Oklahoma Moves To Discourage Solar and Wind Power

Hugh Pickens DOT Com (2995471) writes "Paul Monies reports at NewsOK that Oklahoma's legislature has passed a bill that 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 reversing a 1977 law that forbade utilities to charge extra to solar users. 'Renewable energy fed back into the grid is ultimately doing utility companies a service,' says John Aziz. 'Solar generates in the daytime, when demand for electricity is highest, thereby alleviating pressure during peak demand.'

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. 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.' The prospect of widespread adoption of rooftop solar 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 (PDF). '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.''"

Comments

Something wrong at the foundation -

[Anonymous Coward]

Why do investors think they are entitled to growth?

There is a risk to returns. If the investors want no risk then they should get no gains.

Re:Something wrong at the foundation -

[ArcadeMan]

I don't know how or where this "grow or die" idea began, but it's just plain wrong. You can't have infinite growth within a finite market.

Re:Something wrong at the foundation -

[lgw]

This is the flip-side to regulated utilities. When your profit is determined by the government, you always turn to the government to increase or maintain your profits, which in turn means you become quite expert at that game.

I don't object to a fair "base rate" that actually covers the maintenance overhead; seems fair to pay that even if you're a net seller to the utility. This may become another case where the "last mile" maintenance costs should be separated from the "content provider".

Re:Something wrong at the foundation -

[Anonymous Coward]

Regulatory capture is a symptom of lack of democracy. The solution isn't to eliminate democracy entirely, but to improve the democratic process.

The baby-with-the-bathwater reductio is elimination of the entire justice system because some powerful guys are good at manipulating it a bit. And, having been brought up at the tail end of a fascist state, I guarantee that you don't want to live in a country with an impotent judiciary.

Re:Something wrong at the foundation -

[MrBigInThePants]

The explanation is very simple: debt.
And unfortunately it is not plain wrong in an economic sense.

The neo-con ideology which has pervaded most capitalist economies is one of debt fuelled growth. This is across the board including government, business and private household debt. In the US this started in earnest with Regan, in other countries it began when whatever new-breed, neo-con idealist came to power in their country.
The problem is that these economies are now (metaphorically) "negatively geared". This means that while they are growing and turning a profit they are ok and turn a profit for yourself from other people's money. But when they start to make a loss the losses are exaggerated by the gearing and the economy is in serious trouble.
e.g. How many times has it been reported around the world that even a flat GDP growth is a major problem and will have serious negative consequences and negative GDP growth will be a utter disaster? Sound like a healthy and robust situation to you?!

This is where your "grow or die" mentality comes from and it makes perfect economic sense.

Now everyone in business knows that if the total cost of a project (including interest etc) is less than the profits (after taking risk into account) then the project should usually go ahead. Funding projects with debt and allowing those with capital to benefit from the time value of their money is perfectly sane and sensible and a core part of any healthy economy.

HOWEVER

The problem with this mentality as it has been applied across the board (i.e. at a country or global level) in the modern economy is many-fold:

- The true cost of many projects is simply ignored or left for future generations to deal with. (e.g. pollution, retirement, housing, infrastructure, sustainability)
- Many of the projects are pork barrel spending and not a net positive at all
- The true cost of the DEBT itself is ignored. (e.g. The Fed handing out essentially free money to financial institutions and the accumulation overseas debt)
- The overall impact to the economy of certain projects/decisions is not taken into account. (e.g. job losses, economic stimulus)
- The positive economic stimulus of a policy/project (e.g. Bush tax cuts) is grossly over estimated.

This is what has led you to the current situation. The ONLY way out of it is through a painful correction of some sort.
e.g.
- Higher taxes of some sort to pay off outstanding debt to bring it to sensible levels
- Massive reduction in spending (probably not an actual option as the viable cuts would not amount to enough)
- Create a huge number of new exports that bring in additional money. (again, not really viable since it would probably already have been done if it was)
- Some other major macro economic change that would destabilise the market in the short/medium term.

Re:Something wrong at the foundation -

[Firethorn]

Unless you are at the end of the line the line must be maintained if you are there or not, in order to reach the next customer, so that is not a cost to keep you connected.

This sort of thinking has the cost of the line be $0 every customer but the last one, who's charged millions. Not all that practical. It's much easier to look at the cost of the line* and divide by the number of customers. I'd say it's more fair as well. If you really want, consider that you're paying for the run from your neighbor up the line to yourself. Your down-line neighbor picks up his share, etc...

The next step is to consider the base cost of a line with theoretical zero capacity, and charge each customer that ($10 or so), while building in a standard rate into the cost for building the line with the necessary power capacity(1k amps, 2k amps, etc...), including all associated equipment like transformers, switching stations, etc...
Add another $10 or so into the fee above for billing, support, and other paperwork, and you have the general situation for most power billing in the USA.

*Well, really the network.

Suck It Up!

[whisper_jeff]

'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.''

Suck it up princess!

I know you're going to fight tooth and nail to get legislators to protect your business model but the writing is on the wall. Feel free to look up buggy whip manufacturers if you want to see how this story is going to end in the long run.

Oh, and if you think we, the public, are going to feel any sympathy for you as your business model gets replaced by newer and better technology, trust me when I say you're wrong. No sympathy. Adapt or die.

I know you think legislate or die are the options on the table but I assure you, it's adapt or die.

Koch Brothers

[hondo77]

Perhaps this is all a part of the vast right-wing conspiracy against green energy. Can't let the hippies win!

Re:Interesting hat it mirrors the electric car iss

[Anonymous Coward]

Exactly this. They shouldn't charge solar customers a higher base rate, they should make the pricing more transparent. Charge everybody a monthly connection fee. That goes to maintain the lines. Then you charge for electricity consumed by their plant. They have two businesses going, generation and distribution. Their pricing should reflect that.

Re:Interesting hat it mirrors the electric car iss

[Waffle Iron]

I think the electric companies have a pretty good point that they still have to pay to maintain lines to your house even though you are now consuming a fraction of what you would have.

I don't know about Oklahoma, but my bill is split into two parts: a fixed per-day customer charge, plus a separate charge per kWh. Presumably, the charge per day covers the lines and administrative overhead. (The per-kWh charge is further divided into separate fuel and generation charges, and the fuel rate changes frequently.)

If Oklahoma uses this system, then the utility is being fairly compensated for the power lines no matter how little electricity the customer actually buys.

Keeping Our Priorities Straight

[organgtool]

As this threat to growth becomes more evident, investors will become less attracted to investments in the utility sector.

It's about time that power companies realize that their most important goal is not in providing customers with a quality source of electricity, but in making investors as much money as possible.

Re:False dilemma

[kwbauer]

Not exactly the only way. If a company is profitable it can always return a portion of that profit to its investors. This is called dividends.

Re:False dilemma

[mrchaotica]

But you as an investor will never get rich that way. People want to buy into something like Google, Apple, Amazon, whatever (remember the Netscape IPO?) - that starts out at $30 a share and zooms to $300 a share. The only way that happens is if your company grows! So while never growing is fine, it only appeals to a limited set of investors. Most investors want to buy a stock that will go up in value over time.

And of course, the real issue here is that it's completely and utterly inappropriate for a regulated utility to be that kind of "growth company!"