A Kansas Corporation Commission final order issued Thursday was a “real loss” for residential wind and solar users, an energy activist said, expressing dissatisfaction at the commission’s lack of willingness to engage in a substantive study of how distributed generation users affect the power grid.
“We do feel like it was a real loss,” said Dorothy Barnett, executive director of the climate + energy project, based in Hutchinson. “But I will say we are not giving up.”
The KCC ruling laid out guidance regarding how utility companies can charge distributed generation customers, closing a general investigation opened in July 2016. Distributed generation is the term used to describe customers who can self-produce energy in small amounts to reduce their monthly energy bills.
On one side of the issue were utilities that say customers who get the bulk of their energy from residential wind or solar platforms aren’t paying their fair share of the fixed costs of the power grid. The companies want to set up a fee schedule that takes into account how DG customers use the grid, even as their solar or wind production reduces their energy consumption.
On the other side are energy advocates and solar/wind companies that say they want the utility companies to demonstrate exactly what the fixed costs are they’re not covering, and asking for an in-depth review of the costs and benefits that distributed generation users bring to the grid.
The final order doesn’t change what solar and wind residential customers will be paying, but it opens the way for utility companies to set up a different rate class and propose a new rate design for DG customers. Utility companies will be able to ask to set up those new rate classes during their regular rate cases.
“The KCC’s order today is another step in the process just to set up so that the rates our customers are paying reflect the way they use the power grid,” said Gina Penzig, Westar Energy spokeswoman.
Penzig said Westar currently has 650 customers using private generation. While that number isn’t significant compared to how many customers use Westar services, Penzig said it was important to the company the KCC make a determination on the rate issue so that customers adding distributed generation understand the economics of their choice and that they aren’t trying to make the decision when thousands are already using DG.
Westar utility bills are structured so that customers pay about 15 to 20 percent of their bill for fixed costs, Penzig said, and the remainder of the bill is based on how much electricity is used.
“The fixed cost on your bill makes a contribution toward the fixed cost of the utility, but it falls far short of what our actual fixed costs are,” she said. “A lot of our fixed costs are also recovered through the energy price.”
Which is why Westar and other utilities say that customers not using distributed generation subsidize customers who do.
Barnett and Scott White, research and project analyst for Cromwell Engineering in Lawrence, said the utility companies didn’t show any data to support the idea that DG customers aren’t paying their share of fixed costs.
“We asked for an independent third-party study to help determine the costs and benefits of DG,” White said.
Instead, the KCC ruled a cost-of-service study, which is part of a utility rate case, is enough to show the information. White said the study is limited in scope and breadth, and a more in-depth look is needed to determine if the utilities are due more dollars from DG customers.
“We collectively were interested in something that would actually get us to some solutions and answer the questions that we feel are lacking to find out what the net cost or the net benefits are for having distributed generation on the utility systems,” Barnett said. “This ruling, essentially, everything that we advocated for, was not considered in the ruling.”
Barnett said DG consumers aren’t interested in making customers without wind or solar carry part of their utility burden.
“The thing I would say I have been most impressed by with both the solar companies and the distributive wind companies that we work with is (that) not one of them said ‘We don’t want to pay our fair share,’” she said, adding that no one wants their neighbors without DG to be subsidizing them.
Barnett said the good thing to come out of this docket is that when utility companies apply in their rate cases to charge DG customers a different rate, they’ll have to submit data.
“The burden of proof is on the utilities who want to add an extra fee,” she said.
“We had an opportunity to really make forward-thinking policy that would put Kansas in the front of the pack for leading in distributed generation,” Barnett added. “Instead, we’ve added some volatility and we’ve made it difficult for businesses — home-grown Kansas businesses — to depend on a price structure when they’re selling their product. That, to me, is pretty interesting for a state that so values a free market and so values choice in business.”
Penzig confirmed that no rate changes will occur until the next rate case, planned in early 2018.