Acadian Consulting, infamous for heavy bias towards utilities, accidentally makes a strong case for solar in their report's conclusions.
Miscalculations In the Billions
Baton Rouge, LA – Arriving four months late, the much anticipated cost / benefit analysis for Louisiana solar is finally here. The report’s conclusions were predicted last year when the consulting firm, Acadian Consulting, was hired. Acadian is a firm infamous for heavy bias towards utilities. Despite the biased report’s conclusions, the body of the report makes a strong case for solar.
Hidden within the body of the report, it is clear that solar is an enormous benefit to Louisiana customers, whether they have solar or not. Using Acadian’s assumptions for the purpose of comparing apples to apples, we calculated a net benefit to all customers as follows:
Table 1: Comparing Appropriately Calculated Tax Credits
*The Alliance does not agree with the assumptions. They are used here to illustrate the tax credit miscalculation alone.
The Alliance corrected Acadian’s calculations, which mistakenly applied the state tax credit as a cost in the analysis. In all cases of utility electric rate treatment, tax credits are calculated as a benefit to customers. Entergy, Cleco, and SWEPCO all receive extremely generous tax credits from Louisiana. Below are credits offered to Louisiana’s three Investor-Owned Utilities for 2013 (the most recent year available).
*There are other tax credits offered that benefit cooperative utility customers not included here for brevity. Data from SubsidyTracker.com.
The various tax credits offered to Utility companies are used to decrease customer’s bills through a lengthy rate making process. At no time ever, have these tax credits been added to the rate as a cost to customers. Hence, it is completely appropriate to add the credit as a benefit to all customers as is standard accounting practice at the Public Service Commission.
The utility cost of service section paints a disturbing picture. It appears from the report that customers are being over-charged by 39-90% (page 160). Entergy and Cleco customers that invest in solar decrease their overpayments but still contribute between 48-37%. SWEPCO solar customers are still overpaying for their cost of service by 5.5%.
We are awed by the consultant’s math-olympics. The Alliance will be releasing a full white paper in April for decision makers to clear up the confusion created by Acadian Consulting’s ~200-page report. Though the number games are obvious, it is very unfortunate. The Alliance asked for a cost benefit study to provide high quality information to the LPSC, utilities, solar businesses, and customer’s quality to facilitate a good-faith process that sought a solution that worked for all parties. We did not get that and it is a missed opportunity.
The Alliance believes that it is appropriate to add a grid tie fee. When a solar customer is tied to the grid, they are using the grid as a back-up battery. This is a service that the utility is providing and should be able to charge a fair price for the service. For the Alliance, it is a matter of fairness and setting up a system that will stand the test of time. There is no question that solar is disruptive to the current utility business model. The Alliance is concerned that in 10 to 20 years, a significant portion of customers will have left the grid, much like cell phone use has dramatically decreased the use of landlines. It is a tumultuous time for utility services. However, the devil is in the details. If the grid service cost is too high, the utility risks losing customers to cheaper back up battery systems. In the past, customer retention is not something that utilities have thought about. They are monopolies and take their customers for granted. That needs to change if they want to avoid the fate of the rotary dial.
To read Acadian’s biased report click here:
*Correction: in a previous version of this article, the total amount of 2013 Louisiana Subsidies to Utility Companies was reported as $218,782,909. This has been corrected above.