Montana solar industry fears NW Energy rate change could cripple their business

(KPAX) Buried within NorthWestern Energy’s request to increase Montanan electric rates by $35 million a year is a proposal that solar-power installers say could knee-cap their business — a new rate structure for “net metered” rooftop solar systems.

“What I’ve been hearing from our installer members is that they’re kind of looking down the barrel of a loaded gun,” says Andrew Valainis of the Montana Renewable Energy Association. “They’re very nervous about the proposal. We’re concerned that this could really devastate the industry.”

NorthWestern officials say the new rate structure for residential rooftop solar systems simply would charge them for the costs they impose on the overall system when they sell excess power back into the grid.

It’s not fair that other customers without solar-power systems essentially subsidize that cost, the company says.

“This structure would make sure (rooftop solar customers) are paying for more of their full use of the grid,” said NorthWestern Energy spokeswoman Jo Dee Black. “We want all of our customers to pay their fair share of using distribution and transmission, and paying for the electricity that they’re using.”

As the Public Service Commission considers whether to grant NorthWestern’s rate-increase request, it also will decide rate design for the company’s 360,000 Montana customers — including the proposal for residential users that install rooftop, net-metered solar systems in the future.

NorthWestern is asking the PSC to approve a $35 million annual increase for its electric rates — the first full rate case the company has filed in almost 10 years.

If the full increase is granted, residential customers would see a 7.4% increase — or about $75 a year for the average homeowner.

The PSC has scheduled a hearing on the overall rate case in May and will decide multiple issues in the case later this year.

NorthWestern says it has about 2,000 customers now with solar-power, net-metered systems. Most of those are residential, but some are businesses.

When the owner of a net-metered system generates more power than they consume, the excess flows back onto the grid and they get a credit on their bill, offsetting what they pay for any power from NorthWestern when they don’t generate enough electricity with their own system.

Under the current system, owners of net-metered systems get the full retail rate for their power — about 11¢ per kilowatt hour (kWh). They pay that same rate for any power they consume.

NorthWestern is proposing to reduce that amount to about 6.5¢ per kWh, on both ends. But it also wants to have future net-metered customers pay a monthly “demand charge” that’s based on how much electricity they use during one hour of maximum usage, for that month.

Valainis says that charge, which customers could have difficulty calculating or knowing, would be $50 to $70 a month for the average household.

“The use of a demand charge is really inappropriate for residential users,” he says. “It’s hard to understand, it’s going to be really expensive for them, and it’s going to make it nearly impossible to save money by going solar.”

Rooftop solar-power systems can cost anywhere from $10,000 to $15,000, for the average house. Under the current system, homeowners expect to save enough money on power bills to make the system pay for itself over a number of years.

The demand charge could erase those savings or make them much, much smaller, Valainis said, discouraging people from installing new systems.

He also disputes a NorthWestern Energy study that said net-metered systems impose certain costs on the system, saying any cost is “not significant at all.”

Changing the rate structure to deal with such an insignificant cost is “doing harm to the solar industry for no reason, really,” Valainis says. Montana has about 40 installers of solar systems across the state, and they’re all smaller businesses, he adds.

Black said NorthWestern is not trying to harm the solar-power installation industry and supports allowing customers to have the choice of installing solar power on their homes or businesses.

“We just don’t want one class of customers to be paying more than their fair share,” she said.