HISTORY IS FULL OF INNOVATIONS AND REVOLUTIONS that have fundamentally changed our lives. In America, we owe our unprecedented standard of living to the social, political and technological revolutions that have occurred throughout our shared history. One could even argue that the movement that led to the formation of our electric cooperatives was a revolution of sorts.
Less than 100 years ago, most of South Carolina was without electricity and had little hope of getting it. Investor-owned utilities simply couldn’t make profits running lines to rural areas and refused to provide service. Not willing to take “No” for an answer, friends and neighbors across the state banded together to form nonprofit electric cooperatives to improve their local communities. They shared equally in the costs of planting utility poles, stringing power lines and purchasing electricity, and just like today, each member had an equal say in governing the co-op.
Today, these member-owned electric cooperatives maintain the state’s largest utility network, one that provides reliable, affordable power to more than 1.5 million consumers in all 46 counties.
In the current energy climate, our cooperatives face a revolutionary change that you should know about because it can affect how they serve you and your neighbors. I’m talking about the proliferation of distributed energy resources (DERs). As defined by the U.S. Department of Energy, a DER is any small, decentralized energy source designed to provide on-site power to a home or business. Common examples include generators, small wind turbines, fuel cells and photovoltaic solar panels.
Fuel sources for DERs can be dirty or they can be clean. They can be intermittent and uncontrollable or they can be constant and controlled (sometimes even by an electricity provider). By their nature, DERs can create technical challenges for the power grid, but the largest problem they create is that, absent changes in rate structures, DERs shift costs from consumers who own them to consumers who don’t.
Let me explain. There are two major costs included in your monthly bill: the energy cost, which is the price of generating the electricity, and the system cost, which is the cost of maintaining the power grid and getting that electricity to homes and businesses. While your bill fluctuates each month according to the amount of power you consume, the system cost is basically fixed.
Most co-ops use a rate structure that charges everyone a small portion of the total system cost upfront and recovers the rest based on energy use. This is rooted in the principle that members who use a lot of energy (historically more affluent users) are better able to bear the extra costs than members who use less energy (historically the less affluent and elderly).
DER owners use less electricity from the grid and thus pay less toward the system costs. However, the cost of maintaining the grid remains the same, so a higher share of system costs necessarily shifts to the other co-op members. This is clearly an unsustainable scenario.
So what kind of rate structure will make DERs feasible? Would a rate structure that recovers system costs and energy costs separately solve the dilemma, or does it just create another set of problems?
Your cooperatives are working to find the answers to the issues raised by the DER revolution, and we have pledged to policy makers what we have always pledged to you: We will do all we can to adapt to changes in energy technology and bring our members the best value we can deliver.