Kan. regulators to hear dispute over distributed generation

Source: Jeffrey Tomich, E&E News reporter • Posted: Tuesday, July 24, 2018

Solar advocates will square off with Kansas utility Westar Energy during a hearing this week to decide whether the utility can implement demand charges for residential solar customers.

Topeka-based Westar, Kansas’ largest utility with 600,000 customers, has since 2015 sought approval for demand charges and a new rate structure for residential customers with distributed generation, arguing that they weren’t paying their fair share to maintain the grid.

The utility’s latest request follows a decision last year by the Kansas Corporation Commission authorizing formation of a separate rate class for DG customers.

The KCC, in its 15-page order, said DG owners used the grid as “a backup system resulting in their consuming less energy than non-DG customers, which results in DG customers not paying the same proportion of fixed costs” (Energywire, Sept. 22, 2017).

Still, solar advocates said the burden is on Westar to show its proposal is “just and reasonable” and nondiscriminatory. They say the proposal currently before the commission — a negotiated settlement with other parties — doesn’t meet that test.

The demand charge proposal is “severely prejudiced against (residential distributed generation) customers and results in higher charges and rates, without the evidence to support that such a dramatic change for these customers is warranted,” Madeline Yozwiak, regulatory research manager for Vote Solar, said in testimony filed last week.

Today, only hundreds of Westar’s 600,000 customers have DG systems. But the case could have larger significance as utilities across the country are increasingly proposing residential demand charges to help offset lost revenues.

While mandatory demand charges are standard across the U.S. for large commercial and industrial energy users, they remain controversial for residential customers, many of whom don’t understand the difference between kilowatts and kilowatt-hours.

Westar, in fact, would be only the second investor-owned utility to get approval for mandatory demand charges if the KCC grants its request. In January, Massachusetts regulators approved demand charges for residential solar customers who install systems after Dec. 31.

In the Westar case, customers who installed systems after Oct. 28, 2015, would be subject to the new rate structure.

The proposal is being considered as part of a broader rate case proposed by Westar in February.

Last week, the utility and numerous other parties including the Citizens’ Utility Ratepayer Board, the KCC staff and some other large electricity users agreed to a negotiated settlement that would resolve all issues in the case.

Among other terms, the settlement would reduce rates by $66 million a year and provide a one-time $50 million bill credit related to last year’s federal tax cuts.

Vote Solar, the Sierra Club, and the Climate and Energy Project, a Kansas-based advocacy group, opposed the settlement based in part on the agreement to impose demand charges on residential DG customers.

If approved by the KCC, the settlement would establish demand charges of $3 or $9, depending on the season. The per-kilowatt charge would apply to a customer’s monthly peak hour of electricity use from 2 to 7 p.m. on weekdays. The new rate structure for residential DG customers would also eliminate tiered, seasonal energy rates in favor of a single, fixed rate.

In testimony filed by Westar, consultant Ahmad Faruqui, a Brattle Group economist, said some customers would pay more under the new three-part rate with demand charges and others would pay less.

Overall, Faruqui argued that customers would find the rate design preferable because it would enable them to reduce bills by controlling energy use at times of peak demand.

But Yozwiak disagrees. She said the new rates are unsupported by evidence and discriminatory because they would leave residential DG customers paying more for the same utility service than their neighbors without rooftop solar systems.

The KCC will conduct a hearing this week and is expected to decide the case later this year.