What’s fair and what’s right? Those are highly technical questions when it comes to the S.C. Public Service Commission setting rates for utilities to pay solar producers.
South Carolina utility regulators have reversed course in a case involving Dominion Energy and solar developers, bowing to public pressure and…
But the PSC’s Jan. 3 decision to increase the rates Dominion Energy will pay is a welcome one, upping the price from an average of slightly more than 2 cents per kilowatt-hour to about 3.5 cents per kwh and averting the “doomsday” scenario some predicted if the rates were so low that they shut down South Carolina’s nascent solar industry.
Presumably, the PSC also will reconsider the rates Duke Energy will pay, as well as the 10-year limit on contracts between solar producers and the regulated utilities.
Rarely does the PSC reconsider orders. But the quasi-judicial, seven-member panel listened when the Coastal Conservation League, the Southern Alliance for Clean Energy and other groups asked the commission to reconsider its November order, and a handful of legislators complained that setting rates among the lowest in the nation undermined the intent of last year’s Energy Freedom Act: to persuade more solar producers to invest in South Carolina.
That’s all good news because South Carolina relies far too heavily on coal- and petroleum-based electricity. Though solar production grew by 44% in 2019, the state gets just over 1% of its electricity from the sun.
Just like a smart investment portfolio, our energy supply needs to be diverse — and we need to have as much of it generated here in the United States as possible. We can’t depend on the sun’s free energy to supply all of our electricity needs, but we can count on a lot more of it than we currently do — and that will create stability, lower costs (in the long run if not the short run) and help reduce the carbon emissions that contribute to the rising seas that threaten to drown Charleston and other coastal areas.
The PSC starts its deliberations on solar prices at “avoided costs,” or what it would cost the utility to produce the same amount of electricity. That itself is a complicated calculation that can involve everything from an employee’s salary to the cost of fuel. But experts nationally say the current cost of energy produced from natural gas — the sort of energy Dominion likely would be using if it weren’t buying solar — is about 50% higher than energy produced from solar.
Eddy Moore, energy and climate director for the Coastal Conservation League, said macroeconomic trends suggest the cost of solar energy production will continue to fall. Natural gas and other fossil fuel prices have probably bottomed out, he said.
The SC Public Service Commission us charged with protecting ratepayers from abuse by the utilities that enjoy legislatively granted territorial monopolies.
In November, investment bank Lazard put the average cost of solar-produced electricity at $36 per megawatt-hour, or about 3.6 cents per kwh, which seems to jibe with the PSC’s rates for Dominion.
The rate the PSC set for Duke in November averaged about 3 cents per kwh. That’s something the commission should reconsider in light of the adjustment to Dominion’s soon-to-be formalized rate.
Once the PSC’s order is finalized, the rates become effective immediately for the next two years. Then, the PSC will review them again for possible adjustments.
But will higher rates paid to solar producers help the utilities lay the groundwork to raise rates? Dominion suggested it would, with a spokeswoman saying the PSC’s adjustment “means customers will have to pay more for their electricity than they would have under the commission’s original ruling” in November.
The S.C. Public Service Commission has long seemed more concerned about the utilities it’s supposed to regulate than the public it’s supposed to protect from regulated monopolies, so it was refreshing to see it act so quickly Wednesday to correct the perception if not the fact that it was once again carrying water for the industry.
Well, yes, customers would indeed pay more for solar-generated electricity if Dominion has to pay more for the energy than the utility had planned to pay. But customers would pay less for electricity if Dominion were able (and perhaps even required) to use more solar energy and less natural gas, which produces more expensive electricity under the old or new solar rate.
The same Lazard research that pegged the cost of solar-produced electricity at $36 per mwh put the cost of electricity produced from natural gas at $44-$68 per mwh.
Dominion and Duke shouldn’t be afraid of a little competition. If they don’t want to pay more to purchase solar energy, they should invest in their own solar generation and other renewable energy projects, and try to beat the solar producers’ prices. Let the markets lead the way for shareholders and ratepayers alike.