Serving the Public Good
Kenneth Costello, long-time principal researcher with the National Regulatory Research Institute has been engaged in the field of utility regulation for several decades. In a recent article appearing in Public Utilities Fortnightly, Costello urges state and federal utility regulators and government officials to exercise caution in making policies that affect the electricity industry in major ways. In particular, Costello illuminates the risks in assuming too much about the future direction of the industry as it relates to distributed generation. According to Costello, “[d]ecisions that bank on the sureness of the future invite regrettable outcomes. He goes on to say that regulators “should do more to question whether popular actions will serve the public good.”
I couldn’t agree more.
In Arizona, the rooftop solar industry has grown from small start-up to a thriving business over the course of five short years. Between APS and SRP, the Phoenix metro area now has over 35,000 solar installations. The largest rooftop solar company in Arizona has a market cap approaching $5 billion.
Quite an accomplishment.
Of course this could not have occurred without substantial financial assistance from the remaining 2 million Phoenix area electricity customers and countless taxpayers, who have subsidized this meteoric rise.
Utilities are now seeking to even the playing field for their non-solar customers through new rates on solar installations. The imposition of new fees and modifications to net metering arrangements are intended to recover the fixed grid-related costs solar customers largely avoid paying. Yet, solar customers depend on the grid for backup and supplemental power and for conveying the excess power produced by their solar panels back to the grid for credit from the utility.
The rooftop solar industry portrays itself as the clean energy alternative to the traditional utility, while also disparaging the utility companies as job-killing monopolists intent on “taxing” the sun and putting the solar industry out of business.
Both sides then leave it up to regulators and decision makers to sort out winners and losers in what has become an epic and very public battle.
Costello surmises, “One interpretation of recent events is that solar advocates are rent-seekers who are motivated either by ideology or economic interests to promote this technology with little concern for taxpayers, utility ratepayers or the public good”
The result of policies in which subsidies are handed out to a special interest group like rooftop solar is a lack of fairness in the system of payments by customers and inefficient economic outcomes.
It’s now up to regulators to chart a corrective path.