Commentary: Removing co-op oversight jeopardizes rural solar

A plan floated by Minnesota lawmakers to exempt rural electric cooperatives from virtually all regulatory oversight would allow these utilities to restrict development of local solar power, even where their member-owners support renewable energy.

Legislation introduced last month and working its way through the state’s House (HF234) and Senate (SF141) would put co-op boards themselves, rather than the Minnesota Public Utilities Commission (PUC), in charge of resolving customer disputes over rates and other policies. Disguised as “local control,” the measure undermines the objective role of the Commission as a mediator between cooperatives and their members.

Co-ops provide electricity across greater Minnesota, and have in recent years come under fire as sharp opponents of distributed solar generation. Customer have complained about outsize fees for having rooftop solar – sometimes masked as other charges, like for a new meter. In 2015, co-ops successfully pushed a state law allowing them to impose higher fees on distributed solar systems 40 kilowatts or smaller. The Public Utilities Commission already opened a probe into whether the fees were justified based on the actual costs to serve a customer who has solar panels, or a backhanded method to recover lost sales.

Why the solar animus?

To those who know the rich history of co-ops as engines of rural self-reliance, the notion of opposition to local solar power may seem antithetical. However, much has changed since farmer-organizers went door-to-door to collect $5 fees needed to electrify rural farmsteads.

Co-ops that serve everyday customers are often bound to long-term contracts with the generation and transmission co-ops that provide their electricity, largely from coal. Although on-site power generation from members is exempt from such contracts, co-ops remain on the hook for the debt used to finance large power plants. Furthermore, there is a cultural bias toward this arrangement, with co-op boards often showing deference to hired managers and to these coal-reliant generation and transmission co-ops.

The result is a hostility to local solar, seen as a threat to the business model of remote power generation and to reliable revenue from electricity sales. Serving areas with minimal population growth and long supply lines, co-ops (and other utilities) tend to reflexively shrink from any policy that decreases sales, even when e proven benefits outweigh the costs. Value of solar calculations by two other Minnesota utilities — Xcel Energy and Minnesota Power — show that grid and environmental benefits outstrip the cost in sales from each kilowatt-hour of solar generated from homes or businesses.

In other words, many co-ops oppose solar on the basis of incomplete cost-benefit calculations.

The animus to solar may be an understandable, if misplaced, feeling. But removing a crucial source of consumer protection will do little to ensure rural residents a fair process for engaging with  their monopoly utility. There’s no question that locally- and democratically-elected boards ought to provide effective dispute resolution. And they might, if elections actually played out that way.

Analysis by the Institute for Local Self-Reliance shows 70 percent of U.S. co-ops see fewer than 10 percent of their members vote in board elections. Many of them introduce barriers, including incumbent-controlled nominating committees or requirements for in-person voting. Typically, co-op boards comprise a complainant’s neighbors who have ties to others in the community – it’s a jury of peers, but not a random or unbiased one.

Lacking evidence, the assumption that co-op boards can fairly self-regulate- is fundamentally flawed.

A public interest unrecognized

A second problem is that the disputes over fees on local solar are of substantial public interest, even outside the affected cooperatives’ service territories. When their customers install solar arrays, it offsets electricity generation from pollution-heavy fossil fuel power plants. The benefits of this offset reach across the state, similar to the pollution from the coal power plants it supplants.

Allowing hyperlocal, and potentially biased, dispute resolution undermines the strong public interest in minimizing health impacts of power generation, through large- or small-scale shifts to cleaner energy.

There’s no doubt that the local governance of cooperatives can spur remarkable and innovative solutions. Steele-Waseca Cooperative Electric in southeastern Minnesota, for example, should be lauded for its innovative combination of community solar and demand-controlled electric water heaters. In southeastern Iowa, Farmers Electric Cooperative boasts an eye-popping 3,000 watts of solar generation per customer.

But even when utilities are confident their arguments uphold the public good, they should not weasel out of public oversight. Their members deserve better than legislation that would deprive them of an opportunity for a fair hearing.

John Farrell is the Director of Democratic Energy at the Institute for Local Self-Reliance

Karlee Weinmann is a research associate for ILSR’s Energy Democracy initiative

6 thoughts on “Commentary: Removing co-op oversight jeopardizes rural solar

  1. I am a solar and LED energy provider. The irony to me is that I can provide two options for a Dairy Farmer Option with LED reduces his monthly kWH purchase from $700 per month to $400 per month and option with solar reduces his kWH purchase from $700 per month to $409 per month. The investment and payback are very similar. If the farmer chooses LED we send a check to China and wait for the shipment. With the solar option, I make a living, my MN electrician and installer also make a living BUT the Cooperative chooses to charge the customer up to $85 per month if the use solar. Same net result with both options. If the Cooperatives want to penalize customers for being more energy efficient, shouldn’t they also charge fees for those who swap to LED? These farmers aren’t being forced to do solar. They want the option. I hear them. My customers are mostly young educated farmers who do not feel they have a voice with their Cooperative. It is obvious to them that these fees with no logical basis or discourse for dispute are really designed to predjudicially eliminate this new technology for customers who want the option. MN Cooperative kWH rates have risen 42% in the last 8 years without any major impact from solar. I have young educated farmers who are so “fed up” with this that we are designing off grid models with battery technology to “cut the cord” from the Cooperative. Farmers are also angry because his neighboring rural farm is on Xcel Energy and uses solar successfully without these fees. These young farmers I work with are smart and they believe what the cooperatives are really doing is trying to add penalties and uncertainties to solar in an attempt to kill this MN industry.

    • Well said! A more level playing field must be demanded to allow those wishing to pursue solar to do so.

  2. We need to level the playing field. In is in the public interest and the interest of the future – to have distributive energy.

  3. A crucial point may have been overlooked. Opposing distributed solar has another globally damaging impact: critical mass.

    The more local solar installations proliferate, the more demand for local-scale solar equipment and the faster local-solar costs decline — accelerating fossil fuel’s power-generation death spiral while keeping more carbon out of our planet’s atmosphere.

    Thus by opposing local solar, co-ops are slowing critical-mass buildup for the local-solar industry as a whole, which affects people everywhere.

  4. I may have missed it, but I didn’t see any answer proposed to resolve the issue of co-ops left on the hook for huge contractual commitments — while the co-ops’ anticipated rate base is crumbling beneath their feet as folks increasingly seek to generate their own power.

    Whatever their flaws, it sounds like these co-ops have been blindsided. They potentially face financial ruin because few experts anticipated local solar’s proliferation and plummeting cost — at least, not that it would happen this early in the game.

    It reminds me a bit of US ranchers and overseas villagers beset by predators that need some protection to ensure ecological balance and preserve biological diversity. Sometimes it is wiser and cheaper to just pay these folks for their losses — while long-term solutions seek to accommodate conflicting interests, introducing structural changes that can permanently resolve these conflicts.

    What might that mean for these co-ops? Perhaps a government program to buy out now-burdensome contracts, freeing co-ops to once again act in the public interest without perverse incentives getting in the way.

  5. We must protect solar energy and not inhibit environmental sustainability