United States: Northern Nevada's Electric Utility's Proposed Rates Maintain The Economics Of Rooftop Solar And Shift To Higher Residential Fixed Monthly Charges

Last Updated: June 20 2016
Article by Roman Borisov

Northern Nevada's electric utility, Sierra Pacific Power Company d/b/a NV Energy, has recently filed an electric rate case with the Public Utilities Commission of Nevada ("PUCN").  While the press release from the Company and subsequent news coverage focused on the Company's welcome request to maintain the current revenue requirement, at least two aspects of the proposed rate design were also newsworthy.  First, the net metering rates proposed in the filing will maintain the economics of residential rooftop solar that existed prior to the 2015 PUCN net metering decision.  Second, the rate case filing requests approval of a residential rate design with higher Basic Service Charge rates and lower volumetric Consumption rates with the aim of recovering customer-specific fixed costs through fixed charges.

When the Nevada Commission implemented new rates for partial requirement (net metering) residential customers, multiple news outlets and rooftop solar advocates reported that the decision utterly and abruptly eroded the economics of rooftop solar and eviscerated customers' investments in rooftop solar systems.  Little attention was paid to the fact that the Commission's decision phased the new rates over a 12-year period or that the rates would be evaluated and changed in subsequent rate cases to reflect economic realities of providing electric service in the utility's territory.  The rates filed by the Nevada electric utilities in response to the Commission's initial decision in December of 2015 presented minor changes to the economics of rooftop solar and gave little reason for alarm.  Sierra's net metering customers' Basic Service Charge increased by less than $6 a month while the value of each kilowatt hour ("kWh") supplied to the grid still roughly equaled the retail rate paid by Sierra's net metering customers: 7.6₵ per kWh export credit versus 8.2₵ per kWh consumption retail rate.  These minor changes hardly eroded the economics of rooftop solar investment and effectively preserved the prior regime for the short term.  Sierra's recent rate filing further preserves the pre-2016 economics of rooftop solar through at least 2020.

For all intents and purposes, Sierra's residential net metering customers will continue to, essentially, net the excess electricity they supply to the grid against the electricity they receive from the utility.  Net metering customers' volumetric charge is proposed at 7.57₵ per kWh while the credit they are to receive for each kWh exported is set at 7.22₵.  Thus, the value of kWh supplied to the grid will, for the most part, offset the value of the equal number of kWh received from the grid.  The utility's proposal would leave a net metering customer responsible for any energy received from the grid in excess of the energy supplied and the applicable Basic Service Charge.  Which brings us to my next point.

Sierra's filing proposes increases in the Basic Service Charges for residential customer classes with corresponding decreases in the Consumption Charges.  The change in the rate design comes as a result of the Commission's directive in 2015 Nevada Power Company rate case (southern Nevada's electric utility) for Basic Services Charges to start including 100% of Customer and Facilities costs as well as a portion of the Primary Distribution Demand costs.  Citing gradualism, the Basic Service Charges proposed by Sierra include 100% of the Customer and Facilities costs, but only 25% of the Primary Distribution Demand costs.  The result is an increase in the Basic Service Charge from $15.25 to $20.75 for the Residential Single Family class and from $7.50 to $8.50 for Residential Multi-Family class.  At the same time, the volumetric consumption charge is reduced from 8.5₵ to 8₵ per kWh for the Residential Single Family class and from 7.6₵ to 7.3₵ per kWh for the Residential Multi-Family class.  The move to include a portion of the Primary Distribution Demand costs in the full service residential Basic Service Charge also more closely aligns the Basic Service Charge for full service residential customers with the cost-based Basic Service Charge for net metering customers, which currently includes less than 25% portion of the associated Primary Distribution Demand costs, but is set to include 100% by the end of the 12-year transition period.

The net result of these proposed rate design changes for full service residential customers is anticipated to be a monthly bill decrease for multi-family residential customers and a slight increase in the average single-family residential monthly bill from $78.10 to $79.56.  Historically, the anticipated average bill amounts are slightly lower than they were at the time of Sierra's 2013 rate case filing, 20% lower than they were in 2006, and almost 30% lower than they were at the end of 2008.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Roman Borisov
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