Governor Fallin recently signed into law SB 1456, which repeals the prohibition against utilities charging customers with distributed generation more from other customers. Now, utilities are required to create a tariff for these customers that reflects cost of service. The Governor took the rare step of issuing a signing statement filed as an executive order alongside the bill, which passed unanimously in the Senate and with only five opponents in the House. Because of the anti-solar rhetoric surrounding this bill, including a political TV commercial by the bill’s author, many people have come away wondering what this new law means for the future of distributed generation in Oklahoma.
This bill is part of a nationwide attack on renewable energy by ALEC and the Koch Brothers. Lobbyists from PSO and OG&E, Oklahoma’s largest utilities, pushed hard for the bill. The intent of the bill’s backers is clear: to increase the costs on individuals who choose to produce their own power with solar or wind so as to keep more customers reliant on their businesses.
The Governor’s signing order highlights the fact that the actual language of the bill is more nuanced. It commands retail electric suppliers to develop a rate structure in which customers with distributed generation pay no more and no less than is necessary to recover the costs of serving that customer. Governor Fallin’s signing order is an effort to guide implementation and emphasize the need for consistency with the Oklahoma First Energy Plan.
The Governor’s energy plan recommends that decisions about the state’s energy system take into account human health and the full cost accounting of externalities, which historically have not been factored into energy cost analyses. Additionally, the plan notes the benefits of enhanced integration of renewables into the power grid and creating new opportunities for utilizing Oklahoma’s solar energy potential. A major theme throughout the plan is job creation and attracting new renewable energy businesses to the state. Both of these goals are advanced through expanding distributed generation – which requires local, skilled labor.
Reporters have questioned the Governor’s power to impact implementation of this bill. They rightly point out the Oklahoma Corporation Commission and the Attorney General will be involved. What they overlook is that the Governor is not changing the text of the bill, merely providing a lens for evaluating the text.
“What is the utilities’ ‘cost of service’?” is one question that will need be answered. Even the utility companies backing this bill do not yet have any estimates on the claimed infrastructure costs to serve customers with distributed generation. Despite the bill’s suggestions that distributed generation customers may be subsidized by other ratepayers, the utilities have not quantified any such subsidy. A true cost-benefit analysis should take into consideration not just the costs to serve customers but the value of distributed generation to the grid and utilities and the value to society.
Many assume the bill requires an additional charge since it uses the terms “tariff” and “fixed charge”. Under OCC rules, “tariff” includes “every rate schedule, or provision thereof, and all terms, conditions, rules and regulations for furnishing electric service.” Even if the Corporation Commission decides that distributed generation customers are being “subsidized” by other consumers (and we will contend the opposite is true), a fixed charge is not the only solution. The bill says that a fixed charge is but one possible way, and the signing statement expands upon this by expressing the desire for the Commission to consider the use of all available alternatives to a fixed charge, including other rate forms such as increased use of time-of-use rates, minimum bills and demand charges.
Our hope is that the Oklahoma Corporation Commission, the main agency that will implement this policy, will give careful consideration to the emphasis on renewable energy in the Governor’s energy plan and the bill’s recognition that distributed generation customers should not be made to pay more than their cost of service. It is critical that the OCC allow all stakeholders to participate in this process. We are hopeful that through an informed process, distributed generation customers will not be penalized for the beneficial contribution they provide. We look forward to engaging in this process.
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