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Power play: Utilities want solar users to pay up

With solar power use expanding in the U.S., utilities are pushing back at what they call unfair rate advantages for solar users.
With solar power use expanding in the U.S., utilities are pushing back at what they call unfair rate advantages for solar users.MARIO ANZUONI / Reuters

The explosive growth of solar power -- a new rooftop system was installed every four minutes in 2013 -- has utility companies pushing in several states to scale back what they call unfair rate advantages that solar users have long received.

The debate centers on net metering, which requires utility companies to credit customers for solar energy that they generate in excess of their own usage. The credits were part of financial incentives to invest in solar energy.

Policies for net metering, which is used in 43 states, vary from state to state, but most credits are set at the local retail price for electricity. That bothers utilities, which contend that the retail price is set too high, resulting in excessive credits to solar users. Utilities want credits set by wholesale prices, which are much lower than retail.

"The principal issue is making sure everyone is paying a fair price for what they use," said Ted Carver, CEO and chairman of Edison International, the parent company of utility Southern California Edison. "We don't care where or who we buy the power from, but it should be purchased at the wholesale price."

But some experts say the mere fact that utilities—which generate $360 billion a year in energy sales—are battling with solar indicates the threat it now poses to them.

"The success of solar power is forcing utilities to rethink their business model and push for the changes," said Franc Del Fosse, an energy industry lawyer and partner at Snell & Wilmer. "If you have an individual putting solar panels on the roof, it's easy to suggest that a utility is making less money."

The effort for higher fees on solar panel users could backfire, said Alan Beale, general manager of SolarMax.

If the fees are too high, he said, "it will just delay ... the inevitable, and more companies and individuals will go to the independent energy producers."

According to Carver at Edison International, part of the problem is that many power users, such as apartment renters, lack access to solar energy, which creates a two-tier system that shifts higher costs to nonsolar users.

According to a policy paper from the Edison Electric Institute, a trade association, solar users avoid paying for the system's fixed costs but still take power from the grid when they need it, such as after sunset, when solar panels aren't generating. (Most solar users don't have solar storage capacity, the paper states.)

The solar industry seems willing to accept some changes but stops at what it sees as the utilities' exorbitant price proposals.

"Solar customers give much more valuable peak power to utilities for free during the day than they get back at night," said John Berger, CEO and founder of solar energy provider Sunnova. "Utilities are like socialist monopolies.They don't provide good service or pricing."

Utility companies are having some success getting net metering rules changed.

In California, the No. 1 solar state in panels installed, lawmakers let net metering continue but directed its public utility commission to devise a new program by 2017 to ensure that nonsolar customers aren't burdened unfairly in paying for the grid.

In Arizona, regulators voted in November to allow the largest utility to tack a monthly fee of $5 onto the bill of customers with new solar installations. Arizona Public Service originally sought a $50 surcharge.

Colorado's utility commission is considering a proposal to halve credits for solar energy households. Other states, including Louisiana and Idaho, are also contemplating changes in net metering rates.

Even some solar power users see change as necessary.

"I believe there's a way of restructuring metering rules and rate structures that won't impact the solar industry for the long term," said Karin Corfee, managing director of the energy practice for consulting firm Navigant, who has solar panels on her Danville, Calif., home.

Utility firms have valid cost issues, she said, but she is concerned that big rate increases could affect solar users' ability to pay off their energy investment.

"I figure I can pay it off in seven years," Corfee said. "But if decisions are made to shift the economics of my system ... that will be difficult."

Money is at the heart of solar energy growth.

Since 2008, the price of solar panels has fallen by 75 percent. The cost of installation has also declined as more contractors entered the market. Leasing options for users also fostered growth.

And Wall Street still likes solar. An estimated $13 billion was invested in such projects last year, 10 times as much as in 2007, according to GTM Research,

Even as they push for net metering changes, utilities are jumping on the solar bandwagon.

"We've invested in a solar distribution firm ourselves," said Carver.

—By CNBC's Mark Koba. Follow him on Twitter @MarkKobaCNBC.

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