Santee Cooper sets solar standby charge

The board of South Carolina's state-owned electric utility has approved a plan to increase retail rates and -- controversially -- add new charges for customers who install solar panels.  Santee Cooper is South Carolina's largest power producer, providing electricity for about 2 million people.  Its interim rider for distributed generation includes a "standby fee" charged to customers with rooftop solar projects and other customer-sited generation.  It also declined to adopt a net metering structure similar to those used by South Carolina's investor owned utilities.

Notably, Santee Cooper says it "supports development of solar power resources".  Its Distributed Generation Approach notes that Santee Cooper has generated solar energy for its customers since 2006, including demonstration projects across South Carolina.  Santee Cooper buys solar power from sources including the 3-megawatt Colleton Solar Farm.  The Colleton project, owned and operated by TIG Sun Energy, is South Carolina's largest solar installation.  Santee Cooper also offers its customers blocks of Green Power.
But residential solar projects aren't typically owned by or developed for utilities.  From the utility perspective, this means that the costs associated with serving customers with solar generation need to be recovered from ratepayers.  But the allocation of those costs among ratepayers is an issue.  Should they fall on all consumers equally?  Or should a rider or specific charge be added to recover these costs from the consumers who install distributed solar generation?

In Santee Cooper's case, the board approved a new charge, called a “standby fee,’’ on residential customers of $4.40 per month per kilowatt of installed solar capacity.  It also elected to use rebates and credits to reward customers for solar generation, instead of a net metering rate.  At the same time, the board set the rates for crediting generation at less than its retail rate.

From the utility perspective, it needed to adjust its rates to account for growth in rooftop solar and other distributed generation resources, and to protect customers who don't develop solar projects from unfairly bearing costs imposed by those who do.   Cost-shifting is a typical utility concern; the issue is to make sure that the allocation of consumer costs is fairly related to how the costs were incurred.
  
But from the perspective of advocates for rooftop solar and other distributed generation resources, a "solar fee" would deter people from developing alternative energy projects.  Under this view, these fees and rate structure are unnecessary and "penalize customers for exercising their right to use this clean, renewable resource."

Santee Cooper is not alone in considering how to adjust utility rates to handle more rooftop solar projects.  But its approach differs from that of South Carolina's largest investor owned utilities, Duke Energy Carolinas and South Carolina Electric and Gas, which have agreed to net energy metering and solar development targets.

How should utility rate design allocate the costs and benefits of connecting distributed solar projects to the grid?  How can essential fairness in ratemaking be balanced against policy values like customer choice and renewable energy?