By Cyrus Reed
In a series of filings with the Texas Public Utility Commission, El Paso Electric is making some strange moves on solar, making them almost seem two-faced. Sometimes they seem to like solar, but in their proposed rate case, they would create a new rate class of people and hit them with huge rate increases. Who would be in this new rate class? People who have dared to put solar on their homes in the past or are thinking about it in the future.
But let’s back up first, because this gets complicated.
First, in PUC Docket No. 44805, El Paso Electric seeks to end its use of coal by divesting itself of its seven percent ownership in the 45-year-old Four Corners coal-fired power plant owned principally by Arizona Public Services. In addition to paying off any remaining debts and mine closing costs, the application seeks to make clear that after July 2016, there will be no coal use by El Paso Electric. While the amount of coal-fired power that El Paso utilizes is small – a total of 108 MW of capacity – it matches the trend throughout the country: if given a choice, utilities are turning away from coal. As El Paso Electric’s Nadia Powell states in EPE’s own filings, “Both EPE and its customers will avoid the uncertainties and environmental risks associated with extending the operating life of Four Corners Units 4 and 5 beyond the 46 to 47 year life they will already have had by July 2016, and the potential rate impacts associated with these uncertainties. Coal is an embattled resource, and the risks of continuing ownership of a coal resource are substantial.”
If not coal, then what?
It would be incorrect to state that El Paso Electric is turning only to solar power for its future, but it will be an important part. What is clear is that El Paso Electric is turning to two resources – natural gas for peak needs and solar to fill in daytime gaps. Thus, in addition to building several natural gas “peaker” plants in its service territory, El Paso Electric has slowly built out its solar resources.
In another docket, No. 44800, El Paso Electric is seeking authority to add a 3 MW community solar plant (next to a new natural gas peaking facility) to its generation mix as part of a new “voluntary Community Solar Program.” Again, in this case, the utility is seeking the authority to charge customers a voluntary tariff. In essence, those customers who want to invest in solar would be “buying” a piece of the community solar plant and paying for it, and in return receiving a credit for the electricity generated by the plant. El Paso Electric already has a voluntary renewable energy tariff associated with some older wind units, but it is proposing to convert that program to one focused on community solar.
According to the docket, El Paso Electric would bid out construction of the solar farm later this year, and add the 3 MW plant into its resources in 2016. Essentially, they are checking with the PUC to make sure it has permission to move forward on incorporating the community solar plant into its rates now before it bids out construction of the plant. Because the program would be completely voluntary and utilize a subscription-based service, no current ratepayers would be impacted by the investment decision, and those wishing to invest in solar might see a slight rate increase, but over time, their rates might actually decline if, for example, natural gas fuel prices rose. The current proposal would allow residential and small commercial customers to subscribe up to their estimated annual peak capacity requirements.
Sierra Club provided written comments into this docket, suggesting that El Paso Electric consider adding a “neighborhood” rate for those that live near the proposed community solar project – which is in a working-class neighborhood – so that those residents can take advantage of the project. Generally, we are supportive of the idea of adding a community solar option.
In yet another docket before the PUC – Docket 44637, El Paso Electric was originally seeking a Certificate of Convenience and Necessity for the build-out of a 20 MW solar PV plant near Fort Bliss. In what would be the largest PV array in El Paso County, the output would be credited to the U.S. Department of Defense, which has embraced the need to move toward renewables. Proposed to be built by SunPower, the PV plant would raise the utility’s total solar capacity to 127 MW, meaning El Paso Electric’s total solar capacity would be larger than their current coal capacity. Interestingly, El Paso Electric is not seeking any rate adjustment in adding the PV plant to their resources – in essence, Fort Bliss and other El Paso customers would be receiving the benefits of the solar plant without any rate hike.
However, in August of this year, and after some opposition from industrial rate customers, the utility took this proposed contract off the table and is not currently pursuing the contract with SunPower. This about-face is of great concern to solar developers and solar advocates, but pales in comparison to the larger proposed rate increase.
So What Will the Cost of Getting out of Coal Be for El Paso?
While there will be some costs to get out of its contract with Four Corners – located some 400 miles from El Paso in Northwest New Mexico (near Farmington) – in its 320-page application, El Paso Electric makes the case that staying in would cost much more and subject its ratepayers to risky future investments.
Essentially, in its filing, EPE stated that the old coal behemoth was not flexible enough to respond to its changing energy needs, while its local resources – including both solar and natural gas – can more easily be matched to loads. In addition, by generating power locally, El Paso Electric does not have the risk of transmission problems with importing coal from 400 miles away, and generating locally – whether through solar or natural gas – eliminates transmission losses. Overall, El Paso Electric’s consultant found that the company would benefit to the tune of $110 million in net present value and another $88 million in other benefits in getting out of the contract versus extending their involvement in the old, dirty coal plant for another 15 years. In addition, the analysis conducted by the consultant assumed that no environmental requirements would be required on the coal plant, a conservative assumption since the owners of the plant have been told they will need to add Selective Catalytic Reduction (SCR) technology to the plant. Basically, economics alone told EPE it was time to get out of the plant, but the added future costs of reducing its pollution made it a slam dunk.
There are costs El Paso Electric customers would have to pay under the proposal.
First, EPE is asking for the right to continue to recover mine reclamation costs through July 2016 through a fuel charge to customers. They have actually been recovering these costs since 2007, but given the impending sale and end of coal, they are asking for some firm numbers and dates. In addition, once sold, the base rate paid by customers will be reduced by the value of the sale. Essentially, El Paso Electric has been paying off its obligations through ratepayers since 2007 in an effort to prepare for life after coal. In July 2016, assuming approval of the proposal by the PUC, El Paso Electric would be coal-free, rates would go down slightly, and El Paso Electric would not have to worry about paying for pollution reduction from a plant that utilities in Arizona continue to plan to run. All told, the proposal would have El Paso Electric pay a total of $6.9 million in decommissioning liability costs and $19.3 million in coal reclamation costs.
Yes, they are, in essence, paying to get out of coal and it appears to be financially worth it!
Now the Bad News
Now let’s talk rates. In Docket No. 44941, El Paso is proposing to the PUC a major rate increase of approximately 16 percent overall, essentially stating that it must recover the costs of not only getting out of the coal plant, but multiple natural gas plants it has built and other transmission and distribution costs. The proposed rates, however, vary widely by sector, with the main residential sector seeing a doubling of fixed charges from five to ten dollars a month and an average increase of approximately 16 percent.
While universities and community colleges will be none too happy with the proposed rate increase – they are particularly hard hit by the proposal – strangest of all is a proposal to create a new class of ratepayers known as “partial requirement” ratepayers.
El Paso Electric is arguing that these ratepayers – all 522 of them – represent a new class of energy users that costs them more to serve. Why? Because EPE argues they still have to provide power, still have to provide wires, and their demand is harder to predict because of their solar energy use. Thus, even though EPE and City of El Paso has given rebates to people with solar and paid them a net-metering rate for excess generation, they now argue we have to charge them higher rates, and lower those net-metering rates.
Under the proposal, solar customers would not only pay a higher monthly fixed fee – $15 instead of $10 – they would also pay a separate “demand” fee based on their peak energy use, a charge that is not levied on residential customers. Total increase? Potentially in the range of 35% just for owning solar.
The proposal has been met with staunch opposition by the local Sierra Club group in El Paso, solar providers and users, and national solar companies like NRG Residential Solar Solutions, Sunrun, the Solar Energy Industries Association (SEIA), as well as a local grassroots group, Eco El Paso. Those entities are seeking to intervene in the case, as are some large industrial customers and the City of El Paso among others.
Sierra Club’s Beyond Coal campaign, in coordination with the Lone Star and Rio Grande Chapters, also submitted comments in opposition, while supporting certain aspects of the rate case, like the community solar project and the decision to get off of coal. To read our full comments, click here.