At 11:00 AM this morning, the PUC will take up Docket No. 11A-135E, “In the Matter of the Application of Public Service Company of Colorado for Approval of a Reduction in the Standard Rebate Offer.” In less lawyerly terms, the hearing is on Xcel’s request to lower solar subsidies. The issue is a political hot-potato in Colorado, having been the subject of protests in front of the capital last Friday, and a General Assembly hearing two days ago.
I explain in detail the context of today’s PUC deliberations here, and I provide commentary on the matter here. In a nutshell, Xcel is seeking permission to reduce its Solar*Rewards program, a solar panel installation subsidy, because it has become a money pit. This year, for example, the Solar*Rewards program will cost Xcel ratepayers almost 4 percent of their bill, for .3 percent of their electricity. Xcel suspended the program on February 17, a day after it filed its request to the PUC.
This post is a summary of who is arguing what, based on their pre-hearing filings. The information below is meant to be as accessible as possible; for nitty-gritty nuance, go here.
Xcel wants permission to lower the Solar*Rewards subsidy for solar photovoltaic systems up to 100 kilowatt capacity from $2.01/watt, to $1.25/watt. Having already exceeded the statutorily-defined target for solar power generation, Xcel suspended the Solar*Rewards program, effective since February 17, although it says it will re-open the program if the PUC grants its request.
Notably, Colorado statute requires investor owned utilities like Xcel to offer an upfront rebate for solar panel installation. From 2006 to 2010, the “floor” (i.e., the lowest value of this subsidy) was set at $2.00/watt. However, in early 2010, ex-Governor Bill Ritter signed HB 1001, which, among other things, allowed Xcel to petition the PUC for permission to lower the Solar*Rewards rebate below the $2.00/watt “floor.”
In testimony filed on February 16, Xcel Director of Regulatory Administration Robin Kittle explained that the solar subsidy reduction is warranted by: (1) decreasing costs of solar panels; (2) increased federal subsidies; and (3) increasing solar power production requirements.
In separate testimony, Xcel witness Pamela Newell, the Company’s Product Portfolio Manager, noted that Xcel has already far exceeded the solar component of its 2011 Renewable Electricity Standard requirement (i.e., its legally required solar energy production minimum). Xcel needed 19 megawatts of installed photovoltaic capacity, and it already has approved applications for 40 megawatts of capacity (that number is now 43 megawatts). Nonetheless, Ms. Newell said that Xcel would accept applications for 16 megawatts more of solar photovoltaic capacity, but only if the PUC agrees to lower the upfront rebate.
Neither witness cut to the chase: The Solar*Rewards program is a fiscal albatross around the neck of Colorado ratepayers. The program has been over budget annually since 2008, and its deficit now stands at more than $40 million. This deficit, which must be paid by Xcel customers (with interest), will increase precipitously in 2011, thanks to the solar capacity over-procurement that I describe in the previous paragraph. In fact, the PUC staff long has bemoaned Xcel’s “passive” management of costs. To wit, the 2011 Solar*Rewards budget was $37 million; Xcel now projects the costs to be $97 million.
Colorado Solar Energy Industries Association CoSEIA
CoSEIA filed an Emergency Motion for the PUC to immediately restore Xcel’s Solar*Rewards program and a “statutory rebate level” of at least $2.00/watt upfront payment. The document is the most colorfully worded I’ve yet encountered in any docket before the PUC. CoSEIA describes Xcel’s decision to suspend the Solar*Rewards program as a “full body slam” to the industry, one that has put a “chokehold” on sales, resulting in a “death spiral.”
Here’s my favorite passage,
“If the Commission fails to take decisive action and fails to correct the heavy-handed tactics employed by [Xcel], a message will be sent throughout the state and nation that mischaracterizes Colorado’s New Energy Economy as a hallow promise, able to be reversed by the incumbent utility when it is inconvenienced by the orderly growth of the solar industry.”
In addition to resuming the Solar*Rewards subsidy post haste, CoSEIA demands that Xcel accept applications for 95 megawatts of installed photovoltaic capacity in 2011. This is five times the target set by law, and would cost almost $200 million (or $150 million more than the 2 percent rate cap on annual green energy production that supposedly governs Xcel’s implementation of New Energy Economy policies).
The Solar Alliance
The Solar Alliance, an industry trade association, filed surprising opening comments. A “trade association” is another name for “lobbying outfit,” and, in my experience, lobbyists never give an inch. However, the Alliance readily conceded that the Solar*Rewards program costs too much, saying “the cost-efficiency of the Solar*Rewards Program can and should be improved.”
Moreover, the Solar*Alliance’s “solution” seems somewhat reasonable, at least it does at first glance. It recommends a conversion from upfront rebates, to payments over time based on the electricity that is generated by these systems. To me, that sounds logical, but the devil is in the details, and I’d have to see more of the plan before I pass judgment. For now, I remain suspicious, because I’ve never met a reasonable lobbyist.
Although they’ve yet to file opening comments, the following parties have petitioned to participate in Docket 11A-135E: Governor’s Energy Office, Climax Molybdenum (Colorado’s #2 energy user), lawyers on behalf of Louis Bacon (who appears to have declared all out war against the PUC in the wake of its decision to allow for the San Louis Valley transmission project to cross his estate in southern Colorado. He is dispatching his legal army to seemingly every docket with the apparent intent of gumming them all up), the City of Boulder, and Western Resources Advocates.
William Yeatman is an energy policy analyst the Competitive Enterprise Institute