Clean Energy Resource Teams / Creative Commons

A solar array in rural Minnesota.

Minnesota co-ops rolling out high fixed charge for solar customers

Last year Wayne Hesse began considering putting up a solar array on his farm in Tyler, a small town in western Minnesota.

His electric provider, Lyon Lincoln Electric Cooperative, informed Hesse he would be charged a fixed fee of $49.50 monthly for his solar array. He already pays $50 a month for a meter for his existing wind turbine along with a $35 monthly fee the utility charges every customer.

“I think the fixed fee for solar is excessive,” he said. “When I do the cash flow that amount takes 25 percent of my monthly profit. It would take an extra three to four years to get the project paid off.”

Hesse is among the handful of customers of electric cooperatives in Minnesota that have seen skyrocketing fixed charges for installing solar panels on their homes due to a new state law passed last year.

As co-ops continue to add the fees, solar observers believe the number of disgruntled customers will grow.

The fixed charges will only affect solar that has been installed after July 1, 2015 in co-op territory. A March newsletter from the Minnesota Rural Electric Association (MREA) reports that 10 cooperatives have applied the fee and 10 more will be adding the charge within the next two months.

Two rural co-op customers have filed cases with the Minnesota Public Utilities Commission regarding the high fees, and others considering solar have contacted installers with questions about the charges.

Co-ops operate differently than investor owned utilities. Every customer is a member of the co-ops, and their boards of directors, elected by members, make decisions on rate increases, infrastructure investments, and so forth.

They serve 1.8 million members and provide 18 percent of the power sold in the state. They maintain the largest distribution network in Minnesota,  121,000 miles, which is more than Xcel Energy and the other three private power companies combined. Co-ops cover a territory representing 85 percent of Minnesota.

The co-ops say this lack of density means the cost of delivering service to an individual customer is higher, necessitating the higher fixed charges.

Fees will ‘cripple solar’

David Shaffer, an attorney and development director of the Minnesota Solar Energy Industries Association, is assisting with the cases of Hesse and two other members challenging different co-ops.

A high fixed charge “decreases the cost-effectiveness of solar arrays and elongates the payback period,” he said. “Selling solar is based on the payback. If you get payback in under 10 years it’s a great deal, but if it’s beyond 10 years it gets more difficult. Fixed charges cut into the viability of selling solar in those (rural) areas because financially it doesn’t make sense.”

Shaffer said the rural cooperatives had much lower fixed charges prior to the legislation. “What has changed?” he asked. “The result of high fixed fees will be to cripple solar in these areas.”

“The rates we’re seeing charged by Minnesota co-ops are the highest in the country,” said Allen Gleckner, a senior policy associate at Fresh Energy, where Midwest Energy News is published. “In Arizona the charge is typically $15 a month, and they have a much greater penetration of net-metered systems than any Minnesota cooperative.”

As an example, Gleckner showed a January bill from a solar customer of Meeker Cooperative in Litchfield that shows a $55 net metering charge on a just under 40 kilowatt (kW) system. Over a year that would cost the customer more than $600, the equivalent of several months worth of electric bills.

In contrast, the state’s largest investor-owned utility, Xcel Energy, has a fixed fee for all customers of $10 a month, but nothing specifically for solar. Minnesota Power has a monthly “co-generation fee” of around $2.55 a month for a 20 kW system.

The MREA lobbied the state legislature for the change and established a common approach members can use to establish a fair fixed charge cost for solar customers.

Rather than use a flat fee, the association suggested scaling the costs to better reflect the impact of solar on their systems. The larger the output of a solar installation, the higher the fixed fee.

Connexus Energy, one of the larger cooperatives, will soon decide whether to charge around $23 per month for a 10 kW system, up from $5.90 a month now, a fee which goes to pay for a bidirectional meter required for solar production, according to Brian Burandt, vice president of power supply for Connexus.

The fee will cap at $26.22 for systems under 40 kW. The fixed charges pay for infrastructure which costs no less in sparsely populated rural areas than cities, Burandt argued.

“In a rural area it (the fixed charge) will be higher because you have less density,” he said.

Why rates are rising

A state law passed in 2015 that went into effect this year allows rural electric cooperatives to charge solar customers with less than a 40 kW installation a fixed fee.

“Any additional charge by the utility must be reasonable and appropriate for that class of customer based on the most recent cost of service study,” the statute reads. “The cost of service study must be made available for review by a customer of the utility upon request.”

The problem, said Gleckner, is that utilities are not providing cost of service studies, and when they are they don’t account for benefits derived from solar on the electric grid.

Those benefits include providing electricity near where it is consumed, insulation from fluctuating fuel costs, and allowing utilities to defer investment in additional power generation, he said.

“You only see one side the equation, the cost side,” Gleckner said. But the argument for solar energy’s contribution to the market, as described in research done for Minnesota’s Value of Solar principle, was not incorporated in the legislation.

The Value of Solar concept “has not gone through the same rigors as the cost of service,” argued Burandt. Rural utilities will “go bankrupt” if enough customers use solar energy to reduce or eliminate their need to buy power, he said.

Gleckner counters that the value of solar methodology “was developed over a four-month stakeholder process involving hundreds of participants and encompasses eight detailed variables ranging from operations and maintenance costs to avoided infrastructure and fuel costs.”

Outside of the debate over how the fixed charges should be configured is the question of why it is an issue now. Shaffer and other advocates question the dramatic cost increase from this year to last, especially since rural Minnesota isn’t considered a hotbed for rooftop solar, although many co-ops have community solar gardens in place or planned for the future.

MREA’s director of government affairs and counsel, Jim Horan, said the call for allowing higher fixed rates came from several co-ops that had growing numbers of solar customers, he said. Given the co-ops’ relatively small customer bases, even a handful of installations can significantly impact overall load.

More than 2 percent of Steele Waseca Electric Cooperative’s peak system load — dubbed “saturation” by Horan — is from solar energy. Renville Sibley Cooperative Power Association, with 1,900 customers, is somewhere over the 3 percent mark in saturation.

When investor-owned utilities hit 4 percent distributed generation they can ask for rate relief. At least eight or nine of MREA’s 44 members are beyond the 2 percent solar saturation threshold, Horan said.

“A good portion of our co-ops have seen a significantly high saturation rate and its affecting them,” he said. The result of more solar means greater issues with grid reliability that could require additional upgrades and improvements, Horan added.

That may be true of a handful of MREA members, but Fresh Energy’s research using PUC reports shows a different story. Ten co-ops which reported data showed a total of 99 installations in 2015, and more than half in Steele-Waseca’s territory.

Of the 304 net meter customers in these coops, nearly one third – 98 – are also Steele-Waseca customers. The total power generated was 4.28 megawatts.

Gleckner points out that while solar saturation may have grown, co-ops generally report less than one percent of their customers have solar.

‘The costs are spread out’

Horan described how the fees are figured. Co-ops decide on their own what they want to charge for cost recovery per kW of solar. (The association suggests exempting the first 3.5 kW of an array.) Those charges should be based on the true cost of service and nothing more, he said.

The argument that fixed charges lengthen the payback for installations may be true but solar developers MREA spoke to said the additional time would be nominal, he said. “If you’re talking about a 13- or 15-year payback you’re only adding a year or two,” Horan said.

The value of solar is lower than retail rates customers receive for power they generate, Horan said. Those rates will not change, he noted, and the legislation only allows for recovering fixed costs. Co-ops are nonprofits, so any excess revenue is held for upgrades and expansion or returned to members.

The issue comes down to the density of customers. Rural co-ops have six members per mile of electric line, compared to 48 customers per mile of line for investor owned utilities, he said.

“The costs are spread out over much fewer customers,” Horan said. “We need to continue to cover the cost of service, and do so in an equitable way.”

To Hesse, though, the fixed charges may force him to reconsider adding solar.

“Unless (the situation) changes they won’t be many solar arrays put on any rural electric association lines,” Hesse said. “It just doesn’t pay.”

50 thoughts on “Minnesota co-ops rolling out high fixed charge for solar customers

    • sadly. many part of the country require that you be hooked up to the grid whether you want to be or not.

      • I have never heard of such a law. What do you do if are too far away from the Grid. Do they force you to pay $100k to run wires to your isolated house. I don’t think so.

        • Eric, if you own a remote property and want to have a grid power line run to it, there is cost for it. I have a neighbor who needed nine poles and affiliated wiring run to their house. It cost them $19,000. I have another neighbor (these neighbors are miles away, by the way) who had to run twelve poles, and it cost quite a bit less, because it was years earlier. Point is, anyone who wants a specific line run to their remote property has to pay for it. Could $100k happen? I DO think so, in fact, I know so. The examples I state here are for Colorado. I might be different where you live.

        • It’s the law in FL too. You need grid connection to get your certificate of occupancy. You are not required to buy power but you are required to be connected.

      • that is true. I like life uncomplicated. I am greener than anybody I know but I dont like to have separate fees for everything. keep it simple….there are grants to providers so rates should not be higher; on top of this, other states’ old dirty antiquated utilities subsidized by all citizens are now trying to pretend that they paid for infrastructure and clean energy has to pay THEM to use THEIR infrastructure which all citizens paid for. there needs to be NATIONAL standard; some pols say states supercede fed govt but this is the exact quagmire and clu98sturf98uCk which happens without NATIONAL standards and regulation….espec of emerging industries/sectors to ensure there is a LEVEL and fair playing field for ALL. wish it were as easy as a lot of comments below re just produce your own off grid energy!!!!!!

    • You can’t cut the cord to save your soul. They will force your arm and your wallet in new and ever more imaginative ways. It’s nothing more and nothing less than extortion legalized by those who will benefit from it.

  1. I would like to say a couple of things about this. First a Farm is not a single residence. A Farm is a business. It seems that a Business should just write off the expenses like this as business expenses along with the equipment costs as business expenses. It is one thing if a person owns a personal property with a primary residence on a couple of acres of land, But this seems more like an energy generation business.

    • I don’t think “write off the expenses” means what you think it means…

    • Not a business person I take it. This is free enterprise. Revenue less Expense is profit or loss. Loss is bad, less profit is not so bad. Folks engage in business to maximize profit.

      The power company works on the same principle. The farmers buys less electricity therefore less revenue for the Utility. See the equation above.

      Germany is going through the same thing now. So many folks are getting off the grid that is required to have a large infrastructure to delivery power.

      Very similar to the Ma Bells. Cellular took revenue away from supporting all those poles and lines and linemen.

  2. Why bother with all of these lobbyists charging the laws to suit big corporations losing money. Just produce your own energy… or better yet, you and your neighborhood get together and make your own power. Collectively split the cost and share the wealth.

    • That is the definition of a cooperative. The “they” in this story is the local farmers and residents who own and run the local energy cooperative.

    • The E-Barons need to know your E-consumption needs, at all times.

    • if I was trillionaire I would help every citizen who wanted to to install clean energy and get off grid. next best bet is use local elec coops if avail or at least 100% clean energy even if have to be net metered instead of off grid.

      • Maybe you missed the part where the increased fees are being levied by the local electric coops you speak of and not the big corporate utility providers. Go off grid or pay the cost of service. It is the flat fee thing that bugs some people, but then you’d have people way out in the boonies paying 1000’s of dollars to get hooked up at all.

  3. The utilities are too late, the cost of solar has fallen SO low that these added charges are simply going to now push storage adoption. Especially on a farm where space isn’t an issue, adding any number of older proven batteries, such as lead acid or nickel iron is going to be cost effective.

    Utilities are going about this all wrong, rather than fighting solar, they should be embracing it. Offering incentives for adopters to face panels in directions other than south so that they spread the grid load better. If they don’t, the push to go off grid will only follow the same path as solar, very expensive intially, on systems the size of this article, installed per watt price is probably around $2 a watt. That takes a payment that was pure expense and now moves it into an asset that adds value and allows depreciation. Plus the Feds are paying 30% of that $2 so the cost is actually much less. Solar is a no brainer for anyone who uses electricity and makes enough to pay taxes.

    • This isn’t really an issue of utilities fighting solar. Coops are non-profit and as such have no motive other than fiduciary responsibility to their members to keep their board positions safe. It is going to cost a lot more to install and maintain infrastructure on a per customer basis if your customer density per mile of infrastructure is 1/8 that of the for profit utilities. They could easily just charge the increased costs to hook up to all these “nano-utilities” to all their customers equally if their goal is to increase the % of clean energy generation, but the majority of customers would be pissed due to increased utility costs until decentralized power generation becomes cheaper for the utility than a centralized system.

  4. Same thing going on all over the country.
    Somebody has got to help pay for the upkeep of power lines, substations, etc.
    I would love to switch to solar, but I did the math. Doesn’t work.
    If you don’t want to help pay for the grid, guess they can unplug you and you are on your own.
    Have you priced the batteries?? Better be sitting down.

      • Home scale solar uses batteries for storage. Large scale is moving to salt.

      • Depends on the system. If you are selling all the power whenever it is generated, then no they don’t use batteries. If you are storing it for peak demand/higher rates or going completely off-grid, then you still use batteries.

      • I don’t know where you heard that, Dan. If one is off grid, there has to be storage. Batteries are still the norm. …I’m off grid, and keep up with the tech.

    • Math doesn’t work? if you are paying over .10 a KWH the math absolutely works. If you do a purchase you are paying 5-6 cents leveled for power over 25 plus yrs….Works for me!

    • I do agree with maintenance costs, Elmer, but unless you need a huge system for some reason, a stand alone off grid system is viable. My system has paid for itself in less than five years, and if I had to buy a new battery bank today (I don’t), my average “utility bill” (cost of replacement over battery lifespan) to replace them would be around $23/month. That cost goes down as long as these batteries hold charge. I went with two pretty sizable parallel banks of golf cart type batteries wired to 24 volts on the DC side, because I anticipated advances in battery tech. Had I gone with larger L-16 batteries, they’d last many times longer, but weigh much more per unit (for initial installation, and replacement as I get older). I anticipate my bank to expire before lithium or other high tech storage systems are affordable, so I will indeed have to make a choice when that happens. Good luck to you.

  5. Padding a failing business model to keep revenue up. That’s all I see here. This action, and the nonsense the utilities pushed in Arizona, will only lead to a quickening pace of residential and business solar installations. The utilities are actually angering customers, and shortening their lifetimes by pushing these measures.

    • Monopoly trying to keep it business as usual and will do whatever to keep it business as usual
      Storage solutions will put these guys out of business

    • The coops exist because the for profit utilities would charge them much more due to the increased costs compared to higher density areas. These coops are non-profit and thus their only motive for keeping revenue up is financial stability. If everyone becomes self-sufficient there won’t be any reason for the coop to exist. Same goes for for-profit utilities. The reason everyone is angry is that some people are paying more than their share of cost while others are paying less.

    • Won’t be long until affordable solar/battery combo systems will allow consumers to ‘cut’ the cord. The power companies know this and are out to get every penny they can while their business model crumbles. They will go from gouging every customer they can, to no customers left to gouge. I hope I’m around to see it.

  6. The power companies do want people to find and use other sources of power and the whole system nation wide is ready to collapse. the use of coal for power exist because to corrupt coal industry have had billions of dollars to lobby or bribe the government to put aside to needs of a nation for money.
    When the system becomes so overloaded that brown outs and black out become common only those who have solar and or wind power will be better prepared to live through the winters we have.
    Power companies and co-opts should be required by law to buy any excess power from those have it to spare, when they have it to spare.

  7. Of grid is looking much more attractive for me. A small 3kW system seems to be enough for my daily needs.. Unless I run the A/C. If I wanted to go fully off grid, I’d probably opt for 3 more kW of panels. As for the batteries: 23kWh of storage can be had for around $1500. The chargers and inverters would add a bit on top of that, but then I’d be off grid permanently. $500 for a gas generator ‘just in case’. The two electric cars can be charged at work for $0, and bring home 30kWh of juice daily. Show me a home that cannot run for a few days with 60 kWh of juice in the tank. Electric companies can be a real pain in the ass at times. Check out Colorados Solar Program: Incentives, no montly charges, and a 1:1 buy-back on excess generating. All the utilities should do the same.

    • Cary, I agree… except as one who did something very similar, I suggest biting the bullet up front and spend a thousand on the backup generator, instead of five hundred.

  8. What is it with all Solar projects need to be connected to the Grid? Long live the free energy policy and let people build and maintain their own source. And Keep that local E-Baron out of my property.

    • Do my solar flashlight and solar calculator need to be connected to the grid?

  9. The utility has the same problems and cost as you do … payback, expense, capital. They built facilities to be shared by everyone to keep total costs as low as possible. They are scrutinized by state regulators to do so. So, if you go solar, and your neighbor, and so on, who pays for the common infrastructure which was already built in order to serve you? The last people on the grid are the few who cant afford to build their own solar. Wanna try to build your own roads, too? I know of a business that self-generated fifteen years ago. When their generator failed, they were crying to be re-connected to the grid, but the utility had already removed the facilities connecting them! It’s great to be on your own until your solution fails. Then you feel entitled to a better solution.

    • Wrong on the feeling entitled thing, John. Stay at the whims of the utilities, if you want. I’ve been off grid over six years, and will never go back.

  10. Why should solar have a free lunch? The farmer wants to be part of the cooperative but not contribute his share to the cooperative, making the other user’s costs go up. Naw, if alternatives are to be a part of the energy mix then they need to share the load. Heck, they are already getting incentives from the Federal government.

  11. storage options will (are) soon be offered as part of a total system. then the utilities will be completely obsolete. they flail currently trying to hold on to an antiquated business model. its day is done.

  12. Hopefully the storage batteries coming out now will offer homeowners & businesses the chance to pull the plug on incoming wires . Produce / store & use your home acquired power.

  13. Naturally. The tree hugging kitties CLAIM to want to “save the earth”, and demand that we do so. But then they use government and give government the excuse to do their proctology work on you. ‘Bend over and squeal like a pig.’ Give you a “tax break” for installing very costly, and very cost inefficient solar and wind power and then excessively tax you for doing so. They might as well work the other end too, and attach a couple of leaches to your forehead. This is all just one more way to extort money from, and to exert control over the “free” people.

  14. I don’t understand why people installing solar think that the people who own the distribution should just absorb the costs of distribution. If someone wants a utility to pay for their solar production then that someone should have to pay for the distribution system that distributes the power that, that someone produces. I agree if they disconnect and store that power then they shouldn’t be charge this fee, but if they want the utility to pay for the energy then they should help pay for distribution.

    • Because of environmental issues, especially global warming we should ALL (through subsidies or other means) be supporting the installation and operation of renewable energy. As it happens renewable energy (wind & solar) are most practical where densities are lowest, and so puts the rural cooperatives in a pickle. But those of us who live in denser areas should be supporting this because long term local renewable generation will make our power supply more robust and lower its carbon footprint.

  15. I like how it is implemented to pay for infrastructure that is already in place and what the existing fee is supposed to cover.

  16. Require all electrical generators (co-ops or private or whatever) to get a certain percentage from renewable energy. The caveat? Privately owned renewables – solar and wind turbines – connected to the grid count for that district’s generator.
    So if you put solar panels on your house, whatever you generate goes towards your utilities renewable quota.

  17. Battery tech is getting closer to being really long lived. As of now, flooded cell batteries work well up to 15 years (for larger type batteries), less for golf cart type storage batteries, somewhere between for L-16s. We’re off grid, with 24 six year old golf cart batteries still hanging in there. They’ll need to be replaced before the end of the year, so I might get another set until new battery tech comes down in price. If I go with L-16s, they’ll last until I’m past 70 (they might outlast me!!). I do agree with you, however. Batteries are getting better. What people might not get, or want to undertake, is battery maintenance. Flooded cell batteries need service. They’ll last longer than rated life if taken care of. Good luck to you.

  18. These co-ops are reacting exactly as investor owned utilities have. Their business model is threatened by distributed power . They see themselves entering the dreaded ‘death spiral’ where the cost of solar continues to go down resulting in more customers installing solar, reducing demand for centralized power generation, driving up fixed costs for their remaining rate base which encourages still more defections and so on. Rather than adapt to the inevitable change, they have laws or regulations adopted to kill the competition.

  19. They’re Co-ops, the members vote for the boards. Ok, so organize your neighbors and communities and change the board!

  20. For people with plenty of money solar is a good investment. We poor people do not benefit from tax breaks and paying interest to borrow money makes solar very costly. My monthly bill is $100. Even at 5% the interest on a loan to buy the system I need will be more than I pay now.