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New Value of Solar Rate Takes Effect January

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New Value of Solar Rate Takes Effect January

December 6, 2013

The Value of Solar tariff (VoS) was adopted by the Austin City Council in 2012 and is designed to compensate customers for the value of the power produced by their solar systems. It is subject to annual review, in accordance with the tariff language, to ensure that it aligns with market value. The 2014 rate will be reduced to 10.7 cents-per-kilowatt-hour (kWh) from the current rate of 12.8 cents-per-kWh. The Value of Solar tariff was created as an alternative to net metering, which compensates customers at wholesale prices, versus full avoided costs, which include deferred transmission and generation costs, as well as an environmental credit.

An independent review was conducted by Clean Power Research, which developed the Value of Solar methodology for Austin Energy in 2006. Clean Power’s Research’s 2013 review recommended the Value of Solar rate be reduced based on several factors, most significantly the lower value of energy in today’s market due to a 17-percent decline in forward natural gas prices. Austin Energy’s residential solar customers will be paid 10.7 cents-per-kWh Value of Solar rate for energy generated by their photovoltaic (PV) systems beginning with the January 2014 billing cycle.

Austin Energy residential solar customers also receive up-front rebates to help make their PV systems more affordable. The rebates are funded in the Community Benefit Charge paid by all Austin Energy customers. Due to continued increased demand for PV system rebates, rebates and incentives were reduced on Dec. 4. The residential credit was reduced to $1.25 per Watt of installed generation with a $15,000 per year cap, which will allow the budgeted $6 Million in rebates for FY 2014 to be spread among more customers. About 70 percent of funds already have been earmarked just three months into the fiscal year. The Performance Based Incentive for commercial installations was reduced to 10 cents per kWh generated on new systems.

In months that solar customers generate more energy than they use, their VoS credits will be carried forward to offset use in subsequent months. In January of each year, the tariff requires that the accumulated credit be reset to zero. The cumulative value of any excess credits are applied to offset the Power Supply Adjustment paid by all customers, which funds the total Value of Solar credit, fuel for local Austin Energy generation and other purchased power supplies.

Resetting the VoS credit to zero annually aligns with industry best practice —the Value of Solar innovation led to Austin Energy being named 2012 Public Power Utility of the Year by the Solar Electric Power Association. The credit reset also fits with the City of Austin’s goal encouraging zero net-energy homes (homes that generate as much energy as they use in the course of a year). It also removes the potential for solar customers’ Value of Solar payments to be considered income, which could have federal tax implications for customers who received tax credits related to their PV systems. It is estimated about 12 percent of solar customers have accumulated a VoS credit at the current rate since the tariff was introduced in October 2012. Approximately half of those customers have accrued credits of less than $50. VoS credits were not re-set to zero in December 2012 to afford customers the opportunity to build credits and apply them against their summer energy consumption.

Ideally, a solar PV system will allow residential customers to generate sufficient energy to equal their annual use (zero net energy) in a typical year, with highest daily generation occurring during Texas’ highest energy use and hottest summer months. Austin Energy’s goal is to achieve 200 MW of solar by the year 2020, with 100 MW of local solar generated from PV systems on homes, businesses, public structures and community solar projects in the 437-square-mile service area.