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Sangre de Cristo CEO Provides an Overview of Rate Unbundling

The proposed rate increases for solar power customers by Sangre de Cristo Electric Association (SDECA), scheduled to go into effect on Feb. 1 are generating a small, but growing Chaffee County backlash, particularly from those customers with residential solar panels.

SDCEA can likely expect a substantial community comment prior to and during their next board meeting; a lengthy session set for 10:00 a.m. Jan. 26. Originally scheduled to be held in the Cooperative board room of the main offices at 29780 North US Highway 24 in Buena Vista, it has now been moved to a WebEx virtual meeting.

The increases (some solar panel customers say they will see a potential doubling of their energy bills), appear to have come as a shock to some SDECA customers, many of whom say this isn’t what they contracted for. The co-op in its public notice says that “The purpose of these revisions is to more equitably recover power costs and internal expenses among cooperative members.”

A conversation with SDCEA CEO Paul Erickson about the utility rates and reasons for this latest move provided some background.

“Ours has been a several-year’s journey to move to rates that are progressive, and forward-thinking, durable, that can stand the test of time. We have slowly transitioned over the past few years toward state-of-the art; moving to unbundle the rates,” he began. “That’s the keyword, ‘unbundle’. We have set up what is called a monthly service availability charge and unbundled everything else.”

“We’ve identified the various individual pieces of energy distribution costs … the whole premise of this entire rate structure has been cost-causation; cost-causers are going to become cost-payers,” he explained. “Frankly it costs as much to provide service availability to a second-home owner here a few weeks a year, as it does to make energy available to a full-time resident.”

It is a fact that many see the increases as substantial. Single-phase residential and nonresidential service will see an increase of 45 percent:

Single Phase Service

Now               Feb. 1

$ 31.83          46.15

Erickson defends the base increase. “We haven’t raised rates since 2017; we are cost-neutral. By doing this rate change we are finally getting alignment with the folks who are causing the costs.”

That has not stopped those who are upset with the rate adjustments. “SDCEA proposed rate changes, effective February 1, lack forward-thinking and are discriminatory against certain customers,” wrote one Ark Valley Voice reader. “They are a financial disincentive for customers who now have or plan to install renewable energy systems, while also being a disincentive to retrofit homes to conserve energy. They will adversely impact lower-income customers and others who strive to use less energy to save money.”

A review of the rates by another reader charges that “the rate changes are discriminatory towards net metering customers in that they will now be charged a separate ‘distribution services rate’ whenever they are not generating, even though they may have excess banked energy.”

Unbundling Energy Rates

The main offices of Sangre de Cristo Electric Association at 29780 North US Highway 24 in Buena Vista

Erickson admits that there are people who will see increases from this, but says “getting that service availability charge to contain what should be in that rate, actually benefits the folks who live here year-around. The seasonal homeowners, the folks here a few weeks a year – they are finally going to be paying that same service availability — paying their actual cost to be on our system: that’s the bottom line.”

According to Erickson, new tracking technology means cost causers are going to be cost payers. “New technology means we’ve identified the areas of cost and we can assign those to the people incurring the costs. Twenty years ago we couldn’t. I share the renewable and environmental concerns with them, but I can’t run a utility that way. We can’t run a utility on ideology; I say it at every meeting. It has to be based on fact and cost causation.”

SDCEA has roughly 14,000 customers, and around 400 of them are solar panel customers.

Erickson explained that 90 percent of SDCEA meters and 90 percent of SDCEA consumers are residential. Seventy percent of electric sales revenue currently comes from residential customers. Why the difference?

“Because 40 percent of the 90 percent are seasonal —  40 percent of our residential consumers are second homes. It costs the same to deliver to them.”

“I’m happy to tell the 400 out of our 14,000 members, those with rooftop solar, that we are paying them NOW what we pay for that energy elsewhere (Tri-state Power). The Colorado PUC says we can do that……we’re going right off the PUC regs. It’s business and cost causation, not ideology.”

Critics say that steps being proposed by SDECA do not appear to meet the intent of the Colorado Net Metering Law, which states, “A cooperative electric association shall provide net metering service at non-discriminatory rates.” The customer added, “by charging evening rates for solar net metering service customers, even when they are not using power and may have banked solar power, would seem to violate the statute.”

As a co-op, SDECA is exempt from filing the kind of Colorado Rate Case documentation and notification that other public utilities are required to file prior to applying to implement rate increases. Another factor: the relationship between our locally-owned co-op, which is a power distribution company, and its generation entity, Tri-state Power could be called complicated.

Officially, the co-operatives that distribute the power we all rely on co-own the power generation resource that is Tri-state Power. These distribution owners are nonprofits. But how it actually works can sometimes make it seem as if it is the other way around and Tri-state is calling the shots.

Erickson explained that breaking up the energy charges, unbundling them, should allow the year-rounders to get a break on their electric rates, adding “The board seeks to not subsidize second homeowners.”

Asked about the negative reactions from roof-top solar customers, he said,  “It has nothing to do with renewals for our roof-top solar customers. Now we can get it cheaper buying electricity off the grid. When you unbundle, you can get a cheaper electron energy rate; from rooftop solar, it equates to a buyback.”

Renewable energy from rooftop solar is replacement energy. “Rooftop energy is intermittent and it replaces our firm prices… it’s there when it’s there and not when it’s not and Tri-state is there 99.9 percent of the time. So under these rates we’re giving rooftop solar customers what we’d give Tri-state,” he explained. “They talk about transmission savings, but that’s not true. All rooftop solar does is replace our lowest cost resource- that’s energy theory 101 — anything introduced on our system replaces our lowest cost resource. We’re being fair without the subsidization.”

Terrain and Meter Realities

“We have the highest electric rates in the state — because of that second homeowner seasonal thing, a mild climate, practically the most rugged terrain in the solar system — well in the entire state,” says Erickson ruefully. “We serve mountain valleys, nothing flat or wide open, and we have the lowest sales per meter, plus the highest operational costs in the state … everything we do is driven by rates. Then when you add rooftop solar — we are combined into the perfect storm of electric grid cost. We’re doing everything in our power to mitigate.”

Sangre de Cristo Electric Association crews execute power line repair on CR 162 after the May 9 2019 snowstorm. Photo by Jan Wondra.

Asked about the cooperative’s commitment to the solar farm, he said they share frustration with those concerned about sustainable energy and agree the solar farm is behind in what it should be producing.

“We are a private nonprofit, so we have no tax appetite…at least one-third of the profit margin from utility scale renewable projects is for the tax benefit. Since we have no tax appetite, we can’t get the tax benefit — if we bought a solar farm the power costs would be prohibitive with no tax benefit. So the cheapest way to have a utility scale renewable product is by hiring a for-profit company that makes money selling the power back to us.”

But he adds, “typically, they build a product, strip the [tax], benefit, then sell it to another gigantic renewable company, which is what they did. It’s probably the smallest power plant in the international portfolio of the company that bought it. They aren’t going to come out here to fix a few solar panels. I’m angry, but we don’t have a voice to get those guys out here to fix our tracking system.”

Erickson, who has been with SDCEA 15 years, actually cut his “energy teeth” as a national expert on energy efficiency and renewable energy.  “People think we’re trying to punish energy efficiency. We’re not — that’s what brought me into this business. Our cause has always been to protect the have-nots versus the haves….there appears to be a striation between the two… the have-nots are the people who live, work and die here in the valley… those are the people we are most concerned about. We are focused on the growing plurality of second homeowners; rooftop solar generally are the ones who are the haves. If they are shifting costs onto the have-nots, that’s not right.”

He adds that when people criticize the cooperative, without understanding their parameters of distribution, that criticism is hard on co-op employees. “We have among the fewest employees per number of customers in the state. We run lean. We try to do best in class when we can. Our first directive is: first, do no harm to the have-nots. We try to be fair and equitable … we want clean, emissions-free energy, but there are costs in transitioning to it. We want to make sure the most financially challenged among us don’t bear the brunt of it.” It’s not backroom,” he says earnestly, “it’s the conclusion of our board of directors.”

Anyone wishing to submit comments about the proposed changes may file in writing with Sangre de Cristo Electric Association at P. O. Box 2013, Buena Vista, Colorado 81211. Rates can be viewed here.

Featured image: Critics say that the Trout Creek Community Solar project in Chaffee County, is behind schedule in power generation. Photo courtesy of Sangre de Cristo Electric Association.