Salem Electric's billing changes for home solar would penalize early adopters, critics say

Brent Morace wanted solar power for his West Salem home. 

Morace is concerned about global warming and his impact on the environment, which is why he wanted solar panels to have his home produce as much energy in a year as his family uses.

He and his wife, Jennifer, saved $25,000 and paid a company to install a 32-panel home solar system on their roof designed to produce 10.5 kilowatts per year.

And they figured the solar system would pay for itself in 20 years as part of an electricity swap – called net metering – with their utility company, Salem Electric. 

In July 2019, their solar system was turned on.

Then Salem Electric informed customers in October it was making two significant changes in billing for customers with solar systems: It would be changing the billing cycle for home solar customers to monthly from yearly, and instead of swapping electricity with homeowners, it would reduce the value of electricity produced home solar systems by 46%.

Salem Electric officials said the company is following the lead of other utility companies in the nation by ensuring the company's few solar customers are paying an equitable amount as other customers. 

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“We’ve heard sometimes utilities make the argument, oh well, this is cost-shifting. Non-solar customers are having to pay for it,” said Angela Crowley-Koch, executive director for the Oregon Solar Energy Industries Association.  

After push back from solar customers like Morace, the board of the co-op held off on the changes and may address it at its Feb. 25 board meeting.

“They decided to hold off on the implementation of their initial rate decision,” Salem Electric general manager Tony Schacher said.

Customers like Morace dislike altering the formula, arguing it discourages home solar at a time when the state and federal governments have made policies to encourage home solar.

He said it would extend the time his system would take to pay off to 34 years from 20 years, and the warranty on the panels expires in 25 years.

“For that $25,000 investment that I had just made 30 days prior, it ultimately null and voids the value of the system,” he said.

How home solar makes fiscal sense

Small home solar systems can cost between $8,000 and $16,000, depending on the type of equipment and efficiency of where the panels are placed. 

Along with a 30% tax incentive from the federal government for systems in place by Dec. 31, 2019, Salem Electric and other utility companies offer incentives for homeowners to install home solar systems.

Morace said after his solar system was installed, he received a check for $1,500 from Salem Electric as a reimbursement for the installation costs.  

“We’ve actually offered incentives since our program began,” said Salem Electric member services manager Britni Davidson. “It maxes out at $1,500.”

Solar contractors scale the size of home systems – how many panels are purchased and installed – based on the home’s average yearly use so the homeowner's only remaining electric bill will be a monthly connection fee of around $15.

“Everyone’s system is sized to be 100% of their energy use,” Crowley-Koch said.

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Most homeowners take out loans to pay for the system, so they have a monthly payment that equals their current electric bill, except for the base connection charge with the utility.

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That way a customer who previously paid the power company an average of $140 a month would instead make a loan payment of $125 a month, plus the $15 connection fee. Once the loan is repaid, the electricity is essentially free except for the connection fee.

Plus, the solar system remains and adds value to the home, but is tax exempt under state law.

Change in billing by Salem Electric

Having solar panels installed on the roof of a house and wiring it in does not take a house off the power grid.

The panels only produce electricity while there is light in the sky, meaning at 2 p.m. on June 3 the system is producing many times more electricity than the home uses and puts power back into the grid; at 2 a.m. on Dec. 21, the solar panels produce none, and the house must receive electricity from a traditional power grid.

When Oregon law required net metering starting in 1999, all major power companies – including Salem Electric – began swapping the amount of electricity they receive from homeowners for credits for use in low production times.

The changes Salem Electric sought to make would pay its home solar customers 4.17 cents per kilowatt hour, the same price the company pays to purchase power from Bonneville Power Administration. Meanwhile, Salem Electric residential customers pay the utility 7.69 cents per kilowatt hour.

Schacher said the company addressed the change to monthly breakdowns at the request of its customers, and he looked at what other co-op power companies have done. 

“To be quite honest with you, we don’t want to be seen as a pushback on solar,” Schacher said. “I got to make sure it’s equitable.”

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The alteration in pricing structure would be a huge shift and make it difficult for current home solar customers as they would return to having a power bill on top of their loans, in most cases, and the changes could limit future home solar development.

 “When you’re doing it monthly, kind of like doing the books, balancing books, it’s not really a full picture of what the system is providing to the grid,” Crowley-Koch said.

“The extra power he’s producing in the summer, it’s not just like it evaporates. It gets used. And so he should be credited with that. He is using power in the winter. The system is producing in the summer. It should be averaged out.”

Co-ops make their own rules on solar

In Oregon, your electric provider is determined by your address.

The majority of the Willamette Valley receives its power from two major companies, Portland General Electric (which has 892,000 customers including most of Salem and Portland) and Pacific Power (which covers Willamette Valley cities Stayton, Dallas, Albany and Corvallis).

But in Oregon there are 18 co-ops such as Salem Electric and municipalities such as Monmouth that sell power.

Salem Electric started in 1938 and has grown to include 19,738 customers over 17.48 square miles including most of West Salem, a swath of downtown Salem, the southern half of Keizer and a small patch of North Salem along Portland Road.

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Oregon Public Utility Commission spokesperson Kandi Young said their agency regulates the three largest utilities in the state, but not co-ops like Salem Electric or municipalities.

“They have a board and that’s kind of it,” Crowley-Koch said of Salem Electric. “Co-ops, in the true sense of the word, are owned by the members.”

Davidson said Salem Electric has about 70 current solar projects for about 66 customers, about .003% of its customers.  

Impact on Salem Electric solar customers

In Oregon, a small percentage of homeowners have solar systems – about 11,000, according to Energy Trust of Oregon, out of 1.3 million homes in the state – but two other electric co-ops have already made the switch in how they bill solar customers.

Smaller electric co-ops across the nation received push back when they looked at similar changes.  

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If Salem Electric goes ahead with its change, Morace's planned future addition to his solar system to power an electric car would be needed to cover his home's current yearly use.

“Again, it just doesn’t make sense,” Morace said.

bpoehler@StatesmanJournal.com or Twitter.com/bpoehler