Oklahoma electric utilities want higher rate for solar, wind energy producers

Senate Bill 1456 allows regulated utilities to apply to the Oklahoma Corporation Commission to charge a higher base rate to customers who generate solar and wind energy and send their excess power back into the grid. The bill passed the Legislature and is on Gov. Mary Fallin’s desk.
by Paul Monies Modified: April 20, 2014 at 3:00 pm •  Published: April 20, 2014

— Herb Hill might be among just a handful of people in Oklahoma with a house powered by the sun and the wind.

On his 5-acre property west of Crescent, the 85-year-old utility company retiree has 36 solar panels and a 100-foot-tall wind turbine. He also has a propane-powered emergency generator to back up the electricity from his local electric cooperative.

Hill’s neither a “doomsday prepper” who’s ready to live off the grid, nor a hardcore environmentalist enamored with green energy. He just wants cheap, available electricity to help run his deep freezers and his spa.

“I’m all electric, and I just want to live and exist,” Hill said as his two dogs lay in the shade under his solar panels. “I just wanted a secure source of electricity. I’m not in it to make money, but the excess goes over to my next bill. I’ve been real satisfied with the whole operation.”

Small wind turbines like Hill’s work well in rural areas, but have a harder time in cities, where zoning and neighborhood concerns can affect their installation.

Solar growth?

Still, it’s the prospect of widespread adoption of rooftop solar that worries many utilities. A report last year by the industry’s research group, the Edison Electric Institute, warns of the risks posed by rooftop solar. It compared the development to the rapid technological changes from wireless communications that upended the traditional “Baby Bell” telephone companies.

“When customers have the opportunity to reduce their use of a product or find another provider of such service, utility earnings growth is threatened,” the report said. “As this threat to growth becomes more evident, investors will become less attracted to investments in the utility sector.”

The report urged regulated utilities to move quickly to change their rate tariffs to recover fixed costs from distributed generation. In Oklahoma, that happened this year with Senate Bill 1456. It drew some opposition from environmental groups, solar advocates and others, but passed the Legislature and is on Gov. Mary Fallin’s desk.

SB 1456 reversed a 1977 law that forbade utilities to charge extra to solar users. The new bill allows regulated utilities to apply to the Oklahoma Corporation Commission for a new class of customers who use distributed generation. The customers would be charged a higher base rate to make up for the infrastructure costs for sending excess electricity back to the grid.

The state’s major electric utilities backed the bill but couldn’t provide figures on how much customers already using distributed generation are getting subsidized by other customers. Oklahoma Gas and Electric Co. and Public Service Co. of Oklahoma have about 1.3 million electric customers in the state. They have about 500 customers using distributed generation.

Spreading subsidies

For regulated electric utilities, there’s always been some elements of subsidization across customer classes. Oklahoma regulators are trying to smooth out those effects, but residential rates are subsidized to an extent by large commercial and industrial users.

Kathleen O’Shea, OG&E spokeswoman, said few distributed generation customers want to sever their ties to the grid.

“If there’s something wrong with their panel or it’s really cloudy, they need our electricity, and it’s going to be there for them,” O’Shea said. “We just want to make sure they’re paying their fair amount of that maintenance cost.”

She said OG&E isn’t anti-solar and could add utility-scale solar generation if the price is right for its customers. The utility has invested heavily in wind generation in the past decade.

“Our existing rates don’t recognize new technology like solar and distributed generation,” O’Shea said. “They’re kind of based on old, historic models.”

Rep. Mike Turner, the main sponsor of SB 1456 in the House of Representatives, said the bill provides a partial decoupling of rates for distributed generation users. Decoupling is a regulatory effort to better assign fixed charges for utility customers versus the variable costs for electricity use.

“If we decouple across the board overnight, there’d absolutely be rate shock,” said Turner, an Edmond Republican, using the term for a large utility price increase. “If we’d already been decoupled, this issue wouldn’t have come before us.”

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by Paul Monies
Energy Reporter
Paul Monies is an energy reporter for The Oklahoman. He has worked at newspapers in Texas and Missouri and most recently was a data journalist for USA Today in the Washington D.C. area. Monies also spent nine years as a business reporter and...
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