State panel puts pressure on solar industry

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Rate changes that make it harder to recoup money spent on solar panels likely will not be the only shadows cast over that industry in coming years.

During a hearing Wednesday at which the Public Service Commission of Wisconsin approved Madison Gas & Electric Co.’s request to raise the fixed charges collected from customers, one commissioner expressed support for a series of policies viewed as anathema by many advocates of renewable energy. Among other things, PSC Chairman Phil Montgomery said he is in favor of decreasing the compensation a utility must pay ratepayers when they generate power on their own and imposing additional “demand charges” on those who use solar and similar devices to produce electricity independently.

Neither of those changes was up for discussion at that meeting. The main subject of debate Wednesday was MG&E’s request to increase charges that appear on residential customers’ bills in the same amounts each month no matter how much power is used.

The increase approved Wednesday will let the utility raise those charges from $10.50 a month to $19 next year. Even so, the total paid each month by the company’s residential customers is expected to go up by only about $3 a month on average.

The reason for the smaller increase in the total bill is that MG&E, like other utilities that have won approval for higher fixed charges, coupled its proposal with a request to reduce the amount customers pay for the power they use. Next year, MG&E will reduce its winter kilowatt-hour charge from 14 cents to 13 cents, and its summer charge from 15 cents to 14 cents.

Despite the prospect of only small increases to the average bill, many advocates of renewable energy have decried the change. Giving ratepayers less control over what they pay each month, the advocates have argued, takes away many of the incentives for people to reduce their energy use, either by installing energy-efficient appliances or by generating power using solar panels or similar devices.

But Montgomery and Ellen Nowak, another commissioner on the three-member PSC, have said they have been persuaded by utility executives’ arguments that fixed charges historically have been set too low. The charges are meant, in theory at least, to cover the utilities’ nonvarying costs, which largely derive from the electrical grid used to bring power to homes and businesses.

By not properly aligning fixed charges with fixed costs, utility executives have argued, regulators have let those who reduce their power use push the responsibility of paying for the grid and similar expenses onto other ratepayers. Montgomery and Nowak, both appointees of Republican Gov. Scott Walker, have said they want to make sure customers who use equipment to generate their own power are not receiving subsidies from others.

And their positions are likely to become even more ingrained at the PSC next year. The only member of the commission who was not put there by Walker is Eric Callisto, an appointee of former Democratic Gov. Jim Doyle. Callisto also is the only member of the PSC who has voted against the higher fixed rates requested this year by MG&E and two other large investor-owned utilities: Green Bay-based Wisconsin Public Service Corp. and Milwaukee-based We Energies.

His opposition has been unsuccessful. The PSC on Nov. 6 let Wisconsin Public Service increase its fixed charge from $10.40 a month to $19 for residential customers and on Nov. 14 let We Energies raise its fixed charge for residential customers from about $9 a month to $16.

Still, Callisto’s presence on the board has given various renewable-energy groups a means of having their views expressed. But his term is up in March.

On Wednesday, Callisto argued against the notion that regulators should be solely concerned with ensuring fixed charges are high enough to cover costs associated with the electrical grid. He said another goal of rate-setting is to nudge the public to take certain actions, such as saving energy and obtaining power from sources that don’t emit large amounts of pollutants.

“This is a more nuanced exercise than just keeping the books,” Callisto said. “We set rates to incent behavior.”

Montgomery, though, said he is concerned current rates send a distorted “price signal” that masks the costs others must bear when a customer starts generating power independently of utilities.

“This is not some minor accounting and ledger-book sideshow,” he said. “This case fundamentally raises the issues of customer fairness existing, of subsidies and of sending more accurate price signals.”

MG&E originally had asked for a larger increase to its fixed charges, taking them as high as $67 a month by 2017. The utility backed away from that plan, though, in the face of public outcry.

Montgomery, asked Wednesday what guidance he might offer MG&E, said he thinks the company could have been far more bold in attempting to mitigate the subsidies he believes occur when ratepayers produce their own power. He encouraged MG&E to consider a demand charge similar to one the PSC approved for We Energies this year.

That charge would amount to $3.80 a month for every kilowatt a person can generate using solar panels or similar devices. Montgomery also said MG&E should consider lowering the compensation it offers for every kilowatt-hour customers generate on their own.

For energy produced with solar panels and similar devices, MG&E now pays what is often referred to as a “retail rate,” which is essentially what the ratepayers pay for electricity bought from the utility. Montgomery and many others argue that the compensation should instead be at a lower “wholesale rate,” or what utilities pay their suppliers.

“This is not an exercise in accounting but in customer fairness,” he said, “even when the amount of distributed generation on the grid is small.” Follow @TDR_WLJDan