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Editorial: What was the PSC thinking? New SC solar energy rates are ridiculous

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Two new solar farms are being built in Orangeburg County, one of which will supply Google's Berkeley County data center. But industry advocates say solar investment may soon dry up for large-scale projects unless the S.C. Public Service Commission agrees to the revisit rates paid by utilities, which they say are the lowest in the United States. 

Under a recent Public Service Commission decision, Dominion and Duke would pay the lowest prices in the nation for electricity generated by South Carolina solar farms, 2-3 cents per kilowatt-hour.

Conservation Voters of South Carolina called the decision a “doomsday scenario” for big solar producers.

Perhaps that’s an exaggeration, but the utilities pay substantially higher solar rates in their home states of Virginia and North Carolina and elsewhere, where they also offer solar producers longer-term contracts.

So why is South Carolina getting short shrift? It’s hard to understand in a state where consumers pay 12-13 cents per kilowatt-hour, which contributes to the highest electricity costs in the nation, about $1,750 per household per year. It’s doubly hard to understand in light of a 6-month-old state law that lifted caps on rooftop solar, guaranteed homeowners would get full credit for the electricity they produce and ordered a review of payments to big solar producers.

Those solar producers generate electricity at about a third the cost that Duke and Dominion generate that same kilowatt-hour from fossil fuel. But South Carolina has granted those utilities a monopoly, so they have no incentive to keep costs down. Just the opposite, their guaranteed rate of return on investment means the more money they spend building new capacity, the more profit they make. As we learned from SCE&G’s nuclear construction debacle.

The PSC exists to protect ratepayers from their special monopoly status, but once again it appears to be siding with the state’s regulated monopolies, which may want to keep big solar developers off their turf. A NextEra subsidiary just opened a 560-acre solar farm near Aiken, and both Duke and Dominion have substantial stakes in solar generation.

Solar producers aren’t asking the PSC to make solar generation competitive — it already is — they’re just asking for a fair deal that enables them to keep expanding and the utilities to diversify their energy portfolio.

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Meanwhile, the Department of Consumers Affairs has been dragging its feet in filling the new position of consumer advocate to handle utility matters.

Under the rates adopted by the PSC, Dominion will pay 2 cents per kilowatt-hour, down from the current 3 cents, and Duke will pay 3 cents, down from 4.5 cents.

When the Legislature signed off earlier this year on the Energy Freedom Act, it put the PSC in charge of setting rates for large-scale solar producers. The starting point for negotiations was supposed to be at the utilities’ “avoided cost,” or how much more it would cost the utilities to produce the same amount of electricity.

The PSC was expected to come up with a rate that was fair to both, say, slightly below “avoided cost” or around 4 cents per kilowatt-hour. But the PSC’s rates came in 33% lower. And it held the line on long-term contracts, requiring only that they extend for 10 years, the shortest in the Southeast region.

Yes, the cost of solar electricity has continued to drop steadily over the past few years, despite tariffs and other headwinds. But the newly approved rates may be too far of a stretch for South Carolina to remain competitive. And solar companies, which employ about 3,000 people statewide, could simply expand elsewhere.

Solar energy producers are rightfully outraged and have vowed to fight the decision, which they say will shoo away investors and make working in South Carolina virtually impossible. They can file a petition for reconsideration within 10 days, and should.

Technical aspects aside, their case should be clear: Solar is the cheapest, cleanest, most sustainable way to make electricity, and most importantly, South Carolinians want more of it.

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