Thursday, the Alabama Public Service Commission held a formal hearing to consider a complaint by the Southern Environmental Law Center, on behalf of the environmental activist group, GASP and two other parties, demanding that the PSC abolish an Alabama Power Company charge on customers with solar panels that use Alabama Power as a backup service.
Alabama Power Company rates manager Natalie Dean was grilled for nearly two hours by attorneys for the environmental group about the company’s calculations and the assumptions used to make those calculations.
Dean explained that the $5 a month per kilowatt capacity reservation charge was necessary because the company was required by law to provide those customers with backup power at any time.
“They have requested that the company provide a service to them and there is a cost to that service,” Dean explained. “The capacity reservation charge is to recover the cost of providing backup service.”
Dean defended her calculations and the assumptions behind them.
“There are variable and fixed costs benefits and we did consider them when we developed this framework,” Dean said.
In a house with solar panels, but no storage capacity, much of the power needs of that home are produced by the solar panels and in some cases excess power actually enters the system from those homes; but with a solar system when the sun goes down, cloud cover makes solar generation impossible that day, or there is a equipment malfunction; then Alabama Power is supposed to provide for that home’s needs at the exact same rate that other customers pay. Dean said that predictable events like nighttime is supplemental power and is not factored in her calculations of the capacity reservation charge; but unexpected events such as overcast conditions or equipment failure creates the need for backup power.
“If the generator is supposed to be producing and it is not then I am having to provide backup,” Dean explained to the members of the PSC.
Alabama Power is required to provide for the daily power needs of its ratepayers; and in systems where Alabama Power is required by law to provide backup service if needed; then the utility is required to be able to provide that backup whenever it is needed on top of the normal power being generated by the company’s system.
One key point of contention was Dean’s calculation that that number was equal to 65 percent of the systems where Alabama Power is the backup power provider.
“For every 10 kilowatts of solar generation the company must reserve 6.5 kilowatts in reserve,” Dean explained. “I am required to provide 100 percent of their needs whenever they need it.”
The capacity reservation charge is based on the power generation system being used and its capacity
According to the example numbers discussed in the meeting, the typical home in Alabama with a solar system; purchases $609 less electricity from the company than they would without the solar system; but they would typically incur $330 a year in capacity reservation charges. They still have a cost savings; but after paying their capacity reservation charges that savings would only be about $279 a year.
Advocates for the solar industry argue that the capacity reserve charge serves as a deterrent against more Alabama homeowners installing solar systems.
Karl R. Rábago, from Colorado, is the former Executive Director of the Pace Energy and Climate Center.
“A very few of Alabama Power’s small customers have made significant personal investments to purchase and install solar-power generators that provide some of the electricity that those customers use for day-to-day life,” Rábago said. “Alabama Power has proposed and secured approval to charge special rates that eliminate much of the savings those customers expected to realize from their investments.”
“My testimony addresses the many ways in which the Alabama Power Rate Rider RGB is inconsistent with Alabama and federal law, the ways in which the Company relied on unreasonable methods for calculating the charges it imposes under Rate Rider RGB for back-up service, and the ways in which the resulting charges are inconsistent with established principles of electricity rate design and implementation,” Rábago added. “The traditional monopoly utility business model, because utilities make profits, in part, through the sale of electricity and they seek a return of and on their investments made to generate and deliver this electricity.”
“Customer-installed solar cuts into the traditional utility profit-making business model by reducing sales, but solar also reduces utility costs, and especially because it generates before and during summer peak demand periods, when demand and costs are often highest,” Rábago claimed. “The law requires that rates, including Rate Rider RGB, must be just and reasonable, non-discriminatory, and consistent with applicable regulations.”
Dean said that without the capacity reservation charges, then the other ratepayers would be subsidizing the cost of the solar customers backup power needs.
Only 133 homeowners pay the capacity reservation charges currently.
The PSC will announce their ruling at a future regular meeting of the Commission.
