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posted by Jeffrey Dwyer on January 28th, 2014 11:53 AM
Hi All,Following is a letter I sent yesterday to Larry Weis, Juwana Gutierrez, Deborah Kimberly and Kurt Stogdill, all of whom work at Austin Energy. I also sent it to the City Manager, Mayor and all of the Councilmembers.Jeffrey T. Dwyer2415 Campden DriveAustin, TX 78745(512) jeffreytd@earthlink.netAE">440-7511jeffreytd@earthlink.netAE Account # 73860 XXXXXJanuary 27, 2014Dear Ms. Kimberly,Thank you for taking time to speak with me following the recent meeting of the Emerging Technology & Telecommunications Committee.I thought it was prudent to document some of my concerns in writing and forward them to you.1. I was in error about being an over-producer of electricity for my home. It had been some time since I looked at my electric meter to see precisely how much energy my solar PV system produced relative to my on-site consumption. As of 9:29 AM on January 27, 2014 my meter shows net consumption of 619 kWh. My meter was changed out one time after the initial meter was set upon activation of my solar PV system. I believe that meter showed a surplus of about 365 kWh. If that figure is precise, then I have consumed 254 kWh more than I have produced from November 16, 2011 through 9:29 AM on January 27, 2014. This is true in spite of the fact that my solar system has produced over 30kWh for 14 of the 26 days of the month so far. This January will be the best January for solar PV production at my home. The amount of my electric bill, printed on December 23, 2013, before reset, was -$300.95. I wanted to bring this to your attention because you physically winced when I stated that I was a slight overproducer of electricity, which made me feel that perhaps you were less concerned about my issues than you might have been if I were a net consumer of electrical resources, WHICH I AM. I only produce about 99% of what I consume.2. Please stop the misinformation about the IRS. I received your letter dated January 22, 2014. You continue to strongly suggest that the VoS reset is necessary, in part, to avoid “federal tax implications”. However, you made it clear in your statement before the committee on January 15th that you were not a tax expert. I am not a tax expert either, but I do know a few things. First, a 1099 is only required when a payment of $600 or more is made in a single calendar year. This is stated quite clearly in the 1099 instructions. Your testimony indicated that the average surplus was about $400 per customer for those affected. So, AE could return the money for all customers, whose surplus was less than $600 without any obligation to issue 1099s. And AE could cap the annual surplus check at $599 for those who generated a greater surplus, to avoid the 1099 issue altogether. Also, the 80/20 rule as it has been described to me is that a residential solar system is eligible for federal tax credits if at least 80% of the kWh generated is used on-site. It does not have anything to do with total revenue generated or how that revenue is divided between the utility and the customer. So, if AE is truly concerned about federal tax credits, AE should immediately identify those who overproduced by 25% or more and counsel them on modifying their system to get below that threshold. Do any of AE’s solar PV customers currently overproduce by 25% or more? Finally, there is a difference in revenue and profit. The cost for my system ($32,500) after AE rebates ($23,000) and the 30% federal tax credit ($2900) is about $6600 net. If I had a $400 annual credit for 16 years, I would still not have any “federal tax implications” as I would only have received $6400 for a system that had a net cost of $6600. By that time, I would almost certainly have had to replace my inverters at a cost of probably $4000 (although the business case presented to me by Circular Energy estimated inverter replacement at $5854 in year 16). It would take another 10 years of $400 annual surpluses to nearly cover my net expense. At this point the system would be 26 years old. This also assumes there is no other maintenance or repair expense to other system components over the years. The bottom line is that it is unlikely that my solar PV system would ever return a profit. But if it did, I am sure my accountant is more than capable of figuring out the small amount of tax that would be owed. If AE is going to continue to invoke the IRS and “federal tax implications” in formulating its policies, then AE needs to make a formal inquiry to the IRS for a definitive ruling on these specific issues.3. Austin Energy doesn’t incentivize customers to build to zero-net energy. If, for customers like myself who are virtually net-zero, AE confiscates the surplus solar credit, then there is no incentive to build/remodel to net zero kWh. The incentive stops at net-zero dollars on the electrical bill. The -$300.95 that was reset to zero on my account represents about 2350kWh. If I had sized my system to produce that much less annually, my meter would currently show net consumption of over 5000 kWh, which would be much father from a net-zero user than I am now.4. There is no need for 2 bills each month. AE, for years before VoS was implemented, was able to issue a single bill for all utility services provided, including bills to solar PV customers. They were, obviously, then able to allocate the appropriate portions of the payment to the appropriate departments: electrical, water, garbage collection and street cleaning, including the application of surplus dollars from the electrical service to the other services. The separate bills represent a costly, tree-wasting by-product of the reset.5. There is no incentive for additional conservation. I could probably conserve a little more than I currently do, but there is no incentive, as those efforts would simply result in a larger forfeited surplus at year’s end. The best way to truly conserve is for solar customers to use as little energy as practical and then shut down their inverters for an appropriate amount of time to cancel out the surplus. After all, I am sure AE does not produce any more energy than they can sell into the grid, because it would be fiscally irresponsible to do so.6. Natural Gas prices are at a 3-1/2 year high just 24 days into the 10.7¢ VoS. The following url is a link to a New York Times article discussing this fact and the prediction of an industry expert that “it was “highly unlikely” that gas prices would go below $4 per thousand cubic feet for the rest of the year despite the near-record domestic gas production.” This is perhaps the best argument for a multi-year level VoS. AE locked the natural gas price on an arbitrary date for purposes of computing the VoS that is already highly inaccurate of current and foreseeable market conditions. AE needs to protect its solar PV customers from non-refundable, over-billing. Because of the January 1 reset date, some solar PV customers, like myself are net consumers of electricity for the months of January and February because we heat with electricity at a time of year when our solar systems produce less energy. I have been told that if I make the payments for the electricity I consume in those months, that the money will not be refunded later in the year when I have a surplus that exceeds those payments. I have also been told that my service is subject to disconnect if those payments are not received when due. This is perhaps the most egregious of the many consequences of the reset policy. AE knows what my production and consumption are for the last 2 full calendar years. AE knows that if I consume the same amount and produce the same amount this year that I will be in surplus, even at the now lower 10.7¢ VoS. AE needs to address this immediately. If I do not pay the January and February electric bills, it is likely, and highly ironic, that I would be disconnected sometime in March or April, when my system produces its largest monthly surpluses.8. Many current VoS assumptions leading to the 10.7¢ rate are wrong. Not only is the assumption of natural gas prices already demonstrably wrong, but also the assumption that the useful life of solar PV system is only 25 years. You indicated to the committee that your assumption of a 25-year system life was based on 25-year panel warranties and 10-year inverter warranties. My panels are warranted for 25 years, but my inverters are warranted for 15 years. It is likely that inverters would need to be replaced over the life of the system, but not the panels. Automobiles typically come with a 3-year/36,000 mile warranty. It is normal in the vast majority of cases to get many more years of use from them after the warranty expires and the same is expected for solar panels.I did a lot of research before remodeling my home. I earned additional points with AEGB for remodeling an existing home as opposed to building new. I came within 1% of achieving net-zero. I have tried to exhibit all of the behaviors that seemed to be encouraged by AE and AEGB. Yet, I feel maligned by AE because of its policies.Please use my account number above to prepare a case study on how AE actually treats net-zero or near net-zero customers and to verify the representations I make about my usage. I would also greatly appreciate feedback on my concerns as outlined above.Respectfully,Jeffrey T. Dwyer
posted by Jeffrey Dwyer on November 17th, 2013 11:48 AM
Hello All,A few weeks ago, I sent a letter to all of the City Council members, and I think the Mayor as well, through a link at the City of Austin website. I outlined my concerns regarding several issues with AE's solar program including the coming January 1st reset of surplus dollars generated by some solar customers to $0.I received a response on November 8th from Kurt Stogdill, who is the Interim Solar Program Manager with AE. Essentially, all of my arguments were rejected and my suggestions were dismissed. I was told that AE's solar program and policies were designed to benefit the vast majority of ratepayers seeking to implement solar, even if there were some unintended consequences for some of us.I currently have a surplus of nearly $400. My home is heated with electricity. Because of my electric heat and the lower production of my solar panels in January and February, I will not produce enough electricity to offset these bills even though I will have a surplus very soon afterwards. I will be required to pay those bills when due or face late fees and disconnection of services. Later in the year when I am in net surplus for the year, these payments will not be refunded!This is just the latest shoe to drop in this debacle and I am not sure it is the last one. If I had taken the advice of some at AE and purchased an electric vehicle to use up the surplus, these non-refunded payments would be even higher.The explanation I received about resetting the surplus to $0 instead of refunding the surplus with a 1099, is that "if Austin Energy were to consider the solar production as taxable income it is anticipated the negative tax consequences to the solar customer would far exceed the benefit of any refund." This is absurd. AE is not the arbiter of whether or not surplus refunds are taxable income. The IRS is. And, surplus payments would not be taxable income until the amount of the refunded surplus exceeded the net cost of the solar system after AE rebates and federal tax credits. In my case, it would take more than 16 years for a $400 annual surplus payment to offset my net system cost of $6500. I would then replace inverters at a cost of $4000, if they had not previously failed, and it would take another 10 years of $400 annual surplus to offset that. My system would then be at the end of its useful life and $10,400 of surplus payments over 26 years would still not result in a taxable event.Kurt Stogdill also stated in his letter that "a system that generates revenue is ineligible for the federal tax credit (FTC)." I have studied IRS form 5695, which is used to claim the solar tax credit, and I have read its instructions and I cannot find this limitation in these documents or elsewhere. The form and its instructions do indicate that there is no limit to the tax credit. If anyone can point me to a resource that would provide clarity on this I would be grateful.Another justification for resetting the surplus to $0 is to discourage over-sizing of residential solar systems. A better way to avoid over-sizing, while still encouraging maximum efficiency of the building envelope is to set a maximum on the number of installed watts of solar panels that can be rebated per total square footage of the home. Under current policy, the financial incentive is to build the least efficient structure that will qualify for solar rebates and then maximize the solar array. I could easily have saved $6500 in remodeling costs by building less efficiently and I would still have net $0 annual electrical consumption. If AE had a maximum of 5 watts of solar that would be rebated per square foot of my 1200 square foot home, then my system size would be 6kW instead of 8.2kW and AE would have saved $5500 in rebates.A few years ago when the solar rebate was still $4.50 per watt, the 30% federal tax credit was implemented with no cap. Understandably, it took AE some time to react to this and lower their rebates in response to the new market conditions. Many customers who were in the process of having solar installed benefitted from this short overlap in very high AE rebates with the new federal tax credits. They were not penalized for this and neither should any of us who have participated in the program.The policy in place at the time I had my system installed was for surplus to be applied to the other other parts of the utility bill. If this cannot be done, then send a refund check with a 1099 and stop pretending to know better than us how to handle our taxes.I have not received a response from any of the council members or their staff, so it seems to me that council is going to simply defer to AE to deal with solar.When a set of policies is implemented with an apparent motive of social justice over good business sense, the "unintended consequences" quickly pile up and threaten the viability of the program.Regards,Jeffrey T. Dwyer
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