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New electricity rates could help businesses go solar

By: Sammy Roth |

A new electricity rate structure soon to be offered by Southern California Edison could make it easier for businesses and nonprofits to go solar.

Known as “Option R,” the new rate structure — which could be available to commercial electricity consumers as soon as January — lowers demand charges that are difficult to reduce with solar panels but which can account for half of a business’ monthly power bill. At the same time, Option R increases electricity rates — the portion of the bill that can be substantially reduced by adopting rooftop solar.

The result is a rate structure that shortens payback periods for solar-generating systems. Brad Heavner, policy director for the California Solar Energy Industries Association, said Option R “greatly expands the market” for rooftop solar at businesses and nonprofits.

“If you have a perfect roof, and the right kind of electricity usage, you can go solar under a less favorable rate,” he said. “But Option R opens it up so a wider variety of customers can go solar economically.”

The up-front costs of installing solar panels can be especially prohibitive for cash-strapped nonprofits, including churches and synagogues. The JPL Bible Church in Rancho Mirage has been trying to go solar, but the costs have thus far proven an insurmountable barrier, said Steven Shuey, the church’s operations manager.

“Being a church, it’s not like we have a ton of money,” he said.

Even with Option R, the church would still need an investor to help finance a rooftop solar system. But Shuey predicted the new rate structure is “really going to make the solar program that much more beneficial.”

“If we get the investor, regardless of who the investor is, the payback will be tremendously better if we get Option R,” he said.

The Children’s Discovery Museum of the Desert, also in Rancho Mirage, is in a similar position. Betsy Adamson, the museum’s executive director, said the nonprofit has been trying to find an investor to help pay for a solar canopy for its parking lot, but so far to no avail.

It’s possible that Option R — which will now be known as “Rate R” — will help the museum lure an investor by reducing the payback period for a solar canopy.

“We’ll have to see if it’s enough,” Adamson said.

Southern California Edison first offered Option R in 2009, making it available to consumers with rooftop solar arrays and electricity demand between 20 kilowatts and four megawatts. But it set a 150-megawatt cap on the program as a whole, limiting the number of customers who could take advantage of it.

That cap was reached in October 2013, meaning no businesses or nonprofits have been able to switch to Option R for more than a year. Since then, the California Solar Energy Industries Association and its national counterpart have pushed Edison to remove the cap and re-open Option R.

Those efforts paid off — to an extent — in August, when Edison agreed to increase the cap from 150 megawatts to 400 megawatts. The rate-making settlement between Edison and several other parties still awaits a final sign-off from the California Public Utilities Commission, but that approval is expected soon.

Asked why it originally opposed reopening Option R, Edison didn’t provide a straightforward answer. The utility said in a statement that it decided to maintain the 150-megawatt cap “as we looked not only at that specific rate but all of our rates related to solar in the context of” net energy metering, which is the subject of a separate legal proceeding.

Others believe Edison has pushed back against Option R because rooftop solar threatens the utility’s bottom line. Khal Butler — a Palm Desert resident who has worked with JPL Bible Church in its efforts to go solar — noted that even though Edison agreed to expand the program, it didn’t come along without a fight.

“They’re doing it because they’re being beat about the head with a baseball bat,” Butler said. “Not because they’re the good guys.”

Asked whether the utility expects more commercial customers to adopt rooftop solar once Option R reopens, Edison said only that “demand for this rate option will depend on customer interest.” In the past, though, Edison has argued that Option R has not incentivized more businesses and nonprofits to go solar than otherwise would have.

In a letter to the public utilities commission earlier this year, Edison’s vice president for regulatory operations, Megan Scott-Kakures, wrote that “there is no correlation between the availability of Option R” and the number of non-residential customers requesting funding under the California Solar Initiative. While there was a huge spike in businesses and nonprofits requesting solar incentives when Option R first became available, Scott-Kakures noted, applications then leveled off — and stayed relatively constant in the few months after Option R was eliminated.

Customer interest will determine how long the new rate structure remains available. The more businesses and nonprofits switch to Option R, the sooner Edison will reach the 400-megawatt cap.

For the California Solar Energy Industries Association, accepting a 400-megawatt cap was preferable to seeing Option R shuttered entirely, Heavner said.

“It’s not clear that the 400 megawatts will last past 2017,” he said. “But we didn’t oppose the settlement, because we recognize that it’s a good step forward for the time being.”