Thoughts on Solar by Run on Sun's Founder & CEO, Jim Jenal

Glendale Water and Power has started holding public workshops on its proposed rate increase - though still remaining mum about their mandated Feed-in Tariff program.  Here’s an update.

As we reported before, GWP is poised to impose a rate increase over the next five years in excess of 24%.  The first two of six scheduled public meetings to discuss the rate increase were held on Wednesday and Thursday and GWP posted their presentation materials from those meetings online.  Here are some of the highlights from those materials:

• Coal will continue to play a significant role in GWP’s energy mix, being as much as 18% by 2020.
• In 2012, GWP had more service outages per customer than any local utility, narrowly edging out SCE and more than five times as many as PWP.  (Indeed, GWP had nearly twice as many outages as PWP even in 2011 when PWP had the worst windstorm in living memory.)
• Perhaps because practice makes perfect, GWP had the shortest duration of its outages, with SCE being the worst.
• By the end of 2018, systemwide electric rates will increase 40.8% over 2007 prices if the proposed rate increase is approved.
• GWP’s requested 8% increase for 2013-14 compares with 6% in LADWP, 1% in PWP, 1.75% in BWP and 7.7% in SCE territories respectively.

Of course, in any systemwide rate increase like this, some customers will fare better than others.  So who are the winners and losers?  This chart is pretty definitive:

What is going on here?

In each and every year of this five-year rate increase, residential customers are seeing higher rate increases than any other class of customer in Glendale! They aren’t looking at a 24% rate increase, their rate increase is 26.4% or 5.28%/year.  In contrast, small commercial customers who do not exceed the threshold for demand charges (i.e., peak demand less than 30 kW) are seeing the smallest increases.  (GWP’s spokesperson asserted that this result is mandated by Proposition 26.)

Unfortunately, there is nothing in the presentation about the reinstitution of GWP’s solar rebate program, and the GWP website simply advises customers to “check back again after July 2013."  Of course, it would be more useful if GWP published its plans for that program - along with the FiT - and allowed the public time to comment and possibly improve the program.

At present, that doesn’t seem to be happening in Glendale.

So electric customers of GWP are going to see their rates increase substantially - albeit from a relatively low base at present - and the most effective tool that they could have to counter those increases, adding solar, remains in limbo.

“It’s been a long, time coming…” and we are just now starting to get some details about the state-mandated Feed-in Tariff program for Glendale Water & Power (GWP).  While there is more unknown than known, here’s an update on what we have learned so far.

Will GWP’s FiT Actually Support PV Like This?

As we have reported previously, GWP is under a state-law mandate to offer a solar Feed-in Tariff (FiT) program by July 1, 2013 - some 33 days from today. Keeping in mind that it took LADWP the better part of three years to design and approve its FiT does not fill one with confidence that GWP can go from having nothing in writing to distribute to the public to a successful program start in just 33 days.  (Of course, the law only requires that a program be “offered” - it says nothing about whether that program is designed in a way that gives it any chance of being successful.)

Despite having been told that public workshops would be held during May and June, it is clear that at least the May dates have gone by the board.  With the clock ticking, and nothing new on the GWP website about its FiT, we started combing the Glendale website for possible hints in the posted agendas for either the Water & Power Commission or the City Council - no luck.  So we decided to call the City Clerk’s office, because in any city, the City Clerk is the one person guaranteed to know what is going on.

Bingo!

We spoke with Michael Dunn who gave his title as Secretary to the City Clerk.  He informed us that indeed the FiT is scheduled to be considered by the City Council for the first time on June 18, with the second reading (and presumed adoption) one week later on June 25.  He also informed us that the Agenda, complete with downloadable materials, should be available to the public on June 13.  (You can access the Agendas for the Glendale City Council here.)  Of course, a first disclosure of a program as complicated as a FiT just 17 days before its state-mandated go-live date does not suggest that Glendale or GWP actually wants any input from the public.  Rather, this is a schedule that suggests that any public comment is entirely pro forma and whatever is put forward by GWP is what the Council will adopt.  (No doubt citing the state-mandated deadline as justification for taking the proposal “as-is."  Classic.)

Unfortunately, Mr. Dunn knew nothing more about the FiT himself, but he offered to send me to someone at GWP who might be able to answer more of my questions.  He transferred me to Victor Pacheco who gave his title as Senior Electric Service Planner.  Mr. Pacheco  told us that the program would be offered for projects between 30 kW and 1.4 MW capacity and that the program was limited to 4.5 MW total.  He was unable to tell us anything more about the remaining details of the program, such as the base price for energy to be offered, or whether time of delivery factors would be applied, or whether there would be any carve-out from the 4.5 MW total for smaller sized systems (as there is in Los Angeles).

He was able to tell us that a FiT Manager was going to be selected (apparently from existing staff) but no such appointment was yet in place.  Well, not like there’s any urgency here - after all, you still have 30+ days to figure this out - what could possibly go wrong?

As for public meetings to discuss the FiT, he was unaware of any and the only public meetings alluded to on GWP’s website concern their five-year, 24% proposed rate increase.  While the FiT is apparently bundled into that rate ordinance, it just doesn’t make sense to try and combine the two into the same public meeting.

As always, we will update this post as we learn more information.

We have just learned that Glendale Water and Power (GWP) is proposing some significant rate increases over the next five years with a Council vote tentatively set for August.

GWP’s proposed rate increase breaks down as follows:

• 8% in fiscal year 2014;
• 7% FY15;
• 5% FY16;
• 2% FY17 and
• 2% FY18

Put that all together and you are looking at a 24% rate increase over the next five years, or 4.8% per year.  (By way of comparison, we generally assume a 4.5%/year rate increase for municipal utilities and 5.7%/year for SCE when we do our Return on Investment modeling.)

GWP is proposing to hold a series of public meetings during June to discuss these new rates.  From the GWP website, here is the presently scheduled set of meeting dates:

1. Wednesday, June 5, 2013, 7:00 p.m. – 8:30 p.m.
   Dunsmore Park Community Room - 4700 Dunsmore Ave., La Crescenta, 91214
2. Thursday, June 6, 2013, 7:00 p.m. – 8:30 p.m.
   Sparr Heights Community Center - 1613 Glencoe Way, Glendale, 91208
3. Wednesday, June 12, 2013, 7:00 p.m. – 8:30 p.m.
   Police Community Room, 131 N. Isabel St. 91206
4. Thursday, June 13, 2013, 7:00 p.m. – 8:30 p.m.
   Boy Scouts of America - 1325 Grandview Ave. Glendale, CA 91201
5. Wednesday, June 26, 2013, 7:00 p.m. – 8:30 p.m.
   Glendale Youth Center - 211 W. Chestnut St., Suite 302, Glendale, 91204
6. Thursday, June 27, 2013, 7:00 p.m. – 8:30 p.m.
   Pacific Edison Community Center - 501 S. Pacific Ave. Glendale, 91204

Unfortunately, at present the GWP solar program for both residential and commercial customers is “not available,” with the website advising interested residential customers to “check back again after July 2013,” but simply telling commercial customers that the “program is currently not available.”

Faced with a substantial rate increase - with 63% of that increase coming in the next two years - GWP customers should have the option to Go Solar NOW! Hopefully the process that implements these new rates will also provide some assistance for GWP customers who wish to do just that - we will keep you posted.

UPDATE - The GWP website is now displaying tables that layout the anticipated rebate rates for the next three years.  These tables, contrary to what we were told by GWP - but consistent with what we reported regarding the ordinance passed by the Glendale City Council - indicates clearly that systems larger than 30 kW (nameplate) are eligible for rebates and those rebates will be paid as a PBI rebate - not an EPBB rebate.

Full story »

(Editor’s Note: Part 1 of this series - Understanding Your Bill can be found here.)

Commercial solar power systems are economical now - and in the first part of our series we explained how understanding your bill is the key to understanding what is currently driving your costs and how much you will be able to save.

Now we turn to the next step in preparing to install a commercial solar power system - understanding the applicable rebates and tax incentives.  We have written at great length before about these topics, including a blog post summarizing the year-end state of all solar power rebates in the Run on Sun service area and our solar tax incentives page provides great detail into this topic for all types of system owners - commercial, residential and non-profit.  In this post we will analyze just those rebates and incentives that are applicable to commercial solar power installations.

PBI vs EPBB Rebates for Commercial Solar Power Systems

Rebates for commercial solar power systems come in two flavors - Performance Based Incentives (PBI) and Expected Performance-Based Buydown (EPBB) - but PBI rebates are by far the more common for commercial systems above 30 kW.  EPBB rebates are lump-sum payments made based on the expected performance of the system.  The rebate rate is denoted in dollars per Watt based on the calculated AC Watts for the system.  EPBB rebates are nice for the consumer as the money is paid as soon as the system is approved, but for larger systems, they represent too much upfront risk for the utility.  Since there is usually no requirement to monitor the performance of the system, the utility ends up putting out its money with little guarantee of reaping the expected benefit.

PBI rebates, on the other hand, are paid out over five years based on the actual performance of the solar power system as verified by monitoring devices attached to the system inverter(s).  PBI rebates are denoted in cents per kilowatt hour generated.  Since the utility only pays for power actually provided, rebate dollars are guaranteed of providing the bargained for benefit. However, because of the need to provide the utility with verified performance data, PBI rebates increase the Operations & Maintenance expense of a commercial solar power system - at least for the five years of the rebate.  On the other hand, if your system is well maintained and conservatively designed, you may actually receive more in rebate payments than originally projected.

Each utility will have a threshold system size beyond which the system owner must take a PBI rebate.

Regional Rebate Amounts for Commercial Solar Power Systems

Of late there has been a great deal of turmoil among the local municipal utilities regarding their rebates.  This has lead to uncertainty and delays.  As of this writing, here is the landscape for commercial solar rebates in the Run on Sun service area:

This means that as of this writing, only SCE and PWP are paying rebates on commercial solar power systems greater than 30 kW. While LADWP is expected to come back online this summer, in what form remains to be seen.

We believe that these suspensions have come about because the lobby for commercial solar rebates is small and too often silent.  Of course, when no public discussion occurs before the decision is made to suspend rebates - as happened in both Glendale and Burbank - it is pretty hard to organize solar supporters.  Indeed, in Los Angeles, where the plans to severely limit solar rebates were publicly debated, the solar community came out in numbers to argue for those rebates - which resulted in LADWP only suspending their program for a comparatively short time.

The conclusion in inescapable - until there is a statewide feed-in tariff at a reasonable rate that offers predictability along with economic viability, the market for commercial solar in this state will continue to be subject to the caprice of unaccountable bureaucrats.

Tax Incentives for Commercial Solar Power Systems

While the news regarding rebates remains murky, the news on the tax front is - at least for this year - very good.

One caveat before we begin - while we believe this information to be accurate as of the date that it is written, you must always consult with your tax professional as to the applicability of these incentives to your tax situation.  Accountants shouldn’t design solar power systems and we don’t give tax advice.

Commercial solar power systems qualify for a federal Investment Tax Credit of a full 30% on the direct cost of the system.  (By “direct cost” we mean those costs directly associated with installing the solar power system.  The applicability of the Credit to indirect costs - such as deciding to re-roof your building before adding solar - must be decided on a case-by-case basis - see why that tax pro gets paid the big bucks?)  That Credit can be taken over two years and is a substantial incentive if you have the tax liability to offset.  Fortunately for systems that are put in service in 2011, commercial solar power system owners can elect to receive a Grant directly from the Treasury for the full 30%, regardless of their tax appetite.  Moreover, that Grant is paid out typically within 60 days of project completion, as opposed to being credited in the next tax payment cycle.  This provision in the tax code is subject to expiration at the end of this year, and there is no telling whether a more conservative Congress will renew it.  (The tax Credit, however, continues through 2016.)

Commercial solar power systems also qualify for accelerated depreciation.  For the past several years, that was a five year period with 50% in Year 1 and the remaining 50% divided evenly over the next four years.  (California offers a similar depreciation schedule.)  However, once again 2011 is special.  This year alone, that depreciation is 100% in Year 1, meaning that system owners may realize more of their savings sooner.

Collectively, rebates and tax incentives can reduce the cost of a commercial solar power system by 50% or more.  When combined with the savings from the energy generated, it is easy to see why a commercial solar power system is one of the best investments a building or business owner can make.

Up Next - Part 3 of Our Series: Understanding Your Bid for a Commercial Solar Power System