Vermont Electric Coop suggests lowering subsidy for alternative energy projects

James Eniti uses net metering with Washington Electric Cooperative in East Montpelier. Photo by Roger Crowley/for VTDigger

James Eniti uses net metering with Washington Electric Cooperative in East Montpelier. Photo by Roger Crowley/for VTDigger

The state’s second largest utility has stepped out front in the debate over how to proceed with a state incentive program for small, renewable energy producers.

Vermont Electric Cooperative submitted a proposal to the Public Service Board on Tuesday that carries lesser incentives than the program currently offers.

The Vermont Public Service Department and renewable energy advocates are opposed to the VEC proposal.

At issue is a law that compels utilities to credit customers for the solar and other renewable power they produce at a rate of 20 cents per kilowatt-hour (kWh). This practice is known as net metering, and projects that are less than 500 kilowatts (kW) in capacity are eligible for these incentives. Businesses and homeowners can use the credits to zero out their energy bills.

Some small utilities want to change the funding arrangement because they say it kicks the cost of maintaining the grid to other customers, while developers and advocates argue the policy places an accurate value on solar production and should remain intact to continue growing jobs and Vermont’s renewable energy portfolio.

A utility, however, no longer has to accept applications for net-metering systems when the installed wattage of a utility’s total net metering surpasses 4 percent of its peak demand from the previous year or from 1996, whichever is greater.

Vermont Electric Coop is one of four Vermont utilities to reach that threshold and has ceased accepting net-metering applications. Hardwick and Morrisville electric departments also stopped accepting applications. In August, Washington Electric Cooperative — which was the only utility to continue accepting net-metering applications after hitting the 4 percent cap — announced that as of Oct. 1 it would accept only solar installations of 5 kilowatts (kW) or less.

Dave Hallquist, cheif executive officer of Vermont Electric Co-op. VTD/Taylor Dobbs

Dave Hallquist, cheif executive officer of Vermont Electric Co-op. Photo by Taylor Dobbs/VTDigger

What Vermont Electric submitted to the Public Service Board this week was a proposal to continue accepting net-metering applications under new terms. Rather than crediting net-metering systems at 20 cents per kWh, Vermont Electric proposes a credit of 12.5 cents per kWh for a 10-year contract and 15.8 cents per kWh for a 20-year contract. The higher compensation rate of the 20-year contract takes into account energy price inflation.

Vermont Electric CEO David Hallquist said that at the 20-cent compensation rate, his utility’s non-net-metering customers are subsidizing net-metering customers at a value of $580,000 a year for the fixed costs of maintaining the power grid. While Vermont Electric’s proposal would not change the credit for current net-metering systems, Hallquist says the higher rate of compensation cannot continue.

Hallquist points to the dropping costs of solar and argues such a high incentive is no longer necessary. He said the proposed rates take into account the benefits these generators bring to the grid because this distributed power production lowers the costs of infrastructure by bringing generation closer to its source.

“We’re essentially paying what we believe is the fair-market rate for power,” he said. “That is power we don’t have to purchase off the market. We’d rather buy the power from our members.”

Elizabeth Gamache, Vermont Electric’s manager of corporate services, added, “Not only is it fair to net metering customers, but it’s fair to non-net metering customers.”

Soon after Vermont Electric announced its proposal, renewable energy advocates came out in strong opposition. Ben Walsh of the Vermont Public Interest Research Group was one of those advocates.

“Vermont Electric Coop’s attempt today to pull the rug out from under small-scale solar stands in direct opposition to Vermont’s goal of getting to 90-percent renewable energy,” he said in a Tuesday statement, citing the state’s nonbinding Comprehensive Energy Plan. “The Vermont Legislature designed a net metering program that has worked exactly as intended; solar installations are accelerating, and solar is now available and affordable for more Vermonters than ever. VEC’s proposal would reverse both of those trends for its members and is a step in the wrong direction.”

Darren Springer, deputy commissioner of the Vermont Public Service Department, also has reservations about the proposal. He says the department’s research doesn’t jibe with that of Vermont Electric Coop. The department completed a report earlier this year that found net metering does not “impose a significant net cost to ratepayers who are not net metering participants.”

Springer said no large-scale 2.2-megawatt solar projects in the state have been built with a compensation rate of 12.5 cents. If projects with better economies of scale can’t be built for such levels of compensation, he questions how small-scale projects can.

“We just don’t see how the analysis squares with both our own ratepayer analysis and the actual cost to develop solar,” he said.

Springer and the department plan to present a policy proposal to the Legislature at the beginning of the session to set longer-term standards for the net-metering program.

“We expect to have this resolved through the Legislature, and having utilities go to the board and filing tariffs and having each utility with a vastly different program is not preferable to having the Legislature set policy statewide,” he said.

Rep. Tony Klein, D-East Montpelier, chairs the House Natural Resources and Energy Committee. He said the issue is a high priority for the Legislature, and he expects to have a bill on the House floor within two weeks of the session’s opening.

“The program is finally working,” he said. “People are getting what they want. It’s the policy of the state of Vermont, and we want to move forward.

“We have a system of franchised monopolies,” Klein continued. “In return for giving utilities areas to serve without competition, they have to carry out the policy of the state of Vermont. And if they can’t, then maybe they have to evolve, or they have to sell, or they have to go bankrupt. Things don’t stay static. The role of utilities’ just being a poles and wire company is changing.”

Andrew Stein

Comments

  1. Don Peterson :

    Currently, VEC customers pay about $16.00 a month combined taxes and fees and 8 cts kwhr for the first 100 kwhrs of power, a total of $24.00 a month. If a customer uses 200 kwhrs, their bill will be not $48.00 but only $40.00. In other words, the more electricity you use, the less you pay.

    Its a small thing, but it underscores that the way we as a society value energy is all on its head.

    I’m glad to see the VEC makes the distinction between small production sites like mine and large production sites like KCW. My production (4kw) goes out on existing infrastructure to my neighbors houses at peak useage hours with no additional grid improvements needed.

    It must surely be appearent by now to those in the utility industry that people will no longer gladly bear the environmental costs of large scale energy development. And since small scale projects are available and welcome, its time the utility industry gets on the train.

    Perhaps this announcement by VEC is a tacit acknowledgement of those realities.

    • Ben Walsh :

      Don, what VEC is saying is that people who install small solar like yours in the future should be paid substantially less than you are for the electricity they generate. If you support more and more Vermonters installing small, distributed renewable generation (and it sounds like you do), then this announcement actually is a step away from your vision of the electric system.

      • Don Peterson :

        Lets make a big distinction between large producers who are in it to harvest PTCs and federally backed loans, and small producers who are aiming for carbon neutral lifestyles. I supplied all the equity for my project–and consequently dont produce more than I believe I wll need. Large industrial projects are just the opposite: they produce more energy than the local grid can absorb, and supply as little equity as possible, with the help of the federal and state government support (ie taxpayers)

        So what are we really steppng away from here? As far as I can tell VPIRG is just a lobbying arm for GMP, so dont try to recruit me!

        • John Greenberg :

          Please explain what you see as the difference in between the equity put in by homeowners and the equity put in my the developers of large industrial projects. In particular, what is your basis for suggesting that all homeowners did what you did, and “supplied all the equity.” If no one ever takes out a loan to build these small projects, why is there a national movement to pass laws to facilitate just such loans?

          • Don Peterson :

            If developers use federally back loan guarantees to fund their projects, that is significant. To a bank, that means the project is risk free; to the developer that means the project has to meet a minimum of performance.

            As a homeowner, I dont have the luxury of a risk free loan: I have to pay the money back from my own pocket. It should be that way for any project, all the time. This insures that funds are used wisely.

            That federal loan guarantees result in subpar efficiencies shouldnt be hard to understand. But perhaps it is.

          • John Greenberg :

            I confess I was not aware of this program for renewables, but I just looked it up.

            I can certainly see how such a program would decrease the rate of interest banks would charge on loans, which I assume is the purpose of the program. But I still don’t see how it necessarily changes the amount of equity used for funding. Banks MIGHT accept a smaller amount for a guaranteed loan, but I would assume they would still demand some skin in the game, and I suspect the federal program does as well.

            And, as noted before, homeowners DO sometimes borrow to fund their home renewables projects.

            You’ll have to explain to me how “federal loan guarantees result in subpar efficiencies,” however. It’s not at all obvious to me.

          • Don Peterson :

            Imagine this John:

            You buy a truckload of teak decking at a yard sale. It should be worth $1000, but you get it for $5.00.

            ITs easy for you to use it for firewood–how nice it burns! You probably get $10.00 worth of heat out of it– so you doubled your money.

            An efficient use of money?

          • John Greenberg :

            Don:

            Hunh??

        • Matt Fisken :

          “As far as I can tell VPIRG is just a lobbying arm for GMP”

          I’ve thought about this, but I think its safe to say (since VTGas and GMP are both subsidiaries of the same company) that if this were true VPIRG would be supporting the pipeline.

          • Vanessa Mills :

            Gaz Metro is the parent company o Green Mountain Power. Gaz Métro of Montréal, Québec owns Northern New England Energy Corporation, which in turn owns Vermont Gas.

            Gaz Métro is owned by Noverco Inc, which is owned by Trencap L.P. and Enbridge Inc.

  2. Howard Shaffer :

    At 90% renewables, if it is all solar, who will pay for the grid the 90% are using for free?

  3. Annette Smith :

    This seems like a matter of simple arithmetic. VEC says 20 cents is too high. PSD says 12.5 cents is too low. Is there a number in between that is the right number?

    Rep. Klein is right, things don’t stay static. The price of photovoltaics has dropped dramatically, and a review of the policies is due. Rep. Klein’s attitude towards the utilities doesn’t seem to be helpful. He seems to think that once his committee has decided a policy, it is set in stone and no longer open for discussion.

    And Don is right, how about charging people more if they use more electricity. There’s a policy for the legislature to look at.

    • John Greenberg :

      Annette Smith says of Tony Klein: ” He seems to think that once his committee has decided a policy, it is set in stone and no longer open for discussion.”

      The article, however, says just the opposite: to address precisely this problem, “He [Tony Klein] said the issue is a high priority for the Legislature, and he expects to have a bill on the House floor within two weeks of the session’s opening.”

  4. The dysfunctional SPEED program, producing energy at almost 4 times grid prices, pays in-state and out-of-state multi-millionaires with tax shelters 27 c/kWh for PV solar systems up to 2,200 kW.

    The excess above 5.5 c/kWh grid prices gets rolled into electric rates.

    Coddling the rich, at the expense of already-struggling households and businesses, by a Democrat-dominated government. Shame on them.

    Those with systems less than 5 kW are to be paid less while the SPEED bonanza for the rich continues?

    A totally outrageous, crony-capitalist, situation concocted and aided and abetted by Shumlin, Klein, Blittersdorf & Co using global warming/climate change as a fig leaf.

  5. Don Peterson :

    Consider how we fund the interstate highway system, another large grid: we tax fuel by the gallon. That way, big users of the infrastructure pay their way.

    So we should tax kwhrs in a similiar way; instead we use a fixed fee per user.

    That was fine in 1934. The goal then was to boost consumption. But it does not reflect the usage of the present, or of the future. Let those who require the most electricty pay the most for the infrastructure, the same way highways are funded.

    And in any case, I’m of the opinion that the grid infrastructure bottleneck is not the small producers and consumers, but the industrial scale producers, who have to be located where the infrastructure is smallest (and opposition is weakest); they can’t sell their power locally since its out of scale with the local need. Fat chance of getting them to pay their fair share.

    So once again, the users get to shovel up after the ponies go to town.

  6. Coleman Dunnar :

    Vermont’s goal of getting to 90-percent renewable energy,” .., citing the state’s nonbinding Comprehensive Energy Plan.
    The operative word here is non-binding. Administrations come and go, and as with the seasons plans change as they should in order to reflect the current and projected perceptions of the future.
    Vermont’s net-metering program is now in its 14th year. Beginning slowly the rate of participation has accelerated greatly in the past four years and a result of this growth is production of sufficient data to quantitatively determine the impacts of the program. VEC has done the accounting and calculates the cross subsidization at $580,000 a year. A significant sum for a small cooperative utility.
    In rebuttal Darren Springer, says “the department’s research doesn’t jibe with that of Vermont Electric Coop. The department completed a report earlier this year that found net metering does not “impose a significant net cost to ratepayers who are not net metering participants.” I have read the report and find it lacking. The conclusions are based upon a number of assumptions about the future state of the electric market and economy which may or may not come to pass. Sorry Darren but I have to go with the real world data from VEC.
    Where is the critical mass, is it 4%, 10% or 90%? This question has never been rigorously examined. Now Rep. Klein expects to have a bill on the House floor within two weeks of the session’s opening. Why the rush Rep. Klein. Is it because too many are beginning to ask why in the world are we paying 22 cents for something that can be had 24/7 for 6 to 12 cents on the market and why am I paying my neighbors electric bill.

    • Don Peterson :

      A list in descending order of what projects got the $580,000 last year would make some interesting reading I suspect…

      • Don Peterson :

        I would even accept a descending order list with names redacted!

    • John Greenberg :

      Coleman Dunnar writes: ” I have read the report and find it lacking.”

      Please explain why it is “lacking?” Where are the problems with the report as you see them?

      “The conclusions are based upon a number of assumptions about the future state of the electric market and economy which may or may not come to pass.”

      Every report is based on assumptions, as are all predictions, including VEC’s. So please tell us which assumptions you disagree with an why.

      I’m not defending DPS or attacking VEC, but you ARE defending VEC and attacking DPS, and readers have a right to know the basis for your positions.

  7. Coleman,

    “Why the rush Rep. Klein. Is it because too many are beginning to ask why in the world are we paying 22 cents for something that can be had 24/7 for 6 to 12 cents on the market and why am I paying my neighbors electric bill.”

    Just to clarify:

    NE grid spot market prices are about 5 – 5.5 c/kWh. Only rarely do they go to 12 c/kWh. See ISO-NE website.

    Also, utilities buy almost ALL their energy under long-term contracts, very rarely do they buy on the spot market, and even less rarely when prices are 12c/kWh.

    I trust the VEC numbers relating to the real world much more than any numbers coming out of the DPS with Recchia, a Shumlin appointee/self-proclaimed RE aficionado, in charge.

  8. Hilton Dier :

    Here’s something to add in to the “market” cost of electricity. A recent study by EPA analysts in California took existing data on power plant emissions and their health effects and wound it back around to cost per kWh. What they found was that the health costs of power plant emissions were somewhere between 14 and 34 cents per kWh. (US average; higher downwind on the central east coast) That 5 cent power the utilities buy actually costs us 19 to 39 cents. Not to mention the prolonged suffering of millions with heart and lung diseases.

    The health costs of power plant emissions are higher than the retail cost of electricity in most places. It could amount to 6% of GDP.

    I’m surprised nobody had made that calculation before. It was all readily available data. It puts the price of renewable energy in a whole new perspective.

  9. John Rodgers :

    If they bring a bill to the floor in two weeks they will not be taking much testimony. Perhaps they already have a bill and do not want public input.

  10. Ann Wade :

    As someone who has toyed with the idea of our own backyard solar for a few years, I have to say I was dismayed that VEC reached capacity for accepting net-metering projects and would no longer be accepting them. The utility market is beyond my comprehension, but it makes me wonder if a lower amount for net-metering would allow the program to continue expanding?

  11. Margaret Harrington :

    I like Annette Smith’s suggestion of some kind of compromise on the numbers.

    We Vermont Electric Cooperative customers are well aware that VEC is a cooperative and we will come to a decision together on this.

    I take offense at Rep. Klein’s remarks which essentially add up to: Get with the program VEC.

    Or what, Mr. Klein? Will you say again, “It’s not about Grandma getting her $69 back.” That was the remark you made when Green Mountain Power took over 70% of Vermont’s electric utilities and money was not repaid to ratepayers, money which was owed to them.

    It’s a shame the Vermont Public Interest Research Group has turned into a mouthpiece for the Big Wind Turbine industry. Time was I thought they were young people knocking on doors listening to what people want, but no more, and maybe they never were.
    I’m grateful to Annette Smith that she is willing and able to deal with such self serving people and all her efforts are for the citizens of Vermont.

    • John Rodgers :

      Look at VPIRG’s donner list it will explain there posission. I remember when they were an enviromental group now they promote the destruction of wildlife and wilderness in some of the most important high elevation forest in the state.

  12. guy page :

    As to 12 cent affordability – prices are dropping all the time, and the latest standard offer (SPEED) contracts are for 13 cents. Seems pretty close to me, especially when you consider that homeowners shouldn’t need a total recoup, because presumably the value of their home is rising, it’s their choice, and especially because 20 cent power places an unreasonable, ultimately unsustainable burden on their neighbors. I say because it is socially and politically unsustainable for someone to tell his/her neighbor, “I’m building it, now you pay for it.” The builder must accept a greater share of the risk than the neighbor. It just seems the right thing to do. It will be interesting to see how well VEC’s reduction works in the marketplace.

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