If you are the government and want to raise a ton of money for the purposes of furthering a policy agenda, you need look no further than your local energy providers. To steal the tag line from the GEICO® Insurance commercials: ‘Everybody knows that” Consider an initiative in Vermont that seeks to reach a state’s goal of providing 90 percent of the state’s energy needs with renewable sources by 2050. Ambitious? Yes. How are they going to do it? Throw money at it, of course, but ‘with massive conversions to electric heat and electric cars,” says the Vermont Fuel Dealers Association, the association representing non-utility fuel dealers. How much? $700,000,000 a year, and yes, a carbon tax on fossil fuels should do the trick.
The concept of carbon taxes has been around for decades and a handful of state and municipal entities have deployed the tactic, however, one of the difficulties with a carbon tax, so says Wikipedia, is that a carbon tax ‘suffers from combining a set price for carbon along with a transfer of revenue from industry to government.” ‘Transfer of revenue” ‘ what a quaint euphemism. In this instance, this is a ‘transfer of revenue” for sure, though it’s arguable that it is not the government, per se, that gets the bulk of the money.
Notwithstanding the revenue that the regulatory agencies will realize as their departments grow in sync with utility market growth and the ‘programs” that will follow, this looks and smells like a transfer of revenue away from heating oil and propane marketers and to the utility industry with government in lock-step with utility interests. There are issues with such a tax, including whether those taxpayers can actually afford to pay $700,000,000 a year.
The state seeks to essentially eliminate all but 10 percent of fossil fuel use while simultaneously pushing for (some say ‘rubberstamping”) the expansion of natural gas pipelines. It’s certain to be one ‘hell of a fight,” though it’s not necessarily all roses when it comes to utility interests and renewables either. For instance: Most of you have heard of net metering, whereby customers generate their own power on site and sell any excess back to the utility. Net metering tends to favor power generated with renewable fuels, i.e., solar and wind, but in November Arizona ‘dealt a blow” to the state’s largest utility by approving a fee for customers with solar panels that was a fraction of what the utility wanted.
The approved fee was an attempt by the utility to recover costs from solar customers and the utility took the position that the approved fee is not enough to offset costs that the rooftop systems have placed on its remaining ratepayers. The measure, approved by the Arizona Corporation Commission in a 3-2 vote, was reported as a compromise between the utility and the solar industry. The solar industry fought to stop the utility’s efforts to change a solar incentive that has ‘buttressed the rapid growth of rooftop systems in one of the nation’s sunniest states.” The utility argued that net metering there allows solar customers to avoid paying their fair share of the cost to maintain the electric grid; an annual number the utility places at $18,000,000. Solar systems are being added to utility service territory there at a rate of about 500 installations a month. The fee of 70 cents a kilowatt ‘ which the utility never actually agreed to – equates to about $5 a month for the average solar customer in Arizona. The utility was seeking upwards of $100 a month. The charge will only apply to customers installing solar systems after December 31 2013, so 20,000 utility customers who already have solar panels will not see changes to their bills.
Utility and solar advocates knocking heads over net metering rooftop solar systems and utility customer selling power back to their utilities at retail (or higher) rates has no end in sight, so don’t expect this debate to go away anytime soon. If you are selling solar, you will want to keep an eye on this issue as it could impact your solar equipment sales. Solar advocates are concerned that substantial recovery fees could dampen customer appetite for new solar installations. In Arizona, the utility spent $3.7 million on lobbying and advertising efforts leading up to the net metering hearing and lost. The solar lobby spent less about 10 percent of that. Utilities outspending opponents by 10-to-1: that sounds familiar.
Shane Sweet is an energy and management consultant with clients in the heating oil, propane and motor fuel sectors. He served the industry as President & CEO of the New England Fuel Institute ‘NEFI” from 2007 to 2011, and as Executive VP/Director and Lobbyist for the Vermont Fuel Dealers Association ‘VFDA” from 1993 to 2007. He lives in Shaftsbury, Vermont and may be reached at firstname.lastname@example.org or 802-558-6101 cell/text. Suggestions by readers for future column content, as well as general comments, are welcome.