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SC utilities and solar builders at odds over price for power contracts

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Bushy Park Solar Farm

The South Carolina Public Service Commission is set to decide how much the state's investor-owned utility companies should pay for power from independent solar companies. File/Provided

South Carolina's power companies and the solar industry are at odds over how much utilities should pay for the large arrays that continue to pop up across the state.

The seven members of the S.C. Public Service Commission soon will decide how much Duke Energy and Dominion Energy — the state's two investor-owned electric utilities — must pay independent solar farms for the power they produce and supply to the electrical grid.

Those price points are expected to have a huge impact on how many new utility-scale solar projects are constructed in the state and could ultimately decide how much competition there is in the energy sector in South Carolina.

South Carolina's investor-owned electric utilities are regulated monopolies with set service territories. Dominion, which purchased South Carolina Electric & Gas this year, supplies power to customers around Columbia, Aiken and Charleston. Duke Energy's two subsidiaries in South Carolina electrify homes and businesses in the Upstate and the Pee Dee.

Those utilities have traditionally produced the vast majority of the power their customers use, and they regularly receive a guaranteed profit margin for any plants they own. 

The issue before the Public Service Commission is how much the utilities need to pay independent power providers that want to supply electricity to their customers. Many of the arguments the utilities and solar companies made during hearings last month were based on complicated energy forecasts and long-term modeling.

But the basic dispute comes down to one thing: The solar developers in South Carolina want the utility commission to force Duke and Dominion to pay a higher price for solar power than they currently are. 

The solar industry argued the addition of more solar power benefits customers by ensuring the utilities won't need to build massive multibillion-dollar power projects in the future. And additional solar capacity, they say, will insulate consumers from the price swings for fuel that gas, coal and nuclear stations can be subject to.

Hamilton Davis, director of regulatory affairs for Southern Current, believes the current prices that Duke and Dominion are offering to solar developers are "artificially low."

The terms of the power purchase contracts, Davis said, will decide whether solar developers can continue to get loans for their projects and whether there is a market for the power they produce. 

"This really is a technical dispute between experts as to whether Duke and Dominion took the right approach to setting these rates," Davis said. 

The utilities don't want to pay as high of a price for each new solar project that is hooked up to their power lines. They noted any increased cost for a power contract will be passed on to their ratepayers.

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Ryan Mosier, Duke's spokesman, said the company wants to make sure its customers are "paying the same for solar generation as they would pay for traditionally produced power." 

The giant energy companies also cited the intermittent nature of solar farms — meaning the panels don't produce power around the clock — as one of the reasons for providing a lower price.

For instance, the utilities argued that solar energy would not help them when power demands peak in the winter months. In order to make up for the solar power during those times, the utilities say they will need to have other plants, like gas-fired turbines, as a backup. 

"As more and more intermittent solar generation is added to our system, our ability to respond to system events and maintain compliance with federal reliability standards becomes increasingly difficult," said Ashley Cunningham, a Dominion spokeswoman. 

Environmental groups, like the Southern Alliance for Clean Energy and the Coastal Conservation League, also advocated for the commissioners to make it easier for solar developers to enter the market. If the price is set too low, they warned solar developers will effectively be denied the ability to supply power to customers in South Carolina. 

"This case is absolutely pivotal to bringing on more solar, which we believe is the way to go," said Blan Holman, a senior attorney with the Southern Environmental Law Center, which represented both environmental groups. 

Another dispute in the utility cases is over the length of each contract that Duke and Dominion offer to solar developers. 

The new state law that initiated the regulatory cases requires the utilities to offer at least a 10-year contract to new solar farms. But the solar industry is pushing the utility commissioners to allow even longer contracts.

The solar developers argue extended contracts will make it easier for companies to find financing for new projects with banks and other lenders. The utilities, however, argued their customers shouldn't be locked into fixed-price contracts for that long.  

Ultimately, it's up to the Public Service Commission to decide what terms are fair for the solar developers and the utilities. Those decisions are expected this month.

Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.

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