Who pays? Solar fairness community issue

Already burdened with the nation’s highest electricity bills, Hawaii residents are paying even more for renewable energy development, and what they pay depends on whether they’re among the “haves” or the “have-nots.”

It’s what Maui County Energy Commissioner Doug McLeod describes as “Robin Hood in reverse.”

Mayor Alan Arakawa raised the issue of fairness recently in a speech in Japan about Maui’s photovoltaic market, McLeod said, adding that the mayor “feels solar fairness has become a community issue.”

Numerous questions have arisen about the fairness of the “first-come, first-served” playing field – and the requirement of an interconnection study – for those seeking to install solar power systems on circuits that might be deemed unable to accept more renewable power without system upgrades.

“But there’s another equally important issue: Who pays?” McLeod said.

And therein lies what he said is “deeply troubling . . . Why would it be fair for the islands’ poorest residents to pay for the wealthiest to have inexpensive solar power?”

Among the solar power “haves” are almost 4,800 Maui Electric Co. customers who have had systems installed on their homes or businesses over the last five years. MECO released the number of solar customers last month.

With 5.4 percent of its customers having solar power, MECO has been ranked No. 1 in the country in 2011 and 2012 for its per-capita number of solar-power customers, according to the Solar Electric Power Association.

Residential consumers with solar systems pay approximately $20 per month to connect with MECO’s power grid. When the sun shines, they generate power for the island’s grid and get credited for it by the utility. At night or on cloudy days, photovolatic system owners receive utility-generated power. If, at the end of a billing cycle, customers use more utility power than they generate, they pay regular power rates for it, but that’s not usually the case on sunny Maui.

There are also costs to set up a system, with a residential photovoltaic system for example costing approximately $30,000 upfront. Tax breaks can chop that initial expense nearly in half.

Meanwhile, the photovoltaic “have-nots” pay an average of around $220 a month on Maui for power, including a charge known as the “Revenue Balancing Account,” or “RBA Rate Adjustment.” It helps pay the utility for its fixed costs and offset its loss of electric sales from the “haves,” those able to seek refuge from high electric costs with solar power systems.

Maui Electric maintains that the revenue balancing charge is a way for it to support development of renewable energy, not to guarantee profits. Consumers on Oahu and the Big Island also pay RBA charges.

The current RBA charge for MECO customers is calculated by multiplying 0.008071 by a customer’s monthly kilowatts per hour. So, a typical consumer using 600 kilowatts per hour in a month is charged $4.84 for “revenue balancing.”

In the “About Your Bill” section of Maui Electric Co.’s website, it is described as “a charge or credit approved by the Public Utilities Commission under a new method called decoupling, which supports Maui Electric’s clean energy efforts.”

In August 2010, the PUC approved decoupling, a rate-setting mechanism aimed at encouraging the development of renewable energy and energy conservation by eliminating the utilities’ incentive to sell more electricity. In May, the PUC launched an investigation to see how well decoupling is working. If it isn’t, the commission may revoke the rate-setting system.

On its website, MECO explains that “decoupling breaks the link between utility revenues and how much electricity customers use. This removes the incentive for utilities to increase the use of electricity.”

The PUC determines how much revenue utilities should collect to cover costs.

MECO emphasizes that “decoupling does not guarantee the utility a profit. Many factors can cause the utility to earn less than the amount allowed by the PUC.”

When asked whether the charge offsets revenue lost to customers who have switched to solar power systems, Maui Electric said it “reflects what the utility is allowed to recover for the fixed costs of providing service to anyone connected to the grid and to allow the utility to recover the cost of investments it makes in clean energy and reliability.”

Decoupling also protects consumers against excessive recovery of costs when there are periods of higher electric usage, the utility said.

McLeod doesn’t mince words with his assessment of the revenue balancing rate adjustment.

“It’s morally repugnant and reprehensible,” he said. “It’s just wrong.”

It doesn’t take into account that MECO’s peak demand for power is at night, when those with solar power systems also need to rely on electricity generated by fossil fuel-powered plants at Maalaea and Kahului.

The formula is “too generous for people who have solar,” McLeod said, adding that Mayor Arakawa “wants solar to grow in a sustainable fashion.”

The development of distributed power generation through rooftop solar power systems is “being done on the back of the poor,” McLeod said.

Hawaii’s power utilities, MECO, Hawaiian Electric Co. and Hawaii Electric Light Co., also recognize that there are fairness issues.

In the executive summary of the utilities’ 2013 Integrated Resource Planning Report, revised Aug. 1, there’s a section titled “Fairness.”

It says that “as more customers generate their own electricity, they leave fewer customers on the utility system to pay for the fixed capital and operational non-energy costs of running the system. Yet most customers who generate their own power remain connected to the utility system in order to receive service to supplement their power needs or to cover times when their generating systems are not operating due to clouds, darkness or maintenance.”

Elsewhere in the report, it says: “As the amount of installed rooftop PV grows within Hawaii, it is creating significant economic cost transfers between groups of Hawaii’s citizens. These include the fact that Hawaii taxpayers are providing tax credit subsidies for new PV that do not accrue to non-PV owners.”

Non-photovoltaic consumers also pay for system upgrades and operational requirements that increasing levels of solar power use impose on utilities, the report says.

“And as more PV owners (often more affluent citizens) generate their own energy, they leave fewer customers remaining on the utility system to pay for the fixed capital and operational non-energy costs of system operations,” the report says.

PV owners also take advantage of the utilities’ net energy metering program.

When Maui Electric receives more kilowatts per hour from a customer with a solar power system than the utility delivered during a billing period, then the kilowatts per hour are converted to credits. The credits can be applied toward eligible bills in the future within a customer’s 12-month billing cycle, MECO said.

While calling the program “very successful,” the utilities’ resource planning report questions the fairness of giving net metering customers credits at the full retail price of electricity.

The utilities acknowledged that net metering customers, primarily residential, “are being subsidized since providing credits at the full retail price of electricity far exceeds the cost that Hawaiian Electric saves in utilizing the energy that a net energy metering customer exports to the utility grid.”

According to the U.S. Energy Information Administration, Hawaii consumers paid 36.97 cents per kilowatt hour for electricity in September. That’s three times more than the national average of 12.15 cents per kilowatt hour.

In Maui County, electricity costs were higher in 2012. On Maui, consumers paid 39 cents per kilowatt hour, on Molokai 46 cents and Lanai 47 cents, according to the Hawaii Energy Office’s November report of “Energy Facts and Figures.” Average monthly power bills in 2012 were $224 on Maui, $161 on Molokai and $198 on Lanai.

According to the state Department of Business, Economic Development and Tourism, Maui Electric had 54,500 residential customers on Maui in 2012, 2,600 on Molokai and 1,400 on Lanai. The utility had 9,000 commercial customers on Maui, 500 on Molokai and 200 on Lanai.

The Hawaii Energy Office points out that Hawaii is the only state that depends so heavily on petroleum for its energy needs. Nationally, less than 1 percent of electricity is generated using oil. In 2011, Hawaii relied on oil for 74 percent of its electricity generation, the office said.

Meanwhile, Hawaii has made progress in shifting its energy generation to renewable sources. In 2012, Hawaiian Electric companies met 13.9 percent of their energy needs from nonfossil sources, nearly two percentage points ahead of the 12 percent reported in 2011, the utilities said. At the end of 2015, the companies are mandated to get 15 percent of their electricity sales from renewable sources; that increases to 25 percent at the end of 2020 and 40 percent by Dec. 31, 2030.

When asked to comment on McLeod’s assessment of decoupling as “Robin Hood in reverse,” Maui Electric said it’s “more appropriate to look at the bigger context under which the Hawaii Public Utilities Commission approved the implementation of decoupling.”

“It is one of many policies to help reduce Hawaii’s dependence on imported oil,” MECO said. “In the past, the more electricity used by utility customers, the more money the utility collects. That formula wasn’t consistent with our state’s current energy policies.

“Decoupling is designed to support energy efficiency and conservation and distributed generation like PV. More than 50 percent of a typical electric bill goes to pay for fuel or fuel-related costs. Overall, as we reduce our use of expensive imported petroleum oil, all customers will benefit.”

* Brian Perry can be reached at bperry@mauinews.com.