Kansas regulators need to do more to shine some light on why they think it is a good idea that homes with solar panels should pay a higher rate for electricity than those without.
The Kansas Corporation Commission last week paved the way for Westar and other electric providers to create a new rate class for residential customers that use solar panels or other types of “distributed generation” systems. The new rate class can be structured in a way that those residential customers will pay a higher rate for their electricity than the neighbors next door who don’t have solar panels on their roofs.
In one sense, the argument for such a rate increase can be justified. The utility companies argue that a large amount of their costs are associated with providing a system that delivers electricity on demand when a consumer needs it. In other words, you are paying for the ability to flip a light switch and know that the lights will come on.
Maintaining such a system is expensive. The problem is, people pay for the assurance of such a system based on how much electricity they use. They really shouldn’t. The benefits of knowing that the lights will come on when you flip the switch are the same whether you flip that switch 10 times per month or 1,000 times per month. At least theoretically, that is true. A business that uses electricity to make $10 million worth of products a month may care about the reliability of electricity more than the average residential consumer. Conversely, a residential consumer who relies on electricity to power a key medical device may care about the reliability of electricity more than anyone.
The point is, this is a complicated topic that deserves more thought by regulators. The time for that thought is now. Kansas electric companies face no immediate threat from homeowners putting solar panels on their roofs. The number of such systems in Kansas is small. No electric utility is on the verge of going broke because of this.
Given that, regulators should take the time to think about truly comprehensive rate reform. It is needed because the world is changing. Think of this: Electric utilities spend a lot of time encouraging all of us to conserve electricity. Use LED light bulbs. Install a programmable thermostat. Get better windows. But if we all conserve electricity as we are urged to do, electric companies will face a financial crisis, and they’ll seek to charge us more for electricity in order to cover their costs of providing a reliable system.
Maybe we shouldn’t conserve electricity after all. Of course, we should. Producing less electricity through coal and natural gas have benefits both environmentally and in matters of efficiency. Figuring out ways to produce electricity on-site will reduce the strain on our power grid and will improve national security. Figuring out how to feasibly use renewable sources of energy — like the sun — just makes sense.
Determining the financial model for all of this won’t be as easy as flipping a switch. But Kansas regulators should be the people to insist that we figure it out.