A handful of homeowners are challenging a proposed increase to a monthly charge Alabama Power collects from customers who generate their own solar energy — a charge the plaintiffs and environmental activists claim already unfairly targets renewable energy sources.
Since 2012, Alabama Power has collected a monthly “capacity reservation charge” from certain customers who generate their own solar energy, but connect to the company’s power grid when their personal solar systems fail to generate enough power.
The cost of the charge varies because it’s based on the kilowatt capacity of each system, though it has been based on a single monthly rate of $5 per kilowatt. Now, Alabama Power is asking the Alabama Public Service Commission (PSC) to approve a 42-cent increase.
According to the Southern Environmental Law Center (SELC), which is representing the plaintiffs challenging Alabama Power, an average residential solar array is about 5 kW. At a rate of $5.42 per kW, customers with a system that size would pay $27.10 a month or $325 annually.
That’s on top of the $14.50 “fixed customer charge” all Alabama Power users pay monthly and the cost of whatever energy those customers wind up using, if any. An average solar system of that capacity already costs about $15,000, and advocates say the extra fees are effectively pricing even more people out of the slowly growing market for solar energy in Alabama.
“If you’re a homeowner and you invest money into a solar power system to lower your energy costs or to be greener, it takes you probably twice as long to recoup that investment,” Keith Johnson, managing attorney for SELC’s Alabama office told Lagniappe. “When you stack those those costs on top of one another, it’s almost not worth it to put a solar system on your house, and in our opinion, that is a very deliberate attempt to discourage solar use in this state.”
According to the SELC’s complaint, plaintiff Ralph B. Pfeiffer Jr. added a 3.36 kW solar system to his home in the Dawes areas of Mobile and connected it to Alabama Power’s electrical grid for backup power in 2017. On average, a system that size costs from $7,000 to $10,000.
At $16.80 per month, the capacity reservation charges alone have cost Pfeiffer $200 and are projected to add up to approximately $6,000 over the 30-year life of his solar investment, according to SELC. Under the proposed increase, the final number would be closer to $6,500.
SELC has argued these types of charges are “unreasonable, unjust and discriminatory.”
Johnson noted that many other utilities charge a fee for providing backup power to customers that produce at least some of their own energy, but he said Alabama Power’s capacity reservation charge is “one of the highest, if not the highest, in the country.”
According to the website ratesofsolar.org, there are some utilities in Alabama that charge solar users lower fixed monthly fees. Diverse Power only charges $5 a month, while others charge no monthly fee but instead collect the excess energy users generate at no cost.
There are also utilities with higher rates, though. For instance, the Baldwin County EMC charges customers connected to its system who generate solar energy a $37.95 monthly fee.
Of Alabama Power’s 1.4 million customers throughout the state, the company’s capacity reserveage charge only affects about 155. SELC argues that cost is “financially devastating” to a small group of customers and “appear[s] to be financially unnecessary to the company.”
However, Alabama Power maintains there is a real cost to providing backup power, and argues capacity reservation charges are the only way the company can recoup the expenses incurred to provide those customers with adequate access to its system.
In written statements to the PSC, Alabama Power Regulatory Pricing Manager Natalie Dean said certain infrastructure is required to provide customers with backup power and without those charges, they’d be receiving the benefits of those services “at the expense of other customers.”
“Alabama Power cannot ignore the capacity requirements of customers with onsite generation and allow them to lean on the system,” Dean wrote. “Subsidization concerns aside, the impacts to system reliability — especially during peak periods — could be economically significant and potentially disruptive to the ability of Alabama Power to provide service to all its customers.”
In previous filings, Dean has also defended the methods Alabama Power used to calculate the $5 per kW charge. She claims the company rounded down the initial cost to $5 to make the rollout more palatable in 2012, and said the current 42-cent increase is being sought to adjust for that.
Alabama Power spokesperson Michael Sznajderman also noted that customers with the resources to install residential solar arrays tend to be higher-income earners. He also said that, though there are only a handful of solar users now, the company expects that number to grow.
Aside from the validity of the proposed increase, one of the SELC’s concerns has been that no evidentiary hearing, company testimony or public comment period was ever held before Alabama Power’s original $5 capacity reservation charge was approved by the PSC in 2012.
SELC has requested a public hearing be held before the PSC makes a final ruling on the proposed increase in order to address “fundamental differences” in how its expert witnesses and Dean have characterized the method used to calculate Alabama Power’s capacity reservation charges.
Emily Driscoll, an SELC communications manager, said when similar regulatory battles in Georgia were debated publicly, it led to an uneasy alliance between environmental groups and members of the tea party movement, and ultimately to more progressive solar energy regulations at the state level.
Driscoll said Alabamians deserve to have these issues addressed in the public sphere as well.
At this point, it’s still unclear how the PSC will proceed with Alabama Power’s requested rate increase or SELC’s request for a public hearing on the matter. As a general practice, public service commissioners have declined to comment on pending legal or administrative issues.
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