Evolution and alignment
More on net metering; updates on rate increase, supply chain, and changes to incentive program
Time to evolve net metering
Steve: We continue to hear from our members in response to our net metering theme issue (September 2022). It’s worth reminding our members that we are not faulting those homeowners who have already chosen to net meter, nor are we suggesting that the state eliminate their financial compensation for the excess power they export. This is about policy going forward, not individuals. Net metering homeowners were able to respond to a government incentive program. And we recognize that net metering, as it was implemented 25 years ago, was a way of incentivizing solar developers as a way of giving them the business of homeowners so residential solar arrays could be built cheaper as time went on.
What WEC is raising concerns about is not what’s happened in the past. It’s about the shape of things to come. As a result of net metering and other means of support, the cost of installing solar arrays has come down substantially, which we believe is a good result. Solar power has become cheaper, and if WEC or any other utility chooses or is required by regulators to buy solar power to distribute to its members, it can do so at prices that are coming closer to those of other renewables and closer to wholesale prices. Net metering, while an incentive to solar installers, represents to a utility a very expensive source of solar power, because of compensation set in statute that does not reflect market conditions as the solar industry has evolved. In a nutshell, the incentive has done its job. Going forward, we agree with a number of members who have responded to point out the state, and/or the Co-op, should be looking ahead to new strategies, like coupling solar with energy storage, including batteries. We believe the state policy on intermittent renewables must evolve to facilitate the progress we as a cooperative utility and as a state are making.
So, going forward, we need to initiate a dialogue in the state among all concerned parties about what should come next. Some say that should happen sometime later once net metering has expanded further. We don’t agree. Solar generation without storage isn’t enough. People who live off-grid have known this for decades, and have made the investment and lifestyle choice to make it work for them. Having a weather-dependent renewable resource that can only produce expensive electricity for several hours a day mostly between mid-spring and mid-fall here in Vermont is not transformative to a utility’s mandate to deliver power reliably and as inexpensively as possible to Vermont ratepayers at any time and in any season. Solar electricity is a great resource, and we need to implement improvements that are not incentivized by current net metering policy.
Louis: I have another angle to add. According to the Energy Action Network, the electric sector now produces only 2% of the total statewide carbon load. That’s down significantly from the past few years; specifically, it’s down since the Renewable Energy Standard took effect. The energy sector has gone from being a big part of Vermont’s carbon load to 2% or less. WEC of course is below that, given our all-renewable portfolio.
I think it’s important because electric utilities and elected policymakers need to focus on electrifying other sectors that are producing the bulk of the carbon from Vermonters’ activities: mainly, home heating and transportation. That matters in regard to net metering, because rising electric rates will make it more difficult for people to transition to electricity for heating and driving and transportation. I want to reiterate what Steve said, which is we’re trying diligently to separate the activities of our net metering members, who are doing things allowed under Vermont laws and regulations, from our efforts and others’ efforts to modernize the regulatory structure around net metering. We need to be clear those are two different things.
Steve: In reviewing responses from our members, we find that some complain WEC discourages net metering, and others complain we encourage net metering. In practice, we do neither. We don’t discourage it; it’s the law, and we follow the law when it comes to hooking up net metered solar arrays on our grid. As we’ve said before, this is not a complaint against solar electricity; it’s a recognition that net metering has its problems as an effective incentive.
Rate increases at WEC and elsewhere
Louis: We’re working with the Department of Public Service on our rate case since we filed for a 14.19% increase this fall. The way it works for co-ops in Vermont is: we put the requested rate into place, and if the case results in a lower rate than we requested, we refund the money above the final rate that we collected from members in the meantime. The case likely won’t be resolved for the next couple of months.
As readers may have seen, there are a number of other electric utilities in Vermont coming in for rate cases. None have been in the circumstances Washington Electric has been in the last year or so, so theirs are a bit lower than ours. Stowe came in at 13%, VEC at 8.19%. We expect other utilities to request rate increases as well.
At the risk of repetition, the reduction in production at Coventry coincided with record high prices in the New England energy market the last year and a half, and that’s why Washington Electric’s case is as high as it is. The market factor is a phenomenon across Vermont. In fact, in the unregulated New England states, the power portion of bills is going up many times what WEC’s is. You can’t compare regulated and unregulated markets apples to apples, but we’ve seen increases as high as 60-100% in some other New England states.
Steve: It’s important to add that as a not-for-profit utility, WEC charges the rates it needs to operate without loss. There’s no profit motive. There’s no planning of rate increases going forward. We’re regulated strictly by the Public Utility Commission; we can’t charge for what we don’t provide. Rate increases are a consequence and not a strategy.
You achieve the greatest carbon reduction when each individual incentive for each member for each activity is just enough to help them undertake that activity. That leaves more money for more members, and requires you collect less money from members to provide those incentives.
– Louis Porter
Louis: That’s a great point, Steve, and I would add even further: Washington Electric is owned by its members who pay its rates. It’s not owned by investors. Money raised over operating costs is returned to members over time in the form of capital credits. Since 1998, the Co-op has returned more than $9 million to members and former members.
Supply chain update
Louis: Utilities all across the US are facing shortages of key supplies and materials. Washington Electric is seeing the same. We’ve been very lucky so far in our planning and purchasing ahead of materials and the shortage has not, until recently, impacted our ability to do work.
Now, particularly with work that requires transformers, we need to be very careful about which jobs we take on and when, to ensure we have enough transformers in stock to restore a major power outage. It’s a balancing act to meet members’ desires to have system upgrades, to do the work for Communications Union Districts so they can string fiber, but we need to maintain enough materials, including transformers and poles, to restore power if we need to. We’re hopeful in the next month or so we’ll get another shipment of transformers, but a lot of those have been delayed recently. The hurricanes and restoration of power in Florida made it more difficult for us because equipment was needed to restore the system there. So we’re hoping for some relief, but we haven’t seen it yet. And we are concerned, given the number of delays we’ve had in supplies.
Steve: Sooner or later this supply chain issue will improve. In the meantime we need to keep our chins up and do the best we can.
Louis: Something that goes beyond the current supply chain issue is that for many years, as Washington Electric worked to reduce electric use and promoted conserving electricity, WEC had a standard of 5 kVA transformers as our standard transformer size. That was a good and smart thing to do at the time, because it meant we wasted less electricity through transformer losses, and those small transformers suited our members’ needs. Now we are making the effort to increase beneficial electrification, because we know it’s better for our climate to use clean electricity to power our lives instead of fossil fuels. As a result, we and other utilities are finding those small transformers are simply not big enough for member households that may have electric vehicles and heat pumps, and while beneficial and a good thing to install, use more electricity. While a 5 kVA transformer may have been fine for most households in the past, we really need to have larger transformers there if people are going to transition to beneficial electrification technology.
Steve: One often assumes one will need to install a Level 2 charger right away. As Bill Powell points out elsewhere in this issue, that’s only true if your daily mileage exceeds what a Level 1 [120 volt] can provide by charging overnight. I say this as an EV driver who has only ever charged my vehicle at home with a 120-volt charger with a 20 Amp circuit breaker. It provides my small sedan around four to six miles worth of driving for every hour of charging.
Like other utilities, WEC has to plan for the future, and like other utilities, our equipment, whether small or large, has multi-decade lifespans. We’re investing our members’ money in those improvements. To say we’re cautious may be too strong, but we’re cognizant that the investments we make on behalf of members are paid for by members, and we have to be thoughtful about how useful they’ll be to most members, and how long until electric distribution technology is likely to advance and become more affordable to usher in the need and opportunity for new investments.
Louis: Washington Electric provides a base transformer size, and if a member needs to upgrade their transformer above that, it’s at that member’s expense. The prices of transformers have increased so quickly and radically that the price that we charge members hasn’t kept up, so it’s not the full cost that members are bearing. Theoretically, our policy is, and this also goes for other co-ops, that if you create the increase in load, you pay for the upgrades demanded by that increase in load, whether that’s a new house or new devices that cause the increase. We try to stick to that, but the prices we charge haven’t kept up.
As a not-for-profit utility, WEC charges the rates it needs to operate without loss. Rate increases are a consequence and not a strategy.
– Stephen Knowlton
Steve: I expect in the future as the multiple benefits of batteries become more apparent and they become less costly, we’ll have a similar conversation about who pays for batteries. They don’t just cover the intermittency and unreliability of solar or wind, they have other uses as well, but it’s always an issue of who benefits and who pays. It’s in the figurative DNA of a co-op, that with every investment we take, we ask, “Is the intent to provide equitable benefits to all?” Sometimes it doesn’t work out that way especially during times of change in the utility world, but that’s the long-term direction.
Louis: My goal as the General Manager at Washington Electric is to encourage and help people move to beneficial electrification, with the goal of decreasing members’ use of fossil fuels, meeting the regulatorily required standards put in place by the state for doing that, and doing it at the least cost to members. I want to provide incentives that encourage people to do those things, and help do those things, at the least cost for each deployment, because that means more money for beneficial electrification and members are paying least for those things.
I asked Bill [Powell, Director of Products & Services] to align our incentives with that goal. We have enough banked regulatory credits to meet our goal for next year even if we didn’t have an incentive program at all. But rather than pause the program for a year, we’re using the space we have to align our incentives and figure out what incentives we need to offer to deploy these technologies. We’re working on this now and will have more information in 2023.
Steve: I agree this is a priority item for us. We’ve exceeded the regulatory requirements for our Tier III performance according to Vermont’s Renewable Energy Standard. We’ve found we’re obliged to have a rate increase, so to connect Louis’s dots, we have to be concerned about how much we offer in incentives at the same time we have a rate increase that will fall on everybody. It’s about balancing incentives that have a good purpose with what our members have to pay for electricity.
Louis: Were also seeing significant increase in federal money for incentives. If we weren’t seeing those, we might take a different approach. You achieve the greatest carbon reduction when each individual incentive for each member for each activity is just enough to help them undertake that activity. That leaves more money for more members, and requires you collect less money from members to provide those incentives.
Steve: It speaks to what we talked about earlier, trying to benefit as many members as possible with the least overall cost per member. We’re at a point in this effort where we’re figuring out what’s more effective and what’s less effective for our members in the context of the Comprehensive Energy Plan that drives the state’s policy and regulation.
Winter preparation and support
Louis: We encourage our members to prepare for the possibility of outages. In a rural territory like ours with relatively few line crew per mile of line, we will have outages, we will do our absolute best to restore them as quickly as possible, and our crew members are incredible. But we live in rural Vermont. There will be storms that put members out of power. I encourage members to have a plan in place, whether that means backup power, reliance on woodstoves, extra supplies.
I and others at Washington Electric, including on the Board, and people involved in the electric industry in Vermont and New England at higher levels than we are, understand that beneficial electrification relies on increased investment and continued reliability in the grid to allow for increased heating and transportation with electricity. Some of the federal spending coming down the pike is geared for that. There’ll need to be investment in utilities by investors, or in our case, member-owners, geared toward a modernized and hardened grid. It’s probably the most significant issue facing utilities over the next few years. Supply of power is essentially a market system. But making sure the wires and poles are there to deliver that electricity will be increasingly important and, in some ways, increasingly difficult.
Steve: Overall, WEC and other utilities will be tasked to provide electricity under severe conditions and in an increasingly unstable climate with a greater eye toward resilience and reliability than we do at the present, because we understand people will be more and more dependent on electricity if the move toward full-scale beneficial electrification takes place.
Louis: The end of the year is approaching, and winter can be a challenging and expensive season here in Vermont. In keeping with the cooperative spirit and tenet of Concern for Community, Washington Electric participates in several efforts to spread some cheer and support to those who need it. We support local anti-hunger initiatives and many other worthy programs through the Community Fund, which is funded by the capital credit donations of about 1,500 of our members. Separately, our staff, Board, contractors, and vendors collaborate to support veteran families in our service area.
I’d like to invite any members who are able to help out to contact Member Services. You can contribute to WARMTH, which provides emergency home heating assistance, distributed in our region by Capstone and NEKCA, by rounding up your electric bill. You can also choose to donate your capital credit refunds to WEC’s Community Fund. Finally, if you need assistance with paying your electric bill, Member Services can help you, and also help connect you to other resources. Call them at 802-223-5245 or 1-800-932-5245.