ED3: Solar customers must pay fair share

By Raquel Hendrickson

Three weeks after Electrical District No. 3’s new solar policy went into effect, General Manager William Stacy took some tough questions from the Maricopa City Council.

“We’re not looking to recover lost revenue,” Stacy said. “We’re just looking at recovering some of our fixed costs.”

Stacy gave a presentation on ED3’s “Distributed Energy Generation” (DG) policy during a work session Tuesday. Stacy’s explanation was frequently met with responses from council members that they “still don’t understand” or were “still confused.”

The utility and its rates are outside the jurisdiction of the city council. It is a nonprofit run by a board of directors.

Stacy previously brought the solar policy to the council during the Call to the Public section of a regular meeting May 27. That was when he announced an increase in the DG fixed cost rate from 70 cents to $3 per kilowatt hour for all new solar installations.

“There are a lot of claims out there that people think electrical companies are trying to kill solar,” Mayor Christian Price said.

Fixed costs pay for debt service, contracts, maintenance and depreciation along with the variables in energy use, labor and operations. They are costs “everybody has to pay” to maintain the system, Stacy said.

The recent jump in the number of solar customers created ED3’s concerns over the rate impact, power quality and reliability, and employee safety. ED3 has twice as many solar customers as other utilities in the state , based on percentage. He said 6.9 percent are on solar.

Stacy said ED3 has no intention of being an “alpha” leader in solar energy. “We like to be beta testers. We like to be second generation, that we know it’s going to work and not have problems.”

He said ED3 was “trying to be fair with everybody, including the solar companies” when it put its policy together. Solar customers, he said, need to pay their fair share of the fixed costs.

The loss of those fixed costs amounts to about $730 per solar customer. Those solar customers now number 1,397, making the estimated loss for ED3 more than $1 million a year, Stacy said.

He said non-solar customers are having to make up the difference.

As a solar customer, Price said he wanted to understand why his system would still be considered to have the same impact on the grid. Price said going solar was a financial decision on his part.

“I’m using less, therefore I’m clearly paying less,” he said.

Stacy confirmed that, showing the average non-solar customer using 1,545 kilowatt hours per month and a solar customer using 491 kWh. But they are similar in “demand.” Non-solar customers have 8.9 kilowatts of demand compared to solar customers’ 8.5.

“When it gets dark, they’re totally on the ED3 system,” he said.

Price said he was voicing the question of many people when he asked, “If I’m using so much less, why is demand not that great of a differential?”

Stacy said solar customers still use ED3 infrastructure – transformers, transmission lines, substations and generators – and solar only offsets electricity use in the daytime until about 4 or 5 p.m.

At night, he said, “We still have that demand on the system.” Residential rates do not have a demand charge at ED3. Salt River Project has an upfront demand charge on its bills, but Stacy said ED3 did not want to try that.

“We capture all of our fixed costs in the energy charges,” he said.

“I don’t think anyone would disagree there’s a cost to doing business, but by the same token we have a cost to manage our homes as well,” Councilmember Henry Wade said.

Councilmember Nancy Smith, who is not a solar customer, questioned the two other streams of revenue besides customer billing. She said potential solar customers have asked her why the two line-items on the property tax are not sufficient for the fixed cost recovery.

Smith said there was an operation and maintenance (O&M) tax and an O&M fee on the bill. Stacy called that a variable cost.

“I’m still struggling with that,” Smith said. “It seems to me O&M should be spread across evenly to all residents, and if the property tax is the way to do that, that seems like it makes more sense.”

The revenue from the tax levy does not cover all the O&M, Stacy said.

With solar generation systems having an expected lifespan of 20-25 years, Stacy said he was worried about inverters and automatic disconnects failing over time. He said the latter could cause backfeed on the line and endanger crews working on the lines.

ED3 has six power contracts. It buys “several million kilowatt hours” on the market each month, Stacy said.

“When a solar generator generates in excess, they’re really reducing the amount that we buy on the market,” he said. “The average price of that is 2.6 cents.”

That is credited as an “avoided energy cost rate.” He said the ED3 board of directors will review the rate every year.

Wade pointed to ED3’s new limit of 30 solar installations allowed per month, asking how the utility came up with that figure when the average over the past 19 months has been 40.

“We just tried to pick a number,” Stacey said. “That’s 360 a year.”

ED3 is capable of doubling its capacity for overall electric service, but Stacy repeatedly used the phrase “new paradigm” to describe the solar movement. He said utilities across the country have unanswered questions about how to deal with it and what its long-range impact will be.