CRESCENT — 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.
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.
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.”
With the details to be worked out at the Corporation Commission, Turner said there will be plenty of opportunities for public comment on the proper fixed charges for distributed generation customers.
“All we’re doing is setting the blueprint,” he said. “Should we have 100,000 customers or 200,000 customers go this route, we can properly account for them.”
Issue raised elsewhere
Across the country, similar fights between utilities and solar users over additional charges have sprung up, including in California, Hawaii and South Carolina. An Arizona utility last year proposed a steep surcharge for solar customers but succeeded in getting just a fraction of its proposal. The bitter fight led to a downgrade last month in the stock of Pinnacle West Capital Corp., the parent company of Arizona Public Service Co., by a Bank of America analyst.
“We believe the relatively constructive balance between regulators, consumer advocates and Pinnacle West from the last two rate-case cycles no longer exists and that the upcoming rate-case cycle, involving a highly contentious net-metering debate for solar panels, will likely be a challenging one,” Bank of America analyst Brian Chin wrote in March research report after visiting the state.
With additional federal environmental mandates looming and new transmission needing to get built, it’s unlikely rates will decline for most electric utility customers. At 8.33 cents per kilowatt hour, Oklahoma had the nation’s third-lowest average residential electric rates in January, according to the Energy Information Administration.
The state’s low electric rates are part of the reason solar hasn’t made more inroads in Oklahoma. But with the prices of solar panels declining each year, installation costs are looking more attractive for many homeowners.
Chris Gary, owner of Sun City Solar Energy in Oklahoma City, said a 10-panel setup with a mirco-inverter now costs about $15,000, not including installation charges. A similar system cost almost twice that six years ago, he said.
Gary said the effects of SB 1456 won’t be known until the new tariffs get approved by the Corporation Commission. But news of the bill has sparked interest from potential customers.
“It may affect our business, but we don’t know yet,” Gary said. “Is it a killer for solar in Oklahoma? I don’t believe so, but when you open the door to a charge, that means it can always be increased. A speedbump could turn into a roadblock.”
Out near Crescent, Hill wouldn’t be affected by SB 1456. The bill doesn’t cover existing solar and small turbine users. Hill, who spent 34 years at Oklahoma Gas and Electric Co. as an accountant and bookkeeper until he retired in 1987, understands the push by utilities to establish a new customer class for distributed generation.
“I don’t see any one side that is completely right or wrong,” Hill said. “I understand the utilities, but they’re not always looking out for the customer either.”
Hill, who still thinks highly of OG&E, said utilities have to change with the times.
“When I worked for them, there was a big federal push for coal, and now they’re penalizing them for it,” Hill said. “But there wasn’t anyone out here even talking about solar cells or wind turbines when I put this in, so I’m a pioneer in this area.”
Hill said passers-by see his wind turbine from the road and stop to ask questions about his wind and solar setup. He sold a farm near Guthrie and used the money to install the systems. Hill said he spent about $78,000, although solar prices have come down significantly since then.
“Some of them around here scoffed a little bit, especially at church,” Hill said. “But what’s the difference in that and taking three or four trips or season football tickets at OSU?”
Hill’s local electric cooperative, Cimarron Electric Cooperative, was more concerned about proper installation than any financial concerns about sending excess electricity back to them. Hill said he spent more on top-of-the line materials and components to make sure everything was safe and reliable.
“It just amazes me how you bring that sunshine in that’s all DC current, it goes through an inverter and comes out 120 volts and 60 (Hertz) cycle on the other side,” Hill said with a chuckle. “It was a little expensive, but they saw I was trying to do the right thing, and I haven’t heard any complaints.
“I’m not here to compete with the electric company. I’m just here to live.”