The Virginia State Corporation Commission faces a stark choice in setting the minimum charge for customers who subscribe to shared solar projects.

Dominion Energy (NYSE:D) has proposed a charge of more than $75/month, saying anything less than that would result in cost shifts to nonparticipating customers. But commission staff, legislators and the Virginia Department of Energy have joined solar advocates in expressing concern that Dominion’s proposed charge is so high it could smother the shared-solar concept in its cradle.

Expected to launch in July 2023, the shared-solar program would allow apartment dwellers and those in homes unsuitable for rooftop solar to offset part of their electric bills by purchasing a share of solar projects remote from their homes. Solar advocates said the “minimum bill” — after accounting for all bill credits — should be 1/10 of what Dominion proposed.

“The high amount proposed by Dominion … may have a significant inhibiting effect on customer acquisition,” the Department of Energy said in filed comments (PUR-2020-00125).

Dominion’s proposal also drew a backlash from the authors of the legislation establishing the shared-solar program, which was enacted last year (HB 1634/SB 629).  

“We believe Dominion’s proposed minimum bill is too high for the program to function as intended,” Sen. Scott Surovell (D) and Del. Jay Jones (D) wrote in an April 29 letter to the commission. “Prior to the passage of this legislation, Dominion Energy attempted to create a community solar pilot program with a minimum bill amount that we understand is similar to the current proposal. The pilot program did not work with a similar amount and we do not believe the program will work this time if the current proposal is enacted.”

Dominion’s April 1 proposal said that a residential customer who consumes 1,000 kWh of power should receive a minimum bill of $74.90 (distribution service charges: $29.45; transmission service charges: $20.29; generation balancing service charges: $25.16), not including administrative overhead costs, which it estimated at $10 to $20/month per customer.

Commission staff warned such administrative costs could push the bill to almost $95/month. It proposed an alternative fee of $10.95/month, which excludes transmission and distribution charges, or $55.10/month, which includes them.

“Staff believes that, ultimately, the determination of the appropriate minimum bill is a policy question for the commission’s determination,” David Dalton, principal utilities analyst with the commission’s Division of Public Utility Regulation, testified in a Nov. 18 hearing on the matter.

Staff said the commission must make a policy decision because the legislation creating the shared-solar program provided “wide statutory discretion.”

The legislation said the minimum bill “shall include the costs of all utility infrastructure and services used to provide electric service and administrative costs of the shared-solar program” and “minimize the costs shifted to customers not in a shared-solar program.” Low-income customers are exempt from the minimum bill.

Points of Disagreement

Dominion and solar advocates disagree over administrative charges, credit calculations for solar generation, and the impact of shared solar on the utility’s generation and transmission expenses.

In an April 30 filing, the Coalition for Community Solar Access (CCSA) and the Chesapeake Solar & Storage Association (CHESSA) recommended a minimum bill of $7.58/month for residential customers: the basic customer charge (currently $6.58/month) plus $1 for incremental administrative costs. The basic customer charge would be different for other rate classes, ranging from as low as $10 for small general service commercial customers to up to $120 for large general service customers.

Based on Dominion’s estimate that a typical 1,000/kWh residential customer would pay about $117/month for electricity service and supply, “this means that Dominion’s minimum bill proposal of about $75/month would be approximately 64% (nearly two-thirds) of the typical residential customer’s bill,” the solar groups said. “Individual customer savings would be reduced if not eliminated.”

CCSA/CHESSA said the additional $67 in Dominion’s proposal “seems to be entirely calculated by Dominion as the sum of the charges a hypothetical customer might have paid, net of avoided energy costs, if the customer had received no bill credit.”

“Dominion’s assertions about cost shifting … are incorrect and premised on a flawed view of its entitlement to effectively eliminate savings customers may realize by participating in the shared-solar program,” said former Texas regulator Karl Rabago, CCSA’s witness at the Nov. 18 hearing. “Dominion’s approach appears specifically designed to make shared-solar subscription unattractive to potential subscribers and, therefore, renders the shared-solar program unworkable.”

Dominion: Seeking to Prevent Cost Shifts

Dominion argued that its proposed charge is an effort “to mitigate cost shifting to nonparticipating customers.” That was a point attorney Jontille Ray, a partner at McGuireWoods, speaking on behalf of the utility, made repeatedly at the SCC hearing. “It is not meant to discourage participation” in the shared-solar program, she said.

Public comments during the hearing weighed heavily the other way. Jay Epstein, president at Health-E Community Enterprises of Virginia, a solar developer, said Dominion’s proposed minimum rate was much too high. Larry Bright, an Arlington resident who said he owns his own solar-powered home and pays $7/month for access to the grid, said $75/month would put shared solar out of reach “for almost everybody who would be interested.”

Likewise, Dr. Samantha Ahdoot, a pediatrician in Alexandria, speaking on behalf of the American Academy of Pediatrics, said Dominion’s proposal would discourage uptake of the shared-solar program. She talked of recently treating a young girl’s first asthma attack, a condition that is aggravated by air pollution of the kind the shared-solar program intended to alleviate.

There was no ruling at the end of the Nov. 18 hearing. Hearing Examiner Matt Roussy directed the parties to file post-hearing briefs by Jan. 13.

The solar groups said the commission should identify and minimize net program costs to nonparticipants by ordering a full benefit-cost analysis, “more transparent and forward-looking” integrated resource planning, including distribution planning, and more effective delivery of energy efficiency and demand response programs for shared-solar customers.

Threat to Shared Solar?

Dominion’s proposal and the two from staff would include a volumetric component that increases with the customer’s energy use. The solar groups said the charge should be a flat fee, arguing “a simple minimum bill will facilitate customer participation while minimizing potential confusion.”

“Higher costs and risks … would likely render projects nonviable,” they added. “Community solar projects are multimillion-dollar projects for which the return on investment takes many years of a project’s multidecade useful life.”

But Dominion said the impact of the minimum charge on the uptake of shared solar is irrelevant. “The appropriate question for this proceeding is not whether the framework of the minimum bill, established by statute, will be conducive to signing up subscriber organizations for the program, but what costs should be included in the minimum bill and how it should be administered to participating customers,” it said in a response to the solar groups’ comments. “The minimum bill as proposed does not interfere with the creation of shared-solar facilities, and the company believes it is too early in the program to reach this conclusion. Significantly more evidence would be needed to support a finding that the minimum bill proposal renders the program inoperable.”

Six Categories of Charges

Commission staff identified six categories of charges that could be included in the minimum bill: the basic customer charge; non-bypassable charges required by the Virginia Clean Economy Act (VCEA) for the renewable portfolio standard; transmission charges; distribution charges; generation balancing services charges; and administrative charges.

Dominion included all but administrative charges in its $75/month proposal.

“Since the shared-solar program is a couple of years away from implementation, it may be premature to set a specific administrative cost to the subscribers at this time, but the company does anticipate that could be in the $10 to $20/month range,” the company said in response to a question from commission staff. “This monthly rate would be independent of subscription size.”

“It is inconceivable that a prudent utility of Dominion’s size would incur incremental fixed costs, independent of subscription size, as large as $120 to $240 per customer per year for shared-solar billing,” Rabago responded.

“Because utility infrastructure and services costs associated with the operation of the shared-solar generator are recovered through upfront and ongoing interconnection costs assessed on shared-solar facilities, the only remaining administrative costs of the shared-solar program that must be reflected in the minimum bill are the costs incurred by Dominion for apportioning, crediting and billing-shared solar subscribers,” CCSA/CHESSA said.

Staff opposed Dominion’s proposal to set the administrative charges when the company files the tariff pages for the shared-solar program. “Staff believes that it is appropriate for the administrative charges to be subject to a formal petition, investigation, litigation and a finding of fact as to their reasonableness rather than proposed and reviewed informally after the commission’s issuance of an order in this case,” the SCC’s Dalton testified.

Dominion said CCSA and CHESSA “appear to use the basic customer charge as a proxy to account for all delivery charges and generation balancing service charges that must be recovered from customers to successfully support the shared-solar program, but the basic customer charge does not account for all costs of supporting the program.”

Commission staff said the CCSA/CHESSA proposal does not include any non-bypassable charges required by the VCEA.

Dalton said staff concluded Dominion’s proposal “appears to include some level of generation in excess of the non-bypassable charges” while leaving it to the commission to determine if recovery of such costs is appropriate.

Staff’s proposed $10.95 monthly fee incorporates the non-bypassable fees and also adopts the solar advocates’ proposed $1/month charge as a placeholder for administrative costs pending an evidentiary proceeding.

Staff’s $55.10/month option includes $49.74/month for transmission and distribution charges — a response to the company’s assertion that shared-solar subscribers will continue using the utility’s transmission and distribution infrastructure in the delivery of their electricity.

Different than Net-metered Solar

Dominion said shared-solar subscribers must be distinguished from net-metering customers who generate power behind their own meter.

“The [shared-solar] generation is not serving any of the customer’s load directly in real time … and, because of the nature of solar generation, does not cover the customer’s load whenever the solar facility is not generating (e.g., night, cloudy days, when the facility is down for repair or maintenance),” Dominion said. “Thus, at all times, the company is providing generation service to the participating customer.”

Rabago and the solar groups counter that Dominion failed to recognize the value of shared solar to Dominion’s system. “Fundamentally, shared-solar subscribers are supporting the construction and operation of clean, distributed solar generation. As such, they supplement and offset costs that the general body of customers would otherwise have to pay to support Virginia’s clean energy transition,” Rabago testified. “Shared-solar subscribers are frontline volunteers, mitigating costs that Dominion would otherwise incur to develop solar to meet the requirements of the Virginia Clean Economy Act and the renewable portfolio standard and which Dominion has not accounted for.”

The utility also ignored the locational value of solar sites, the groups said.

“Even in the near term, shared-solar generation can be injected into the grid at or near distribution load, providing transmission and distribution system savings that Dominion has not accounted for,” Rabago said. “Exported energy from shared-solar facilities does not physically travel to the homes of shared-solar subscribers. That energy will serve the nearest unserved load and will pass through a revenue meter when it does so. That service will generate full retail billings by Dominion, but without incurring the total system costs that drive Dominion’s cost of service.”

Rabago testified that the solar groups’ proposal would add about $25 million in costs to nonparticipants — adding about 35 cents/month for a 1,000-kWh/month user.

“Dominion has not performed and does not possess any research, analysis or other material on distributed generation that would be installed under the shared-solar program as [it] relates to the Virginia Clean Economy Act, the renewable portfolio standard or Virginia’s participation in the Regional Greenhouse Gas Initiative, and has conducted no evaluation of how the shared-solar program would impact its integrated resource planning process and plans,” Rabago said.

Crediting Calculation

Solar advocates also challenged Dominion’s proposal over how to calculate the bill credit that shared-solar subscribers should receive.

CCSA called for use of U.S. Energy Information Administration data, which it said justified a credit of 12.06 cents/kWh. Dominion proposed using data from FERC Form 1, which it said would amount to a credit of 11.765 cents/kWh.

Commission staff agreed, noting that Form 1 is already used by the commission in its multifamily shared-solar program.