Why are utilities spending $22 million to 'protect' your right to solar?

A worker installs a solar panel at Duke Energy Florida's 3.8 megawatt solar array in Osceola County, near St. Cloud. The facility is on 17 acres and is expected to start generating electricity in the spring.
A worker installs a solar panel at Duke Energy Florida's 3.8 megawatt solar array in Osceola County, near St. Cloud. The facility is on 17 acres and is expected to start generating electricity in the spring.
Published Oct. 27, 2016

TALLAHASSEE — Why would Florida's electric utilities want to spend $22 million to get voters to put into the state Constitution "rights of electricity consumers regarding solar energy choice," if consumers already have that legal right?

The answer is in the fine print. The Amendment 1 title — "Rights of Electricity Consumers Regarding Solar Energy Choice" — uses the popularity of solar to embed new language into the Constitution that can be used as a legal barrier to raise fees on solar users and keep out companies that want to compete with the monopoly-owned utilities to provide solar generation of electricity.

The amendment starts off by summing up an existing Florida law — which allows "consumers to own or lease solar equipment installed on their property." But it is the next sentence that adds something new. It declares that customers who do not install solar "are not required to subsidize the costs of backup power and electric grid access to those who do."

"Subsidize" is the key word here. In the language of political rhetoric, a subsidy is a good thing if you're the one receiving it, but for many it's considered a bad thing if you're paying to subsidize someone else.

Proponents of Amendment 1 say it is needed to protect consumers from "scam artists" trying to "rip-off customers" by leasing solar equipment without proper protections. In an op-ed in the Fort Lauderdale Sun-Sentinel in August, Florida Power & Light CEO Eric Silagy said Florida's solar rebate program "was not cost effective for ratepayers."

"Subsidies help make solar more economical, but they have to be measured," he said.

Opponents, which include the growing industry of solar contractors in Florida, fear that the subsidy language in the amendment is really intended to provide the legal argument for FPL and other investor-owned utility companies to claim that a 2008 law requiring them to pay for excess energy customers generate from their solar panels is unconstitutional.

In 2008, the Florida Public Service Commission ruled that every Florida electric utility is required to provide customers that have installed renewable generation systems the opportunity to sell their excess energy back to the utility through an interconnection agreement and net metering program. The program was intended to make it easier and more affordable for customers to invest in clean, renewable energy and lower their utility bills.

Jeff Prutsman, CEO of American Solar Energy Systems of Jacksonville and an Amendment 1 opponent, said the amendment will make rooftop solar power financially unattractive in one of two ways.

"You either get rid of net metering or you add surcharges to the electric bills of consumers who own rooftop solar power systems,'' he said. "Either way, you increase the number of years that it takes for a rooftop solar power system to pay for itself with utility electric bill savings."

As solar installation becomes more affordable, and the utility industry's market declines, solar poses a fundamental threat to the traditional power distribution structure. Investor-owned utilities were given a guaranteed monopoly to produce and distribute energy because of the enormous investment of building and maintaining large power plants.

Just as wireless telephones transformed the telephone industry, which also once held a government-sanctioned monopoly, the utility industry faces a massive disruption that threatens its monopoly. The advent of rooftop solar and the advances in energy storage have the potential to one day turn every home into an independent power plant. The utility industry, and its think tank supporters like the James Madison Institute of Tallahassee, argue that solar customers who rely on the traditional utilities for their backup power on cloudy days or at night are subsidized by non-solar customers. They argue these customers do not pay for the fixed costs associated with power generation — wires, poles, meters and other infrastructure — and should therefore incur a surcharge or be reimbursed at less than the retail rate of electricity.

The political committee promoting Amendment 1 has used this argument to win the support of groups such as the NAACP of Florida, the Central Florida Urban League, the Jacksonville Urban League and the Pinellas County Urban League. NAACP president, Adora Obi Nweze, for example, defended the amendment in a recent op-ed in the Florida Courier.

"As solar consumers contribute less to maintaining the electric grid, consumers who continue to rely completely on the grid will be left picking up more of the cost of the grid," Obi Nweze wrote. "This means the possibility of higher rates imposed on the poor."

But opponents of Amendment 1 says that argument is misleading. They point to economic analyses in other states and a compilation of studies by the Brookings Institution, which have shown that consumers who added rooftop solar have had the net effect of saving all customers money by reducing the need to build new power plants and reducing the need for companies to buy expensive power during peak times.

But the subsidy language has been used by the utility industry in Nevada, Arizona and California to provide a legal argument for regulators to change the way rooftop solar system owners are billed by the utilities, and that has opened the door for added fees or to lower rates that reduce the financial attractiveness of installing rooftop solar.

In a letter to the Florida Public Service Commission last year, Florida Power & Light asked for changes to the net metering rule or "solar-installing customers will continue to be subsidized by other customers."

The James Madison Institute prepared a paper on the subsidy concept, which it called "crony capitalism." The JMI policy director, Sal Nuzzo, told a group of conservative advocates at a conference earlier this month that the utility industry attempted to deceive voters into supporting restrictions on the expansion of solar by shrouding Amendment 1 as a pro-solar amendment. JMI's executive director, Robert McClure, said Nuzzo "misspoke."

The concern that Amendment 1 is designed to undercut the value of independently installed solar worries customers who have already invested in solar panels.

Charles Scully, 69, a retired airline executive from Port St. Lucie is one of them. In 2009, he spent $21,000 installing a solar system on his home at the encouragement of his electric company, Florida Power & Light, back when the state was offering solar rebates. He now relies on solar generation for about one-third of his electricity, but is concerned about the impact Amendment 1 will have on his investment.

In a call to Terry Yeager in FPL's customer service department, Scully said he feared Amendment 1 will open the door for the company to impose a surcharge for using solar without taking into consideration the value his investment has on reducing the overall cost of electricity for other customers.

"I produce excess energy back to the grid during peak hours," he wrote back to Yeager this month, in an email he shared with the Times/Herald Tallahassee bureau. "It reduces the amount of electricity FPL has to purchase as FPL is under capacity approximately 30 percent during peak. FPL pays a premium for the purchase of electricity from other utilities."

In addition, Scully said, he worried that a surcharge or solar fee may "affect my ability to sell my home, as well as discourage others from purchasing PV [photovoltaic] panels."

Yeager responded to Scully that Amendment 1 "does not limit customer-owned solar. It does not eliminate net metering. It does not protect the regulated monopoly utility system. It does not penalize solar users or create any new taxes on solar; and it does not prohibit third-party sales of solar energy. Simply put, Amendment 1 will help ensure Florida expands its solar footprint in a way that is fair to all Floridians, whether they choose solar or not."

When Scully replied and pressed him about whether he could rule out any surcharge, Yeager replied: "No."

Finally, a third barrier to competition is in the way the language could be used to create disincentives to third-party leasing. Consumers who don't want to spend the up-front costs of solar panels have entered into lease agreements with companies that finance the solar panels and lease them back to customers.

Current Florida law bans consumers from purchasing electricity from anyone but their designated monopoly utility. Florida allows third party leasing, but not third party Power Purchase Agreements, and it is one of only five states that have this ban. The amendment doesn't remove the ban on third-party sales but if the "subsidy" language is used to discourage solar leasing or reduce net metering, the financial attractiveness of installing rooftop solar will diminish.

Screven Watson, a board member for Consumers for Smart Solar, the utility-backed political committee behind Amendment 1, wrote in an op-ed for the Tallahassee Democrat in June that Amendment 1 would provide consumer protections for out-of-state solar companies that sell third-party leases and "not only want to make money off their customers, but they also want to be subsidized by everybody else."

When it comes to arguing over subsidies, Florida's utility giants have their own history.

Good Jobs First, an economic development watchdog group, has developed a federal subsidy tracker tool that lists NextEra Energy, the parent company of Florida Power & Light, as No. 2 in the nation in receiving federal subsidies since 2000 — more than $2.3 billion. It lists Duke Energy, the state's second largest utility, as having received nearly $900 million. Both companies have spent more than $5 million to get the anti-subsidy language into the Florida Constitution.

Rob Gould, spokesman for FPL, said the subsidies included approximately $386 million that "directly benefited FPL customers via the Recovery Act" and FPL also received "another $5 million grant to help pay for Florida colleges and universities to expand their offerings related to cutting-edge energy technologies."

"NextEra Energy is the world's largest producer of renewable energy from solar and wind, and much like other clean-energy companies, we have been able to make major investments in these technologies with the support of federal programs," he said adding: "We have also been supportive of sunsetting those subsidies."

In his op-ed, FPL's Silagy noted that another subsidy — the tax credit approved by voters as Amendment 4 on the primary ballot — "reduces taxes for businesses and homeowners to further incentivize investment in renewable energy." He noted that "as the state's largest solar investor, FPL will obviously be the biggest beneficiary."

When it comes to subsidies, "Amendment 1 does it the right way," proclaims the campaign's brochures and television ads.

Prutsman, the Jacksonville solar installer, disagrees. He said if voters pass it, there will be a backlash.

"I believe that if Amendment 1 passes, it will have the unintended consequence of a groundswell move to deregulate electricity sales in Florida," he said. "This is exactly what is happening right now in Nevada."

Contact Mary Ellen Klas at Follow @MaryEllenKlas