City ordinance would add charges to large systems
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Courtesy City of Gunnison
This chart shows the costs associated with each kilowatt-hour of energy the city distributes.
This chart shows the costs associated with each kilowatt-hour of energy the city distributes.

When Gunnison City Council passed on first reading a new solar net-metering policy more than a week ago, the move was met with welcome by advocates for alternative energy. But after a bad case of sticker shock, Gunnison County leaders are asking the city to reconsider a portion of the policy.

On Tuesday, May 14, council passed the net-metering policy in an attempt to remove barriers to local renewable energy production. The new policy includes annual reconciliation — instead of monthly — for excess electricity produced by small-scale systems while also addressing specifics for larger solar arrays in city limits.

Proponents of the change say the rollover will prove beneficial for small-scale customers with a solar array in the winter months when bills are generally higher.

But the policy also addresses large-scale generation projects — those over 25 kilowatts (kW) — such as is proposed by Gunnison County. The project has been envisioned since the Gunnison County Courthouse was built four years ago.

The 270 kW project — an array of panels on top of five county buildings within city limits — would be the second largest among members of the Municipal Energy Agency of Nebraska (MEAN) network, which provides energy for the City of Gunnison. The county’s goal is to reduce its carbon footprint without significantly increasing energy costs.

 

Large generation pays more

Yet, the policy passed by council includes a “demand charge” of $9.50 per kW drawn on peak usage billed monthly. City Finance Director Ben Cowan explained the demand charge is multiplied by the highest amount of kW delivered by the city at any particular moment during the month. If a solar array “flattens” their peak, or reduces that highest amount, their total demand charge goes down.

“The concept is that we want them to generate when they (peak) so that their overall load in the system is less,” Cowan wrote in an e-mail. “The demand charge encourages them to modify usage patterns as much as possible to flatten the peak.”

In addition, large-scale generators would not be paid the wholesale rate of about 4 cents per kilowatt-hour (kWh) for excess energy put back on the grid. The wholesale rate would still apply to small-scale projects, and county leaders believed a rate would be negotiated. Rather, such a project would receive the “avoided cost rate” of about 2.7 cents per kWh under the new policy, further reducing any financial offset the county could gain by generating electricity.

Neither provision sat well with county staff, who learned of the net-metering policy the day after it passed. County staff have been working for months to develop their project and during that time have been in talks with city staff. However, they say the demand charge was not discussed.

Initial calculations by county Sustainable Facilities Director John Cattles indicated tens of thousands of dollars annually could be added to the project. Such an added cost, county staff speculated, could make the project infeasible.

County leaders have sought to partially fund the project through grants, with cost savings helping pay for the $1 million in panels over their 30-year life span. However, they say $20,000 annually over a 30-year period could add an additional $600,000 to the bottom line.

 

‘Please press the pause button’

A flurry of e-mails last week exchanged between county and city staff were shared with the Times.

In an e-mail between County Manager Matthew Birnie and City Manager Russ Forrest, Birnie expressed disappointment that the demand charge was not mentioned during a discussion of other “availability” charges.

Important decisions about the size and feasibility of the project, Birnie said, are largely dependent upon an understanding of the city’s fees. He asked that the city consider setting aside the large generation section of the ordinance until more analysis and discussion occurs.

Birnie also reminded Forrest of commitments made by city leaders.

“Please press the pause button and give us time to work on mutually acceptable solutions,” Birnie said. “After all, the City of Gunnison, along with all of the local jurisdictions in the Valley, has pledged ‘institutional changes to improve energy efficiency, reduce carbon emissions, protect air and water quality, and enhance economic viability.’ It’s time for those words to be reflected in policy and action.”

Forrest responded that his staff would work with the county and Western Colorado University — also considering a future large-scale project — to discuss this issue before second reading. He admitted the large generator component “did come together quickly at the suggestion of MEAN.”

 

Privilege of flipping the switch

Yet, on Tuesday, MEAN spokesman Kevin Wickham said his company was not involved in the city’s ordinance. He offered that MEAN does assist “member-owner communities” with understanding how local behind-the-meter generation will impact their system costs.

“When local generation is installed, the City still has an obligation to serve electric load when the unit is not generating,” Wickham wrote in an e-mail. “And there are infrastructure and system costs that remain regardless of how many units of electricity a customer purchases from the utility.”

Talks between city and county staff also took place on Tuesday, after which city Finance Director Cowan echoed Wickham’s comments.

Cowan explained that the city is responsible for a “Fixed Cost Recovery Charge” (FCRC), which consists of unchangeable expenses related primarily to MEAN’s ownership of and participation in generation as well as administrative and general expenses.

“This is the cost of necessary capacity to produce power at peak periods,” Cowan said. “The cost is the same if 0 kW are produced, or at maximum production at the peak period.”

The city, he said, also has to pay for staff and equipment regardless of how much electricity is required. Based on last year’s figures, the city’s retail rate of 8.4 cents included 1.2 cents in FCRC and 3.1 cents for city infrastructure.

However, actual costs incurred by the city resulting from the county’s project cannot be determined until more analysis occurs, and further discussions are held, Cowan said.

“We’re going to try to get creative how that occurs and perhaps may remove the demand charge in favor of something more predictable for the County or other large systems such as a larger base charge or charging actual transformer costs,” Cowan said.

Cattles reiterated the county’s commitment to increase the efficiency at its facilities, decreasing operating costs and reducing the environmental footprint of the county buildings.

“Gunnison County is concerned that the proposed policy for PV arrays over 25 kW may, unintentionally, make large solar projects unviable,” Cattles said. “We are encouraged that City staff has committed to re-visiting the policy and are confident that a solution that is equitable for all is possible. … County building efficiency and lowering greenhouse gas emissions are both stated goals of the Board of County Commissioners. The (solar) project we are working on aligns with both goals.”

 

(Chris Rourke can be contacted at 970.641.1414 or at chris.rourke@gunnisontimes.com .)