New York Enacts Fixed Charge For Solar Customers
What does the fixed charge mean for current and potential solar customers? What does it mean for the future of the solar industry in New York?
Current Compensation for Solar Panel Customers
To date, a mechanism known as Net Energy Metering (NEM) compensates New York State residential solar customers. NEM allows residential solar customers to send any excess electricity generated with their solar panel systems back to the grid, solely charging for the “net” energy that they use. However, in recent years, there has been a shift away from NEM due to claims that utility companies charge non-solar customers more money to compensate for the revenue lost from solar customers- this mechanism is known as “cost-shifting.”
What is the CBC Charge?
The Customer Benefit Contribution (CBC) charge is a monthly fixed charge enacted by the New York Public Service Commission to fund various social programs, including energy efficiency, solar, and low-income discount programs. Why is the CBC Charge Being Implemented? In New York State, many public benefits programs (such as those listed above) receive funding through volumetric charges. The public then pays these charges according to their electricity use. However, due to an increase in the use of net-metered solar customers, some New York-based regulators have proposed the idea that said solar customers are avoiding their share of the volumetric charges for public benefit programs. As a result, these regulators created the Customer Benefit Contribution (CBC) charge to account for this disparity in costs between solar and non-solar customers and prevent cost-shifting moving forward.
How Does the CBC Charge Function?
The CBC charge functions as a fixed monthly dollar-per-kilowatt charge rather than the volumetric cost for non-solar customers. The charge applies to all residential solar customers in New York and commercial solar customers who do not pay demand charges. The payment was first proposed in December 2019 and was fully approved and published in the New York Public Service Commission in August 2021. The CBC charge becomes effective for New York utility customers as of January 1, 2022. The public benefit programs supported (in part) by the CBC charge thus far include:
1. The Clean Energy Fund
2. Utility energy efficiency programs
3. Utility low-income programs How Much is the CBC Charge?
According to the New York Solar Energy Industries Association (NYSEIA), the estimated monthly CBC charge (in dollars-per-kilowatt) for residential customers on SC-1 rates that currently receive compensation through NEM is as follows:
• Con Edison: $0.96
• Orange and Rockland: $1.33
• Central Hudson: $1.33
• National Grid: $1.13
• NYSEG: $0.91
• RGE: $1.01
• LIPA: $0.90
Based on these numbers, assuming an average 10-kilowatt solar system, residential solar customers would have to pay an additional $109 to $159 annually to cover the costs of the newly implemented charge.
Impacts on Solar Panel Customers
It is important to note that CBC charges will only apply to solar panel customers who install solar systems after the order comes into effect- i.e., after January 1, 2022. Furthermore, the New York Public Service Commission order specifies that commercial customers who pay demand charges will also be exempt from the additive CBC charge. As stated, the proposed goal of the CBC charge is to “recover the costs from these customers for key policy programs that aid low-income customers and fund energy efficiency and clean energy programs” to work towards the greatest possible public good. However, this position fails to consider the distinct contributions that solar customers already make to public benefit programs. By switching to solar energy, residential solar customers are already making direct contributions to the environmental goals in which the public benefit programs were created to advance. Their effort and positive impact are not fairly valued in the imposition of the CBC charge- at least, not at the current rate(s) of the charge.
Additionally, based on the current rates within the CBC charge, the economic savings gained by residential solar customers are reduced. While the money from the CBC charge may be going to public benefit programs, there is an increased likelihood that the adoption of solar energy amongst residential customers in New York will slow- potentially drastically so. Slowing Solar progression would counteract the goal of the CBC charge. This action would create extreme difficulty for New York to meet the legislatively mandated targets for distributed solar
electric sector decarbonization and economy-wide GHG emissions reductions as set by the 2019 Climate Leadership and Community Protection Act(CLCPA).
NYSEIA Position and Recommendations
The NYSEIA defends solar customers and argues that they should not be paying the CBC charge. Being required to pay the CBC charge impacts the cost savings (and therefore incentives) to adopt such an environmentally-friendly energy system. Solar customers are already contributing to several social initiatives funded by the CBC charge simply by embracing solar energy. Solar customers should not have to pay for environmental programs they already support directly through their energy systems. However, the NYSEIA does recognize that solar energy clients do not directly support the utility low-income programs supported by the CBC charge. Therefore, it is the position of the NYSEIA that if the CBC charge is necessary, the rates should be significantly reduced. Also, it should only support the payment of utility low-income programs.
Overall, both solar and non-solar customers deserve to pay equitable rates- neither group should have to bear the brunt of cost-shifting. However, the CBC charge shifts additional, unnecessary costs to solar customers in its current state. Therefore, revising the programs supported and reducing the CBC charge rates is necessary to create a more equitable system for all New York residents.