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House Research Department Updated: October 2017
<br />Xcel Energy’s Community Solar Garden Program Page 4
<br />In 2017, Xcel Began to Credit Electricity Generated by Solar Gardens at Its
<br />Value-of-Solar Rate
<br />The statute contained three directives regarding the price at which Xcel is to purchase energy
<br />generated by a solar garden and issue credit back to solar garden subscribers. This price was set
<br />at the utility’s value-of-solar rate. 6 Until that rate, calculated according to a methodology
<br />developed by the Department of Commerce, was approved by the commission, the applicable
<br />retail rate was to be used. The statute also requires that any plan approved by the commission
<br />must “reasonably allow for the . . . financing” of community solar gardens.
<br />In its April 2014 order, the commission defined the applicable retail rate to include the energy
<br />charge, demand charge, customer charge, and applicable riders for the appropriate class,
<br />approximately $0.12 per kWh. That rate was deemed “too low to reasonably allow for the
<br />creation and financing of community solar gardens. Rather, developers’ uncontroverted
<br />statements indicate that a rate of approximately $0.15 per kWh is the conservative minimum
<br />needed to secure financing and make solar gardens attractive to subscribers.”7
<br />Accordingly, the commission allowed solar garden developers to transfer the solar Renewable
<br />Energy Certificate (RECs) associated with the garden’s generation to Xcel at a rate of $0.03 per
<br />kWh for gardens with a capacity of 250 kW or less and $0.02 for larger gardens, resulting in a
<br />2014 applicable retail rate plus REC payments for residential customers of $0.14033 and
<br />$0.15033 per kWh, respectively.8
<br />In its September 2016 order, the commission directed Xcel to pay solar garden operators the
<br />value-of-solar rate for electricity the utility purchases from gardens whose applications are filed
<br />in 2017 and thereafter. The value-of-solar rate in place at the time an application is completed
<br />will remain in effect for the term of the solar garden’s operation, adjusted annually for inflation.
<br />Updated value-of-solar calculations will be made each year for new project applications.9
<br />Rejecting Xcel’s Solar-Garden Tariff Filing and Requiring the Company to File a Revised Solar-Garden Plan, April
<br />7, 2014, p. 7. In December 2015, Congress extended the 30 percent credit through 2019, after which it declines to
<br />26 percent in 2020, 22 percent in 2021, and 10 percent in 2022 and beyond, at which point it is available only for
<br />commercial, not residential, applications.
<br />6 A utility’s value-of-solar rate reflects the cost savings realized by a utility when a customer uses solar
<br />electricity generated at or near the customer’s location rather than electricity generated by fossil fuels at a
<br />centralized location and transported to the customer. Among the costs that a utility no longer must pay when
<br />customers use small-scale solar energy are fuel costs, costs of pollution control equipment, costs to transmit (long-
<br />distance) and distribute (short-distance) the electricity from the generation site to the customer. These savings
<br />accrue to all utility customers.
<br />7 April 7, 2014 Order, p.15.
<br />8 Letter from Amy A. Lieberkowski, Manager, Rates and Regulatory Affairs, Xcel Energy, to Daniel P. Wolf,
<br />Executive Secretary, Minnesota Public Utilities Commission, Docket No. E-002/M-13-867, Re: ARR calculation,
<br />Community solar garden program, March 2, 2015, Attachment A.
<br />9 Minnesota Public Utilities Commission, In the Matter of the Petition of Northern States Power Company, dba
<br />Xcel Energy, for Approval of Its Proposed Community Solar Garden Program, Docket No. E-002/M-13-867, Order
<br />Approving Value-of-Solar Rate for Xcel’s Solar Gardens Program, Clarifying Program Parameters, and Requiring
<br />Further Filings, September 6, 2016, p. 14.
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