Holy Cross Energy is a relatively small, member-owned electric cooperative in Colorado’s ski country that services 44,500 customers. It is known for having progressive climate policies and has an ambitious and exemplary goal of moving to 100% renewable energy by 2030. But it is now proposing a rate change that is putting it at odds with solar installers and solar customers alike.
Net metering in Colorado
Colorado residents set a milestone in November of 2004 with Amendment 37, the first renewable energy standard approved by public ballot in the United States. Then in 2008, Colorado passed further legislation “requiring municipal utilities with more than 5,000 customers and all electric cooperatives to offer net metering (NEM) for residential systems up to 10 kW and commercial and industrial systems up to 25 kW.” Up until now, Holy Cross Energy has been following both the letter and the spirit of that law.
However, its new rate change separates out delivery costs from energy production costs and adds a new peak demand charge. This accounting trick in which HCE splits bill line items is a deliberate attempt to circumvent Colorado’s net-metering law and no longer pay a 1:1 ratio for solar energy production and energy grid consumption.
Attempts to evade Colorado’s net metering law and discourage residential solar installations have been made before. For example, in 2009 Xcel attempted to institute a solar tax on customers, and earlier this year it was accused of “purposefully delaying hundreds of solar energy sites” as a cost-saving measure.
Net metering and solar market evolution
While the typical evolution of the solar market is to move from feed-in tariff (FiT) to net metering, and then to some form of self-consumption, Time of Use (ToU) or virtual power plants (VPPs), the timing of this transition is crucial. Solar markets that are not yet mature enough to move to the next incentive model can suffer a severe and devastating crash. For example, when the UK drastically reduced its FiT for smaller residential PV systems, the market dropped from over 500 MWDC in 2015 to under 200 the following year, and remained low for at least five more years. On the other hand, California recently evolved to NEM 3.0, with significant opposition, but only after it reached well over 30% solar penetration. This is compared to HCE’s residential solar penetration standing at only 4%.
Impacts of HCE rate change
While Holy Cross Energy (HCE) states that its goal with the new rate design is to match costs with revenues, the co-op already has a strong balance sheet. Its last reported YoY operating revenue had a 4.7% increase of $6.7 million and its YoY net margins achieved a 30% increase of $2.75 million.
According to Rich Clubine, owner of Active Energies Solar, a solar installation company in HCE’s service area, the new rate change will more than double the payback period of PV systems in the area to up to 22 years – that’s longer than hardware warranty periods of solar equipment. Rich used his own 1,500 sq.-ft home with a 6.4-kWDC PV system as an example on how this rate change would increase his annual electricity bill by more than 600%, from $152.88 to $950.13.
In addition to making the economics of residential solar installations unattractive or potentially unfeasible, the rate change will particularly harm lower-income households. According to the Colorado Solar & Storage Association (COSSA), “when fully implemented in 2025, smaller homes and townhomes/condos stand to see bill increases in the range of 8 to 18%. Conversely, larger homes (4,500-6,000 sq.-ft) could see their bills drop by 5 to 17%!”
This rate change could also potentially destroy the livelihood of people like Rich Clubine, and the other employees of Active Energies. And if this rate change snowballs to other utilities, it could put the jobs of more than 9,000 Coloradans who are employed in the solar industry at risk. Without thriving clean energy jobs, especially solar and battery installers, in Colorado, reaching the goal of 100% clean energy and electrification becomes exponentially difficult, not just for HCE, but the entire state.
But its impact does not stop there. It also puts at risk nearly $500 million of federal funding from the Inflation Reduction Act (IRA) that is targeted at helping the 44,500 households in HCE’s service area transition to clean and electrified energy.
Reaching 100% by 2030
Without the help of its members, how is HCE going to achieve 100% by 2030? HCE plans to build its own front-of-the-meter (FTM) wind, solar and battery systems to reach its goal. While at first glance this seems like an excellent plan that helps to accelerate the clean energy transition, it means now that clean energy has reached grid parity and there is an injection of incentives and tax credits from the IRA, the cooperative is locking its members out of the market in order to receive all the economic benefits and financial control itself. Just as the Levelized Cost of Energy (LCOE) for solar is becoming economically viable for the middle class and programs like PPAs and community solar are further opening up the market to low-and-moderate-income customers, HCE’s new rate structure is making it nearly impossible for them to become power owners and producers themselves.
Holy Cross Energy has a precedent of being a good community steward and is proactive in its commitment toward transitioning to clean energy. It is very progressive in its rebate program and offers a variety of energy efficiency and smart electrification rebates on heat pumps, air sealings and insulation and much more. As this rate change is out of line with the co-op’s tradition, there is the potential that HCE will revisit and revise its plan so it can better serve the community and fulfill its core values.
Jessica Fishman is a marketing professional with nearly 20 years of progressive expertise, ten of which are in the clean energy industry. Passionate about addressing climate change by accelerating the clean energy transition, she has worked at leading renewable companies and with numerous clean energy technologies, building marketing and communications departments.