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Power company wants to pay less for solar energy

Wed, 12/26/2012 - 8:13am
The Associated Press

The nation's largest electric company wants to slash its payments to solar generators in North Carolina, even as it seeks to increase what residents pay.

The News & Observer of Raleigh reports (http://bit.ly/TuuNVC ) that if approved, the request would reduce rates paid for green energy to levels unseen since 1984, when the state produced virtually no energy from renewable sources.

Progress Energy, which recently merged with Duke Energy, links the request before the N.C. Utilities Commission to the plummeting cost of natural gas, which is lowering the market price of electricity nationwide. The utility argues it's overpaying for the green energy that a 2007 state law requires it to buy, then passing on those inflated costs to customers.

"It is important that the costs paid to qualifying facilities reflect the utilities' true cost," said utility spokesman Mike Hughes. The company must "ensure that retail customers do not have to subsidize energy sources priced above the market."

Advocates of renewable energy say North Carolina's solar industry already operates on very thin margins due to the impending loss of a subsidy. The 12-cents-per-kilowatt-hour premium that power companies paid solar generators a few years ago is now at less than one cent. The proposed cuts could bring the industry to a standstill, advocates warn.

"There would be a big curtailment," said Richard Harkrader, chief executive at Carolina Solar Energy, a Durham developer. "The stuff under contract would go ahead, but it would be very difficult to build any new" solar projects.

In North Carolina, solar producers also benefit from a 35 percent state tax credit that can be combined with a 30 percent federal tax credit to reduce the cost of materials, equipment and installation.

The request affects electricity rates the utility pays to small renewable energy producers — those with a capacity of up to 5 megawatts. Contracts with larger producers are negotiated individually.

But Harkrader said any rate approved by the utilities commission will likely set a precedent for how power companies deal with the entire renewables industry.

The utility is seeking cuts between 3 percent and 29 percent for 15-year contracts with solar, biomass and wind power producers. The larger cuts would be to Progress Energy contracts, since it has been paying more than Duke.

The state commission has set a public hearing for Feb. 12 but is not expected to make a decision until at least the summer.

The request comes as the utility seeks a 14 percent rate increase for North Carolina residential customers to cover the cost of transmission line updates, new power plants and other operating expenses.

Hughes said there's nothing hypocritical about asking households to pay more for electricity while it seeks to pay less. Not all electricity is equal from an accounting perspective, he said.

Progress officials initially asked the utilities commission to approve the rate cut for renewables Nov. 1 but backed down after complaints. The utility agreed to let the current rates apply to any green energy project proposed by Dec. 1.

Those locked in at the higher rates would include the 130 alternative energy producers — most of them solar — that filed proposals for new projects in the month leading up to the deadline. Those projects represent more than 200 megawatts of power, Hughes said.

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Information from: The News & Observer, http://www.newsobserver.com

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