Solar advocates take dim view of new fees - Agency wants to tax homes that generate their own power

By John Woolfolk
Mercury News


San Jose, CA - Californians who recently took the trouble to put up solar electric panels expected hearty thanks from a state desperate for clean energy to relieve its strained power grid.

Instead, they may be getting a bill.

A California Public Utilities Commission proposal would slap a charge on consumers who start generating their own power. The reason: to cover the high costs of electricity the state bought for utility customers during the energy crisis two years ago.

Though aimed at big businesses that fire up their own generators to escape high utility rates, the proposal also affects those who turn to solar power.

Alternative power advocates say the extra charge will dampen interest in solar systems and will undercut California's longstanding goal of pushing alternatives to fossil fuels.

``California is a leader in renewable technology, and now it's the first state to install a solar tax,'' said Doug Linney, president of the Next Generation, a solar trade group in Oakland. ``If you're part of the energy solution, you're going to get dinged.''

The proposal stems from worries that, if customers of the state's utilities rush to install their own power systems, other ratepayers would be stuck with the bill for the multibillion-dollar bonds and long-term power contracts left over from the energy crisis two years ago.

``Costs have been incurred which now are inescapable,'' said Commissioner Carl Wood. ``To the extent some customers leave the system, customers left behind have to pay for it.''

Customers of Pacific Gas & Electric and the state's two other major corporate utilities who installed solar systems on or after Jan. 17, 2001, would be on the hook.

How much they would pay has yet to be decided.

But under one proposal, a PG&E customer would pay a surcharge on the power used from new solar panels. The charge would range from a half a cent to 2.7 cents per kilowatt-hour. For an average monthly household use of 500 kilowatt-hours, that would add anywhere from $2.50 to $13.50 to the bill.

Start-up costs

Jacquelyn Hall, who spent $40,000 putting solar panels on her son's San Jose home last year, said she might not have done it if she knew about the proposed charge. Her system was designed to produce just enough power to cancel out the bill each year.

``There can't be a break-even point if they're taxing you,'' Hall said. ``It's such an expensive venture to begin with, I probably wouldn't have done it.''

Eric Jorgensen, a solar installer whose San Jose home has been powered by the sun since 1999, said his customers already must overcome high purchase costs, utility hookup hassles and a discouraging scheme in which they are not paid for power they put back on the grid.

``You're spending a lot of money and giving more benefits than taking away,'' Jorgensen said, explaining that he believes the utilities benefit. ``You're doing them a favor.''

It's unlikely that most solar power customers would pay more than the minimum charge, which is half a cent per kilowatt-hour.

Under the proposal, 1,800 of PG&E's 2,000 current solar customers who now pump surplus solar power back into the grid would have to pay just the minimum charge.

And the proposal allows some 200 megawatts of new renewable projects to be added each year with those customers also paying just the minimum.

That could cover most of the new solar systems built each year. All the solar systems installed by PG&E customers last year totaled just 7.5 megawatts.

Critics say any charge, however small, would deter needed investment in solar. In light of such criticism, commissioners have offered two alternatives that would fully exempt most or all solar customers and postponed a vote on the matter until their March 13 meeting.

``Solar people will probably get a break,'' said Commissioner Geoffrey Brown. ``The degree of the break -- whether it's a total or partial exemption -- is the question. I just smell political blow-back to the point where it appears they're going to be OK.''

Brown conceded there are so few solar customers that the amount they would generate in fees would hardly be missed. ``It may not be worth pursuing,'' he said.

The surcharge is rooted in concern over how to repay the state for buying overpriced electricity on behalf of utility customers at the height of the energy crisis in 2001, when companies like PG&E could not keep up with soaring market prices.

The state in November sold a record $11.3 billion in bonds to cover the costs of electricity bought for utility customers in 2001. The state also has signed some $40 billion worth of long-term contracts to supply those customers with power over the next eight years.

While wholesale power prices have subsided, utility customers are still paying inflated rates to cover the bonds and contracts.

State regulators already have been trying to figure out how to deal with customers who leave the utilities for cheaper power suppliers. An earlier decision held that customers choosing ``direct access'' to a cheaper energy supplier should pay up to 2.7 cents per kilowatt-hour that they use.

Opposition groups

Consumer groups are leery of allowing exemptions even for solar power. They say the state already does plenty to promote it through rebates of up to half the purchase cost and tax write-offs, and they fear an exemption from the charge could leave regular consumers paying more.

``I'd love to have solar, but I can't afford it,'' said Mindy Spatt of The Utility Reform Network. ``I can't pay for somebody else's.''

TURN's Matt Freedman said the group supports exempting solar systems from the long-term contract costs -- which account for the highest charges. But he said the half-cent per kilowatt-hour charge to cover the bonds may be inescapable under state law.

But Rose Jacobs Gibson, president of the San Mateo County Board of Supervisors, said, ``Taxing green power in the name of equity is entirely shortsighted.''

San Mateo County recently installed solar panels on its crime lab that generate 270,000 kilowatts a year. The proposed charge could cost an extra $5,400 to $41,700 a year, she said.

The International Brotherhood of Electrical Workers Local 332, which spent $500,000 to solar power their San Jose headquarters at the height of the energy crisis, feels betrayed.

``It's unfair,'' said board member Jay James. ``On one side of their mouth they talk about, `Hey, you need to do something to help the state out with renewable energy.' And yet when you start installing it they say, `Now we're going to charge you.' ''


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