What you must know about the demise of the most solar friendly commercial rate, A6

In its 2012 general rate-case filing, PG&E asked to reduce the cap on commercial customers’ eligible for the A-6 tariff from 500 kilowatts to 75 kilowatts, which would cut out a large number of commercial customers. Solar advocates protested, the issue went into litigation and the result was:

  1. Effective January 1st 2017, Schedule A-6 is closed to Commercial PG&E customers with a maximum demand of 75kW or greater for three consecutive months in the most recent 12 months or with a usage of 150,000kWh per year or greater.
  2. Eligibility for A-6 will be reviewed annually and migration of ineligible customers will be implemented once a year on bill cycles each November.
  3. Any customer with a maximum demand of 75kW or greater or with usage of 150,000kWh per year or greater, who sends PG&E a certified letter in time to complete a rate change on or before December 31st 2016 shall be allowed to take service on Schedule A-6.

How does the fact that Pg&E is killing THE best solar rate effect you?

Background: As a medium sized commercial electricity consumer (maximum demand less than 500kW), PG&E gives you two options. Schedule Rate A-10. Under this rate schedule you pay PG&E for:

  1. The energy you consume (kWh). Like a gas pump, your electric meter measures how much power you consume and you will pay a price per kWh that depends on the time of the day, day of the week and time of the year. This is known as time of use (TOU).
  2. The maximum peak consumption (kW), or demand charges. Also, PG&E charges (penalizes) you for the maximum peak consumption in the month, arguing the utility has all transmission lines, distribution lines and power plants ready to react to serve all business’ electricity needs. And those that have high spikes of consumption pay a premium.
  1. Schedule Rate A-6. Under this rate, PG&E does not charge for the maximum peak of consumption (demand), it just charges for energy consumption. But the peak price (Monday – Friday between noon and 6pm) is twice as expensive as the peak price of the A10 rate.

The table below shows the PG&E summer pricing for energy consumed and maximum peak demand as of today. As you can see, customers who are on A6 pay 51 cents per kWh while a customer on an A10 rate pays 21 cents per kWh and in addition it pays for the peak demand $17.84 per kW. For most of the customers we have analyzed bills for, demand typically represents anywhere between 25% to 40% of the electric bill.

pge_a6_a10_tou_demand_example
PG&E commercial rates pricing comparison

IF YOU GO SOLAR, THE RATE YOU CHOOSE CAN MAKE A BIG DIFFERENCE.

If you install a solar system, your solar system will generate power during the day, while the sun is out, and at night you will draw electricity from the electric grid. Under net metering, if you produce more energy during the day than you consume, the excess is exported to the electric grid, and the electric company must give you credit priced at the retail rate available when the electricity was exported.

WHY do SOME COMMERCIAL BUILDING OWNERS WANT TO SWITCH TO AN A6 RATE AFTER INSTALLING A SOLAR SYSTEM?

  1. If you switch to an A6 rate, you are automatically removing demand charges and this can represent 25% to 40% of your bill.
  2. If you have a solar system that is designed to generate more power than you consume during the week on Summer afternoons and you are under an A10 rate, the exported electricity would be priced at $0.21/kWh, but if you are under an A6 rate, your electricity exported would be priced at $0.55/kWh plus you would not pay any demand charges.

This means that you can install a solar system that is 10% to 30% smaller than if you stay with an A10 rate and in addition you automatically remove demand charges.  

 WHAT should you do?

Get in before the doors closes. If your demand is greater than 75kW try to get to an A-6 rate in 2016. But don’t delay your solar installation. Beware, that going to an A-6 will add much higher energy costs to the building until the solar system is turned on — between 30 percent and 50 percent higher, depending on what time of year the transition comes. Also, if you switch onto an A-6 right now, you can’t change rates for a year.

The future is uncertain. If your demand is greater than 75kW and you manage to switch to A6 before year end and install a solar system, the California Public Utility Commission decision was not clear for how long PG&E needs to grandfather these customers.

But there is a solution for uncertainty. If you managed to be grandfathered under A6 in 2017 and beyond, but one day PG&E decides that you are no longer eligible to stay on the A6 rate, you can consider installing energy storage. Behind-the-meter batteries can store power from solar or the grid (charged during cheap off peak times), and then inject energy when a customer’s energy usage is approaching a peak demand. That, in turn, could:

  1. Keep you below 75kW and therefore you would be able to enjoy the non-demand charge benefits.
  2. If demand is too high to get you below 75kW, the energy storage would at least reduce the impact of the demand charges.

Knowing your options and the approaching end of year deadlines from PG&E will, in the long run, save you thousands of dollars, not only on the cost of designing the right sized system, but on future energy savings through net metering.

 

 

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