How future rate changes may affect solar investments

You’ve done the research, found a solar installer, and understand your electric usage patterns. It may seem like solar is the right decision now, but will it still pencil out in the future if and when net metering laws or electric rates may change?

Electric utilities like Gunnison County Electric Association (GCEA) are subject to inflation, supply chain issues, and other pressures, just like any other industry. As a result, its rates will undoubtedly adjust over time.

This is often an argument in favor of roof-top solar. The idea is that residents can lock in their energy costs with an up-front investment or purchase contract. However, they should also consider that net metering laws are beginning to be revised across the country. There is a good chance revisions may also occur in Colorado during the life of customers’ solar system investment.

Potential revisions could reduce the value of the bill credit provided within existing net-metering legislation, and in turn, affect a solar system’s return on investment. But these revisions may be acceptable, especially if an individual's primary solar objective is not financial.

It is also probable that the electric cooperative’s rate structure will change in the future. Roughly three-fourths of GCEA’s costs to provide service are fixed and do not vary based on how much energy a member may use. The cooperative incurs costs in three major categories: electricity generation (variable), infrastructure operation and maintenance (fixed) and operating and maintaining the local distribution system and business functions (fixed).

Variable costs fluctuate with the amount of energy delivered to consumers, while fixed costs do not. Conversely, GCEA consumers are billed mostly through a variable energy charge, measured in kilowatt-hours (kWhs).

For example, GCEA’s primary residential rate has a fixed service availability charge of $38 per month (no matter how much energy a member may use) and a variable energy charge of $0.13821 per kWh consumed. The average residential member therefore pays only approximately 28% of their monthly bill through the fixed service availability charge. As a result, a member who may reduce their kWh usage via a solar net-metering installation can reduce their bill by more than GCEA is able to reduce its cost.

GCEA continues to incur fixed costs in order to provide services to members with net-metered systems. GCEA is billed for the fixed costs associated with the generation and transmission infrastructure based on its monthly peak demand, which almost always occurs within the three hours after sunset. Net-metered solar members contribute to this monthly peak in exactly the same way as non-solar members do. The monthly service availability charge only partially recovers these costs.

As more GCEA members install net-metered solar systems and purchase electric vehicles, the cooperative is researching and considering new rate structures for all members that better align with the costs.

For more information about solar, visit gcea.coop and go to GCEA’s “Solar Opportunities” page.

(Matt Feier is the strategy execution specialist at GCEA, a member-owned, not-for-profit electric cooperative, that delivers electricity to homes and businesses throughout Gunnison County, Hinsdale County and parts of Saguache County.)