How conflict and collaboration shape utility policy in the age of renewables

The following is an edited transcript of a speech given by Herman K. Trabish to the Solar Power International conference in Las Vegas on Sept. 14. The opinions expressed are that of the reporter and do not necessarily reflect editorial positions of Utility Dive. 

In stepping up here at Solar Power International (SPI) 2016, I am ignoring Lincoln’s advice to remain silent and be thought a fool rather than speak and remove all doubt. But I figure the secret’s going to get out sooner or later so what the heck.

As you get older, history gets easier because instead of it being something you read in a book or saw in a movie it is something you remember.

As a reporter, I have had a front row seat on history and I got to ask questions about the things I didn't understand. What I am going to talk about today are the answers to my questions and the impressions I formed about what those answers might mean about the relationship between utilities and renewables advocates.

I interviewed Lyndon Rive at SPI in 2007. At that time, the plan for SolarCity was to get a bunch of houses in a neighborhood to go solar together in order to get volume discounts on panels and labor. Now SolarCity is a major presence in solar markets in over 20 states. And the SolarCity story is far from over. That’s how much things change.

I covered contentious regulatory proceedings at the state level involving utilities and the renewables advocates for some time and it seemed like nothing changed. But then I noticed the quiet states were often where things were getting done and I wondered how that was happening.

It turns out renewables have made more progress through collaboration with utilities than by fighting them.

And just about every time I covered a collaborative effort that made progress, more than one of my sources referred to Arizona and Nevada and how they didn’t want policies to turn out as badly as they did in those states.

So maybe the folks here in Nevada can take some comfort in having given the rest of the country the gift of a bad example.

Good and bad process

I don’t remember a time when many people spoke highly of utilities. Personally, I think that is really shallow because I also can’t remember a time when many people were enthusiastic about living without electric lighting and air conditioning.

But there’s no denying there has been a lot of conflict between solar advocates and utilities. My first exposure was the 2013 fight over net energy metering (NEM) in Arizona. NEM is the solar policy that reimburses solar owners with a retail rate credit for the electricity their solar exports to the grid.

In November 2013, after two days of impassioned public comment on the future of net metering, the Arizona Corporation Commission voted 3-2 to charge $0.70/kW to solar owners to help offset what the utility referred to as a “cost shift” caused by the NEM.

The commission kept the bill charge far below the Arizona Public Service (APS) $8.00/kW proposal. It was a compromise brokered by the Residential Utility Consumer Office (RUCO), Arizona’s ratepayer advocate.

I asked Arizona Solar Energy Industries Association (AriSEIA) Attorney Court Rich if the $0.70/kW charge would impede Arizona’s solar industry. He said the leasing programs that were driving Arizona’s skyrocketing rooftop solar growth at that time saved solar customers about $5.00 to $10.00 per month. “You do the math,” he said.

The average rooftop solar installation in Arizona at that time was around 6 kW to 7 kW. That made the average charge $4.20/month to $4.90/month, so there would still be savings. Solar advocates celebrated.

“The decision allows the industry to move forward without damaging ratepayers,” AriSEIA President Mark Holohan told me. “But we are near the danger zone where more customers won’t see savings.”

They might have been closer to danger than it seemed, because a fixed charge for solar was now on the table. So Arizonans can blame the ratepayer advocate for letting fixed charges into the discussion, or they can credit RUCO for saving the industry.

By the way, APS Renewables Program Manager Greg Bernosky and Court Rich both told me at the time that a rate case would be the right place to take up the discussion of solar’s costs and benefits. That discussion has since been moved to its own proceeding and its outcome could be pivotal for solar in Arizona.

The conflict seemed to get worse in several 2014 Wisconsin rate cases that imposed a series of fixed charges.

Environmental Law and Policy Center Attorney Bradley Klein told me advocates had worked hard to establish a collaborative relationship and a data-driven policy conversation. They did that because, he said, they knew that getting the debate out of a high stakes zero-sum rate case was the only way to get a data-based discussion about solar’s costs and benefits.

“But," he told me, "the utilities and the regulators seemed to know where they wanted to go."

The result was that a Wisconsin appellate court overruled the decisionbecause it was not based on data.

“Once you get the data into the record, it is hard to look away from,” Klein told me. “That’s what the Wisconsin court decided.”

If you could pick one example of a proceeding that did not follow good process, it was Wisconsin, because it was not data-driven decision-making, he said.

The term “good process” is a reference to the call for collaboration on renewables policy disputes recently sent to the National Association of Regulatory Utility Commissioners by 32 stakeholder organizations.

Iowa was an example of “good process” because the Iowa Utilities Board told the involved utilities they did not have adequate data to justify its rate request and ordered a now-ongoing value of DER study, Brad told me.

“It was a very different approach that has the potential for a much better outcome,” he said.

There often seems to be conflict with Duke Energy at the North Carolina Utilities Commission but Duke Energy Commercial Portfolio President Marc Manly told me something very interesting for a Public Utilities Fortnightly essay I wrote last year.

“I would point to what we managed to do in South Carolina,” he said. “We showed we can work with all stakeholders, including some very difficult people, and work out legislation and regulatory rules.”

The South Carolina example

A lot of things that happened in the South Carolina solar debate strike me as important. 

First, they started early.

“In other states there has been a lot of [solar] adoption, and then they discovered they had policies that were causing big fights,” explained Electric Cooperatives of South Carolina Vice President John Frick. "Our idea was to get ahead of mass adoption so it would not be necessary to correct messy policy later.”

Second, utilities were deeply engaged and co-ops led the charge. That’s important. Co-op leaders are co-op customers so co-op advocacy is like a waving banner that reads “customers want it.”

For their work on the South Carolina solar settlement, Duke Energy nominated the Electric Cooperatives of South Carolina (ECSC) and Central Electric Power Cooperative (CEPC), ECSC generation and transmission provider, for the 2015 Electric Cooperative Solar Power Player award.

Co-op leaders, the nomination said, “effectively changed the conversation in South Carolina from one that was very adversarial and positional, to a conversation about ‘what we are interested in doing’ and ‘a shared vision’ for the future.”

During the legislative vote on Act 236, when the list of endorsers was read on the South Carolina House floor by the Chair of the sponsoring committee, he said it was “highly unusual for those endorsers to even be in the same room…”

Third, stakeholders were already running into rate increases on nuclear plant construction when the process was initiated. That meant nobody could blame higher electricity costs on solar. With the currently-rising costs of coal and natural gas facilities due to EPA rules, that could become a relevant factor going forward in other states.

Fourth, politics didn’t get in the way. The coalition of environmentalists, solar advocates, and utilities and electric cooperatives had already agreed on Act 236 before it went to the legislature. That meant the politicians had no votes or campaign contributions to lose in supporting it.

Fifth, the law covered a lot of ground and left some questions open.

It required regulators to approve a Value of Solar (VOS) methodology going forward. It also established the legality of third party ownership (TPO) of rooftop solar. That meant solar leasing companies had something to gain by supporting it, but utilities knew the retail rate NEM credit would eventually be up for discussion.

The bill also required that South Carolina Electric & Gas and Duke Energy Carolinas commit to minimum amounts of renewables. But it allotted the renewables in various sizes. That gave both sides something. The utilities liked the opportunity in utility-scale projects and private sector developers saw opportunity in smaller projects.

Finally, the bill opened up a rate structure discussion.

South Carolina's collaborative effort, though not perfect, was a big step forward. I think some of those things are possible in North Carolina. But I am not going to tell you I know how to get to them.

Solar lobbying and Nevada

You can’t talk about contentiousness in policy proceedings without talking about The Alliance for Solar Choice (TASC). Since its founding in April 2013, it has aggressively lobbied for the preservation of retail rate net metering.

TASC’s backers say its tactics get results, but others decry its behavior in regulatory dockets as counterproductive to utility-solar dialogue.

In that 2013 ACC debate over a fixed charge for solar owners, Commissioner Bob Stump was the swing vote in the 3-2 vote and was the "reason solar was saved in Arizona," according to Sunnova Policy and Government Affairs Vice President Meghan Nutting, who worked with TASC during that debate.

"He was the entire reason we got a $0.70/kW solar fee instead of a $3/kW fee,” Nutting said.

But Stump, recently termed out of the commission, now believes the work of what he called “rooftop solar interests” is driving “green McCarthyism.” He did not mention TASC by name, but told me that efforts by “out-of-state third-party installers” are pushing the policy debate in a way “that does not contribute to a constructive outcome.”

In defense of NEM, TASC has been a passionate — though sometimes disruptive — force in Maine, Hawaii, and other states. It has also been a leading critic of Value of Solar tariffs.

Value of solar (VOS) studies date to at least 2006. The first one was developed by Pace Energy and Climate Center Executive Director Karl Rabago as an Austin Energy executive.

Minnesota Commissioner Nancy Lange called VOS ‘the future’,” Rabago told me, “because it shows a way to analyze value and set rates through that analysis. That allows regulators to escape being caught between utilities and solar advocates.”

The question the TASC leadership has to take on, he said last year, is how to stay engaged in an increasingly nuanced solar market. “They have to recognize the nuances because utilities really are doing solar now.”

Recently, SolarCity pulled out of TASC and appointed former FERC Chair Jon Wellinghoff to help run policy. And Sunrun just hired former Maryland Commissioner Anne Hoskins. It appears there may, in fact, be change afoot.

Divisiveness reached what may have been its nadir in Nevada at the end of last year. The outcome has deeply wounded if not killed the state’s solar industry.

Nevada solar was growing very fast. “It jumped from the 14th-biggest residential solar market in 2014 to 2015’s second-biggest state market,”according to GTM Research Senior Solar Analyst Cory Honeyman.

Then the Public Utilities Commission of Nevada (PUCN) imposed higher basic service charges for rooftop solar customers and a significant reduction in the NEM credit. But more dramatic than those changes was the fact that the order did not grandfather existing solar customers under the former rates and rules.

The move was expected to damage solar growth so seriously that SolarCity and Sunrun announced they would pull out of the state. But some Nevada stakeholders told me the SolarCity-and-Sunrun-led TASC lobbying efforts may have sown the seeds for the entire controversy.

NV Energy "did not propose eliminating grandfathering,” the utility’s Mark Severts told me.

That part of the ruling originated with the commission regulatory staff, the PUCN’s Peter Kostes acknowledged.

One of my sources with extensive experience in Nevada utility-solar issues called the ruling against the grandfathering that is so common in other rulings “punitive.”

The source pointed out the lack of grandfathering essentially reverses the value proposition of solar-leasing companies like SolarCity and Sunrun. It was likely influenced, the source added, by the long political and regulatory battle surrounding NEM in the state.

“There was a lot of personal animus between the parties,” the source said. “That made it hard to do a negotiation.”

Other observers of the solar proceeding came to similar conclusions.

“Some of the tactics used by solar advocates were very aggressive and, at times, overly aggressive, and it has been acknowledged from some members of the solar community that their approach could have been a bit more diplomatic,” Democratic State Senate Minority Leader Aaron D. Ford told me.

"But," he added, "I do not believe that should have led to the decision the PUCN came to on the grandfathering issue."

The game was played so rough at that time that most of my sources would not go on the record due to concerns about professional retribution. Each of them echoed Ford’s observation that negotiators for the solar industry were less than diplomatic.

Two senior solar executives involved in the case told me that solar industry tactics alienated the governor, utility commissioners, and both their staffs.

“It was unfortunate and a huge misstep to politicize this before we could get into the substantive aspects of the argument,” one said.

Commission officials denied that the ruling was punitive and Kostes said it was a “baseless allegation.”

But the final ruling “is not the outcome we hoped for,” former Nevada commissioner and solar advocate Rose McKinney-James told me. “Maybe we ought to be thinking about where there are new opportunities for utilities and new ways to advance solar.”

Oregon's ballot initiative strategy

Oregon proved collaboration works – though there was an interesting lever at work.

Senate Bill 1547 raised the state’s renewables mandate from 25% renewables by 2025 to 50% by 2040 and required Oregon’s investor-owned utilities, Pacific Power and Portland General Electric (PGE), to eliminate consumption of coal-fired generation by 2035.

The law was passed as the result of a collaborative effort by the IOUs, the state consumer advocate, environmentalists, and renewables advocates. 

It happened because, in 2015, Renew Oregon started a ballot measure aimed at increasing the state’s renewables mandate and eliminating coal.

Sierra Club, Renewable Northwest, the Citizens' Utility Board of Oregon, and other environmental groups joined in a statewide campaign. A year later, seven of 10 Oregonians favored the ballot proposal. 

"That brought the utilities to the table," an advocate told me.

“The ballot measure put some urgency to the discussion,” PGE Public Policy Vice President Dave Robertson acknowledged. The utilities were prepared to fight the ballot measure, “but it would have been an uphill battle,” he admitted.

A key turning point for the IOUs in the negotiations was when the renewables advocates agreed the utilities’ coal investments could wait to be retired until they had been fully depreciated. That got utility buy-in.

"We thought that measure could pass and we thought we could collaborate on a package with more flexibility for the utilities, more consumer protections, and more protections for system reliability,” Robertson said.

I should add that the agreement that led to the law was reached despite state regulators' opposition.

The ballot initiative has not been successful everywhere. In Florida, it has gotten mixed results at best. In Arizona, a SolarCity-led ballot initiative that would have constitutionally protected retail rate NEM was gaining momentum when two APS-backed opposing ballot measures were suddenly introduced.

An ugly political struggle was shaping up when Gov. Doug Ducey, his Chief of Staff, and legislative leaders convinced the two sides to negotiate. Unfortunately, negotiations broke down in only one day. 

That leaves the ACC decision on the VOS proceeding, due to be announced in October, as pivotal for Arizona solar. It will decide whether the traditional cost-of-service methodology still applies, justifying the utility’s claim of a cost shift, or whether a more complete cost-benefit valuation must be used, which would open a different discussion.

Solar advocates I have heard from in Arizona are not optimistic.

Hope for Maine solar?

I had planned to tell you how Maryland legislators and stakeholders worked together over three years to pass a landmark increase this year in the state’s renewables mandate. The thing I wanted to call attention to is that more than one leader in that effort called it a long, hard legislative slog.

I thought the Maryland story might encourage folks in Maine.

Last year, a wide array of renewables advocates and environmentalists and Maine’s biggest utilities collaborated on a breakthrough policy concept that could be the next evolution of NEM.

At that time, the head of the Maine Office of the Public Advocate, Tim Schneider, urged the commission to endorse it and legislators to pass it to avoid an “intense debate over the wrong thing.”

The legislature passed it but Republican Gov. Paul LePage vetoed it.

That “intense debate over the wrong thing” may now be about to happen. The commission just announced a new NEM plan that phases out retail rate NEM over 15 years. My sources there say it is not as strong a policy as last year’s legislative proposal.

There is an outside chance stakeholders can block the commission’s plan. The commissioners might then exercise their option to send the question back to the legislature. If those things happened, Maine’s utilities and stakeholders might get into that hard political slog that won Maryland a new renewables mandate.

The Governor’s Energy Office “actively opposed” the 2015 solar legislation and recently proposed a $0.10/kWh credit.

Advocates for last year’s legislation said their plan would reimburse exported electricity with at least the retail rate if not the just-updated complete solar valuation of $0.272/kWh.

Emera Maine, one of the state’s major IOUs, supports “the general ideas in last year’s compromise bill that there is a more fair and sustainable way of compensating customers,” Government Relations Manager Julie Hashem told me.

Central Maine Power, the state’s other big IOU, “would like to see a more comprehensive, forward-looking, fair, equitable, and sustainable energy policy for Maine like the one we worked on last year,” Spokesperson John Carroll told me.

Colorado's collaboration

The agreement just reached in Colorado between Xcel Energy and 26 renewables, consumer and environmental groups widely applauded. It did one thing that could be really determinative.

The final settlement included three key provisions.

First, it replaced Xcel’s initial request for a fixed charge with a voluntary time-of-use rate trial and a voluntary time differentiated rate demand charge pilot program.

Second, it approved Xcel’s proposed Renewables*Connect 50 MW solar installation. That left Colorado’s budding private sector community solar developers very concerned about fair competition.

Third, the settlement approved updates of Colorado’s Renewable Energy Plan.

The Renewables*Connect program “is one of the big things Xcel got in the agreement,” Erin Overturf, a senior staff attorney for Western Resource Advocates (WRA) and a key player in the negotiations, told me. But whether it undercuts the private community solar developers “only time will tell.”

Time is what was, crucially, written into the final agreement, Colorado Solar Energy Industries Association (COSEIA) Executive Director Rebecca Cantwell told me. There is a commitment by Xcel and the parties to ongoing quarterly stakeholder conversations.

“The stakeholder groups will be important for implementation,” Overturf agreed. “There has been relationship-and-trust-building they can expand on to deal with technical, nitty gritty details still to be worked out.”

There are some big things still to be settled in Colorado because, in the interests of reaching a settlement, the stakeholders decided not everything had to be settled immediately.

Collaboration outside the commissions

Here’s the key lesson I have taken way from covering these stories: Ideally, regulatory matters are entirely open and transparent. But, in almost every story I have written about the success of collaborative efforts, I have found there was determinative legal and ethical conferring between parties outside their regulatory proceeding.

In the Oregon case, Citizens' Utility Board of Oregon Executive Director Bob Jenks told me that when talks with the utilities began, it was challenging. The environmental groups did not initially understand utility regulation and the limits it imposed, he said.

But once the coalition agreed on the increased mandate and the coal phase out, “the rest was details,” he said. “If all the participants accept common goals, it is not that hard to work out details.”

“It was a collaborative effort between groups that wouldn’t normally sit down together," Renewable Northwest Director of Communications Cliff W. Gilmore told me. "You have to be willing to listen to people with completely different points of view.”

In Colorado, Xcel Vice President Alice Jackson initiated talks with pro-solar intervenors including SEIA, the Energy Freedom Coalition of America, Sunrun, SunShare and the Clean Energy Collective. The solar groups then met privately and conferred with the Governor’s Energy Office, the state ratepayer advocate, WRA, and the commission Staff.

They went back to Jackson and told her they wanted to get into all the issues. Jackson told them the only way to reach an agreement in the time they had was to not have 26 parties at the table.

On June 17, a small group of solar advocates and Xcel began a series of four-hour meetings several times a week.  

“It was rough early on because there was a lot of distrust and rhetoric from parties who don’t always play well together and sometimes attribute bad intentions where there may not be bad intentions,” Overturf told me.

“But I think they had seen that none of the Nevada stakeholders came out looking very good and they decided to find a path forward,” she added.

A month later, on July 19, all 26 intervenors were invited to an all-day meeting and the proposed agreement was presented.

Those who had been excluded expressed some dissatisfaction and called for changes but the basics were ratified, making the final agreement possible, Overturf said.

“It takes a big vision and real buy-in when you are in the trenches to see that the possibility of an agreement like this could be worth the heartache and the headache and Alice Jackson saw that,” Overturf said.

That is a dedicated environmental advocate describing a utility executive. Think about it.