FinLogic FinLogic Quantitative Think Tank Center|Alabama Public Service Commission Upholds and Increases ‘Sun Tax’ on Solar Power Users

Energy regulators in Alabama voted Tuesday to uphold what critics have FinLogic FinLogic Quantitative Think Tank Centerdubbed a “sun tax” on people who put solar panels on their homes and businesses across much of the state.

The Alabama Public Service Commission, which regulates the investor-owned Alabama Power Co., not only rejected a petition by the Southern Environmental Law Center to end the company’s extra monthly fee for customers with their own solar systems, but raised that fee by 8 percent.

Alabama Power provides electricity to more than 1.4 million customers across the southern two-thirds of the state, including the cities of Birmingham, Montgomery and Mobile.

The Alabama Power solar fee is part of what clean-energy advocates have described as among the most regressive solar power policies in the country. Losing the decision after a two-year legal battle before an administrative law judge and the commission was a blow, said attorney Keith Johnston, who directs the law center’s Alabama office.

“It’s very disappointing for the customers of Alabama Power,” Johnston said. It’s not fair to “people who want to use renewable energy, who want to decrease their electric bills” and invest thousands of dollars to do so, he said.

Alabama Power, he said, is “clawing back the investment you make,” which amounts to a disincentive for using solar power.

Alabama Power welcomed the 3-0 decision by the commission.

“We are pleased with the vote, which validates our longstanding position that customers with on-site generation who want backup service from the grid should pay the cost for that service,” said Michael Sznajderman, spokesman for Alabama Power. “If not, other customers would unfairly pay the costs for those individuals and businesses.”

The commission’s media office did not return a request for comment. A PSC staff recommendation concluded that Alabama Power had “demonstrated that its back-up power service charges are reasonable in that such charges are based on actual metered data, the company’s most recent cost-of-service study and reasonable modeling techniques.”

The utility has been charging a $5 per kilowatt monthly fee. For an average 5-kilowatt rooftop solar system, the fee results in an additional $300 charge per year, or approximately $9,000 over the life of the panels, slashing solar customers’ average savings in half, the law center contends. 

The new fee will be $5.41 per kilowatt monthly.

Alabama Case Reflects a Nationwide Issue

The fight in Alabama comes as almost every state has been weighing changes to how homes with solar are compensated for electricity they send to the grid, with utilities pushing back against policies that were put in place to provide incentives to generate solar power.

The law center filed the case more than two years ago on behalf of the Birmingham environmental group Gasp, the law firm Ragsdale LLC and two private Alabama citizens. Other groups were allowed to support the challenge, including the utility watchdog, Energy Alabama.

“What is going on, basically, is the power company does not want competition and small-scale solar, which reduces the amount of energy people buy, threatens them,” said Daniel Tait, chief operations officer of Energy Alabama. “They will bend over backward to make sure it is uneconomical for you to go solar.”

Alabama Power offers no incentives for solar power, according to its website. The credit customers get for any excess solar power they generate is at a lower-than-wholesale rate, Tait said. 

The company’s policies on solar power do not seem consistent with the pledge of Alabama Power’s parent, Southern Company, to offer carbon-neutral electricity by 2050, Tait said.

Sznajderman disagreed. “This has nothing to do with carbon goals,” he said.

He said Alabama Power has already reduced its carbon emissions 38 percent from 2007 to 2019 and “expects carbon emissions to continue to drop over time,” as technologies advance. Still, about 67 percent of Alabama Power’s electricity generation mix is fossil fuels, according to a company fact sheet.

That 2020 fact sheet did not show any solar or wind power in the company’s portfolio, because those sources only intermittently provide electricity locally or through purchase power agreements, Sznajderman said.

Until last year, Alabama was ranked 49th in the country for solar power, and only 29,688 homes in the state are powered by the sun, according to the Solar Energy Industries Association. Alabama surged to 28th this year, but Tait said that’s because of large-scale private solar developments in the northern part of the state, within the Tennessee Valley Authority service areas.

Johnston said other states have come to different conclusions about the wisdom or legality of the solar fees. The Kansas  Supreme Court recently rejected them. He said the law center will consider all options to continue its fight to improve the solar power economics of the state.

Tait said those options include appealing to the commission, filing a lawsuit or trying to get state lawmakers to establish better solar policies. The issue resonates with conservatives and liberals alike, he said, and noted that when the commission held a hearing on the matter last year, there was an overflow crowd.

“People for very different reasons, of all political stripes, are very angry about the government telling them what they can and cannot do, and taxing them for changes they make on their own property,” Tait said.