Just Say No to ComEd’s Demand Charge Plan
Bad news for solar customers and other residents on the horizon in the Prairie State.
Exelon, the big utility holding company and its Chicago’s utility affiliate, ComEd, are proposing legislation in Illinois that would be a one-two punch for customers. The legislation, SB 1585, would make it harder for customers to choose solar, while seeking new subsidies for its aging Clinton and Quad Cities nuclear power plants. Exelon is leveraging the possible closure of the two struggling nuclear plants and the loss of local jobs to try to strongarm the state legislature into enacting a number of other retrogressive energy policies.
One particularly egregious element of the proposal is ComEd’s call for demand charges, which hurt residential customers – especially those who use a modest amount of electricity – and a broad group of stakeholders are sounding the alarm. Demand charges penalize customers for their highest use of electricity in a month, even if that period is as short as thirty minutes. For example, a family’s peak electricity use might occur while they’re baking a pie, using the microwave and watching the World Series. That family may use a modest amount of power over the month, but that month’s utility bill would still be weighted by that short period of high demand.
ComEd’s proposal is an unnecessary departure from the way that electric bills are currently calculated in Illinois. Normally, customers are billed for the amount of electricity they use each month. This type of charge is easy to understand and gives customers reasonable control over their energy costs.
Low and fixed-income customers can be particularly disadvantaged by mandatory demand charges. Utility bills typically account for a higher percentage of wages for low and fixed-income families compared to higher-income families, so the blow from a higher bill is especially challenging. Meeting basic needs like heating and cooling might be compromised, and for certain families can become a precarious budget balancing act. Most customers – across the income spectrum – don’t have smart home technology to constantly monitor or respond to a short period of higher electricity usage, which makes it really difficult for customers to attempt to control power bills.
In addition to being discriminatory for many customers, a residential demand charge reduces the benefits of solar. One common and compelling reason that people install solar power is the control it gives them to reduce their electric bills. With demand charges, a few cloudy hours and the subsequent short term spike in the electricity that solar customers buy from the grid means they would be slapped with a much higher bill. So, while a robust solar program for low-income customers is also being discussed as part of the deal, Vote Solar is opposed to the demand charges in the legislation because they would make it harder for everyone to choose solar in Illinois.
In addition to imposing a mandatory demand charge, Exelon and ComEd also want to eliminate net metering in Illinois. Net metering exists in most of the country and is a simple and effective way of crediting solar customers for the excess electricity they deliver back to the grid. It has also has been a key driver of the industry’s growth because it dramatically reduces the cost of solar.
The utilities argues that net metering creates subsidies in the rate structure – a claim that has been disproven in study after study across the country. In fact, thorough and fair benefits and costs analyses show that net metering can be a net benefit for all utility customers, particularly in states like Illinois that are just beginning to build solar markets.
Given how far behind Illinois lags compared to other states in terms of solar power development, now is not the time to consider ending the nascent net metering policy. Instead, Illinois policymakers should encourage a robust market for rooftop solar and enable a more resilient and reliable grid in an era of onerous baseload nuclear plants.
Exelon and ComEd’s controversial proposal to change the way electric bills are calculated should not be included in legislation that’s meant to address the lack of competitiveness of the Clinton and Quad Cities nuclear plants in open wholesale electricity markets. Like every other state in the nation, electric rate redesign is best left to state regulators who consider the facts, including the impact that is has on ratepayers.
Illinois policymakers should plan carefully for a future when costly aging nuclear plants will be retired. Policies like net metering and time-of use rates that support solar development and energy storage technologies, along with a smarter and more responsive grid, are what’s needed in the Prairie State.