Charging Rate Payers for What?

appalachian_school_of_pharmacy

The Appalachian School of Pharmacy… located in Appalachian Power Co. service territory.

by James A. Bacon

In 2012 Dominion Virginia Power donated $10,000 to the Appalachian College of Pharmacy in Buchanan County, far outside the company’s service territory. It so happens that Del. Terry Kilgore, R-Gate City, head of the House Commerce and Labor Committee, has been a salaried fundraiser for the school, according to the Associated Press. It also so happens that Kilgore played an important role ushering legislation through the General Assembly this year that suspends until 2022 biennial reviews of Dominion’s base rates. Of the $10,000 Dominion donated, $4,000 was recouped from Dominion ratepayers, the AP says.

It’s one thing for Dominion shareholders to donate to charitable causes, even if the donation is politically motivated. Dominion should be entitled to the same right to participate in the political process as any business. But it’s quite another thing for the giant utility (and sponsor of Bacon’s Rebellion) to charge such donations to rate payers.

“Why should captive ratepayers, who have no option to get electricity from another company, be compelled to fund the charitable choices of a company?” AP quotes former Attorney General Ken Cuccinelli as asking. “Leave the ratepayers their money, and let them make their own charitable choices.”

We’re not talking about a tremendous amount of money here. According to the AP, Dominion included $1.37 million of donations in the cost of service it charged to customers in 2o11 and 2012. State Corporation Commission staff recently filed testimony saying that Dominion should not be able to pass along $3.3 million in donations from 2013 and 2014. Dominion spokesman David Botkins says the company will file a detailed rebuttal later this month.

Many of those donations may be entirely legitimate, tied at least tangentially to the business of generating, distributing and conserving electric power. I can’t get exercised about the $7,500 donation  to the Peninsular Council for Workforce Development, cited in the AP article, even if CEO Matthew James also serves as a Portsmouth delegate to the General Assembly. As a major employer, Dominion has as much a stake in workforce development as any company in Virginia. (Although I would be interested to know if Dominion donated to other workforce councils in its service territory.) And, frankly, from the rate payer perspective, we’re talking chump change here. There are much bigger issues to worry about, like how rapidly to phase in renewable energy sources, where to build electric transmission lines, whether or not to build a nuclear power plant, and so on.

But the controversy isn’t about the impact on ratepayers. It’s about the political clout of the most influential corporation in Virginia politics. Dominion shouldn’t charge ratepayers for actions designed to influence legislation effecting ratepayers.

Katherine Bond, director of public policy for Dominion, told the AP that the company feels it “is important to support the communities in which we do business.” But the Appalachian School of Pharmacy, located in Oakwood, Va., is not a community served by Dominion. The company’s motive in donating the money might have been pure as the driven snow — but no one is going to believe it.

Dominion would do itself a big favor by tightening its guidelines for billing ratepayers. Limiting donations to communities within the company’s service area would be one place to start. If the company doesn’t police itself, legislators might be tempted to draft a law limiting such donations — and those limits could well be stricter than any limits the company would want.

Update: Dominion has issued a response to the AP story. Here’s the  meat of it: “Some perspective about the source of funding for those investments is important. In 2014, our company donated $18.5 million to charitable causes; the vast majority of these funds were provided directly by shareholders. In fact, in our latest filing with the Virginia State Corporation Commission (SCC), we stated that only about $740,000 of these donations were supported by rates collected from our Dominion Virginia Power electric customers in the Commonwealth. That’s just 4 percent of the total.”

I have posted the full response in the comments and highlighted it in yellow.

There are currently no comments highlighted.

30 responses to “Charging Rate Payers for What?

  1. Jurisdictions are split as to whether charitable contributions are, and if so, to what extent, chargeable to ratepayers as a legitimate operating expense. When allowed, they normally must be reasonable in amount and directed a recognized charitable organization or qualified nonprofit.

    For example, FERC allows recovery of charitable contributions. http://r.search.yahoo.com/_ylt=A0LEV1y91dlVAR0AW6xXNyoA;_ylu=X3oDMTByNXQ0NThjBGNvbG8DYmYxBHBvcwM1BHZ0aWQDBHNlYwNzcg–/RV=2/RE=1440368189/RO=10/RU=http%3a%2f%2fwww.ferc.gov%2findustries%2fgas%2fgen-info%2fcost-of-service-manual.doc/RK=0/RS=LYelojlLsAT4MHmdaq4Qw3IUe1s-

  2. GOOD LORD! Are you actually calling for regulation?

    isn’t that going to cost money?

    you’re actually advocating regulating corporations and limiting their free speech donation rights?

  3. Federal law generally allows the recovery of reasonable charitable donations to recognized charities and nonprofits as a recoverable expense from ratepayers. States are split. This is hardly a new issue.

  4. Jim,

    You didn’t read my post carefully. I’m talking about regulatory law – FERC, FCC, state PUCs. The federal regulators usually allow recovery. State law and policies vary. Some allow full recovery; others part or none.

    TMT

    • Oh, regulatory law… Such law may be appropriate in that context. Dominion is not a dominant player in the political system in Washington, D.C., like it is in Richmond.

    • The FERC has no say whatsoever in what electric utilities recover from their ratepayers; it regulates wholesale transactions only.

      • Rowinguy. FERC allows charitable contributions in wholesale rates that are passed along to retail users. Ditto for the FCC. It allows charitable contributions in access charges and reciprocal comp fees that are passed along to consumers. Sorry if I was not clear enough.

        • Yes, you are probably right. FERC mechanisms will set rates for wholesale purchases of power that local utilities will most likely be passing on in their entirety to their customers. I was a little hasty in my response, TMT.

  5. “Dominion should be entitled to the same right to participate in the political process as any business.”

    I disagree. Any for-profit company which holds a legislated monopoly position should be tightly restricted from participating in the political process. This is exactly the problem in Virginia. Dominion should be given the choice of continuing its monopoly OR making gifts and campaign contributions to Virginia politicians. Recovery through the rate setting process is interesting but a minor point compared to buying the politicians charged with regulating the monopoly.

    Virginia is the most systematically corrupt state in the union. This is just another reason why.

    • DR – a 1980 SCOTUS case, Consolidated Edison v. Public Serv. Comm’n, 447 U.S. 530 (1980), discussed regulated utilities’ First Amendment rights in the context of holding that a regulatory agency could not prevent a
      state-regulated public utility from using its billing envelopes to advocate
      nuclear power even though the company’s monopoly status was
      conferred by the state and the corporation had a duty to operate in the
      public interest.” The Court upheld the power company’s rights to send bill inserts advocating nuclear power.

      Of course, state law could restrict the ability of a utility to include public advocacy costs in its revenue requirement and, hence, rates.

      So long as other entities, such as unions, nonprofits, PACs, can make political contributions and bundle them, corporations should be permitted to do so as well. And true constitutional reform would also prohibit a person from making a contribution to a candidate for whom the contributor cannot vote. No out of state contributions for Warner or Gillespie.

      • “Of course, state law could restrict the ability of a utility to include public advocacy costs in its revenue requirement and, hence, rates.”

        There actually is a state law that touches somewhat on a public utility’s advocacy costs in Virginia. Code of Virginia Section 56-235.2 prohibits the recovery of advertising costs, other than for ads required by law, rule or regulation OR ads that promote the public interest, conservation or more efficient use of energy.

        Lobbying expenses are borne by utility shareholders.

  6. Wow! No sooner than I wrote that Virginia is the most systematically corrupt state I read this – http://bit.ly/1U0QRFS

    It’s hard to pick a favorite quote from a piece with as many good quotes as that one. However, I’ll go with this …

    Authoritarian
    Is that government best that governs least? Virginia Way politicians rail against out-of-touch D.C. bureaucrats while fortifying the “Dillon’s rule” federalism that benefits themselves. Localities cannot pass laws absent consent of the state.

    My only edit would be to say that it is Virginia Way Republican politicians who rail against out-of-touch DC bureaucrats …

    Yet another good example of the deceitful, two faced RPV.

    • And I’ll agree – “The Virginia Way” is a disgusting and corrupt concept as practiced today and I’d apply that to either party.

      there is no way that a regulated monopoly should be donating money to the people in the General Assembly that write laws that affect the monopoly and ratepayers.

      However – on Dillon – every State has a version of Dillon – where the State reserves power for itself and decides what powers are delegated to counties and cities.. just a continuation of how the Feds operate with the States. I certainly don’t want 133 definitions of “murder” or fire code in Va.

      • I could see very good reasons for having different definitions of murder and fire codes. In a rural county where police may be a long way away having the “castle doctrine” might make sense. In an urban locale where you can leave your house and run to safety it might not make sense.

        What fire codes should Arlington County adopt for barns and agricultural out-buildings?

        Actually, as I understand it, fire codes are one of the few things handled intelligently in Virginia. The state fire codes can be amended by the localities to fit the situation at hand. http://www.fairfaxcounty.gov/fr/prevention/fmfpc.htm

        If the good people of Fairfax County want to outlaw the personal possession of dynamite shouldn’t that be their business? If the good people of Lee County want to allow personal possession of dynamite (since it has use in agriculture) shouldn’t that be their right?

        “However – on Dillon – every State has a version of Dillon – where the State reserves power for itself and decides what powers are delegated to counties and cities.. just a continuation of how the Feds operate with the States.”

        Your civics teacher must be rolling over in his or her grave.

        The relationship of the federal government to the states was the subject of much of the US Constitution. The founders realized that this separation of powers was critical to the maintenance of liberty. The problem is that, in some states, the authors of the state constitution were charlatans and rubes. They wrote and rewrote state constitutions for their own gain. In Virginia this was clearly the case. The 1902 constitution was a disenfranchisement of African – American Virginians. That work of applied racism was only rewritten 70 years later after the federal government made it clear that much of Virginia’s 1902 Constitution was illegal under the US Constitution.

        The members of the Imperial Clown Show in Richmond make much ado about Thomas Jefferson. They refer to him as “Mr Jefferson”. They mis-characterize his philosophy over and over again in a vain attempt to justify their half-witted policies. It seems to me that the founding fathers would have wanted the government as close to the people as possible. In their day that meant a separation of federal and state power. Today, it means a separation of state and local power.

        All states split the responsibilities of government between the state and the localities in some way. Some states (like Iowa) give the localities a great deal of power. Some states (like Virginia) give the localities very little power. Given Virginia’s ridiculous over-concentration of power in the General Assembly it seems to me that things need to change. We need a two consecutive term governor, non-partisan electoral district setting, judges recommended by a merit commission, legislators who are actively practicing law abstaining from voting on judges, more power to the localities, term limits for General Assembly members, elections held coincident with federal elections, easier access to get on the ballot and restrictions on political donations.

        In other words, we have gotten just about everything wrong. I am sure Mr. Jefferson would be proud of America’s least democratic state.

        • People like the Dillon Rule when it serves them. For example, the Fairfax County Federation of Citizens Associations, which always has a plank in its legislative program to cut back or eliminate the Dillon Rule in favor of home rule, has been advocating the state declare library services to be critical services under state law because many board members don’t like the spending cuts imposed on the Fairfax County Libraries and the plans to make the Libraries more focused on electronic media than paper books. That is at least as hypocritical as anything the GA does.

          Moreover, it would likely be unconstitutional to have separate murder statutes in a state that depended on where the homicide was committed. The 14th Amendment applies the equal protection clause to the states. I think that’s a good idea.

          • You can’t discharge a firearm outside in Fairfax County unless you own 20 or more acres of land. While you can hunt on large lots you can’t use any rifle over .22 caliber.

            Why? Because the population density is too high in Fairfax County to have people blasting away at things with a .30 – 06 on their 3/4 acre lot.

            Of course people try to bend whatever rules are in place for their own benefit. I just think it’s harder to bend the rules in your own county without anybody noticing what’s going on. There’s no practical way for voters in SouthWest Virginia to decide whether road improvements in Loudoun County are necessary or not. The net effect is that we all have to trust the General Assembly. The absurdity of that should be self evident. If not, please review the success of the Tobacco Commission.

          • The Code 15.2-1209) allows “Any county [to] prohibit the outdoor shooting of firearms or arrows from bows in any areas of the county which are in the opinion of the governing body so heavily populated as to make such conduct dangerous to the inhabitants thereof.” However, they must allow deer hunting with firearms on any tract of land five acres or larger. Bow hunting requires a two acre or larger tract. I suspect Arlington County could draw lines differently than Appomattox County, but not for hunting, assuming you can find a 5 acre tract in Arlington.

            The castle doctrine (the right to use reasonable force to defend one’s home or personal property) in Virginia depends on whether the other party had a right to be on the armed person’s land. Alexander v. Commonwealth., 508 S.E.2d 912, 915 (Va. 1999). The court agreed that a person whose car was being repossessed had a right to brandish a firearm when he felt the re-processor would not allow the former to retrieve personal property within the vehicle. Once removal occurred, the right to brandish arms ceased.

            The court continued “The use of deadly force to prevent threatened harm to property is never justified except in defense of habitation [including the curtilage]; however, the threat of deadly force may be justified under certain circumstances.”

            It seems to me that a person cannot lawfully shoot a burglar in the back when he is running down the driveway with a stolen laptop anywhere in Virginia, but could do so if surprised in one’s bedroom by the same burglar. Why would it matter whether the burglar was in Fairfax or Fluvanna County?

    • Judge Dillion’s ruling on the Iowa Supreme Court in 1868, that municipalities owe their existence to the state and therefore can be controlled or abolished by the state, has been adopted in various degrees by a number of states. A few years later in 1871, a Michigan Supreme Court judge, Thomas Cooley, stated: “[L]ocal government is a matter of absolute right; and the state cannot take it away”.

      It is curious that this ruling has not been given at least equal attention to Dillon’s opinion. It is true that our Constitution reserves powers for the states that have not been expressly awarded to the federal government. However, we seem to be losing touch with our original founding document, the Declaration of Independence, which laid out four major principles regarding our rights as people:

      1. Certain rights – life, liberty and the pursuit of happiness, are natural rights held by virtue of being human.
      2. Governments are created to secure these natural rights.
      3. Every government owes its existence to and derives its just powers exclusively from the community that creates it.
      4. When such governments become destructive of the peoples’ natural rights – or when the government no longer recognizes that its authority comes from the people who created it – the people have a right to alter that government or remove themselves from its improper influence and establish new systems which properly protect their safety and well-being.

      The essential notion is that our governments exist to serve the natural rights of the people – not to determine whether those natural rights should be exercised.

      We, the people, are the source of the power and legitimacy of our government and its regulatory bodies. For too long we laid down the mantle of our sovereignty. As we became distracted by the business of our lives, those with special interests were only too happy to make decisions for us. The mists of time have obscured the efforts of our forefathers and we have forgotten that with freedom comes responsibility.

      The Declaration of Independence was written by a Virginian, a Virginian led the creation of our Constitution, a Virginian was considered the father of our country, and four out of our first five presidents were from Virginia. This land was a cradle for liberty, let it be so again.

      “A long habit of not thinking a thing wrong
      gives it a superficial appearance of being right,”
      Thomas Paine

      I have been investigating the possibility of establishing a municipal utility in our area to demonstrate the costs and benefits of developing renewable generation and more efficient gas-fired generation, as well as other ways of saving customers money and providing a business friendly community through greater energy efficiency, demand response and other programs.

      The idea was to provide data about how best to integrate new technologies and business models into our existing energy system that would allow Virginia utilities and the SCC to decide which programs to roll out on a statewide basis that would have the greatest benefit to all of our citizens. It seemed that projects initiated on a small scale by a group committed to their success, would give the fairest evaluation of the best options.

      I was stunned to learn that, except for two municipal utilities formed long ago, the General Assembly has passed a law which forbids a municipal corporation from selling electricity at retail. As far as I know, Virginia is the only state which prohibits a community of people from exercising the fundamental right of deciding how to provide their energy. I was further shocked to learn that Virginia disallows citizens’ initiatives to be placed on the ballot.

      Rules of this kind do not lead to a free and prosperous society. Those who believe that such tight control over the freedom and actions of others will only further their own demise and that of their communities.

  7. see.. here is the perfect example of clear thinking:

    ” Any for-profit company which holds a legislated monopoly position should be tightly restricted from participating in the political process.”

    AMEN!

    Don says : ” Virginia is the most systematically corrupt state in the union. ”

    that’s pretty harsh – but I tend to agree.

    Dominion occupies a position in the political realm in Virginia that is probably unparalleled in the other 49 states.

    A regulated monopoly who at the same time is the largest Corporate political donor in the State and who clearly influences the laws that affect it’s interests – and rate payers interests.

  8. Bob Blue, senior vice president regulation-law-energy solutions and policy, issued the following response to the AP article Sunday:

    As one of a series of articles he has written about Dominion this year, an Associated Press reporter has published a story questioning our company’s charitable contributions. As we view this story as more an opinion piece than reporting, we wanted to offer our perspective on Dominion’s investments in the communities we serve.

    First, Dominion is proud of these investments in our communities. Some perspective about the source of funding for those investments is important. In 2014, our company donated $18.5 million to charitable causes; the vast majority of these funds were provided directly by shareholders. In fact, in our latest filing with the Virginia State Corporation Commission (SCC), we stated that only about $740,000 of these donations were supported by rates collected from our Dominion Virginia Power electric customers in the Commonwealth. That’s just 4 percent of the total.

    As the Associated Press story notes, Dominion’s charitable contributions are accounted for in keeping with guidance and rulings of the SCC. And, as the story further notes, this practice is not unique to Virginia and is similar to procedures used in other states. Our corporate philanthropy has virtually no impact on customer bills. For the typical residential customer in Virginia, our monthly bill is now $109.40. Of that amount only about 1 cent – less than .01 percent – helps fund charitable contributions.

    Second, our contributions to our communities are not limited to financial investments. We are deeply committed to helping build stronger, better communities, and that commitment is shown through the time and talent our colleagues regularly donate to organizations dedicated to helping others. In the 15 states where we do business, Dominion employees volunteered to work more than 100,000 hours for civic, educational, environmental and charitable organizations in 2014 alone. We are fortunate that so many of our Dominion colleagues want to give back and we encourage them to do so. We will never apologize for this culture of involvement.

    Dominion’s Foundation and associated charitable giving by the corporation itself have helped improve the quality of life in the communities we serve. This includes our well-regarded Energy Share Program, which is being expanded here in Virginia to combine energy assistance with weatherization help to provide long-term savings to low-income, elderly, and disabled customers as well as veterans. This program expansion is a $42 million commitment by our shareholders –not our customers – and results from legislation enacted by the Virginia General Assembly this year and signed into law by Governor McAuliffe (Senate Bill 1349).

    Another result of this legislation was a significant rate decrease in April for all of our electric customers in Virginia. This made our already low rates even more competitive compared to the national, East Coast, and DC Metro averages. For example, Dominion has the second lowest industrial rates among the twelve best states for business in 2015 as ranked by CNBC. At the same time our reliability has been steadily improving from its already strong levels and we continue to find new and innovative ways to invest in the communities we serve. That commitment is reflected in our reliable service and our reasonable prices.

    And it is also reflected in our investments in the communities we serve. Our company and our Dominion colleagues are very proud of this commitment, and we will continue to help build stronger, better communities in the future.

    • Dominion isn’t the problem. Our corrupt General Assembly (and the voters who keep re-electing them) are the problem. If I were Dominion I would try to get away with as much as I could legally get away with. Given no restrictions on campaign donations I would donate a lot. After all, it’s the recipients who set my rates inside the monopoly.

      The blame resides on our General Assembly.

  9. Credit for the response – rather than more typical, silence

    To be fair – many Corporations donate to causes… and one might ask if Walmart donates – does it come out of the shareholder dividends or does it mean that Dr. Pepper costs customers a dime more?

    Some folks oppose ANY donations from Corporations.. on the grounds that it’s not the job of corporations to essentially “transfer” money from customers or stockholder to “causes” picked by the corporation.

    Give credit also that Dominion helps to fund VPAP .. don’t know how much relative to their total lobbying budget… why not have the GA make any registered lobby group pay a fee to fund VPAP?

    Donations to organizations that appear to have political connections, – just smells bad when Dominions influence on the General Assembly is already so outsized and particularly odious with the recent legislation to not have independent rate reviews for 5 years.

    I’m quite sure that Dominion would rightly point out that after everything is said and done – the bottom line is that Virginia ratepayers enjoy some of the lowest cost electricity in the country.

    interesting article on their overall donations at:

    http://www.richmond.com/news/virginia/ap/article_e2838af5-affb-5e11-9cab-296134d1c337.html

  10. I’ve always been worried about utility use of money. For example sometimes a controversial project requires host community benefits. If you are opposed to the project, it feels like rate payer money is being used to push the project. Usually in these cases, state government is pushing for the project too, so it actually feels like tax dollars are being used, whereas I think of electricity costs above the true cost, as a tax from my elected officials.

    • TBill, you are not alone in your belief. But a number of states have allowed inclusion of these costs, when reasonable in amount, in the utility’s revenue requirement. Virginia’s court affirmed this back in 1955. Board of Sup’rs of Arlington County v. Virginia Elec. & Power Co., 87 S.E.2d 139, 149 (Va. 1955). As of 1992, a majority of states, including Alabama, California, Illinois, Iowa, Maryland and Minnesota, held the other way.

  11. Jim’s criticism makes good sense to me. It’s a pretty clear cut case of corporate ethical failure and cheers for going after your donor.

    Now what we need is more of this objective criticism of Dominion:
    — Its “standby” month fee to customers with PV systems over ten Kv.,
    — Its refusal to net-meter multiple meters on the same property, so restricting solar installation on the best location (we have three meters, for example),
    — The cap on the ability to sell solar electricity back to Dominion at a premium price.

    Check out our contrast to North Carolina, with 1,000 MW of solar, versus about 20 in Virgina.

    Dominion’s record of discouraging solar power installation has been highly influential on our state legislature, which lags behind others in solar support.

    So, Jim, here’s another topic for your blog.

    • Why should Dominion pay a premium price for solar generated by others? That pushes up the electric bills for other customers. There’s no difference between customers paying for charitable donations and paying for over-priced electricity. The alternative energy industry totally lacks disruptors. Why can’t all these engineers focused on alternative energy find ways to deliver less expensive power. That would help put fossil fuel plants out of commission.

      • Dominion pays a wholesale rate for the energy flowing from residential solar panels into the grid. I don’t know the specifics of the rate or how it was derived. I suspect it is a savings to Dominion in the peak seasons of Summer and Winter (lower than their avoided costs) but it might be higher than their avoided cost in Spring and Fall. Year-round the energy cost might be cost neutral.

        If there is an increase to others’ bills related to residential solar, it is related to the value of the grid connection that is not fully paid for in the current net metering rate. Some utilities are over-charging for this to discourage more solar (Salt River Project in Arizona). Austin Energy (a municipal utility in Texas) has initiated a new rate called the Value of Solar, which is intended to properly reflect both the benefits and costs of residential solar so that it is neutral in the effect on other ratepayers. Other utilities with significant amounts of residential solar are developing similar cost-neutral rates in their states.

        Many engineers are focused on lowering the costs of renewable energy. Their efforts have resulted in the significant cost reductions experienced in the past five years, with another 50% cost reduction expected in the next 5-6 years. Related advances in inverter technology have contributed to the savings.

        Germany is still well ahead of the U.S. in balance of system and installation costs, so as we learn more from their experience additional savings will be available.

        The cheapest new generation in the U.S. is coming from renewables. Wind generators in the Great Plains are providing costs in the $0.02 – 0.03 /kWh range and two new utility scale solar facilities in Texas and Nevada are producing power at $0.04 /kWh, which is considerably less than the new gas-fired plants Dominion is developing (with long term increases in fuel costs). Old hydro is cheaper than this, but new hydro – probably not.

        We have less sunlight than the west so our prices are a bit higher right now, but will be lower shortly.

  12. re: ” If there is an increase to others’ bills related to residential solar, it is related to the value of the grid connection that is not fully paid for in the current net metering rate. Some utilities are over-charging for this to discourage more solar (Salt River Project in Arizona). Austin Energy (a municipal utility in Texas) has initiated a new rate called the Value of Solar, which is intended to properly reflect both the benefits and costs of residential solar so that it is neutral in the effect on other ratepayers.”

    I’m having a brain fart..

    can you sorta put this in simple enough terms for me?

    thanks

  13. Your Dominion bill charges you for Distribution and Transmission services that are proportional to your energy usage. The more electrical energy that you consume, the higher your charges are for these grid services.

    If you have a solar panel on your roof, your consumption of electricity is lower than it would have been without the solar contribution. Therefore, the amount you are billed for Distribution and Transmission is less. You still have the benefit of the grid connection to supply you with electricity when the sun is not shining, but you are now paying less for that benefit.

    If the cost of providing the Distribution and Transmission services remains the same, but more people have residential solar, then someone must make up the difference in cost – either the utility or other customers. Since the SCC designs rates to cover a utility’s cost plus a return to shareholders, that means other customers must pay a higher cost to make up the difference.

    This subsidy by other customers is one of the arguments against promoting more residential solar. For those utilities that have a significant share of residential solar, they have sought a way to design rates that more fairly allocate the Distribution and Transmission costs among their customers. Some utilities have assessed the benefits to the grid provided by residential solar and the value of the grid connection to the home regardless of the amount of energy consumed and have come up with a rate that reflects the net cost, without requiring other customers to subsidize the grid services provided to residential solar users.

    In this way, the benefits of residential solar can be promoted without harming the interests of those who choose not to have a solar panel or do not have a site that is suitable for its use. Innovative utilities and regulators are moving in this direction, rather than discouraging the use of solar because they don’t want to do the work of establishing an equitable rate.

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