The politically motivated charge that the Montana Public Service Commission is somehow “anti-solar” demands a reasoned response.
For the record, I am a big fan of solar, as I am of emerging technologies of all kinds. As a free-market enthusiast, I cheer on all energy innovators and entrepreneurs, and firmly believe that good public policy demands that we create an even playing field for all technologies, while providing special privileges for none.
Being prejudicial and “taking sides” is simply not an option. Why? Because the PSC is duty-bound to protect the Montana consumer, assuring them “just and affordable rates,” irrespective of the energy source. The law requires this, and I honor it. Indeed, federal law (the Public Utility Regulatory Policies Act) explicitly demands that in the process of the PSC authorizing renewables rates and contracts, we must establish “consumer indifference,” i.e., renewables rates that hold the ratepayer “harmless” relative to the least expensive energy source otherwise available.
For years, the Montana Consumer Counsel has maintained that very long qualifying facilities (QF) contracts make consumer indifference impossible to achieve, given the constant state of innovation and change within the energy markets. Level, 25-year contracts will be far removed from the actual market value of the energy being produced and purchased in just a few years. Under these circumstances, the ratepayer assumes all of the risk. This hardly qualifies as “just” rate-setting or good public policy.
MCC economists have also pointed out that when wind and solar power purchase agreements have embedded in them a “presumed” future cost of CO2 regulation (carbon taxes, etc.), they are passing on to consumers a major price hike that doesn’t now – and may never – exist. Better to have shorter contracts that can be periodically adjusted to the market, and rates that reflect CO2 penalties only after they come into existence, than be locked into 25-year contracts based on sheer guesswork.
Previous commissions have generally dodged this political hot potato, but we rolled up our sleeves and went to work. Consider the PSC’s recent decision to suspend the four-year-old QF-1 solar energy rates (set at approximately $66 per megawatt) until updated rates could be established. Out-of-state developers were perched at Montana’s borders, ready to rush in and take advantage of these inflated rates, reaping windfall profits at consumers’ expense.
Using the best information available, the PSC arrived at a current rate about one-third of the old one — saving ratepayers an average of $2.6 million per project, while maintaining fair and accurate profit margins for developers. Included in our decision was the removal on the non-existent carbon tax, and the shortening of contract lengths from 25 to 10 years.
It is widely asserted that guaranteed renewables contracts of less than 25 years cannot attract financing, but no evidence has ever been presented to support this claim. Were it true, that would only be because these projects are too risky in the first place — in which case, the ratepayer certainly should not be on the hook, guaranteeing business profits for 25 years!
Shorter wholesale contracts protect all parties, and more closely match the retail rate reviews that happen every four to six years in the utilities’ own rate cases before the commission. Remember also that shorter contract lengths do not alter the PURPA requirement that utilities continue to purchase power from QF renewables.
If, under these accurate, consumer-neutral rates, some solar projects can’t attract investors, it is certainly not because they are being discriminated against. Billions in targeted subsidies, tax credits and loan guarantees — together with state mandates — hardly constitutes discrimination. The problem all forms of energy development face right now is an over-built, over-supplied market with corresponding low prices that render these projects financially less attractive. Don’t blame that on the PSC.
Roger Koopman represents Bozeman on the Montana Public Service Commission as the commissioner for District 3. He is serving his second four-year term.