On Nov. 15, the S.C. Public Service Commission, the agency charged with protecting ratepayers from abuse by utilities that enjoy legislatively granted territorial monopolies, ruled that two of those monopolies, Dominion and Duke, are required to pay only 2 cents and 3 cents per kilowatt-hour, respectively, for electricity produced by our solar companies. These are the lowest prices in the country by nearly 50 percent.
The expert testimony at the PSC hearing in this regard was clear and unequivocal: No solar company is able to sell electricity to utilities at these low prices. In fact, filings at the Federal Energy Regulatory Commission that outline Dominion’s cost of generation indicate that it can’t make electricity at these rock-bottom prices.
The PSC also ruled that the power purchase agreements offered by the utilities need only be for a term of 10 years, despite expert testimony that a contract of such short duration would deny solar companies access to capital needed to build solar farms. And even though when the monopolies build power plants, they are permitted to lock customers into paying the costs for 20, 30 and 40 years at a time.
Offering to pay solar companies’ unreasonably low prices for their electricity and making contract terms insufficient for them to access capital means those companies will not enter into power purchase agreements and they will not build solar farms — precisely the outcome the utility monopolies want.
For Dominion and Duke’s objective is to retain control of power generation and to protect their power plant investments from competition and cheaper alternatives — to increase profits for shareholders at the expense of ratepayers. And the PSC has once again done their bidding.
This wasn’t supposed to happen. Earlier this year, the S.C. Senate and House each unanimously passed and Gov. Henry McMaster signed into law the Energy Freedom Act, a step toward consumers paying rates based on what competition dictated, rather than paying the utilities a guaranteed return on their investments.
The process contemplated by the EFA is straightforward: A solar company would make an offer to sell electricity; if the price per unit was less than what it would cost the utility to produce (the utility’s “avoided cost”), then the utility must purchase the cheaper power, and ratepayers would end up with lower bills.
The PSC was charged with determining the avoided cost, and the new law provided that: “Each electrical utility’s avoided cost filing must be reasonably transparent so that underlying assumptions, data and results can be independently reviewed and verified by the parties and the commission.”
Since multiple studies show that unsubsidized renewable energy like solar is comparatively less expensive than what it costs Duke and Dominion to generate, the clear expectation was that solar companies would gain a foothold in our energy markets.
In watching the PSC announce its decision, it was clear they understood this, as Commissioner Florence Belser said: “I think the Legislature is telling us to provide as many avenues as possible for solar to be developed in South Carolina and given the opportunity to thrive in South Carolina.”
Instead, the PSC set prices and contract terms that effectively guarantee no independent power company will build solar farms to compete with Dominion and Duke — even though, as Commissioner Tom Ervin acknowledged, there is a need for “more accurate information from Dominion, more detailed and granular information about how they arrived at their avoided cost.”
This is unacceptable; preventing the PSC from doing the bidding of the monopolies by shutting the door to competition is the very reason the EFA was enacted. The PSC must reconsider its vote and right this wrong.
The PSC’s decision further underscores the urgent need for the General Assembly to end the utilities’ monopolies — to make energy producers compete and give consumers choices. Elected officials of all political stripes despise (or at least ought to despise) cronyism, and South Carolina’s electricity policy reeks of it.
Tom Davis, a state senator representing portions of Beaufort and Jasper counties, was the author and the primary sponsor of the Energy Freedom Act in the Senate.