with rates that are transparent and applied fairly to all members.”

Before the vote, solar installer Freedom Solar had come out strongly against the rate changes. Freedom Solar’s Director of Marketing Sherren Harter said she thinks the board will change its stance on under-collection after considering the full economic and environmental benefits of solar.

“I’m just glad that the board listens to its members,” Harter said.

Staffers have several months to develop the new rate plan. Board members approved some changes at last week’s meeting. They opted to rename some fees to clarify where the money actually goes and reduced the current interconnection fee, which previously included the cost of a new meter. 

The board of directors will hear the new interconnection rate proposal late this year, in conjunction with the 2022 rate plan proposal.

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