Op/Ed – One Utility Commissioner’s View On Electric Rate Structure

Submitted by John Maggitti, Secretary, Marshfield Utility Commission

Marshfield Utilities last increased electric rates in 2012. Over the last five years electric rates for all MU customers have been flat with no increases. This in spite of the fact that costs have risen.

The current rate case before the PSC requests some changes to actual rates and some changes to the structure. The intent is to address future financial needs, the changing power use environment, and fairness.

Historically, rate setting has been based around the idea of consumption. With a continuing decline in consumption, but continually rising costs to deliver the power, utilities like MU see a problem. If rates are a function of consumption and consumption is falling but costs aren’t then the only avenue to continue to provide safe and reliable power is to raise rates. Raising rates is not a topic taken lightly by your commission.

Why is consumption falling? It’s a mix of more efficient devices and appliances, conservation programs like Focus on Energy, and alternative energy systems.

While these and other factors have varying impacts on consumption, combined they have resulted in a continuing slow decline in power consumption by MU customers. And we have every reason to anticipate this decline to continue.

When your neighbor purchases an energy efficient appliance it doesn’t cost you anything. When you take advantage of conservation ideas it doesn’t cost your neighbor anything. Yet when someone installs an alternative energy producing system it comes with a cost for all of us. Admittedly a small cost, but a cost all the same.

Here is why – under federal and state guidance the alternative energy market for home and small business owners was built around the idea of net metering. What net metering means is that the customer is credited for energy produced at the same overall rate energy is consumed. Not the avoided cost of power purchase but the total cost of delivered power.

When a net-metered alternative energy system is tied into the utility grid it dumps excess power onto the utility’s wires. The electric meter at these sites record the “credit” the system is earning as it produces. On cloudy days, after sunset, or when the home or business uses more than it is producing the meter records the consumption. Since the production and consumption are at the same rate the billing math is straightforward; consumption minus production equals billed amount. It is possible and often happens that production is higher than consumption and results in a carried forward credit.

Essentially the home or business owner who installed their system is using the grid as a virtual battery to store their excess production. It goes “in” during daylight hours and is pulled back “out” in the evening. MU does not have a mechanism to charge for this “storage” service even though there is a cost to provide and maintain it.

When an alternative energy system out produces consumption two things happen of concern to MU. First, that home or business owner isn’t paying their share of the cost to maintain and operate MU’s plant. They’re using it for free, or looked at another way, we are subsidizing them because you and I are paying their share. Second, the home or business owner is using the MU plant to store their power at no cost to them. Again, we are paying for this.

Using the MU plant as a virtual battery saves a significant cost when these systems are installed. Telsa is marketing a product they call the Powerwall. For about $12,000 – https://www.tesla.com/powerwall a home or business owner can purchase a true battery storage system sized to run an entire home. The higher meter charge we’re requesting would only cost $1,800 over the 25 year typical life of these systems. That is a significantly lower cost for essentially the same outcome and it gets everyone on the same level playing field.

Marshfield Utilities is not against alternative energy. And neither are our customers. A recent survey revealed there is support for clean energy and a strong desire to keep rates low. How does MU balance these two when they would seem to be mutually exclusive? The sensible answer is in the rate structure.

By asking the PSC to raise the meter charge MU is actually asking the PSC to better disperse the cost of access to safe and reliable electricity. Today the MU meter charge is $6.00 per month. MU has asked the PSC to set this at $12.00 per month. To offset that increase we’ve also asked the PSC to lower the per KwHr charge so it essentially comes out even. The current rate case would result in an overall increase to residential customers of less than 1%.

Some take the position that doubling the meter charge is a disincentive to greater alternative energy production and perhaps even conservation. I disagree. Both continue to grow and I see no reason not to expect that to continue.

For those who don’t have the ability to make major investments in conservation or alternative energy an ever increasing rate based on consumption is just making their situation worse. Why would we keep asking these neighbors to help subsidize those who can afford to do these? That doesn’t seem right to me.

To continue to set rates around consumption can only result in a pay more for less outcome over time. A reduced per KwHr rate combined with a higher meter charge properly addresses the true cost to serve our customers and is the right approach in this changing landscape for the greatest number of MU customers and MU as a provider of our electricity. It helps ensure the continued access to safe and reliable power while distributing the cost fairly and equitably.

John Maggitti
Secretary, Marshfield Utility Commission

Mr. Maggitti spent many years as a solar electric systems engineer and project manager prior to joining the utility commission, most recently with Marathon Solar Roofing. He designed and oversaw the installation of many of the solar electric systems in the greater Marshfield area. He is knowledgeable in the technical, regulatory, and financial aspects of alternative energy. He is a strong advocate of clean power generation and sensible conservation.

Please note: The views and opinions expressed in this article are those of the author.

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