Solar Bills Heat Up at the Massachusetts Legislature
Efforts to Raise the Net Metering Cap
Solar energy has been an important success story in Massachusetts over the last eight years. Three major programs have contributed to this success: retail rate net metering*, solar renewable energy certificates (SREC), and federal tax credits currently scheduled to expire at the end of 2016. Based on these policies, the Commonwealth became a national leader in solar energy, reaching Governor Patrick’s initial goal of installing 250 MW several years early. This prompted the Patrick Administration to embrace a new goal of 1,600 MW of solar capacity, which the Baker Administration endorsed in early 2015.
Unfortunately, Massachusetts solar success is in jeopardy because of legislative caps on the amount of solar capacity that can qualify for net metering, although very small projects are exempted. In past years, whenever there was a danger of hitting these caps, the Massachusetts Legislature agreed to raise them. However, policymakers, including the Baker Administration, have come to demand that increasing the caps should come along with a long-term framework for solar policy. So when the caps were reached in National Grid service territory this March –preventing municipal, community-shared, and low-income solar projects from moving forward in 171 cities and towns across the Commonwealth – no action was forthcoming. At a hearing before the Joint Committee on Telecommunications, Utilities and Energy (TUE Committee) on June 2 , Acadia Center and many other stakeholders proposed a long-term framework – the Next Generation Solar Policy Framework for Massachusetts – that has now been endorsed by 66 organizations and encouraged legislators to act swiftly.
The Senate Acts
As the August recess loomed, it looked as if the Legislature would not address this pressing issue. But in late July, as the Senate prepared to debate a climate adaptation bill, an amendment was unexpectedly introduced to address the net metering caps.
The amendment received bipartisan praise on the floor of the Senate, was attached to the underlying climate adaptation bill, and ultimately the full bill passed unanimously. The solar provisions of this bill would:
- Immediately increase the caps to 1600 MW to accommodate the Commonwealth’s current solar goal and eventually eliminate the caps;
- Allow the Department of Energy Resources to reform the SREC programs or replace them with a new incentive program;
- Grandfather existing solar projects under the current programs; and
- Starting in 2017, allow the Department of Public Utilities (DPU) to adjust the distribution portion of retail rate net metering for solar projects that consume less than 67% of generation onsite.
Overall, this Senate solar amendment is great in the short run and would set the stage for strong continued solar growth after 1,600 MW, including community shared solar, but leaves at least two major questions unanswered. What levels of solar capacity should Massachusetts aim for after the 1,600 MW goal is achieved? And how, if at all, should the DPU use their authority to adjust net metering credits?
The Baker Administration Weighs In
Subsequently, the Baker Administration released its own solar bill, which contains some strong provisions, but also raises at least two major concerns.
On the plus side, the Administration bill would:
- Provide an immediate increase in the net metering caps and the ability for DPU to increase the caps further without legislative action;
- Extend the current programs through 1,600 MW;
- Allow reasonably good grandfathering provisions for projects that start operation before 1600 MW is reached;
- Continue full retail rate net metering for small projects after 1,600 MW is reached;
- Create a new incentive program for post-1,600 MW.
Unfortunately, because the increase in the caps is modest, the bill creates a new problem — needing the DPU to raise the caps again as early as next year. Relatedly, the net metering caps are never eliminated – even for new projects that would be covered by a new net metering structure – so the net metering caps would still be an issue far into the future.
Perhaps even more troubling, the Baker administration’s bill would substantially cut net metering credit value for larger projects after 1,600 MW of solar capacity has been installed. For community shared solar, low-income solar, and municipal projects, the transmission and distribution credits would be entirely removed and other types of projects would receive even bigger cuts. This would significantly affect all types of projects, but it could be a particular challenge for community shared solar and low-income solar. These types of projects are not able to offset the credit value decrease with an increase in incentive programs because of restrictions on how revenue from incentives can be distributed. This change risks setting solar policy back significantly and certainly won’t propel solar forward in Massachusetts.
What’s Next?
Formally, the Senate bill containing the solar amendment (S.1979) has been sent to the House Ways and Means Committee and the Baker administration’s bill (H.3724) is now at the TUE Committee. This allows for a wide array of possible next steps. The Legislature should hit the ground running on these issues when the legislative recess ends in September.
Massachusetts would benefit if the many good aspects of both bills moved forward, such as strong grandfathering for existing projects and a continuation of current programs until 1,600 MW is reached. Both bills would benefit from a solar goal beyond 1,600 MW and a final bill should provide for a bigger cap increase than the Baker administration’s bill. But the major gap between the two bills is the alteration of the net metering credit framework in the long run. The Next Generation Solar Policy Framework for Massachusetts has a detailed proposal on this issue that is fair to solar generators and other ratepayers – adjusting net metering credits based on the long-run value of solar generation. Stay tuned for a coming blog post on how this would work in Massachusetts and similar proposals across the region.
The framework is available here and those interested in more information or signing on can contact mlebel@acadiacenter.org.
* Net metering allows customers to generate their own electricity in order to offset their electricity usage (through, for example, a rooftop solar PV system). Net metering can lower a customer’s electricity bill by reducing the amount of electricity that the customer buys from the distribution company (the utility). Net metering allows customers to receive credits for any electricity that they generate but do not use. Each distribution company in MA has a cap, and after it is hit, no more customers can use net metering. Small systems, primarily those under 10 kW of capacity, are exempt from the caps. For more info see: http://www.mass.gov/eea/grants-and-tech-assistance/guidance-technical-assistance/agencies-and-divisions/dpu/net-metering-faqs.html#6
Mark LeBel is a staff attorney at Acadia Center working from the Boston office. He primarily works on transportation issues, including electric vehicles and clean fuels, and grid modernization issues. Mark holds a JD with honors from NYU School of Law and an AB with honors in Applied Mathematics with a focus in Economics from Harvard College.
Get to Know Tyler Soleau: 10 Questions with Acadia Center’s Energy and Climate Outreach Director
Can you describe your job in one or two sentences?
I’ll be working as a resource to diverse stakeholders and building awareness to support Acadia Center’s mission to advance a clean energy future.
You came to Acadia Center from the Massachusetts House of Representatives where you served as Staff Director and Counsel for the House Committee on Climate Change. How do you think your experience there will help you with this new position?
At the State House, I developed environmental legislation, advocated for clean energy policies, and interacted with a broad range of groups. Having experienced how successful policy gets made and implemented will help me engage and empower communities and other stakeholders to work towards creating an energy system that supports a fair, healthy economy and environment.
Throughout your career your different positions all seem to focus around environmental issues, why is that?
I’ve been excited about the environment ever since I discovered the outdoors. Climate change is the most critical challenge we face, and I’m committed to doing everything I can to combat it.
What aspect of your new position are you most excited about?
I get pumped talking about all things clean energy and I look forward to speaking with a whole range of folks and getting them excited about clean energy as well.
Energy and Climate Outreach Director is a new position at Acadia Center. How does this role fit into the work and goals of the organization?
Building awareness and support for a great idea involves engaging with a number of different audiences. That is a hallmark of Acadia Center’s strategy, and in this new position I hope to create broader and stronger networks while sharing and developing EnergyVision, UtilityVision and other Acadia Center initiatives.
Can you explain what Acadia Center’s 2014 EnergyVision is all about?
If the aim is creating a low carbon, modern, sustainable, economic, and environmental future, EnergyVision is the path to get us there. It presents a clear and comprehensive framework for achieving key economic and environmental goals through reforms in four interconnected areas.
Who do you hope to reach with these messages and ideas?
Fortunately, the Northeast is an active place for energy and environmental issues. There are countless organizations, communities, companies, and individuals working to promote clean energy and protect the environment. I look forward to strengthening my existing relationships within these active communities and forming new ones.
What do you expect a typical day at Acadia Center is going to be like for you?
I’m discovering that there is no typical day at Acadia Center, thankfully. Whether it’s presenting EnergyVision to a group of students, discussing community energy projects with a town, or meeting with public health advocates, every day is going to be a little different.
What are your top priorities right now?
1. Learn as much as I can
2. Start reaching out to groups interested in working towards a clean energy future
3. Get a plant for my desk
Did you always dream of being an Energy and Climate Outreach Director?
I wanted to be a wizard. Once I figured out being a wizard wouldn’t pan out, I focused on the environment. I’m really into Lord of the Rings.
Five Fun Facts
What was your first concert?
My first concert was They Might Be Giants. I was young enough that my Dad brought me in one of those papoose baby slings. It didn’t stop me from rocking out though.
What’s the best vacation you’ve ever been on?
Between college and law school I traveled around the world for 8 months. I flew into Paris and home from Bangkok and went everywhere in between.
If you could live anywhere where would you live?
I’d take the art and culture of Berlin, the food from Tokyo, and plop them into the mountains of New Zealand. I was fortunate to live in New Zealand for six months during college.
If you could trade places with anyone for one day who would you trade places with?
Real or imaginary? Real Mick Jagger, imaginary Indiana Jones.
What’s your favorite movie?
The Original Star Wars Trilogy.
Tyler Soleau is Acadia Center’s Energy and Climate Outreach Director working from the Boston office. He focuses on raising awareness, network building and advancing Acadia Center’s clean energy program goals in Massachusetts and the Northeast. Tyler came to Acadia Center from the Massachusetts House of Representatives where he served most immediately as Staff Director and Counsel for the House Committee on Climate Change.
The Value of Solar and Vermont’s Renewable Energy Goals
Acadia Center released its latest “Value of Solar” study this month, this time quantifying the grid and societal benefits of solar photovoltaic systems (solar PV) in the state of Vermont. The study highlights the unique value solar PV provides to the electric grid by reducing energy demand, providing power during peak periods, and avoiding generation and related emissions charges from conventional power plants.
Through evaluating six solar PV systems, Acadia Center determined that the value of solar to the grid – and ratepayers connected to the grid – ranges from 19-23 cents/kWh in the Green Mountain State, with additional societal values of 7 cents/kWh. The societal values are based on broader societal benefits, including environmental gains from reduced or avoided greenhouse gas emissions and other pollutants.
Vermont has been working to capitalize on the value of solar and other renewables already. In June, Vermont House Bill 40 was signed into law, creating a new requirement that 55 percent of the power sold by Vermont energy companies must come from renewable sources by 2017. That figure rises to 75 percent by 2032.
This target is the highest anywhere in the US except for Hawaii, which just enacted a law mandating the state use 100% renewable energy by 2045. However, because Vermont’s target can be met using energy from existing renewable energy plants, including hydro power, the overall requirement on its own is not projected to lead to new renewable energy facilities being built.
As a part of the total requirement, utilities are also required to use distributed generation equivalent to 1% of retail electric sales in 2017, and increasing annually to 10% by 2032. This is expected to lead to the build-out of over 400 MW of small-scale, decentralized electricity generation in Vermont, including solar PV.
This is not the first time Vermont has been ahead of other states in clean energy. At the beginning of the year Burlington, the state’s biggest city, announced it was using 100% renewable energy to meet its residents’ electricity needs, making it the first city in the country to do so.
As the state as a whole looks to reach the goals set by the new renewable energy standard, Acadia Center’s study will underline the value that solar provides to the grid and ratepayers.
Ellen Hawes is a senior analyst at Acadia Center focusing on energy systems, land use and carbon markets. She also leads Acadia Center’s participation in the New Hampshire State Energy Strategy process. Ellen received her Master in Forestry from the Yale School of Forestry and Environmental Studies.
RGGI Provides Both Economic and Environmental Benefits
A new report from Acadia Center highlights the benefits of the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade program in the New England states, New York, Maryland, and Delaware that started six and a half years ago. The benefits, which stem from emissions reductions and investing revenue the program generates, include declining energy bills, reduced illnesses, and job creation among others.
A cap-and-trade program sets a limit on the amount of CO2 that a region’s electric power generators can release into the atmosphere, with that cap level dropping each year. Companies can purchase permits to release CO2 (called “allowances” in RGGI) through quarterly auctions, and if companies find that they have too many or too few allowances to cover their own CO2 emissions, they can trade with other companies in order to meet their compliance obligations.
RGGI invests 59% of the auction revenue this process creates in energy efficiency programs that reduce consumers’ bills and reduce demand for power. Lower power demand means fewer emissions from power plants, and less money leaving the region to pay for imported fossil fuels.
Independent macroeconomic analysis found that programs supported with revenue raised over RGGI’s first six years of operation would generate over $1.73 billion in energy bill savings. These savings create over $2.76 billion in net economic gains and over 28,500 job-years of employment.
In addition, contrary to projections, electricity prices have declined since RGGI took effect. Comparing average retail electricity prices from 2008 (the year before RGGI’s launch) to 2014 shows that prices have dropped by 2% on average across the region. During the same 2008-2014 period electricity prices in non-RGGI states increased by 13%.
RGGI State Electricity Prices, 2008 and 2014 (Cents/kWh)
Most importantly RGGI is achieving its main goal, reducing pollution. CO2 emissions from the 167 power plants covered by RGGI totaled 86,307,909 short tons of CO2 in 2014, which was 5.2% below the 2014 emissions cap of 91,000,000 tons. In addition, when plants are required to pay for CO2 emissions it makes it less economical to operate dirtier plants in comparison to cleaner generating sources. This along with regulations outside RGGI specific to hazardous pollutants helps reduce sulfur dioxide (SO2), nitrogen oxide (NOx), and mercury (Hg) emissions.
Reducing emissions of hazardous pollutants leads to health savings by avoiding illness, hospital visits, lost work days, and premature deaths. In monetary terms, the reduction in hazardous emissions from RGGI’s launch (January 1, 2009) through 2014 translates into nearly $11 billion for SO2 and NOx combined.
Reduction of Hazardous Pollution
These benefits show that RGGI offers a proven, cost-effective pathway to achieve emissions reduction targets. Which is why, with a few adjustments, Acadia Center believes RGGI is a model program for states to adopt in order to meet the Environmental Protection Agency’s (EPA) forthcoming Clean Power Plan (CPP) requirements. When EPA’s final carbon pollution standards are released (which could be as early as next week) we will provide an update on implications for RGGI.
Peter Shattuck is the Director of Acadia Center’s Clean Energy Initiative and our Boston office. Peter’s work at Acadia Center focuses on cleaning up the energy supply across all sectors of the economy. Driving market-based emissions reductions is at the core of this work, using cap and trade policies such as the Regional Greenhouse Gas Initiative, which Acadia Center has tracked since the program’s early development in the 2000s and which Acadia Center is now promoting beyond the region.
Jordan Stutt is a Policy Analyst in Acadia Center’s Boston office. He works on energy, transportation and climate change issues, with an emphasis on research and policy analysis for energy systems and carbon markets. He was an Energy Policy Analyst at Pace Energy and Climate Center, Pace University Law School in White Plains, NY, where he focused on energy efficiency and RGGI.
Weatherization: Where We Are Now and Where We Could Be
It has become conventional wisdom that our region’s existing building stock needs to be weatherized in order to meet our climate goals and put us on a path to a sustainable future. The energy consumed in the region’s homes, largely from imported fossil fuels, accounts for 21% of all greenhouse gas emissions. Reducing those emissions is a key component of any climate change mitigation strategy. But what does weatherization really mean, and how can we get there? Weatherization generally refers to improvements in a home’s shell, or envelope, that separates the indoors from the outdoors. The main tools for weatherizing a home are sealing gaps to prevent unwanted air leakage and improving the insulating value of ceilings, walls, and windows.
While it sounds easy, for many homes weatherization can be a real challenge. There is often work that needs to be done first before the weatherization upgrades can be performed – asbestos that needs to be removed, outdated wiring that can’t be insulated over, and much more. In addition, there are complex weatherization projects that are just much more expensive than simple ones – insulating brick buildings or air sealing older walls with lots of hidden seams. Buildings that have some insulation, but not the optimal amount, will cost nearly the same amount to upgrade as a building with no insulation, but the savings will be less. The result is that at today’s energy prices, many weatherization projects will take a very long time to pay off and are just not attractive to homeowners.
Fortunately, weatherization makes sense for the majority of homes in the region, and we’re making significant progress in this area. The energy efficiency programs in the New England states are helping hundreds of thousands of residents make weatherization improvements every year. These programs make it easy for consumers to get their homes assessed, get started on upgrades, and get unbiased information on the next steps toward additional improvements. The programs are delivering real savings – to the participants and to our energy system, as well as emissions reductions.
For those weatherization projects that don’t make financial sense for a consumer based on energy savings, do we still want to encourage them? The answer is generally yes – assigning a realistic price to greenhouse gas emissions can dramatically change the cost equation. The states in the region need to move toward better valuing the carbon emissions reductions that will be needed to meet mandatory greenhouse gas targets, and then bundling that value into incentives that can be offered to building owners for weatherization through existing energy efficiency programs. To learn more about this important topic, see Acadia Center’s recent publication, “Weatherization and Energy Efficiency as a Resource.”
Jamie Howland leads Acadia’s 
Climate & Energy Analysis Center (CLEAN), and Energy Efficiency and Demand Side Initiative. His work as a policy analyst focuses on data management on energy markets and emissions trends, buildings and land use issues.
Energy Efficiency Winning Out in Rhode Island
The Rhode Island General Assembly has demonstrated its long-standing commitment to reducing the state’s energy costs through smart and economic investments in low-cost energy efficiency. This spring, the legislature approved a 5- year extension of Least Cost Procurement (LCP), the state’s policy of investing in as much low-cost energy efficiency as possible, and created the Rhode Island Infrastructure Bank, a new clean energy financing tool.
Least Cost Procurement, first implemented 8 years ago, is largely responsible for Rhode Island’s tie with Massachusetts for #1 state in the country for utility-sector energy efficiency programs and policies in the American Council for an Energy Efficiency Economy (ACEEE)’s 2014 State Scorecard. Investing in low-cost energy efficiency instead of expensive electricity and natural gas helps Rhode Islanders lower their energy bills and spurs economic growth. Lower utility bills means that Rhode Islanders have more money left at the end of the month to spend on other things, and most of that spending happens locally. Since 2008, Rhode Island has invested $558 million in energy efficiency and consumers have realized $1.99 billion in economic benefits.
The state’s investments in energy efficiency from last year alone are expected to generate 3,607 job years of employment, increase personal income by $244 million, and increase state tax revenue by $15 million over the next thirteen years.
The Rhode Island Infrastructure Bank (RIIB) will work to increase those benefits by utilizing loan-based financing to enhance the state’s energy efficiency programs and make energy efficiency projects more accessible for RI municipalities, residents, and businesses. The Efficient Buildings Fund at RIIB will provide energy efficiency financing to municipalities for upgrades to public buildings and facilities. RIIB will also administer Property Assessed Clean Energy (PACE) financing for residential and commercial property-owners. PACE allows property owners to borrow money for clean energy upgrades and repay the loan on their property tax bill.
As the RIIB was developed, Acadia Center provided input to policymakers and key stakeholders and shared lessons learned from other states’ experience with clean energy financing. Going forward we will work with stakeholders as they implement RIIB and provide that same support. Acadia Center will continue to represent environmental interests on the Energy Efficiency and Resource Management Council to ensure that Rhode Island consumers benefit from the low cost, low risk energy efficiency resource.
Download Rhode Island’s Legislative Wrap-Up here.
Abigail Anthony leads Acadia Center’s Grid Modernization and Utility Reform initiative, focusing on changing regulatory and economic incentives in order to achieve a sustainable and consumer-friendly energy system. A Rhode Island native, Abigail is director of the Providence office and has played a leading role in advancing the state’s energy efficiency procurement policies.
What is the Value of Solar Power in Rhode Island? A New Study
A new study released this week by Acadia Center quantifies the grid and societal benefits of solar photovoltaic systems (solar PV) in Rhode Island. Establishing the value of distributed resources like rooftop solar is increasingly important as states explore ways to meet energy needs and deploy clean energy resources.
Acadia Center assessed the grid and societal value of six solar PV systems to better understand the overall value that solar PV provides in Rhode Island. The analysis determined that the value of solar to the grid – and ratepayers connected to the grid – ranges from 19-25 cents/kWh. These values derive from solar PV’s ability to reduce energy demand and provide power during peak periods, thus avoiding generation and related emissions from conventional power plants. The overall grid value of solar is the sum total of these different benefits.
The study also finds that solar PV provides broader societal advantages (such as environmental benefits from avoided greenhouse gas emissions) valued at approximately 7 cents/kWh. This additional value should be considered when assessing costs and benefits and determining additional incentives for solar producers.
One of the key findings is that west-facing solar PV systems in particular are not being adequately compensated under existing programs – like net-metering- which provide a single level of compensation and encourage south-facing installations that maximize kWh output. These programs do not fully account for the value that west-facing systems provide in mitigating costs driven by afternoon peak demand (see Table 1 in the report). Incentives should be designed to maximize the value that solar PV provides to system owners and ratepayer rather than simply encouraging system owners to maximize kWh output. This will help ensure that incentives are fair and optimize grid support.
In fact, the value of west-facing systems is already coming into play in Rhode Island where the Office of Energy Resources has procured 250 kW of peak load reduction – with additional incentives for west-facing solar systems – in the Tiverton and Little Compton area. This is being done in conjunction with National Grid’s “DemandLink” pilot, which is using targeted efficiency and demand response to avoid a new substation feeder in the area; ultimately deferring approximately $2.9 million in new distribution-related costs.
While not included in Acadia Center’s analysis, locational values are important to maximize the savings in distribution costs that solar can bring to ratepayers. Appropriate incentives can ensure that solar PV, energy efficiency, and other customer-side resources are targeted to defer or avoid the need for new infrastructure spending.
This study comes at a particularly interesting time as new solar programs and businesses are being introduced in the state. The Renewable Energy Growth Program, launched this June, gives Rhode Islanders the chance to offset their electricity bills and sell their excess electricity from distributed resources to National Grid through a long-term tariff at a guaranteed fixed price. Programs like these are expected to facilitate a bigger shift toward solar and other distributed generation in the state. As a first step in response to this new trend, the RI Public Utility Commission has opened a docket to assess distribution rate design and cost allocation. Having a better understanding of the value that solar provides to the grid and ratepayers will help inform this proceeding, which could be precedent setting for other jurisdictions.
Leslie Malone is a Senior Analyst at Acadia Center based in the Providence office. Leslie is involved in research and analysis of energy efficiency and clean energy, specifically solar.
Envisioning the Energy Future for Rhode Island: Event Recap
On June 26, Acadia Center hosted UtilityVision: A Discussion about the Clean Energy Future for Rhode Island at The Rhode Island Foundation in Providence. The objective was to provide an in-depth look at what the clean energy future could be for Rhode Island and beyond, as well as engage diverse stakeholders to work through the various challenges to implementation. Acadia Center’s presentation described a practical and positive pathway to achieving Rhode Island’s climate change goals and recommendations for reforming the way the energy system is paid for and planned.
The meeting brought together a diverse group of Rhode Islanders who are thinking about the future of the state’s energy system. Attendees included representatives from clean energy companies, universities, state and federal policy makers, consumer and environmental advocates, state environmental agencies, and the media.
Following the presentations, attendees enthusiastically participated in discussion groups led by Acadia Center staff. The discussion groups each focused on: investments in big infrastructure like pipelines and their impact on Rhode Island’s clean energy future; the changes necessary to fully benefit from new clean energy technology; the reforms needed to align utility incentives with consumer and environmental goals; and the challenges energy efficiency programs face.
These topics sparked lively dialogue and some insights including:
- Rhode Island has nation-leading energy efficiency programs, but there are still hard-to-reach sectors like renters that struggle to benefit from them. If municipalities require landlords to share past energy bills with prospective tenants or create a minimum energy standard for all rental housing, it could ensure that all renters are protected from burdensome energy bills.
- Rhode Islanders need to make sure the right questions are being asked about proposals to publicly finance expanded natural gas pipelines that could lock the state into an outdated energy system for the next half-century. Decision-makers should ask more questions about potential lower risk, lower cost, and cleaner solutions.
- New electric technologies, like electric vehicles (EVs) and battery storage, have the potential to help Rhode Island meet its climate change goals. However, there are barriers to consumer adoption of EVs in the region, including reluctance by auto dealers to market them due to the need for more time spent educating the consumer and lower future revenue potential from vehicle maintenance. Utilities may need different financial incentives in order to be full partners in promoting electric vehicles and help overcome these barriers.
In the coming months Acadia Center will address many of these concerns by participating in the development of the state’s 2016 Energy Efficiency and System Reliability Program Plan, and in the RI Public Utilities Commission’s proceeding on reforming electric distribution rates in light of a changing energy system. We hope to stay connected with those who joined the event to provide updates and coordinated support for progress toward a clean energy future.
Abigail Anthony leads Acadia Center’s Grid Modernization and Utility Reform initiative, focusing on changing regulatory and economic incentives in order to achieve a sustainable and consumer-friendly energy system. A Rhode Island native, Abigail is director of the Providence office and has played a leading role in advancing the state’s energy efficiency procurement policies.
Protect Consumers and Savings –Don’t Raise Fixed Charges
At legislatures and regulatory bodies across the country a debate rages on over consumers’ control of their electricity bills. The debate centers on fixed charges, a monthly fee to obtain access to electricity that applies regardless of how much electricity a consumer actually uses.
Utilities are in favor of increasing fixed charges because it would increase certainty: the utility knows that it will collect a certain amount of revenue from all of its customers each month, regardless of the amount of electricity consumed. Consumers and their advocacy allies, on the other hand, are pushing to prevent these increases because they would reduce consumer control over energy bills, undermine the clean energy future, and reduce economic incentives for consumers to invest in energy efficiency and distributed generation.
Acadia Center recently analyzed the impact of increasing fixed charges in Rhode Island in a revenue-neutral scenario. In this scenario the utility is not allowed to increase the total amount of revenue it collects, just redistribute the total between fixed charges and the variable charges based on consumer’s energy use. National Grid will be proposing revenue-neutral changes to the fixed and variable charges in July, as required by Rhode Island Renewable Energy Growth program law. The analysis determined that if the fixed portion of the bill is increased, then the per-kilowatt-hour charge will be lowered because less revenue will need to be collected in that way (see table below). This essentially means that any effort consumers make to lower their energy usage and become more efficient will be less valuable because the majority of their bill is fixed.
Percent Change in Variable Rates Compared to the Current $5 Fixed Customer Charge and Revenue Requirement for Residential Customers in Rhode Island
| $10 Fixed Charge | -22% | $10 Minimum Bill | -6% |
| $15 Fixed Charge | -44% | $15 Minimum Bill | -17% |
| $20 Fixed Charge | -67% | $20 Minimum Bill | -36% |
| $25 Fixed Charge | -89% | $25 Minimum Bill |
-60% |
The analysis also showed that a significant number of Rhode Island customers—those using less electricity than the monthly average — would see an increase in their electricity bill if fixed charges were increased above the current $5/month; higher usage customers’ bills would go down due to the lower variable rate. These results show that high fixed charges are regressive: low-use customers see their bills increase, while higher-use customers see their bills decrease.
Impact of Higher Fixed Charges by Monthly Usage Level Compared to the Current $5 Customer Charge and Revenue Requirement for Residential Customers in Rhode Island
Acadia Center recommends that policymakers and regulators avoid reliance on fixed charges. Instead, policymakers should consider the following recommendations for short-term reforms that protect consumers and maintain incentives to use energy wisely:
- Adopt a narrow definition of fixed charges. Limit fixed charges to the cost of keeping a customer connected to the grid, such as metering, billing, and the service drop. The impact of public policy considerations should be factored in as well.
- Increase transparency. The components of a cost of service study that are included in the fixed customer charge, and the data, process, and methodology used to determine the components, should be publicly available and easily accessible.
Envisioning the Energy Future for RI: Making the System Work for Consumers and the Environment
As consumers become more aware of the costs and impacts of energy use on health and the environment, we’re looking for ways to re-envision the energy system. With emerging technologies and approaches, a new system is possible.
Acadia Center invites you to a discussion, hosted by the Rhode Island Foundation, which will lay out a strategic plan to achieve a new system that meets our energy needs and supports a fair, healthy economy and environment.
Acadia Center staff will tell the story of how we can get there. The presentation will draw on the user-friendly visuals, recommendations and original research in our recent reports EnergyVision and UtilityVision, with background on trends from ClimateVision 2020. It will show an optimistic and achievable pathway for making deep greenhouse gas reductions and introduce specific recommendations for advancing a consumer- and environmentally-friendly clean energy future. The presentation portion will be engaging and brief, leaving plenty of time for questions and discussion. We hope you will join us.
When
Friday, June 26 10 AM – 12 PM
Where
Rhode Island Foundation
1 Union Station
Providence, RI 02903
We encourage you to use public transportation, but the Rhode Island Foundation is generously offering to validate parking.
RSVP
If you plan to come, please register on our Eventbrite page. The event is free and all are welcome to register.