Should Sacramento Raise Solar Customer Rates? AB 1139, #297

Assembly Bill (AB) 1139 proponents want to raise solar customer rates. They say rate increases are needed because non-solar customers subsidize solar customers.

Today, we suggest that in reality, solar customers subsidize non-solar customers.

The Berkeley Haas Equitable Tests

A UC Berkeley Haas study outlines factors that Sacramento might consider when reviewing SDGE (and other power company) rates. The Haas Study says:

“Economists often use three distinct … equity criteria to determine who should pay for a public good. One is the ability to pay principle… . A second is the benefits principle: those who benefit more from the public good should contribute more. A third is the responsibility principle: those who cause the need for the public good should contribute more? [See Haas Study, § 7.1.3 at https://energyathaas.wordpress.com/2021/03/08/ensuring-equity-in-califor...

In short, who has the moola, who benefits, and who causes the need for the costs paid.

Who Has the Money?

By Proposition 13, Californians rejected the principle that the rich should pay more when receiving the same public good. Californians said that house taxes should not be based on a homeowner’s wealth.

Two homeowners living in identical homes can pay wildly different annual property taxes. Homeowner A, a retired multimillionaire, may live in Home A bought 30 years ago and pay $5,000 per year [A Warren Buffet type]. Homeowner B, a young professional couple with $200,000 in student loans, who bought last year, may pay $20,000 annual property taxes for the same house.

And, California courts say that when Sacramento tries to circumvent the 2/3 vote requirement to increase taxes by imposing fees instead, the fee structure must be based on benefits and burdens allocated, not on a Robin Hood wealth reallocation.

Who Benefits from Solar Use?

Yes, homeowners who bought solar systems benefit – after they have lived in their homes for 7 to 10 years to recover the $12,000 or more (after federal solar credits) they spent. These homeowners are out of pocket the $12,000 as well as the lost investment on that money forever.

But non-solar homeowners also benefit in several ways.

First: Utilities Pay Homeowner Solar Generators Far Less Than Wholesale Generators.

The Berkeley Haas Study estimates that utilities pay about 9 cents per kilowatt hour (kWh) to the generators (such as dam owners) who make and send power long distances to California.

But at the end of each solar user energy year, SDGE pays homeowners about 2 cents per kWh for the excess kilowatts they generated and sent back into the SDGE energy grid. SDGE has the option of increasing its profits or passing on this price differential to non-solar customers.

Moreover, SDGE solar homeowners already pay 1 cent per kWh into the SDGE Public Purpose Program (PPP) [a fee built into the SDGE rates], which in part subsidizes lower income households.

Second: Homeowners Producing Solar Reduce Future Fixed Infrastructure Costs That Non-Solar Homes Would Have to Pay.

California has 40,000,000 people. In 1980, it had about 25,000,000. Ask a few questions:

• If no homes had solar, how much growth could the existing California power grid serve? How much would non-solar homes have to pay for added fixed infrastructure cost to serve more people?
• If one half the homes had solar, how much growth could the existing fixed infrastructure serve and how many hundreds of millions in new infrastructure would be avoided?

I don’t know. But the utilities could provide the info. Without that information, it is impossible to fairly conclude that non-solar homes subsidize solar homes. Why? Because the fixed costs comprise 73% of the power system cost and solar homes greatly reduce that cost.

Third: Utility Solar Time of Use Plans (TOU) Force Solar Customers to Pay Higher Rates for the Summer Time Periods with Highest Energy Demand (4 p.m. to 9 pm).

Check out the SDGE rates. The highest rate that non-solar home customers on the SDGE summer standard plan pay for peak demand is 41 cents per kWh and the off peak rate is 33 cents per kWh. In contrast, solar customers pay 61 cents per kWh during peak periods and 34 cents during off peak.

Think about that. At the end of each solar customer year (depending on when the solar system was installed), SDGE pays the solar customer a few pennies and in the summer SDGE can charge solar users 61 cents per kWh for the kilowatts that solar homeowners put back in the system.

Who Burdens the Environment with Greenhouse Gases (GHG) and the SDGE Payments to Offset GHG from Fossil Emissions?

California is committed to avoiding climate change. California utilities must spend significant sums to mitigate for energy produced from fossil fuel. Much energy comes almost GHG free because it is produced by solar or wind farms or dams. But the need to make GHG mitigation payments arises mainly from non-solar homes because a higher percentage of their electricity derives from fossil-fuel sources.

Conclusion

Before Sacramento acts on AB 1139, it should require California utilities to (1) analyze the issues above and (2) disclose what profits the utilities and what salaries their executives make. It appears that utility solar customers in fact subsidize the non-solar customers.