Westar Energy's headquarters in Topeka, Kansas. (Image via Wikimedia Commons)

Kansas utility targets solar customers for higher rate

Correction appended

As utilities around the U.S. have sought to increase fixed charges in response to growing numbers of customers generating their own power, a Kansas utility is taking a more targeted approach.

In a case now pending before the Kansas Corporation Commission, customers of Topeka-based Westar Energy with their own solar, wind or other generation will pay a higher fixed charge than other ratepayers.

“We just want to make sure it’s fair to any customer, whether they decide to generate some of their own power or not,” said Jeff Martin, Westar’s vice president for regulatory affairs.

Opponents see the proposal as another effort to fend off competition from residential solar after Westar’s effort to kill net metering ended in a compromise last year.

“This is another attempt by the utility to kill solar in Kansas,” said Aron Cromwell, co-owner of Cromwell Environmental, a Lawrence-based solar installer.

‘Somehow the rules are different’

Over the past year, utilities across the country have been hiking – or attempting to hike – the fixed portion of their bills.

Last fall, three Wisconsin utilities won increases in fixed-cost recovery from the utility commission there. More recently, Kansas City Power & Light and the Empire District Electric Co., in southwest Missouri, filed requests with Missouri’s Public Service Commission to substantially increase the fixed portion of customer bills.

Westar, which serves about 600,000 customers in eastern Kansas, has crafted three billing options. While most residential customers could opt for a $15 monthly fixed fee plus a per-kilowatt energy charge, solar customers could only choose between a fixed monthly fee of $50 plus an energy charge, or a $15 fixed fee plus a per-kilowatt rate plus a demand charge based on the previous month’s maximum usage. The variable energy charge would be lower in the two options available to solar customers.

Existing solar systems would be grandfathered in.

Cromwell predicts that the billing options outlined in Westar’s rate proposal will increase payback time from 12 years to more than 20 years, thereby creating a powerful disincentive to solar installation.

“It’s discriminatory to say that (solar customers) can’t have ‘this’ rate, they can only have ‘those’ rates,” Cromwell said. And he pointed out that “there are all kinds of ways to use less power,” like turning up the thermostat in July, or replacing incandescent lightbulbs with CFLs or LEDs.

“Is there a reason these people are not being forced into these rate structures?” he asked. “When it comes to solar, somehow the rules are different.”

Martin said the 280 solar generators in Kansas typically offset about 90 percent of their bill, whereas even Westar’s most energy-conserving non-solar customers generally consume at least 300 kilowatt hours in a month.

And although solar customers can produce a good deal of power, Martin said, there are plenty of times when their panels aren’t producing, meaning those customers draw on the utility’s system to get power.

‘Fixed’ costs

Martin said that for the purposes of the rate plan, Westar estimates its fixed costs at 73 percent of the cost of delivering power to customers.

However, the notion of “fixed” costs is more nuanced than Westar and other utilities often portray it, according to Karl Rabago, a former Texas utilities regulator who is now the executive director of the Pace Energy and Climate Center. As an example, he pointed to a California project done 20 years ago.

In an experiment, a utility installed a 0.5 megawatt solar array next to a transformer in Kerman, California and found that it added 4.6 years to the life of that transformer, resulting in a $398,000 reduction in “fixed ” costs.

Although utilities generally would classify a transformer as a fixed cost, Rabago said that in the Kerman experiment, “by changing the pattern of use, they got it to be variable.”

Along the same lines, he said, “If I got everybody to reduce their use of electricity at the hottest time of day, the transformer wouldn’t get as hot. Not getting as hot means they last longer.”

Brad Klein, a lawyer with the Environmental Law & Policy Center, said, “The problem is one of timing and perspective. Over the long term, all costs are variable. Costs ‘vary’ based on customer behavior over the long term.”

Solar a cost, or a benefit?

Cromwell concedes that solar customers – like all utility customers – are tapping into the infrastructure for generating power and getting it to customers. But how much should a solar customer pay for that privilege?

“They have made no effort whatsoever to justify their rates,” he said of Westar. “No study has been done to prove that solar is a cost to ratepayers.”

In fact, “every independent study done on that point has shown exactly the opposite,” said Bryan Miller, vice president of public policy at solar developer Sunrun. Studies in Vermont, New York, Texas, Nevada and, most recently, Missouri, have concluded that solar customers are a net benefit to the power system.

Solar customers create costs, he said, but benefits as well, such as avoided investments in transmission and distribution, and reductions in the amount of power lost in the course of moving it long distances.

There is some overlap between when solar panels are producing and when system demands are at their highest, according to Martin. He said rooftop solar panels, which generally face south, tend to produce maximum power at about 2 p.m.

Peak demand on the system, however, is from about 5 to 7 p.m. And because peak demand, rather than total demand, is what really drives utility costs, he said that customers with south-facing solar panels reduce demand at a time of heavy use, but generally are pulling energy from the system when it’s producing its costliest, peak-hour power.

Distributed generation engenders both costs and benefits, Cromwell said. As to how those compare, and just how much solar customers should pay for using the system, he said, “That’s something the KCC needs to look at.”

Editor’s note: An earlier version of this story incorrectly stated that solar customers would be required to pay the $50 fixed charge. The story has been updated with the correct rate information.

12 thoughts on “Kansas utility targets solar customers for higher rate

  1. Seems to me that it would follow that if a customer rents a generator from Home Depot, Installs CFL’s of LED lights, or turns off their lights when they leave the room in order to reduce their utility bill they should be charged a higher fixed fee as well! Alternatively, the solar customer could size the array and use an inverter that prevents any power from escaping to the grid!

    This needs to stop!

  2. Another view…. Do the Utes back charge the main energy sources for the higher cost connections to their large production facilities.?? In what parallel universe would it be fair to charge extra to a small supplier which requires NO larger supply lines to the grid. For the Utes, distributed energy is a worry free supply at no additional cost to them, so net metering is the fair way to accept it…. In addition to net metering, the states may see their duty to supply SREC programs to compensate DE suppliers for the clean and resource saving additions to the “deferred cost” energy supply, currently around $500 to $800 per megawatt hour.

  3. I cannot believe this is remotely legal. Where is the sanity around supporting responsible building/home owners who choose not to be dependent on the fossil fuel grid? Our grid energy is some of the worst in the country when it comes to burning coal. KS should be incentivizing onsite renewable energy production rather than blatantly disincentivizing it! This is shameful.

  4. Why buy the cow when you can have the milk free? You parasites want to be provided with power at peak times, but are unwilling to pay for those facilities to be there for you.

  5. This is hubris of a protected monopoly. They have no idea how to engage with their customers, because they have held a monopoly for a hundred years. They have no clue, or desire to engage with distributed generation technology.

    It may not be currently feasible, but there will come a time when you can economically build enough self-generation and battery storage in order to leave the grid for good. It is actions like this that will make that day come sooner.

  6. The Westar proposal includes two options for customer-generators, not one.

    Customers with self-generation can either elect the “Residential Stability Plan” which includes a $50 customer charge plus an inclining block for energy starting at $0.02 per kWh or they can select the “Residential Demand Plan” which maintains the lower $15 customer charge and adds a demand component to the bill. Demand charges are $3/kW in the winter and $10/kW in the summer and energy for 4.9 cents/kWh.

    See pages 9-10 of Cindy Wilson’s testimony for a description of the residential rate options: https://www.westarenergy.com/Portals/0/Resources/Documents/RateCasePDF/Direct_Testimony_of_Cindy_Wilson_on_behalf_of_Westar_Energy.pdf

    See page 19 of Dr. Faruqui’s testimony for a table of the proposed rates: https://www.westarenergy.com/Portals/0/Resources/Documents/RateCasePDF/Direct_Testimony_of_Ahmad_Faruqui_on_behalf_of_Westar_Energy.pdf

  7. This reminds me of the RIAA fighting mp3s back in the day. The market for their product changed, and was spiraling out of their control. They fought it tooth and nail, but eventually figured out how to own it again and continue making money. Turns out nobody cares about or wants to buy CDs – they want music.
    Utilities need to make this same transformation. They’re eventually going to have to realize they’re selling the wrong thing. People don’t want dirty power from the grid, they want reliability provided by the grid. Two very different things, and the latter has plenty of value.
    (And NatSecurity is right – if you’re going to penalize solar customers with low bills, you’d better penalize the efficient customers (I’m sorry – “the grid freeloaders”) as well – and good luck with that…)

  8. Matt, thank you for the correction. The story has been updated.

  9. $50.00 per month is almost enough right now to pay for a peak shaving residential power storage system. I suspect that more people will do the math and make a reasonable personal decision, even if is not the best decision for the grid.

  10. No. Just stop. Right now. NO! How can this be fair? Next I’ll be charged for using less! Oh, wait, I guess, I’m already being charged for that too!

  11. What most people don’t understand is that by design (at least historically) the fixed component of residential rates (e.g., $15 per month) is much lower than the actual “fixed cost” that a utility incurs to provide this service. Because of this, higher-use customers (larger residential customers, commercial customers, etc.) have been subsidizing lower-use residential customers–and for years. No one should believe that $15 per month for access by a residential customer to the electric system (i.e, the distribution, transmission and generation resources of a utility) covers the cost to provide this access. A figure like $75 to $100 per month is closer to the truth. So why do utilities only charge $15? Political expediency.

    Distributed generation, like PVs, upset this subsidization plan. What Westar has proposed (or implemented?) still probably has some subsidizing…just less. Many PV providers/supporters know that what Westar is proposing is “fair,” they just don’t want pay if they don’t have to.

  12. The $15 base fee is only for the first year. It escalates for ALL customers by $3/year until 2019 when all customers ,except those who contract for the $50 base fee, will be paying $27/mo. These rates are hoped to be revenue neutral per class, so when there is little remaining in the energy side of the equation, there will be little incentive to conserve. Efficiency as well as solar energy will take a hit.