Stanford research on utility companies' growing opposition to Solar power

The future of our planet literally hangs in the balance:

As installed solar prices fell in the period after 2009, the utility industry maintained the view that these small installations posed no threat to their businesses. Then, the industry made an abrupt about face with the publication of an important briefing paper in 2013. In January of that year, the Edison Electric Institute, the industry association for investor owned electric utilities released a briefing paper entitled “Disruptive Challenges” that focused on the key economic challenges facing the retail electricity sector. In it, a dark future for the industry was outlined: how flat electricity sales, the rapidly falling cost of distributed solar power, and rising rates necessary to replace existing grid infrastructure create a unique set of challenges for the power sector.

The paper was all the more unusual because it was released for public consumption. Most EEI publications are released only to member utilities for internal consumption.

And the likely reason it was released for public consumption was to (more easily) provide talking points for all the other industry-related "think tanks" and right-wing nutters opposed to both renewable energy and climate change science. We're in the middle of this crisis right now, folks, and it's important to understand this is a national battle and not just more Duke Energy shenanigans. And this is especially relevant for many of my environmentalist friends who were eager to make compromises to get the recent energy bill passed, that included more freedom for Duke Energy to "negotiate" rates they pay to Solar farms. It's a long one, so try to stay with me:

Following the release of “Disruptive Challenges,” utilities around the country, but especially in key solar markets, have responded in two significant ways to the challenge presented by distributed solar energy. First, they have sought to change rate structure to eliminate the incentives their customers may have to adopt the new technology thereby suppressing the trigger of the death spiral.

Second, and to a lesser extent, they have entered into direct competition with the companies that seek to provide distributed solar to electricity consumers, thereby positioning themselves to succeed in the new market environment to which the industry is transitioning.

Duke Energy has been engaging in the latter for some time now, but is poised to move forward on the former very soon. I believe they (and others) used the carrot of the wildly-popular but mostly unproven idea of 3rd Party Sales of residential Solar projects to float through their rate strategy, which has the potential to bring to a screeching halt the financing and construction of Solar farms in our state. This is, by any other name, an Antitrust nightmare:

It seems likely that utilities are motivated to focus on cost-causation issues in redesigning rates for NEM customers both for legitimate reasons and because these changes will reduce threats to their
current market position as monopolists. They may also be tempted to enter into direct competition with DER providers in ways that take advantage of their market power. It is at least possible, if not likely, that a
utility might take advantage of its monopoly to attempt to drive providers of distributed energy equipment out of its territory. But would either changing rate structures in ways that disadvantage potential new competitors or engaging in other, perhaps more subtle forms of exclusion pose legal risk for utilities under the federal antitrust laws?

The assumption has generally been no. State-chartered monopolies, since the expansion of federal regulatory powers under the Commerce Clause in the 1930’s, have generally been exempted from federal antitrust laws that limit anticompetitive practices aimed at establishing or maintaining monopolies. The Supreme Court articulated, in a series of cases beginning with Parker v Brown, and reaching its modern form in California Retail Liquor Dealers Association v. Midcal Aluminum, a doctrine exempting state regulation of private industry that restrains free-market competition in ways that would violate Federal antitrust law if pursued by a non-regulated entity.

But natural monopolies do not last forever. At one point in time, the U.S. telephone system was a natural monopoly owned and operated by one firm–AT&T. That is, until new technologies emerged which allowed for competition with AT&T, at least for parts of its business. Similarly, interstate trucking emerged as an important competitor to an earlier network industry–railroad freight–that had been operated as a regulated cost-of-
service monopoly. A key issue for regulated monopoly industries that become exposed to competition is the new role that public utility commissions, either state or federal, most adopt in managing their anticompetitive tendencies as opposed to allowing for enforcement of the antitrust statutes which serve to control the abuse of market power in most of the U.S. economy.

The response from utilities over the past three years has been very active. Given the right of private parties to challenge actions by firms as violations of the antitrust laws, it would seem only a matter of time before major DER providers begin to utilize these tools to call into question the new rate structures or other practices with which utilities are responding to DER competition.

And that last part is the crux of the matter. As long as Duke Energy is allowed to play the NCGA and the NCUC like a damn fiddle, and get whatever they want, the best (and possibly only) recourse for the Solar industry is to take them to court, and expose all the little tricks Duke Energy engages in to keep competition down. And those of us who are advocates for renewable energy need to make sure we don't get played like fiddles also.

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