HEA to seek 10% net metering cap
Thirteen months after raising its net metering cap to twice the state minimum — from 1.5 percent of average annual demand to 3 percent — Homer Electric Association is now seeking to more than triple it to 10 percent.
At their July 14 meeting, HEA’s directors unanimously voted for the expansion of net metering, the policy that gives members with home renewables such as solar panels credit against their electric bills for power they’ve produced. Now the Regulatory Commission of Alaska (RCA), which in 2010 created state-wide net metering rules and set the minimum cap, must approve the increase. The co-op hopes to bring its case to the RCA by mid-August, HEA Director of Member Relations Bruce Shelley said.
Utilities have struggled in recent years to keep their net metering rules ahead of an explosion in home renewable power. Early net metering participants were do-it-yourselfers who installed windmills and solar panels at a relatively slow pace, said HEA engineer Tyler Cheatwood, who oversees the co-op’s net metering. Before 2017, Cheatwood dealt with approximately one applicant per month. But as the price of solar power fell dramatically in the mid-2010s, all six Railbelt utilities saw sudden and accelerating growth in their net metering programs.
“There was a change from do-it-yourselfers wanting to install systems on their house to electricians focusing specifically on solar and renewables, and really advertising it to people and trying to streamline the process,” Cheatwood said.
HEA connected 40 new metering systems in 2018; in 2019 it connected 105. Railbelt-wide, net metered generation increased 74 percent that year, nearly all of it due to solar installations.
In May 2019, HEA became the first Railbelt co-op to raise its net metering cap from the RCA-mandated 1.5 percent of average annual demand to 3 percent, followed by Fairbanks’ Golden Valley Electric Association in May 2020. Still HEA has struggled to keep pace with demand. After bringing 22 new net metering connections online in the past two months, HEA Manager Brad Janorschke told board members that at the end of June it had reached 96 percent of its expanded cap.
The explosion of cheap, efficient solar equipment and of professional solar installers is one reason HEA is blowing through its cap. (Editor’s note: the author is a volunteer organizer for the Solarize the Kenai cooperative solar buying campaign). The other reason is that while solar installations rise, HEA’s demand — of which the net metering cap is a percentage — has fallen about 5 megawatts since 2012.
The reason for a cap is to avoid malfunctions in the fuses and other protective devices that blow or trip to limit outages after a powerline fails. Cheatwood said these devices work well when the power flows in one direction — from substations to homes and businesses that use it — but member-generated power flowing the opposite way could trip the wrong fuses in the event of an outage, causing the outage to spread and making it harder to locate.
“As we move that cap further and further, and have more and larger net metered systems, now it might start to require an engineering study to determine if the specific interconnection would cause instability in an area,” he said. “The cost of that study would go to the consumer. So by having that low cap, it keeps us from having a large cost to interconnect with our system.”
In the future, he said, net metering could expand without this destabilizing effect if HEA replaced the grid-wide cap with local caps tied to each of its substations.
“It will allow more systems to be brought online, but we wouldn't have to stop approving interconnections in, say, Seldovia, because so many interconnections came online in Kenai,” Cheatwood said. “Those two shouldn't be impacting each other as far as the cap is concerned. It's not going to affect stability on one end of the system as opposed to the other.”
Raising the cap
Director David Thomas -- who himself became a net metering member about two weeks before the meeting, with 7.5 kilowatts of solar newly installed on the roof of his home -- moved for HEA to seek a 10 percent cap.
"I think it puts us in a good position politically, and state-wide, if we and other utilities are accepting of members who wish to go down this route,” Thomas said. “These can be very vocal members, understandably. It avoids a clash, and brings us to the point of once again leading the entire Railbelt in net metering and our willingness to give these members that help.”
As for stability problems, Thomas said they would be negligible even at 10 percent because the actual output of solar panels is so often below their potential. The net metering allowance is set by the maximum energy a device is capable of producing, known as its capacity. But the output of solar panels is as variable as the sunshine, and isn't close to capacity most of the time. The University of Alaska Fairbanks' Alaska Center for Energy and Power found that Alaskan solar panels typically have a capacity factor — the ratio of actual output over a period of time to the hypothetical maximum output — of around 6-15 percent. The actual power they put into the grid is not enough to be disruptive, Thomas said.
HEA’s 2019 average annual demand was 50,666 kilowatts, allowing 1,519 kilowatts of net metering capacity under a three percent cap. The new cap would more than triple this to 5,066 kW.
Though the board agreed to seek a 10 percent cap, the number wasn’t written into the resolution they passed so as not to potentially conflict with what the RCA approves. The resolution text merely states HEA’s intent to raise its cap.
HEA Manager Brad Janorschke said 10 percent is the highest target he'd want to bring to the RCA. Beyond that "you're probably asking for trouble, instead of the rubber stamp," he said. “Maybe they'll come back and say 'we'll give you six.' We're going to take what we can get today so we don't break our tariff.”
Delivery charge
Along with their decision on the cap, the board members informally discussed a net metering feature far more controversial among members: the system delivery charge, an add-on to the bills of low power users to insure that even those who generate more power than they consume can’t zero out their electric bill entirely.
The average HEA household buys 550 kilowatt-hours a month from the cooperative. During sunny summer months, a net metering member will consume far less or even no HEA-generated power at all, if solar panels meet their home’s entire energy demand. Those who use less than 150 kilowatt-hours per month are subject to the $25.10 system delivery charge, which, alongside the $20 customer charge that all HEA members pay, makes the minimum HEA electric bill around $45.10. A member with enough solar to go beyond their home energy needs could lower their bill by selling power back to HEA, but at a purchase rate around eight cents per kilowatt-hour, it would take a large excess of generation to go significantly below $45.
But even net metering members who go several months without buying energy still make use of HEA’s grid to buy power during the winter months when solar output is negligible, and to distribute any excess generation they may sell back to the co-op. The service delivery charge is meant to be their share of the cost of maintaining the poles, wires, substations, and other hardware that makes this possible.
Thomas, who said he has no interest in revisiting the delivery charge, distinguishes the portion of a member’s electric bill that pays for energy from that which pays for capacity. According to HEA’s annual reports, what Thomas refers to as “paying for energy” — the cost of natural gas fuel and purchased power — is usually between 34 percent and 39 percent of the co-op’s total spending. Net metering members don’t benefit from these expenses when they generate their own power. But the remaining two thirds of HEA’s spending “pay for capacity” — expenses such as production, transmission, distribution, and administration, which maintain the grid. If net meter members paid only for energy without a service charge to cover their share of HEA’s capacity expenses, Thomas has said, they would effectively receive a subsidy from other HEA members who pay in full for both.
Director Roy Champagne said that expecting to zero out your electric bill with net metering is "like buying a car with cash and thinking you don't have to get insurance or change the oil. It just don't happen."
According to director Jim Levine the system delivery charge was originally intended to recoup expenses from snowbirds who may only buy HEA power three months of the year, but share in a system that needs maintenance year-round. Until January 2020 net metered members were exempt from the charge, and for some, it has created seemingly absurd situations. HEA member Ann Dixon told the board that during the last billing period her solar panels generated all but two of the kilowatt-hours her home used. With the customer and service delivery charges, she spent $47.75 on an amount of electricity that would have cost 33 cents if purchased at HEA’s residential rates.
"I understand that there has to be basic support for the whole system, but $47.75 for two kilowatt-hours just seems kind of ridiculous," Dixon said. She and several other net metering members who spoke to the board described the system delivery charge -- or at least the feeling it creates -- as “disincentivizing” and “punitive.”
Still, she preferred it to a hypothetical scenario that Janorschke put forward, in which HEA billed members only for capacity rather than energy. This, Janorschke said, would end up costing much more than $45.75 a month. If all of HEA’s 24,000 members were able to zero out their bill by buying no energy, he calculated the cooperative would need to charge them $110 each to meet the monthly cost of maintaining the grid. As it is, energy-buying members without home renewables would be paying some of this cost for net metering members without the system delivery charge.
Director C.O Rudstrom said the charge is “an issue we're going to have work more on.”
“The cap is easy,” Rudstrom said. “ The system delivery charge and how we're paying for our fixed cost is something we're going to have to work on more. In the few months I've been a director it's been, with the public reaching out to me, a public relations problem. Mostly I think they're getting upset because they don't understand. I think it's as much an education situation as it is changing the billing. We need to educate people that there are fixed costs.”
Thomas said that becoming a net metering member himself has given him insight into how easy it is to overlook what the system charge pays for. He referred to the smartphone applications that come with most commercially installed home solar systems, which let owners track the output of their panels.
“One can get this emotional wind about the energy I'm producing, and how the decision I'm making to produce energy was the right one, and the energy I'm producing is saving the planet,” he said. “Of course the little app tells me nothing about all the capacity charges HEA incurs whether I'm net zero or not. It's given me some insight into the cognitive dissonance of our most vocal net metering customers, when they look only at energy — which is about a third of our cost — and ignore the capacity — which is two thirds of our cost. So yes, let's do something other than service charge that's easier to explain, because I've never been able to explain it to anybody.”
