Solar forces rate rethink

Hi there, I’m Jervis Whitley. Today is Friday, 22nd of November, and you’re listening to WindFront, the weekly roundup of the wind industry from Australia and around the world. Today I’m talking about a change in California that has public utilities scared and changing their rates. And I’ll take a look at the weekly top 3.

Since the Enron situation, California has used a new tariff structure to protect residential electricity customers. The tariffs differ in that they don’t have a monthly supply charge. So if you don’t use electricity, you don’t pay for anything that month. Instead, what they have is a 4 tier electricity rate structure. Your usage is divided up into it, like a baseline, a low, higher and even higher usage tier. So the baseline usage, it’s a known amount and it’s regulated at 50% of what an average consumer would use and is charged at about 13 cents per kilowatt hour, which is really a rock bottom price, kind of like our off peak rates here. Now you can use that at any time during the day. If you use more than your baseline, which is really only enough to keep the lights on and the fridge running, the net usage is charged at a higher amount, at 16 cents per kilowatt hour.

Now both of these 2 tiers, the baseline and the one higher than that, are regulated by the central utilities body in California. However, should you use more than those 2 tiers and become a higher using customer, for example, a family of four, then you’ll be paying a rate which is set by the utility itself. The 2 higher tiers are charged at 27 and 31 cents per kilowatt hour. Now They may consider this unfair to the family of four. However, those on the equivalent of a government healthcare card would get a mandated cheaper rate, and it’s up to about 30% off, which would almost remove any profit.

The remaining households that are large consumers of electricity have begun to install solar in droves, in fact, over 1800 megawatts so far. And it makes sense. Why pay over 20 cents a kilowatt hour, when the post-subsidy cost of solar approaches 17 cents a kilowatt hour, according to a recent study. So with no fixed charges, many of these households now have 0 net usage, and hence pay nothing whatsoever on their monthly bill.

And this is where the utilities got scared. They’ve been working with the Public Utilities Commission over the last few years, as to a way to fairly distribute the cost of electricity. And now a recently proposed bill was signed into law, which is AB 327, which allows for a restructure of tariffs to include a fixed monthly charge moving forward for residential customers. And the bill allows for a maximum fixed charge of $10 per month, and increases to align with inflation only.

So previously, what we had was a situation where the majority of low using consumers had a regulated rate, which was so low that the utility probably could only barely cover costs, not really make much money on them whatsoever. And the customers that could afford it, and were using quite a lot of electricity, were installing solar. And so they were finding that many of the residential customers weren’t falling into those 2 higher tiers, which are the only 2 tiers that the utility gets a chance to set the rate themselves. So their revenue was obviously declining because of that.

But I think these changes won’t save the utilities from a long-term death spiral. We have a similar setup already in Australia with higher supply charges than what they have, and it hasn’t prevented a drop in the network providers’ revenue from lower sales volume here. The goal of various electricity regulations are to equitably distribute the cost of providing electricity based on the causation, while protecting those that cannot pay. But it turns out that allocating charges for electricity to satisfy these constraints and those of the private network owner’s requirement to shareholders is difficult to balance. So I expect further changes in coming years as we course correct.

Much lower week in wind this week. Waubra taking the top spot, just over half a million dollars, Snowtown, and Waterloo down there, a bit lower. Macarthur falling out of the top three, down at 300,000 for the week.

So that’s all for me until I see you next time. Keep buying those green electrons.