TVA green-lights new potential fees on distributed solar by local utilities

TVA has approved a new rate structure which allows the 153 local power companies that buy power from the federal agency to charge new fees to solar customers, according to records obtained by the Energy and Policy Institute. TVA authorized local power companies (LPCs) to charge fees to existing customers with solar, effectively penalizing them for investments, unless prohibited by an existing contract. 

At least two local power companies, Southwest Tennessee Electric Membership Cooperative (STEMC) and West Kentucky Rural Electric Cooperative Corporation (WKRECC) have considered charging distributed energy customers the new fees. STEMC was considering charging distributed energy customers $25 per month.

TVA spokesman Jim Hopson said that although there was some initial interest from STEMC and WKRECC, “no formal requests by any LPC have been submitted for evaluation, so no alternate rate changes have been implemented.”

Blocking customer access, competition

TVA’s new distributed energy rate structure appears to be an attempt to protect electricity sales and stave off competition from increasingly cost-effective on-site generation, like rooftop solar panels. In documents submitted to the board of directors that were not made publicly available at the time, TVA said that behind-the-meter generation was currently miniscule in comparison to the utility’s system but that the new rate could “lessen the potential decrease in TVA load that may occur through the adoption of behind the meter generation.”

TVA estimated as many as two dozen LPCs would adopt the new structure in an undefined “near term”. 

STEMC was particularly worried about competition from customer-owned generation, saying, “We need to capture this early before we end up with too many solar systems already installed on our system.” STEMC made unrealistic assumptions, such as every customer in its service territory installing solar, in order to justify its proposed $25 monthly fee. STEMC used what appeared to be back-of-the-napkin math in order to determine the fee, as opposed to an industry standard cost-of-service model which would base charges for electricity on the utility’s actual cost to serve each customer type.

WKRECC claimed that, “If a residential customer desires to [install solar] then the rate they pay should be a more cost based rate and not a socialized rate.” WKRECC’s assertion implies that its current rates are not already cost-based and that only solar customers would be subject to cost-of-service ratemaking.

Similar fees struck down by courts, regulators

Most utilities do not charge fees similar to TVA’s new distributed energy rate structure and, in many places where they have been attempted, courts or regulators have struck them down as discriminatory ratemaking, meaning that they single out solar customers for unfair treatment. 

Kansas’ Evergy targeted solar customers in 2018 with a demand charge which was later struck down by the Kansas Supreme Court. The Court ruled that Evergy’s fees were a “discriminatory rate,” and in violation of Kansas law. Evergy has failed to comply with the Court’s decision and solar customers are still being charged the fees, as of the time of publication.

DTE Energy proposed charging $2.31 per kilowatt (kW) of nameplate capacity per month for residential solar customers and $2.28 per kW per month for commercial customers in 2018. 

The Michigan Public Service Commission (PSC) rejected the utility’s attempt, saying that the utility “relied on the distribution revenue deficiency and not on any cost to serve”. The Commission said DTE “based the charge on the size of the customer’s system rather than the customer’s actual usage,” which was evidence of its failure to use an industry-accepted cost-of-service methodology.

STEMC’s considered $25 per month fee was based on neither the size of the customer’s solar system nor the customer’s actual usage.

We Energies of Wisconsin proposed a $3.79 per kW charge on grid-connected solar in 2014. The Wisconsin PSC approved the fee, but a Dane County Circuit Court judge overturned the Commission, saying that, “I do not think a reasonable person would reach the decision [the Wisconsin Public Service Commission] reached based on this record. I don’t think a reasonable person could reach it because there’s just a dearth of data to support the conclusions that are being relied on […].”

TVA lacks absolute carbon target, out of step with Biden Administration

The latest report from the Intergovernmental Panel on Climate Change (IPCC) recommends that all global carbon emissions be cut in half by 2030 to have a 50 percent chance of reaching the 1.5° Celsius scenario, and consequently stave off the worst effects of climate change. 

To meet those goals, utilities will have to move toward 100% carbon-free electricity, all while generating more electricity than ever to power vehicles, buildings and industry. One new study suggested that distributed generation will play a larger role in creating that zero-carbon electricity portfolio than previously assumed. A new study found that the most cost-effective way to reach 95% emissions reductions would entail the development of 247 GW of rooftop and community solar by 2050 – or enough local solar to power over 25% of all U.S. homes. Those findings came from modeling performed by Dr. Christopher Clack and issued by Vote Solar, the Coalition for Community Solar Access, and SunRun. Other models have found relatively smaller roles for distributed solar, but still show that attaining net-zero electricity would require massive growth in deployment of the technology. Rate structures like the ones TVA now allows, however, would threaten that growth. 

President Joe Biden has promised to achieve a zero-carbon power sector by 2035 and has set an economy-wide target of net-zero emissions by 2050. TVA has not set an absolute carbon reduction goal nor has it committed to a decarbonization pathway consistent with the IPCC recommendations.